UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒	☒ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September~~June 30, ~~2021~~2022

☐	☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE 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 incorporation or organization)		(I.R.S. Employer Identification No.)

141 West Jackson Blvd, Suite 4236 Chicago, Illinois		60604
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number: (312) 536-3102

N/A

(Former name, former address and former three months, if changed since last report)

Title of Each Class

Trading Symbol

Name of Each Exchange

On Which Registered

Common Stock, $.001 par value

COSM

~~OTC QX~~The Nasdaq Capital Market

Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the 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 and posted 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, 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~~Filer	☐	Smaller reporting company	☒
(Do not check if a smaller reporting company)		Emerging growth company	☐

If an emerging growth company, indicate by check mark 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 7(a)(2)(B) of the Securities Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Applicable only to Corporate Issuers:

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of ~~November~~August 15, ~~2021,~~2022, there were ~~17,332,628~~26,365,418 shares issued and ~~17,039,208~~25,977,994 shares outstanding of the registrant’s common stock.

COSMOS HOLDINGS INC.

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited).	3

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	3738

Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	4445

Item 4.	Controls and Procedures.	45

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings.	4647

Item 1A	Risk Factors	4647

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.	4547

Item 3.	Defaults Upon Senior Securities.	4647

Item 4.	Mine Safety Disclosures.	4647

Item 5.	Other Information.	4647

Item 6.	Exhibits.	4748

SIGNATURES		4849

Table of Contents

COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,
2021

December 31,
2020

(Unaudited)

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

$ 1,033,875

$ 628,395

Accounts receivable, net

27,189,507

23,440,650

Accounts receivable - related party

2,924,075

3,468,564

Marketable securities

211,203

222,792

Inventory

3,594,061

3,292,557

Prepaid expenses and other current assets

5,912,171

5,148,441

Prepaid expenses and other current assets - related party

2,253,351

3,468,653

Operating lease right-of-use asset

913,541

833,763

Financing lease right-of-use asset

252,051

269,131

TOTAL CURRENT ASSETS

44,283,835

40,772,946

Property and equipment, net

1,968,505

1,757,213

Goodwill and intangible assets, net

508,267

230,506

Other assets

805,264

905,318

Deferred tax assets

111,468

178,430

TOTAL ASSETS

$ 47,677,339

$ 43,844,413

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:

Accounts payable and accrued expenses

$ 11,712,477

$ 11,973,981

Accounts payable and accrued expenses - related party

81,826

1,733

Accrued interest

936,134

742,374

Convertible notes payable, net of unamortized discount of $407,206 and $494,973, respectively

785,794

952,027

Derivative liability - convertible note

115,073

460,728

Notes payable

15,105,242

12,042,712

Notes payable - related party

474,889

501,675

Lines of credit

4,667,324

5,076,684

Loans payable

390,000

0

Convertible loans payable - related party

1,492,132

1,629,246

Taxes payable

746,614

760,446

Operating lease liability, current portion

173,801

200,204

Financing lease liability, current portion

81,070

89,926

Other current liabilities

665,119

361,340

TOTAL CURRENT LIABILITIES

37,427,495

34,793,076

Share settled debt obligation

1,554,590

1,554,590

Notes payable - long term portion

3,020,846

10,771,882

Operating lease liability, net of current portion

739,832

590,538

Financing lease liability, net of current portion

182,169

188,172

Other liabilities

101,446

107,168

TOTAL LIABILITIES

43,026,378

48,005,426

Commitments and Contingencies (see Note 13)

0

0

STOCKHOLDERS' EQUITY (DEFICIT):

Preferred stock, $0.001 par value; 100,000,000 shares authorized; 0 shares issued and outstanding as of September 30, 2021 and December 31, 2020

0

0

Common stock, $0.001 par value; 300,000,000 shares authorized; 17,332,628 and 13,485,128 shares issued and 17,039,208 and 13,069,800 outstanding as of September 30, 2021 and December 31, 2020, respectively

17,332

13,484

Additional paid-in capital

30,146,413

14,333,285

Treasury stock, 293,208 and 415,328 shares as of September 30, 2021 and December 31, 2020, respectively

(439,844 )

(611,854 )
Accumulated deficit

(25,240,326 )

(18,750,824 )
Accumulated other comprehensive income

167,386

854,896

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

4,650,961

(4,161,013 )

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

$ 47,677,339

$ 43,844,413

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30, 2022			December 31, 2021
	(Unaudited)
ASSETS

CURRENT ASSETS:
Cash and cash equivalents	$	562,320		$	286,487
Accounts receivable, net		26,231,722			26,858,114
Accounts receivable - related party		2,299,982			2,901,300
Marketable securities		10,333			11,468
Inventory		3,595,814			3,147,276
Loans receivable		358,982			377,590
Prepaid expenses and other current assets		1,725,111			2,987,687
Prepaid expenses and other current assets - related party		4,120,335			3,263,241
Operating lease right-of-use asset		858,025			834,468
Financing lease right-of-use asset		237,154			211,099

TOTAL CURRENT ASSETS		39,999,778			40,878,730

Property and equipment, net		1,619,227			1,888,052
Goodwill and intangible assets, net		741,003			485,767
Loans receivable - long term portion		3,897,876			4,410,689
Other assets		875,011			915,250
Deferred tax assets		709,546			850,774

TOTAL ASSETS	$	47,842,441		$	49,429,262

LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses	$	11,171,467		$	12,126,626
Accounts payable and accrued expenses - related party		529,512			599,125
Accrued interest		1,429,722			1,019,889
Lines of credit		4,795,680			4,743,557
Convertible notes payable, net of unamortized discount of $5,744 and $258,938, respectively		619,256			381,062
Derivative liability - convertible note		41,291			45,665
Notes payable		12,120,437			5,462,504
Notes payable - related party		429,438			464,264
Loans payable		1,000,000			1,000,000
Loans payable - related party		1,281,802			1,293,472
Taxes payable		1,125,351			1,324,722
Operating lease liability, current portion		134,833			138,450
Financing lease liability, current portion		80,150			73,078
Other current liabilities		1,112,421			1,255,824

TOTAL CURRENT LIABILITIES		35,871,360			29,928,238

Share settled debt obligation		1,554,590			1,554,590
Lines of credit - long-term portion		191,825			366,171
Notes payable - long term portion		1,179,626			12,356,384
Operating lease liability, net of current portion		723,190			696,015
Financing lease liability, net of current portion		167,187			148,401
TOTAL LIABILITIES		39,687,778			45,049,799

Commitments and Contingencies (see Note 14)		0			0

MEZZANINE EQUITY
Preferred stock, $0.001 par value; 100,000,000 shares authorized:
Series A preferred stock, stated value $1,000 per share, 6,000,000 shares authorized; 2,966 and 0 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively; liquidation preference of $3,073,548 and $0, respectively		3,024,607			0

STOCKHOLDERS' EQUITY
Common stock, $0.001 par value; 300,000,000 shares authorized; 23,998,857 and 17,544,509 shares issued and 23,611,433 and 17,157,085 outstanding as of June 30, 2022 and December 31, 2021, respectively		23,997			17,544
Additional paid-in capital		59,861,359			39,675,753
Treasury stock, 387,424 shares as of June 30, 2022 and December 31, 2021		(816,707	)		(816,707	)
Accumulated deficit		(52,352,868	)		(34,345,506	)
Accumulated other comprehensive loss		(1,585,725	)		(151,621	)

TOTAL STOCKHOLDERS' EQUITY		5,130,056			4,379,463

TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY	$	47,842,441		$	49,429,262

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(Unaudited)

Three Months Ended
September 30,

Nine Months Ended
September 30,

2021

2020

2021

2020

REVENUE

$ 13,595,418

$ 14,352,098

$ 40,061,419

$ 39,105,318

COST OF GOODS SOLD

11,249,848

11,954,788

34,677,671

33,166,706

GROSS PROFIT

2,345,570

2,397,310

5,383,748

5,938,612

OPERATING EXPENSES

General and administrative expenses

2,427,085

543,776

6,708,796

1,340,602

Salaries and wages

683,129

473,910

1,786,954

1,361,657

Sales and marketing expenses

41,715

211,874

586,440

645,930

Depreciation and amortization expense

108,192

87,747

323,678

298,543

TOTAL OPERATING EXPENSES

3,260,121

1,317,307

9,405,868

3,646,732

INCOME (LOSS) FROM OPERATIONS

(914,551 )

1,080,003

(4,022,120 )

2,291,880

OTHER INCOME (EXPENSE)

Other income

17,716

75,124

80,241

120,654

Other expense

(140,193 )

0

(420,344 )

(17,581 )
Interest expense

(670,282 )

(789,426 )

(2,182,715 )

(1,853,414 )
Non-cash interest expense

(353,303 )

0

(492,391 )

(29,509 )
Gain (loss) on equity investments, net

38

(46,883 )

317

(36,637 )
Gain on extinguishment of debt

350,008

16,194

795,644

795,418

Change in fair value of derivative liability

125,621

0

213,490

0

Foreign currency transaction, net

(183,036 )

427,289

(392,472 )

394,983

TOTAL OTHER EXPENSE, NET

(853,431 )

(317,702 )

(2,398,230 )

(626,086 )

INCOME (LOSS) BEFORE INCOME TAXES

(1,767,982 )

762,301

(6,420,350 )

1,665,794

PROVISION FOR INCOME TAXES

(168,561 )

(4,435 )

(69,152 )

(13,927 )

NET INCOME (LOSS)

(1,936,543 )

757,866

(6,489,502 )

1,651,867

OTHER COMPREHENSIVE INCOME (LOSS)

Foreign currency translation adjustment, net

(214,216 )

79,882

(687,510 )

118,960

TOTAL COMPREHENSIVE INCOME (LOSS)

$ (2,150,759 )

$ 837,748

$ (7,177,012 )

$ 1,770,827

BASIC NET INCOME (LOSS) PER SHARE

$ (0.11 )

$ 0.06

$ (0.40 )

$ 0.12

DILUTED NET INCOME (LOSS) PER SHARE

$ (0.11 )

$ 0.06

$ (0.40 )

$ 0.12

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING

Basic

17,136,735

13,225,387

16,103,193

13,225,387

Diluted

17,136,735

13,263,944

16,103,193

13,260,518

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021

REVENUE	$	13,208,504		$	14,846,925		$	26,280,304		$	26,466,001

COST OF GOODS SOLD		11,362,632			12,810,082			22,542,500			23,427,823

GROSS PROFIT		1,845,872			2,036,843			3,737,804			3,038,178

OPERATING EXPENSES
General and administrative expenses		988,465			2,586,670			1,857,104			4,281,367
Salaries and wages		577,479			578,598			1,098,950			1,104,169
Sales and marketing expenses		245,443			139,633			392,392			544,725
Depreciation and amortization expense		108,848			108,413			221,470			215,486
TOTAL OPERATING EXPENSES		1,920,235			3,413,314			3,569,916			6,145,747

INCOME (LOSS) FROM OPERATIONS		(74,363	)		(1,376,471	)		167,888			(3,107,569	)

OTHER INCOME (EXPENSE)
Other income expense, net		(315	)		(39,415	)		(55,127	)		(217,626	)
Interest expense		(560,643	)		(780,607	)		(1,079,992	)		(1,512,433	)
Non-cash interest expense		(215,807	)		(88,979	)		(476,334	)		(139,088	)
Gain (loss) on equity investments, net		(1,622	)		(161	)		56			279
Gain on extinguishment of debt		0			0			1,004,124			445,636
Change in fair value of derivative liability		(22,256	)		26,496			(7,255	)		87,869
Foreign currency transaction, net		(356,687	)		96,584			(516,039	)		(209,436	)
TOTAL OTHER EXPENSE, NET		(1,157,330	)		(786,082	)		(1,130,567	)		(1,544,799	)

LOSS BEFORE INCOME TAXES		(1,231,693	)		(2,162,553	)		(962,679	)		(4,652,368	)

BENEFIT FROM (PROVISION FOR) INCOME TAXES		(9,563	)		(216,503	)		(75,230	)		99,409

NET LOSS		(1,241,256	)		(2,379,056	)		(1,037,909	)		(4,552,959	)

Deemed dividend on issuance of warrants		0			0			(5,788,493	)		0
Deemed dividend on downround of warrants		(8,480,379	)		0			(8,480,379	)		0
Deemed dividend on downround of preferred stock		(8,189,515	)		0			(8,189,515	)		0
Deemed dividend on preferred stock		(352,807	)		0			(352,807	)		0

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS		(18,263,957	)		(2,379,056	)		(23,849,103	)		(4,552,959	)

OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency translation adjustment, net		(1,028,875	)		284			(1,434,104	)		(473,294	)

TOTAL COMPREHENSIVE LOSS	$	(19,292,832	)	$	(2,378,772	)	$	(25,283,207	)	$	(5,026,253	)

BASIC NET LOSS PER SHARE	$	(0.93	)	$	(0.15	)	$	(1.28	)	$	(0.29	)
DILUTED NET LOSS PER SHARE	$	(0.93	)	$	(0.15	)	$	(1.28	)	$	(0.29	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
Basic		19,540,097			16,105,409			18,652,736			15,572,773
Diluted		19,540,097			16,105,409			18,652,736			15,572,773

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

Cosmos Holdings, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT

Accumulated

Other

Common Stock

Additional

Treasury Stock

Comprehensive

Total

No. of
Shares

Value

Paid-in Capital

No. of
Shares

Value

Accumulated
Deficit

Income
(Loss)

Stockholders'
Deficit

Balance at January 1, 2020

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

-

0

0

-

0

0

(143,762 )

(143,762 )
Net income

-

0

0

-

0

(483,310 )

0

(483,310 )
Balance at March 31, 2020

13,225,387

$ 13,225

$ 13,525,749

(365,328 )

$ (411,854 )

$ (20,054,920 )

$ (160,101 )

$ (7,087,901 )
Foreign currency translation adjustment, net

-

0

0

-

0

0

182,840

182,840

Net income

-

0

0

-

0

1,377,311

0

1,377,311

Balance at June 30, 2020

13,225,387

13,225

13,525,749

(365,328 )

(411,854 )

(18,677,609 )

22,739

(5,527,750 )
Foreign currency translation adjustment, net

-

0

0

-

0

0

79,882

79,882

Purchase of treasury stock from third party

-

0

0

(20,000 )

(80,000 )

0

0

(80,000 )
Net income

-

0

0

-

0

757,866

0

757,866

Balance at September 30, 2020

13,225,387

$ 13,225

$ 13,525,749

$ (385,328 )

$ (491,854 )

$ (17,919,743 )

$ 102,621

$ (4,770,002 )

Accumulated

��

Other

Common Stock

Additional

Treasury Stock

Comprehensive

Total

No. of
Shares

Value

Paid-in Capital

No. of
Shares

Value

Accumulated
Deficit

Income
(Loss)

Stockholders'
Deficit

Balance at January 1, 2021

13,485,128

$ 13,484

$ 14,333,285

(415,328 )

$ (611,854 )

$ (18,750,824 )

$ 854,896

$ (4,161,013 )
Foreign currency translation adjustment, net

-

0

0

-

0

0

(473,578 )

(473,578 )
Sale of treasury stock to third party

-

0

249,350

65,000

650

0

0

250,000

Restriced stock issued to a consultant

1,800,000

1,800

1,187,650

-

0

0

0

1,189,450

Conversion of notes payable into shares of common stock

781,819

782

2,563,582

-

0

0

0

2,564,364

Net loss

-

0

0

-

0

(2,173,903 )

0

(2,173,903 )
Balance at March 31, 2021

16,066,947

$ 16,066

$ 18,333,867

(350,328 )

$ (611,204 )

$ (20,924,727 )

$ 381,318

$ (2,804,680 )
Foreign currency translation adjustment, net

-

0

0

-

0

0

284

284

Conversion of related party debt

500,000

500

2,999,500

-

0

0

0

3,000,000

Forgiveness of related party debt

-

0

600,000

-

0

0

0

600,000

Restriced stock issued to a consultant

-

0

1,968,000

-

0

0

0

1,968,000

Net loss

-

0

0

-

0

(2,379,056 )

0

(2,379,056 )
Balance at June 30, 2021

16,566,947

16,566

23,901,367

(350,328 )

(611,204 )

(23,303,783 )

381,602

384,548

Foreign currency translation adjustment, net

-

0

0

-

0

0

(214,216 )

(214,216 )
Cancellation of treasury shares

(57,120 )

(57 )

(171,303 )

57,120

171,360

0

0

0

Conversions of convertible note payable

126,501

127

569,302

-

0

0

0

569,429

Conversion of related party debt

375,000

375

2,249,625

-

0

0

0

2,250,000

Conversion of notes payable into shares of common stock

321,300

321

1,313,796

-

0

0

0

1,314,117

Beneficial conversion feature related to convertible notes payable

-

0

294,000

-

0

0

0

294,000

Restriced stock issued to a consultant

1,989,626

-

0

0

0

1,989,626

Net loss

-

-

-

-

-

(1,936,543 )

-

(1,936,543 )
Balance at September 30, 2021

17,332,628

$ 17,332

$ 30,146,413

$ (293,208 )

$ (439,844 )

$ (25,240,326 )

$ 167,386

$ 4,650,961

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~

Cosmos Holdings, Inc.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND MEZZANINE EQUITY

																				Accumulated			Total
	Preferred Stock				Common Stock				Additional		Treasury Stock									Other			Stockholders'
	No. of Shares		Value		No. of Shares		Value		Paid-in Capital		No. of Shares			Value			Accumulated Deficit			Comprehensive Income (Loss)			Deficit

Balance at January 1, 2021		-	$	0		13,485,128	$	13,484	$	14,333,285		(415,328	)	$	(611,854	)	$	(18,750,824	)	$	854,896		$	(4,161,013	)
Foreign currency translation adjustment, net		-		0		-		0		0		-			0			0			(473,578	)		(473,578	)
Sale of treasury stock to third party		-		0		-		0		249,350		65,000			650			0			0			250,000
Restricted stock issued to a consultant		-		0		1,800,000		1,800		1,187,650														1,189,450
Conversion of notes payable into shares of common stock		-		0		781,819		782		2,563,582		-			0			0			0			2,564,364
Net loss		-		0		-		0		0		-			0			(2,173,903	)		0			(2,173,903	)
Balance at March 31, 2021		-		0		16,066,947		16,066		18,333,867		(350,328	)		(611,204	)		(20,924,727	)		381,318			(2,804,680	)
Foreign currency translation adjustment, net						-		0		0		-			0			0			284			284
Conversion of related party debt						500,000		500		2,999,500		-			0			0			0			3,000,000
Forgiveness of related party debt						-		0		600,000		-			0			0			0			600,000
Restricted stock issued to a consultant						-		0		1,968,000		-			0			0			0			1,968,000
Net loss						-		0		0		-			0			(2,379,056	)		0			(2,379,056	)
Balance at June 30, 2021		-	$	0		16,566,947	$	16,566	$	23,901,367	$	(350,328	)	$	(611,204	)	$	(23,303,783	)	$	381,602		$	384,548

Table of Contents

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

Nine Months Ended
September 30,

2021

2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income (loss)

$ (6,489,502 )

$ 1,651,867

Adjustments to Reconcile Net Income (Loss) to Net Cash Used In Operating Activities:

Depreciation and amortization expense

243,410

207,992

Amortization of right-of-use assets

80,268

90,551

Amortization of debt discounts

469,387

29,509

Lease expense

146,831

148,218

Interest on finance leases

9,995

9,197

Loss on disposal of fixed asset

-

21,624

Stock-based compensation

5,147,076

0

Deferred income taxes

62,606

0

Gain on extinguishment of debt

(795,644 )

(779,224 )
Non-cash interest expense for accretion of debt

23,004

0

Change in fair value of the derivative liability

(213,490 )

0

Loss on change in fair value of equity investments

3,586

19,798

Changes in Assets and Liabilities:

Accounts receivable, net

(5,122,888 )

(10,099,941 )
Accounts receivable - related party

464,223

(358,528 )
Inventory

(481,409 )

(727,960 )
Prepaid expenses and other current assets

(2,839,134 )

(5,273,072 )
Prepaid expenses and other current assets - related party

1,064,000

2,712,271

Other assets

157,920

(51,836 )
Accounts payable and accrued expenses

2,040,097

1,933,923

Accounts payable and accrued expenses - related party

83,645

(116,875 )
Accrued interest

217,904

193,760

Lease liabilities

(104,126 )

(120,799 )
Other current liabilities

303,779

154,819

Taxes payable

-

7,772

Other liabilities

(20,807 )

4,819

NET CASH USED IN OPERATING ACTIVITIES

(5,549,269 )

(10,342,115 )

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchase of property and equipment

(521,758 )

(113,845 )
Purchase of licenses

(313,667 )

0

NET CASH USED IN INVESTING ACTIVITIES

(835,425 )

(113,845 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Payment of convertible note payable

(529,000 )

(413,000 )
Proceeds from convertible note payable

600,000

0

Payment of related party note payable

(3,473 )

(941,357 )
Payment of note payable

(300,364 )

(5,253,918 )
Proceeds from note payable

578,850

15,926,295

Payment of related party loan

(122,716 )

(109,024 )
Proceeds from related party loan

5,830,757

594,836

Payment of loans payable

390,000

0

Payment of lines of credit

(18,281,863 )

(13,270,971 )
Proceeds from lines of credit

18,139,012

14,588,466

Payments of finance lease liability

(75,801 )

(57,316 )
Proceeds from sale of treasury stock

250,000

(80,000 )
NET CASH PROVIDED BY FINANCING ACTIVITIES

6,475,402

10,984,011

Effect of exchange rate changes on cash

314,772

515,043

NET CHANGE IN CASH

405,480

1,043,094

CASH AT BEGINNING OF PERIOD

628,395

38,537

CASH AT END OF PERIOD

$ 1,033,875

$ 1,081,631

Supplemental Disclosure of Cash Flow Information

Cash paid during the period:

Interest

$ 208,565

$ 124,178

Income tax

$ -

$ 11,605

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Cancellation of treasury shares

$ 171,360

$ 0

Beneficial conversion features of convertible debentures

$ 294,000

$ 0

Conversion of convertible notes payable to common stock

350,000

Conversion of notes payable to common stock

$ 3,878,160

$ 0

~~The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.~~


	Preferred Stock						Common Stock				Additional			Treasury Stock									Accumulated Other			Total
	No. of Shares			Amount			No. of Shares		Amount		Paid-in Capital			No. of Shares			Amount			Accumulated Deficit			Comprehensive Loss			Stockholders' Equity

Balance at January 1, 2022		-		$	0			17,544,509	$	17,544	$	39,675,753			(387,424	)	$	(816,707	)	$	(34,345,506	)	$	(151,621	)		4,379,463
Adoption of ASU 2020-06		-			0			-		0		(294,000	)		-			0			53,248			0			(240,752	)
Foreign currency translation adjustment, net		-			0			-		0		0			-			0			0			(405,229	)		(405,229	)
Issuance of Series A preferred stock, net of issuance costs of $547,700		6,000			5,452,300			-		0		0			-			0			0			0			0
Conversion of notes payable into shares of common stock		-			0			238,000		238		973,182			-			0			0			0			973,420
Cashless exercise of warrants		-			0			829,471		829		(829	)		-			0			0			0			0
Net income		-			0			-		0		0			-			0			203,347			0			203,347
Balance at March 31, 2022		6,000			5,452,300			18,611,980		18,611		40,354,106			(387,424	)		(816,707	)		(34,088,911	)		(556,850	)		4,910,249
Foreign currency translation adjustment, net		-			0			-		0		0			-			0			0			(1,028,875	)		(1,028,875	)
Conversion of Series A preferred stock		(3,034	)		(2,427,693	)		4,892,222		4,892		2,422,801															2,427,693
Conversion of convertible debt		-			0			39,339		39		38,105			-			0			0			0			38,144
Cashless exercise of warrants		-			0			455,316		455		(455	)		-			0			0			0			0
Deemed dividend upon downround of preferred stock and warrants		-			0			-		0		16,669,894			-			0			(16,669,894	)		0			0
Deemed dividend on preferred stock		-			0			-		0		352,807			-			0			(352,807	)		0			0
Stock-based compensation		-			0			-		0		24,101			-			0			0			0			24,101
Net loss		-			0			-		0		0			-			0			(1,241,256	)		0			(1,241,256	)
Balance at June 30, 2022		2,966			3,024,607			23,998,857		23,997		59,861,359			(387,424	)		(816,707	)		(52,352,868	)		(1,585,725	)		5,130,056

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

Table of Contents

COSMOS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

	Six Months Ended June 30,
	2022			2021

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(1,037,909	)	$	(4,552,959	)
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities:
Depreciation and amortization expense		181,863			166,219
Amortization of right-of-use assets		39,607			49,267
Amortization of debt discounts and accretion of debt		476,334			139,088
Lease expense		89,606			99,610
Interest on finance leases		7,333			5,250
Stock-based compensation		24,101			3,157,450
Deferred income taxes		61,111			(107,646	)
Gain on extinguishment of debt		(1,004,124	)		(445,636	)
Change in fair value of the derivative liability		7,255			(87,869	)
(Gain) loss on net change in fair value of equity investments		(56	)		(1,318	)
Changes in Assets and Liabilities:
Accounts receivable		(1,472,461	)		(2,839,680	)
Accounts receivable - related party		358,339			324,536
Inventory		(717,900	)		(336,047	)
Prepaid expenses and other assets		468,014			(1,415,455	)
Prepaid expenses and other current assets - related party		(1,150,256	)		450,454
Other assets		0			153,055
Accounts payable and accrued expenses		492,024			2,249,153
Accounts payable and accrued expenses - related party		(27,708	)		195,151
Accrued interest		427,729			211,251
Lease liabilities		(89,247	)		(71,436	)
Taxes payable		(104,709	)		0
Other current liabilities		(52,631	)		159,132
Other liabilities		0			(20,964	)
NET CASH USED IN OPERATING ACTIVITIES		(3,023,685	)		(2,519,394	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from loan receivable		179,829			0
Purchase of property and equipment		(31,546	)		(12,100	)
Sale of fixed assets		11,837			0
Purchase of intangible assets		(320,427	)		0
NET CASH USED IN INVESTING ACTIVITIES		(160,307	)		(12,100	)

CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of convertible note payable		0			(362,000	)
Proceeds from convertible note payable		0			100,000
Payment of note payable		(2,476,350	)		(20,000	)
Proceeds from note payable		349,716			0
Payment of related party loan		(469,384	)		(125,589	)
Proceeds from related party loan		545,341			2,811,062
Payment of lines of credit		(11,363,636	)		(12,189,057	)
Proceeds from lines of credit		11,700,459			12,311,882
Proceeds from issuance of Series A Preferred Stock		5,452,300			0
Payments of finance lease liability		(46,677	)		(51,427	)
Financing fees		(218,572	)		0
Proceeds from sale of treasury stock		0			250,000
NET CASH PROVIDED BY FINANCING ACTIVITIES		3,473,197			2,724,871

Effect of exchange rate changes on cash		(13,372	)		(16,000	)

NET CHANGE IN CASH		275,833			177,377	��

CASH AT BEGINNING OF PERIOD		286,487			628,395
CASH AT END OF PERIOD	$	562,320		$	805,772

Supplemental Disclosure of Cash Flow Information

Cash paid during the period:
Interest	$	317,449		$	208,565
Income tax	$	0		$	0

Supplemental Disclosure of Non-Cash Investing and Financing Activities

Conversion of notes payable to common stock	$	973,420		$	2,564,364
Deemed dividend on warrants upon conversion of convertible debt	$	5,788,493		$	0
Deemed dividend on preferred stock and warrants upon trigger of downround feature	$	16,669,894		$	-
Deemed dividend upon cumulative dividend on preferred stock	$	352,807		$	0
Conversion of Series A preferred stock	$	2,427,693		$	0
Conversion of convertible debt	$	38,144		$	0

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

Table of Contents

NOTE 1 – BASIS OF PRESENTATION

The terms “COSM,” “we,” “the Company,” and “us” as used in this report refer to Cosmos Holdings, Inc. The accompanying unaudited condensed consolidated balance sheet as of ~~September~~June 30, ~~2021~~2022 and unaudited condensed consolidated statements of operations and comprehensive income for the three ~~and nine~~ months ended ~~September~~June 30, ~~2021~~2022 have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management of COSM, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three and ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, are not necessarily indicative of the results that may be expected for the year ending December 31, ~~2021,~~2022, or any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the financial statements for ~~each of~~ the ~~two years~~year ended December 31, ~~2020 and 2019,~~2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 (“Form 10-K”). The accompanying condensed consolidated balance sheet as of December 31, ~~2020~~2021 has been derived from the audited financial statements filed in our Form 10-K and is included for comparison purposes in the accompanying balance sheet.

NOTE 2 – ORGANIZATION, NATURE OF BUSINESS AND GOING CONCERN

~~Overview~~

Cosmos Holdings Inc. ~~(“us”, “we”, or~~(d/b/a Cosmos Health, Inc.) (Nasdaq: COSM) is an international healthcare group headquartered in Chicago, Illinois. The group is engaged in the ~~“Company”) is a multinational pharmaceutical company.~~nutraceuticals sector through its own proprietary lines of products “Sky Premium Life” and “Mediterranation”. The Company ~~imports, exports~~is operating in the pharmaceutical sector as well, through the provision of a broad line of branded generics and ~~distributes pharmaceutical products of brand-name and branded pharmaceuticals, over-the-counter (OTC) medicines, and a variety of dietary and vitamin supplements~~OTC medications. In addition, the group is involved in the healthcare distribution sector through its ~~established network. Currently,~~subsidiaries in Greece and 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 believe 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~~UK, serving retail pharmacies ~~across~~and wholesale distributors. Cosmos Holdings Inc. is strategically focusing on the ~~EU through a network~~research and development (“R&D”) of ~~three strategic distribution centers,~~novel patented nutraceuticals (Intellectual Property) and specialized root extracts as well as ~~an additional warehousing facility. Pharmaceutical manufacturers generally implement variable pricing strategies within~~on the ~~EU market. Identifying~~R&D of proprietary complex generics 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~~innovative OTC products. Cosmos has developed a global distribution platform and ~~export to countries where the same products are priced higher. The Company focuses on leveraging its growing purchasing scale~~is currently expanding throughout Europe, Asia and ~~supplier relationships to secure discounts~~North America. Cosmos Holdings has offices and ~~provide pharmaceuticals at reduced prices~~distribution centers in Thessaloniki and ~~on continuing to drive organic growth at attractive margins for its cross-border pharmaceutical wholesale business.~~Athens, Greece and Harlow, UK.

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. We invest in technology to enhance safety, distribution and warehousing efficiency and reliability. Cosmofarm operates two robotic ROWA™, a German fully automated 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 of the ~~brand Sky Premium Life~~^®~~to be developed, commercialized and to be added to our portfolio. We intend to continue to brin~~~~g Sky Premium Life~~^®products to market primarily through our existing network of over 160 pharmaceutical wholesale clients and vendors and approximately 1,200 independent retail pharmacies within the EU market. Moreover, we have penetrated several markets through digital sale channels. There is growing demand for vitamins and food supplements and we are committed to developing quality products and creating enhanced customer value.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

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). 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 at least the end of 2021and expects to receive a temporary license by the end of 2021.~~

Decahedron received its Wholesale Distribution Authorization for human use on February 5, 2021, 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.

Our subsidiaries are 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 are in compliance with the General Data Protection Regulation (GDPR) adopted by the European Union. GDPR applies to the processing of personal data of persons in the EU by a controller or processor neither of which apply to our operations.

~~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~~2009, and on November 14, 2013, we changed our name to Cosmos Holdings, Inc.. On August 2, 2022, the Company filed a Fictitious Firm Name Certificate in Nevada to do business under the name Cosmos Health, Inc.

On and will seek shareholder approval at the next annual shareholders meeting to amend its Articles of Incorporation for the name change. Through its acquisition of Amplerissimo Ltd, on September 27, 2013, the Company changed its principal activities into trading of products, providing representation, and provision of consulting services to various sectors. On August 1, 2014, the Company formed SkyPharm S.A., a Greek Company (“SkyPharm”), a subsidiary that focuses on the trading, sourcing and export of nutraceutical and pharmaceutical products. In February 2017, the Company acquired ~~one hundred (100%) percent of the outstanding common stock of Amplerissimo~~Decahedron Ltd., a ~~company incorporated~~UK Company (“Decahedron”) which is a fully licensed second-generation wholesaler specializing in ~~Cyprus (“Amplerissimo”), which became a wholly-owned subsidiary~~imports and exports of generics and OTC pharmaceutical products within the ~~Company.~~EEA and distributor of Sky Premium Life nutraceutical products in the UK .

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.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

On December 19, 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd. ~~(“Cosmofarm”)~~, a pharmaceutical wholesaler based in Athens, Greece. The principal of the selling shareholder is Panagiotis Kozaris, who remained with Cosmofarm as a managing director once it became a wholly owned subsidiary of the Company.. 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 condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. ~~GAAP,~~GAAP”), which contemplates the continuation of the Company as a going concern. For the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company had revenue of ~~$40,061,419,~~$ 26,280,304, net loss of ~~$6,489,502~~$1,037,909 and net cash used in operations of ~~$5,549,269.~~$3,023,685. Additionally, as of ~~September~~June 30, ~~2021,~~2022, the Company had working capital of ~~$6,856,340,~~$4,128,418, an accumulated deficit of ~~$25,240,326,~~$52,352,868, and stockholders’ equity of ~~$4,650,961.~~$5,130,056. 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.

Table of Contents

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 taking the proper actions for new fund raising.

The condensed 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 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 curtail 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 equity and/or debt financing. 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 condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

Principles of Consolidation

Our condensed 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.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with ~~generally accepted accounting principles~~U.S. GAAP 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 ~~August 16, 2021,~~ the date of issuance of this Quarterly Report on Form 10-Q. 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.

The Effects of War in the Ukraine

On February 24, 2022, Russian forces launched significant military action against Ukraine. There continues to be sustained conflict and disruption in the region, which is expected to endure for the foreseeable future. We do not conduct any commercial transactions with either Ukraine or Russia and 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 the date of issuance of this Quarterly Report on Form 10-Q. Such political issues and conflicts could have a material adverse effect on our results of operations and financial condition if they escalate in areas in which we do business. In addition, changes in and adverse actions by governments in foreign markets in which we do business could have a material adverse effect on our results of operations and financial condition.

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. We will continue monitoring the social, political, regulatory and economic environment in Ukraine and Russia, and will consider further actions as appropriate.

Table of Contents

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 ~~September~~June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, there were no cash equivalents.

The Company maintains bank accounts in the United States denominated in U.S. Dollars, ~~and~~ in Greece denominated in Euros, U.S. Dollars and Great Britain Pounds (British Pounds Sterling), and in Bulgaria ~~all of them~~ denominated in Euros. The Company also maintains bank accounts in the United Kingdom, denominated in Euros and Great Britain Pounds (British Pounds Sterling).

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. ~~$22,340 in customer deposits as~~As of December 31, ~~2020~~2021, $7,393 in accumulated depreciation has been reclassified from property and equipment to accumulated amortization of goodwill and intangible assets and $4,772 was reclassified from prepaid expenses and other current ~~liabilities.~~assets to marketable securities on the unaudited condensed consolidated balance sheet. For the three and ~~nine~~six months ended ~~September~~June 30, ~~2020, $473,910~~2021, $578,598 and ~~$1,361,657~~$1,104,169 was reclassified from general and administrative expenses to salaries and ~~wages. For~~wages on the ~~nine~~unaudited condensed consolidated statements of operations and comprehensive income. Additionally, for the six months ended ~~September~~June 30, ~~2020, $193,760 was reclassified from accounts payable and accrued expenses to accrued interest and $228,566~~2021, $2,312 was reclassified from customer deposits to ~~accounts payable accrued expenses~~other current liabilities on the ~~Statement~~unaudited condensed consolidated statement of ~~Cash Flows.~~cash flows. These reclassifications have no impact on previously reported net income.

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. ~~As of September~~At June 30, ~~2021,~~2022 and December 31, ~~2020,~~2021, the Company’s allowance for doubtful accounts was ~~$677,623~~$1,575,015 and ~~$715,845,~~$1,702,743, respectively.

Tax Receivable

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. The net VAT receivable is recorded in prepaid expense and other current assets on the condensed consolidated balance sheets.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September~~ As of June 30, 2022 and December 31, 2021, the Company had a VAT net payable balance of $497,182 and $400,616 respectively, recorded in the condensed consolidated balance sheet as accounts payable and accrued expenses.

Inventory

Inventory is stated at the lower-of-cost or 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.

Table of Contents

Property and Equipment, net

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is calculated 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 ~~$68,852~~$80,576 and ~~$58,905~~$78,341 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$218,664~~$165,456 and ~~$183,156~~$149,812 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Impairment of Long-Lived Assets

In accordance with ASC 360-10, Long-lived Assets, 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.

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.

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

On December 19, 2018, as a result of the acquisition of Cosmofarm, 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 its pharmaceuticals and nutraceuticals products 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 ~~September~~June 30, ~~2021,~~2022, no revision to the remaining amortization period of the intangible assets was made.

Amortization expense was ~~$8,339~~$8,249 and ~~$8,339~~$8,249 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$24,746~~$16,407 and ~~$24,836~~$16,407 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, 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 will record its share in the earnings of the investee and will include it within the condensed 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

Investments in equity securities are accounted for at fair value with changes in fair value recognized in net income (loss). 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 ~~September~~June 30, ~~2021,~~2022, investments consisted of (i) 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 $5.16 per share, or value of $206,534 of Diversa S.A.~~ and (ii) 16,666 shares which traded at a closing price of ~~$0.28~~$0.30 per share or value of ~~$4,669~~$4,925 of National Bank of Greece. Additionally, the Company has ~~$4,517~~$5,407 in equity securities of Pancreta Bank, which are ~~not publicly traded and recorded at cost.~~revalued annually. See Note 3, 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.

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

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 tables presents assets that are measured and recognized at fair value as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, on a recurring basis:

	September 30, 2021						Total Carrying		June 30, 2022						Total Carrying
	Level 1		Level 2		Level 3		Value		Level 1		Level 2		Level 3		Value
Marketable securities – ICC International Cannabis Corp.	$	0		0		0	$	0	$	0	$	0		0	$	0
Marketable securities – Divsersa S.A.		206,534		0		0		206,534
Marketable securities – National Bank of Greece		4,669		0		0		4,669		4,925		0		0		4,925
Equity securities – Pancreta Bank										0		5,407		0		5,407
	$	211,203					$	211,203	$	4,925	$	5,407			$	10,332

	December 31, 2020						Total Carrying		December 31, 2021						Total Carrying
	Level 1		Level 2		Level 3		Value		Level 1		Level 2		Level 3		Value
Marketable securities – ICC International Cannabis Corp.	$	0		0		0	$	0	$	0	$	0		0	$	0
Marketable securities – Divsersa S.A.		218,183		0		0		218,183
Marketable securities – National Bank of Greece		4,609		0		0		4,609		6,696		0		0		6,696
Equity securities – Pancreta Bank										0		4,772		0		4,772
	$	222,792					$	222,792	$	6,696	$	4,772			$	11,468

~~In addition, FASB ASC 825-10-25, Fair Value Option, (“ASC 825-10-25”), expands opportunities to use~~

Derivative Instruments

Derivative financial instruments are recorded in the accompanying condensed consolidated balance sheets at fair value ~~measurements~~ in accordance with ASC 815. When the Company enters into a financial ~~reporting~~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 ~~permits entities~~closely related to ~~choose~~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 ~~measure many~~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 ~~instruments~~derivative instrument, then the embedded feature is bifurcated from the host contract and ~~certain other items at fair value.~~accounted for as a derivative instrument. The ~~Company did not elect the~~estimated fair value ~~options for any~~ of ~~its qualifying financial instruments.~~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 condensed consolidated statements of operations.

Table of Contents

Customer Advances

The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s ~~products; the~~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~~advances 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 transfer of the product to the customer.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

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”) 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~~Translation and Transactions

Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and amounts included in the accompanying condensed statements of operations and comprehensive income (loss) 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’ deficit 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.~~comprehensive income (loss).

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 The corporate income tax rate is 22% in Greece and 19% in United Kingdom. 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 ~~September~~June 30, ~~2021~~2022 the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.

Table of Contents

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 Company undergoes an annual certified audit each year in lieu of an audit by the Greek tax authorities, the Company has not taken any tax positions that warrant accrual under ASC-740-10.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

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 judgments 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 September30, 2021 and December 31, 2020, was $101,446 and $107,167 respectively, and has been recorded as a long-term liability within the condensed consolidated balance sheets.~~

Basic and Diluted Net 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.

	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended				Six Months Ended
	2021		2020		2021		2020		June 30,					June 30,
Weighted average number of common shares outstanding Basic		17,136,735		13,225,387		16,103,193		13,225,387
									2022		2021		2022		2021
Weighted average number of common shares outstanding-Basic										19,540,097		16,105,409		18,652,736		15,572,773
Potentially dilutive common stock equivalents		-		38,557		-		35,131		-		-		-		-
Weighted average number of common and equivalent shares outstanding - Diluted		17,136,735		13,263,944		16,103,193		13,260,518		19,540,097		16,105,409		18,652,736		15,572,773

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~~Standard Adopted

~~In August 2020, the FASB issued ASU No.~~The Company has adopted Accounting Standards Update (“ASU”) 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) (“ASU 2020-06”), effective as of January 1, 2022, using the modified retrospective transition method which, among other things, simplifies the accounting for convertible instruments by eliminating the requirement to separate conversion features from the host contract. Consequently, a convertible debt instrument is accounted for as a single liability measured at its amortized cost and interest expense will be recognized at the coupon rate. The adoption resulted in the elimination of the debt discount that had been recorded within equity (see Note 11, “Convertible Debt”).

Correction of an Immaterial Error

During the three-month period ended June 30, 2022, the Company concluded it should have adopted ASU 2020-06 on January 1, 2022. The Company is now retrospectively adopting ASU 2020-06 as of January 1, 2022 in this Form 10-Q with a cumulative catch-up adjustment. The net impact of the adjustments was recorded as a reduction to the January 1, 2022 balance of additional paid-in capital in the amount of $294,000 and a reduction in accumulated deficit in the amount of $53,248, as presented in the statement of stockholders’ equity, and a reduction in discount on convertible notes payable in the amount of $240,752. The Company has concluded the impact to form 10-Q for the three-month period ended March 31, 2022 to be immaterial to the financial statements and recorded a catchup/correcting adjustment in the current Form 10-Q.

Recent Accounting Pronouncements

In October 2021, the Financial Accounting Standards Board (“FASB”) issued accounting standards update (“ASU”) 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities (i.e., deferred revenue) acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers, as if it had originated the contracts. The new guidance creates an exception to the general recognition and measurement principles of ASC 805, Business Combinations. The new guidance should be applied prospectively and is effective for all public business entities for fiscal years beginning after December 15, 2022 and include interim periods. The guidance is effective for all other entities for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the effects of the adoption of ASU No. 2021-08 on its consolidated financial statements.

Table of Contents

In May 2021, the FASB issued ASU 2021-04—Earnings Per Share (Topic 260), Debt— Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for ~~Convertible Instruments~~Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and ~~Contracts~~reduce diversity in an ~~Entity’s Own Equity.” ASU 2020-06 will simplify the~~issuer’s accounting for ~~convertible instruments by reducing the number~~modifications or exchanges of ~~accounting models~~freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this ASU are effective for ~~convertible debt instruments~~public and ~~convertible preferred stock. Limiting the accounting models will result in fewer embedded conversion features being separately recognized from the host contract as compared~~nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods 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.fiscal years beginning after December 15, 2021. Early adoption is permitted, ~~but no earlier than January 1, 2021,~~ including adoption in an interim ~~periods within that year. Management~~period. The Company is currently evaluating the ~~effect~~effects of the adoption of ASU ~~2020-06~~No. 2021-04 on ~~the~~its 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.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

NOTE 3 – 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 was 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 corporation 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 in the year ended December 31, 2018.

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.

Table of Contents

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 six months ended ~~September~~June 30, ~~2021~~2022 of $0. The value of the investments as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, was $0 and $0, 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 the future for its services under the Distribution and Equity Acquisition Agreement, if certain milestones are achieved. Refer to Note 1112 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 period ended ~~September~~June 30, ~~2021.~~2022. 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.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

As of ~~September~~June 30, ~~2021,~~2022, 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 $5.16 per share, or value of $206,534 of Diversa S.A. and~~ 16,666 shares which traded at a closing price of ~~$0.28~~$0.30 per share or value of ~~$4,669~~$4,925 of National Bank of Greece. Additionally, the Company has $5,407 in equity securities of Pancreta Bank, which are revalued annually. The Company recorded a net unrealized gain on the fair value of these investments of ~~$317~~$56 during the ~~nine~~six months ended ~~September~~June 30, ~~2021.~~2022.

CosmoFarmacy LP

In September 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, and OTC 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 ~~September~~June 30, 2022 and December 31, 2021 was ~~$173,655~~$157,035 and $169,770, respectively, and is included in “Other assets” onin the ~~Company’s~~accompanying condensed consolidated balance sheet.

NOTE 4 – PROPERTY AND EQUIPMENT ~~NET~~

Property and equipment ~~net~~ consists of the following:

September 30,
2021

December 31,
2020

Leasehold improvements

$ 531,011

$ 560,711

Vehicles

98,868

105,057

Furniture, fixtures and equipment

2,062,739

1,632,654

Computers and software

143,015

149,005

2,835,633

2,447,427

Less: Accumulated depreciation and amortization

(867,128 )

(690,214 )
Total

$ 1,968,505

$ 1,757,213

	June 30, 2022			December 31, 2021
Leasehold improvements	$	482,848		$	519,278
Vehicles		77,752			96,657
Furniture, fixtures and equipment		1,911,170			2,065,100
Computers and software		134,122			141,490
		2,605,892			2,822,525
Less: Accumulated depreciation and amortization		(986,665	)		(934,473	)
Total	$	1,619,227		$	1,888,052

~~NOTE 5 – GOODWILL AND INTANGIBLE ASSETS, NET~~

~~Intangible assets, net consist of the following at:~~

September 30,
2021

December 31,
2020

License

$ 352,507

$ 50,000

Trade name / mark

36,997

36,997

Customer base

176,793

176,793

566,297

263,790

Less: Accumulated amortization

(107,727 )

(82,981 )
Subtotal

458,570

180,809

Goodwill

49,697

49,697

Total

$ 508,267

$ 230,506

Table of Contents

~~COSMOS HOLDINGS, INC.~~NOTE 5 – GOODWILL AND INTANGIBLE ASSETS

Intangible assets consist of the following at:

	June 30, 2022			December 31, 2021
License	$	630,506		$	345,739
Trade name / mark		36,997			36,997
Customer base		176,793			176,793
		844,296			559,529
Less: Accumulated amortization		(152,990	)		(123,459	)
Subtotal		691,306			436,070
Goodwill		49,697			49,697
Total	$	741,003		$	485,767

~~Notes~~NOTE 6 – LOAN RECEIVABLE

On October 30, 2021, the Company entered into an agreement for a ten-year loan with a third-party to ~~Unaudited Condensed Consolidated Financial Statement~~

~~September~~memorialize €4,284,521 ($4,849,221) in prepayments the Company had made. Interest is calculated at a rate of 5.5% per annum on a 360-day basis. Under the terms of the agreement, the Company is to receive 120 equal payments over the term of the loan. As of December 31, 2021, the Company had a short-term receivable balance of $377,590 and a long-term receivable balance of $4,410,689 under this loan. During the six months ended June 30, ~~2021~~2022, the Company received €164,521 ($172,237) in principal payments such that as of June 30, 2022, the Company had a short-term receivable balance of $ 358,982 and a long-term receivable balance of $3,897,876 under this loan.

NOTE 67 – INCOME TAXES

The Company is incorporated in the United States of America and is subject to United States federal taxation. No provisions for income taxes have been made as the Company had no U.S. taxable income for the ~~three and nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020.~~2021.

The Company’s Greece subsidiaries are governed by the income tax laws of Greece. The corporate tax rate in Greece is 22% on income reported in the statutory financial statements after appropriate tax adjustments.

The Company’s United Kingdom subsidiaries are governed by the income tax laws of the United Kingdom. The corporate tax rate in the United Kingdom is 19% on income reported in the statutory financial statements after appropriate tax adjustments.

As of ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the Company’s effective tax rate differs from the USU.S. federal statutory tax rate primarily due to a valuation allowance recorded against net deferred tax assets in in the United States.

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. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company has maintained a valuation allowance against all net deferred tax assets in the United States only. Foreign valuation allowances ~~had been~~were reversed ~~as of~~on December 31, 2020.

Table of Contents

~~As of September~~

For the three months ended June 30, ~~2021,~~2022, and ~~December 31, 2020,~~2021, the Company has ~~a benefit for~~recorded tax ~~recorded~~expense in any jurisdiction where it is subject to income tax, in the amount of ~~$111,468~~$9,563 and ~~$178,430,~~$216,503, respectively, ~~which is included in Deferred tax assets,~~ on the condensed consolidated ~~balance sheets.~~statements of operations and comprehensive loss.

For the six months ended June 30, 2022, and 2021, the Company has recorded tax expense in the amount of $75,230 and tax benefit of $99,409, respectively, on the condensed consolidated statements of operations and comprehensive loss.

NOTE 78 – CAPITAL STRUCTURE

Preferred Stock

The Company is authorized to issue 100 million shares of preferred stock, of which ~~may be~~6,000,000 are designated as Series A convertible preferred stock. The preferred stock has a liquidation preference over the common stock and is non-voting. As of June 30, 2022 and December 31, 2021, 6,000 and 0, preferred shares have been issued, respectively, and 2,966 and 0, shares outstanding, respectively.

Major Rights & Preferences of Series A Preferred Stock

On and effective October 4, 2021, the Company amended and restated its articles of incorporation (the “Amended and Restated Articles”) and filed a certificate of designation (the “COD”) for its Series A Preferred Stock (the “Series A Preferred Stock”) with the State of Nevada. On February 23, 2022, the Company filed Correction No. 1 to the COD. On July 28, 2022, the Company filed an Amendment to the COD with the State of Nevada to allow a holder to waive application of the Beneficial Ownership Limitation with respect to the conversion of Series A Preferred Stock.

The Amended and Restated Articles allow the Company’s Board of Directors the authority to authorize the issuance of preferred stock from time to time in one or more classes or series ~~authorized~~by resolution.

With respect to payment of dividends and distribution of assets upon liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, all shares of the Series A Preferred Stock will rank: (i) senior to all of the Company’s Common Stock and any other equity securities that the Company may issue in the future, (ii) equal to any other equity securities that the Company may issue in the future, the terms of which specifically provide that such equity securities are on parity or senior to the Series A Preferred Stock (“Parity Securities”), (iii) junior to all other equity securities the Company issues, the terms of which specifically provide that such equity securities rank senior to the Series A Preferred Stock, and (iv) junior to all of the Company’s existing and future indebtedness; without the prior written consent of the Majority Holders.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (a “Liquidation”), the Holders of shares of Series A Preferred Stock shall be first entitled to receive out of the assets of the Company available for distribution to its shareholders.

Each Holder shall not be entitled to vote with holders of outstanding shares of Common Stock, voting together as a single class, with respect to any and all matters presented to the stockholders of the Company for their action or consideration, except as provided by law or as set forth in the COD. The holders of Series A Preferred Stock are entitled to receive dividends paid and distributions made to the holders of Common Stock to the same extent as if the holders of Series A Preferred Stock had converted such shares into shares of Common Stock.

The Series A Preferred Stock was initially convertible into the Company’s Common Stock as determined by dividing the number of shares of Series A Preferred Stock to be converted by the ~~Board~~lower of ~~Directors.~~ (i) $3.00 or (ii) 80% of the average volume weighted average price for the Company’s Common Stock for the five (5) trading days immediately following the effectiveness of the registration statement concerning the shares (the “Conversion Price”). On June 14, 2022, the Conversion Price was reset to $0.6215 per share.

On February 28, 2022, the Company entered into a securities purchase agreement, or the Purchase Agreement, with certain investors and an insider for a private placement of the Company’s securities (the “Private Placement”).

The Private Placement consisted of the sale of 6,000 shares of the Company’s Series A Convertible Preferred Stock, or the Series A Shares, at a price of $1,000 per share, and 2,000,000 warrants to purchase shares of common stock, or the Warrants, for aggregate gross proceeds of approximately $6 million. The Warrants were initially exercisable to purchase shares of common stock at $3.30 per share, or 110% of the Series A Shares initial conversion price and will expire five and one-half years following the initial exercise date of the Warrants. The Company determined that the 2,000,000 warrants are additional value being distributed to the preferred stockholders and presented the warrants’ fair value of $5,788,493 as a deemed dividend in the unaudited condensed consolidated statements of operations and comprehensive loss. The warrants were valued using the Black-Scholes option pricing model with the following terms: a) exercise price of $3.30, b) common stock fair value of $3.42, c) volatility of 118%, d) discount rate of $1.71%, and e) dividend rate of 0%.

The closing of the Private Placement occurred on February 28, 2022. As a condition to the closing of the sale, the Company’s common stock received conditional approval for listing and trading on the Nasdaq Capital Market and commenced trading on February 28, 2022, under the trading symbol, COSM. Concurrent with the issuance of the Series A Shares, the Company executed a registration rights agreement (the “Registration Rights Agreement”) to register the resale of the shares of common stock issuable upon conversion of the Series A Shares and the shares of common stock issuable upon exercise of the warrants issued in connection with the Series A Shares. The Company was required to file its initial registration statement within 45 days following February 28, 2022. The Effectiveness Date was required to be 60 days after February 28, 2022, or 75 days following the SEC’s full review, and any additional registration statements that may be required are to be filed within 20 days following the date required by the SEC. If the Company fails to timely file its initial registration statement, or any additional registration statement, or otherwise comply with the requirements of the Registration Rights Agreement, the Company shall pay each holder 2% of the subscription amount in cash until cured, with an additional penalty of 18% if the cash payment is not made within seven days of the cash payable date.

Table of Contents

The Company filed its initial registration statement on May 25, 2022, and thus accrued for liquidated damages payable to the Holders in the amount of $187,970, calculated as described above, for both the late filing of the registration statement (event) and the 1^st anniversary (30 days following the event date) of the event. Upon the effectiveness of the Company’s registration statement, the Series A Shares conversion price was adjusted to $0.62152 and the warrant exercise price was adjusted to $0.62152 per share. The Company recorded a deemed dividend in the amount of $8,189,515 upon reducing the conversion price from $3.00 to $0.62152 which was recorded as an increase to additional paid-in capital and an increase to accumulated deficit.

The Series A Shares rank senior to all of the Company’s Common Stock and any other equity securities that the Company may issue in the future with respect to payment of dividends and distribution of assets upon liquidation, dissolution or winding up. While the Series A Shares are outstanding, the Company may not amend, alter or change adversely the powers, preferences or rights given to the Series A Shares, create, or authorize the creation of, any additional class or series of capital stock of the Company (or any security convertible into or exercisable for any class or series of capital stock of the Company), including any class or series of capital stock of the Company that ranks superior to or in parity with the Series A Shares, alter, amend, modify, or repeal its Articles of Incorporation or other charter documents in any manner that adversely affects any rights of the holders of Series A Shares, increase or decrease the number of authorized shares of Series A Shares, any agreement, commitment or transaction that would result in a Change of Control, any sale or disposition of any material assets outside of the ordinary course of business of the Company, any material change in the principal business of the Company, including the entry into any new line of business or exit of any current line of business, and circumvent a right or preference of the Series A Shares. Any holder of the Series A Shares shall have the right by written election to the Company to convert all or any portion of the outstanding Series A Preferred Shares. Immediately upon effectiveness of a registration statement registering for resale all of the Registrable Securities (as defined in the Registration Rights Agreement), all outstanding Series A Preferred Shares shall automatically convert into Common Stock, subject to certain beneficial ownership limitations.

Mezzanine Equity

The Series A Shares are recorded as mezzanine equity in accordance with ASC 480 at its initial net carrying value in the amount of $5,452,300. The Series A Shares are recorded as mezzanine equity in accordance with ASC 480 as the Company may be obligated to issue a variable number of shares at a fixed price known at inception and there is no maximum number of shares that could potentially be issued upon conversion. In this instance, cash settlement would be presumed and the Series A Shares are classified as mezzanine equity in accordance with ASC 480-10-S99. Immediately upon effectiveness of the registration statement registering for resale of all the common stock issuable under the Series A Shares, all outstanding Series A Shares shall automatically convert into common stock.

As of ~~September~~June 30, ~~2021, no preferred shares~~2022, 3,034 of the Series A Shares have been ~~issued.~~converted into 4,892,222 shares of common stock in accordance with the terms of the agreements and thus an amount of $2,427,693 was reclassified from mezzanine equity to additional paid-in capital.

Common Stock

The Company is authorized to issue 300 million shares of common stock. As of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company had ~~17,332,628~~23,998,857 and ~~13,485,128~~17,544,509 shares of our common stock issued, respectively, and ~~17,039,208~~23,611,433 and ~~13,069,800~~17,157,085 shares outstanding, respectively.

~~Sale of Treasury Shares~~

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 sell65,000 shares of the Company’s common stock held in treasury at $3.85 per share or a total of $250,000.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

~~Cancellation of Treasury Shares~~

~~On September 15, 2021, the Company cancelled 57,120 shares of common stock valued at $171,360 that were held in Treasury.~~

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 iswas for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement iswas terminable by the Company for any reason upon written notice at any time after the Initial Term.

Table of Contents

The Company agreed to pay Consultant and its assignees an aggregate of 1,800,000 restricted shares of Common Stock, earned 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. The shareswere valued on the date of the agreement at $3.28 per share or $5,904,000, which ~~will~~was be amortized over the term of the agreement. As of ~~September~~June 30, 2022 and 2021, the Company has ~~recorded $5,147,076 in stock-based compensation for~~expensed $0 and $3,157,451 under the ~~1,600,000 shares earned through the end of the period.~~agreement.

Debt ~~Exchange Agreement~~Conversions

~~As of February 5, 2021, The Company entered into an Amended and Restated Debt Exchange Agreement (the “Agreement”) with~~During the ~~“Lender that provided for the issuance by~~six months ended June 30, 2022, the Company ~~of 781,819~~issued 238,000 shares of common stock ~~(the “Exchange Shares”), at~~upon the ~~rate~~conversion of ~~$3.85 per share, in exchange for an aggregate~~$1,190,000 of ~~$3,010,000 principal amount of existing loans made by the Lender to the Company (See Note 11).~~notes payable. The ~~market price at the time this Agreement was negotiated was $3.28 per share and the~~ Company recorded ~~a gain on debt extinguishment of $445,636.~~

On June 23, 2021, the Company entered into a Debt Exchange Agreement (the “June Debt Exchange Agreement”) to exchange various loans pursuant to which the related party Lender has made (See Note 8), in the aggregate principal amount of $3,000,000 (the “Debt”). The Company agreed to issue the Lender shares of common stock of the Company at an exchange rate of $6.00 per share (the “Exchange Shares”) in exchange for the principal amount of Debt of $3,000,000 or 500,000 shares of common stock (exchange rate of $6.00 per share). On June 23, 2021, the fair value of the Company’s shares of common stock was $5.00 per share. For the three and nine months ended September 30, 2021, the Company recorded $3,000,000$973,420 as a capital contribution and an increase in equity ~~in accordance with ASC 850-10-20 due~~related to the ~~related party relationship and ASC 470-50-40-20 which provides guidance on extinguishments~~conversion of ~~related party debt. Accordingly,~~the $1,190,000 reduced by $216,580 recorded as a gain upon extinguishment ~~transactions between related entities are in essence capital transaction, and no~~of debt upon modification. The $216,580 gain ~~is recorded in the consolidated statements of operations for the difference between the fair value of $5.00 per share and the exchange rate of $6.00 per share.~~

On July 13, 2021, the Company entered into a Debt Exchange Agreement (the “July 13 Agreement”) with Grigorios Siokas, the Company’s Chief Executive Officer (See Note 8). The July 13 Agreement provided for the issuance by the Company of 166,667 shares of common stock, at the rate of $6.00 per share, or an aggregate of $1,000,000, in exchange for $1,000,000 of existing loans by Mr. Siokas to the Company. On July 13, 2021,upon extinguishment was determined using the fair value of the ~~Company’s~~Company of $4.09 per share at the extinguishment commitment date.

On May 1, 2022, the Company issued 39,339 shares of common stock to convert $26,515 principal and accrued interest. Following the conversion, the outstanding balance of the above Note was ~~$4.03 per share. For~~$0. Upon conversion, the ~~three and nine months ended September 30, 2021, the Company recorded $1,000,000 as~~39,339 shares were issued at a capital contribution and an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-20 which provides guidance on extinguishments of related party debt. Accordingly, extinguishment transactions between related entities are in essence capital transaction, and no gain is recorded in the consolidated statements of operations for the difference between the fair value of ~~$4.03 per share and~~$38,144 which was recorded as equity. Accordingly, upon conversion, the ~~exchange~~Company reduced its derivative liability by $11,629 (see Note 11).

Exercise of Warrants

During the six months ended June 30, 2022, the Company issued 1,284,787 shares of common stock upon the cashless exercise of 3,488,171 warrants.

Issuance of Warrants

On May 25, 2022, the Company granted 33,333 warrants to a third party based on a settlement agreement signed on May 25, 2022 as a compensation concerning the services the third party provided for the Private Placement closed on February 28, 2022. The Company recorded stock-based compensation in the amount of $24,101 upon issuance of the warrants valued using the Black-Scholes option pricing model with the following assumptions: a) common stock fair value of $1.07, b) exercise price of $3.30, c) term of 5.51 years, d) volatility of 107.3%, e) dividend rate of ~~$6.00~~0%, and d) discount rate of 2.71%.

On June 7, 2022, the Company issued 8,619,127 warrants upon triggering the down round protection feature in relation to the warrants issued in connection with the Series A shares with an exercise price of $0.62152 and a term of approximately 5 years. Additionally, the Company lowered the exercise price of the 2,000,000 warrants then outstanding from $3.30 to $0.62152 per ~~share.~~common share upon triggering the down round protection. The Company recorded a deemed dividend in the amount of $8,480,379 in relation to the down round protection feature for the incremental value of the shares issued and lowered exercise price valued using the Black-Scholes option pricing model with the following assumptions: a) common stock fair value of $1.07, b) old exercise price of $3.30 and revised exercise price of $0.62152, c) term of 5.24 years, d) volatility of 121.47%, e) dividend rate of 0%, and d) discount rate of 2.99%.

1921

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

On July 19, 2021, the Company entered into a Debt Exchange Agreement (the “July 19 Agreement”) with Grigorios Siokas, the Company’s Chief Executive Officer (See Note 8). The July 19 Agreement provided for the issuance by the Company of 208,333 shares of common stock, at the rate of $6.00 per share, or an aggregate of $1,250,000, in exchange for $1,250,000 of existing loans by Mr. Siokas to the Company. On July 19, 2021, the fair value of the Company’s shares of common stock was $4.30 per share. For the three and nine months ended September 30, 2021, the Company recorded $1,250,000 as a capital contribution and an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-20 which provides guidance on extinguishments of related party debt. Accordingly, extinguishment transactions between related entities are in essence capital transaction, and no gain is recorded in the consolidated statements of operations for the difference between the fair value of $4.30 per share and the exchange rate of $6.00 per share.

On August 4, 2021, the Company entered into a Debt Exchange Agreement (the “August 4 Agreement”) with a senior institutional lender (the “Lender”), SkyPharm S.A., a wholly-owned Greek subsidiary of the Company, and Grigorios Siokas, the Company’s Chief Executive Officer, as Guarantor. The parties to the Agreement had entered into a senior loan, as amended, as of June 30, 2020 (the “Loan”) pursuant to which the Loan had been reduced to EUR 2,700,000 (the “Debt”). The August 4 Agreement provides for the issuance by the Company of 321,300 shares of common stock (the “Exchange Shares”), at the rate of $5.00 per share, in exchange for the repayment of $1,606,500 (€1,350,000) principal amount effective upon the closing of the Agreement and 238,000 shares at an exchange rate of $5.00 per share, or at market value if the price is above $5.00 per share, upon listing of the Company’s common stock on Nasdaq in exchange for €1,000,000 of the Debt. On August 4, 2021, the fair value of the Company’s shares of common stock was $4.09 per share. For the three and nine months ended September 30, 2021, the Company recorded a gain on the settlement of debt in the amount of $292,383 in the condensed consolidated statements of operations for the difference between the fair value of $4.09 per share and the exchange rate of $5.00 per share. As of September 30, 2021, the Company recorded $1,314,117 as a capital contribution and an increase in equity related to the extinguishment of debt.

~~Debt Conversions~~

On July 14, 2021 and August 16, 2021, the Company issued 55,021 and 71,480, respectively to convert $374,644 of principal and accrued interest, in the aggregate, in accordance with a convertible promissory note issued to Platinum (as defined in Note 10). As of September 30, 2021, the Company recorded $374,644 as a capital contribution and an increase in equity related to the conversion of debt.

~~Potentially Dilutive Securities~~

~~No options, warrants or other potentially dilutive securities have been issued as of September 30, 2021 and December 31, 2020, respectively.~~

NOTE 89 – RELATED PARTY TRANSACTIONS

Doc Pharma S.A.

As of ~~September~~June 30, ~~2021,~~2022, the Company has a prepaid balance of ~~$2,253,351~~$4,120,335 and an accounts payable balance of ~~$81,457,~~$511,143, resulting in a net prepaid balance of ~~$2,171,893~~$3,609,192 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of ~~$2,924,075.~~$2,299,982. As of December 31, ~~2020,~~2021, the Company has a prepaid balance of ~~$3,468,653~~$3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of ~~$3,468,564.~~$2,901,300 and an accounts payable balance of $565,756.

During the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the Company purchased a total of ~~$761,552~~$624,627 and ~~$2,441,256~~$1,091,118 of products from Doc Pharma S.A., respectively. During the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 the Company had ~~$44,950~~$34,132 and ~~$208,625,~~$523,712 in revenue from Doc Pharma S.A., respectively.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

During the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, the Company purchased a total of ~~$2,164,913~~$1,328,435 and ~~$3,994,896, respectively,~~$1,413,924 of products from Doc Pharma S.A., respectively. During the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 the Company had ~~$835,914~~$418,717 and ~~$1,696,904,~~$796,917, in revenue from Doc Pharma S.A., respectively.

On October 10, 2020, the Company entered into a contract manufacturer outsourcing ~~(CMO)~~“CMO” agreement with ~~DOC Pharma~~DocPharma whereby ~~DOC~~Doc Pharma is responsible for the development and manufacturing of pharmaceutical products and nutritional supplements according to the Company’s specifications based on strict pharmaceutical standards and ~~GMP (Good Manufacturing Practice)~~good manufacturing practice (“GMP”) protocols as the National Organization for Medicines requires. The Company has the exclusive ownership rights for trading and distribution of its own branded nutritional supplements named “Sky Premium Life^®”. The duration of the agreement is for 5 years however either party may terminate the agreement at any time giving six-months advance notice. ~~DOC~~Doc Pharma is exclusively responsible for supplying the raw materials and packaging required to manufacture the final product. However, they are not responsible for potential delays that may arise, concerning their import. ~~DOC~~Doc Pharma is obliged to store the raw and packaging materials. The delivery of raw and packaging materials should be purchased at least 30 and 25 days, respectively, before the delivery date of the final product. The Manufacturer solely delivers the finished product to the Company. There is a minimum order quantity ~~(MoQ)~~“MoQ” of 1,000 pieces per product code. Both parties have agreed that the Company will deposit 60% of the total cost upon agreement and assignment and 40% of the total cost including VAT charge upon the delivery date. The prices are indicative and are subject to amendments if the cost of the raw material or the production cost change. ~~As of September~~For the six-month period ended on June 30, ~~2021,~~2022, the Company has purchased € ~~1,535,042.46~~798,353 ($~~1,835,603.77)~~872,489) in inventory related to this agreement.

On May 17, 2021, Doc Pharma and the Company entered into a Research and Development ~~(R&D)~~“R&D” agreement whereby ~~DOC~~Doc Pharma will be responsible for the research, development, design, registration, copy rights and licenses of 250 nutritional supplements for the final products called Sky Premium Life^®. These products will be sold in Greece and abroad. The total cost of this project will be €1,425,000 plus VAT and will be done over three phases as follows: Design & Development (€725,000); Control and Product Manufacturing (€250,000) and Clinical Study and Research (€450,000). In the ~~nine months~~year ended ~~September 30,~~December 31, 2021, SkyPharm bought 67 licenses at value of €261,300 ($~~302,507)~~289,860) from Doc Pharma which was the 18.33% of the total cost. During the three months ended June 30, 2022, SkyPharm bought another 14 licenses at value of €293,200 ($306,951) from Doc Pharma which was the 20.57% of the total cost. SkyPharm has bought in total as of June 30, 2022, 81 licenses at value of € 554,500 ($580,506) which is the 38.91% of the total cost. The agreement will be terminated on December 31, 2025.

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.

Table of Contents

Notes Payable – Related Party

A summary of the Company’s related party notes payable as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is presented below:

	2021			2020			June 30, 2022			December 31, 2021

Beginning balance	$	501,675		$	1,375,532		$	464,264		$	501,675
Payments		0			(996,136	)
Foreign currency translation		(26,786	)		122,279			(34,826	)		(37,411	)
Ending balance	$	474,889		$	501,675		$	429,438		$	464,264

Grigorios Siokas

On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum, ~~and~~ matured on March 18, 2019 pursuant to the original ~~agreement.~~agreement and was extended until December 31, 2021. The note is not in default and the maturity date has been extended again until December 31, ~~2021.~~2023. As of December 31, ~~2020,~~2021 the ~~note~~Company had an outstanding ~~principal~~ balance of €400,000 ($~~489,200)~~452,720) and accrued interest of ~~€158,287~~€177,313 ($~~193,585)~~200,683). As of ~~September~~June 30, ~~2021,~~2022, the Company has an outstanding balance of €400,000 ($~~463,080)~~418,760) and accrued interest of ~~€207,814~~€186,645 ($~~240,586)~~195,399).

Grigorios Siokas is the Company’s CEO and principal shareholder.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

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. As of December 31, ~~2020,~~2021, the Company had a principal balance of €10,200 ($~~12,475)~~11,544). A principal balance of €10,200 ($~~11,809)~~10,678) remained as of ~~September~~June 30, ~~2021.~~2022.

Dimitrios Goulielmos is a current director and former CEO of the Company.

The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022, the Company recorded a ~~loss~~gain of ~~$26,786.~~$34,826.

Loans Payable – Related Party

A summary of the Company’s related party loans payable during the ~~nine~~six months ended ~~September~~June 30, ~~2021,~~2022, and the year ended December 31, ~~2020~~2021 is presented below:

	2021			2020			June 30, 2022			December 31, 2021

Beginning balance	$	1,629,246		$	1,026,264		$	1,293,472		$	1,629,246
Proceeds		5,830,757			725,563			526,612			6,377,156
Payments		(122,716	)		(149,695	)		(449,643	)		(133,552	)
Conversion of debt		(5,250,001	)		0			0			(6,000,000	)
Settlement of lawsuit		(600,000	)		-			0			(600,000	)
Foreign currency translation		4,846			27,114			(88,639	)		20,623
Ending balance	$	1,492,132		$	1,629,246		$	1,281,802		$	1,293,472

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, ~~2020,~~2021, the Company had an outstanding principal balance under these loans of ~~$1,629,246~~$1,293,472 in loans payable to Grigorios Siokas.

~~On May 10, 2021,~~During the six months ended June 30, 2022, the Company ~~entered into a Debt Exchange agreement (“May Debt Exchange”) related to a lawsuit from on or about July 25, 2019, whereby Mark Rubenstein, individually~~borrowed additional proceeds of €407,500 ($426,612), and ~~as a shareholder~~$100,000 and repaid €429,500 ($449,643) of ~~the Company, brought the action styled~~ ~~Rubenstein v. Siokas, et al.~~, Case No. 1:19-cv-06976-KPF (S.D.N.Y.) against Grigorios Siokas for recovery of alleged profits earned under Section 16(b) of the Securities Exchange Act of 1934. Although recovery was sought only from Mr. Siokas, the Company was also named as a nominal defendant. Both the Company and Mr. Siokas vigorously defended the lawsuit. On or about September, 18, 2020, in an effort to avoid the uncertainty of litigation and further legal expense, Mr. Siokas agreed to settle the lawsuit by agreeing to reimburse the Company a total of six hundred thousand ($600,000) dollars, payable as a combination of: (1) Mr. Siokas reimbursing the Company for Plaintiff’s attorneys’ fees, in an amount subsequently determined by the Court to be $120,000 plus $4,137 of litigation costs to be paid in cash, and (2) Mr. Siokas relieving the Company of certain debt owed to him. Mr. Siokas and the Company strongly opposed Plaintiff’s motion for attorneys’ fees. The Company has accrued the Plaintiff’s attorney’s fees and the balance as of September 30, 2021 was $124,137 and is included in accounts payable and accrued expenses on the balance condensed consolidated balance sheet. Pursuant to the terms of the May Debt Exchange the Company forgave $600,000 of the existing loan payable and recorded the forgiveness to additional paid in capital.these loans.

2223

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

On June 23, 2021, the Company entered into an exchange agreement (“June Exchange Agreement”) with Mr. Siokas whereby an aggregate total of $3,000,000 of these outstanding loans were converted into 500,000 shares of the Company’s common stock. On July 13, 2021, the Company entered into an exchange agreement with Mr. Siokas whereby an aggregate total of $1,000,000 of outstanding loans were converted into 166,667 shares of the Company’s common stock. On July 19, 2021, the Company entered into an exchange agreement with Mr. Siokas whereby an aggregate total of $1,250,000 of outstanding loans were converted into 208,333 shares of the Company’s common stock.

During the nine months ended September 30, 2021, the Company borrowed additional proceeds of €1,350,000 ($1,562,895), €230,000 ($275,306) and $3,993,380 and repaid €106,000 ($122,716) of these loans. Included in the $3,993,380 is a convertible promissory note issued to Mr. Siokas on July 20, 2021 for $2,000,000 in exchange for $2,000,000 in cash proceeds (the “July 20 Note”). The July 20 Note bears no interest and is convertible at anytime into shares of the Company’s common stock at a conversion rate that exceeds the then current market price of the Company’s common stock. The Company determined that the conversion feature is equity in nature and that no beneficial conversion feature exists. The July 20 Note is carried at face value. During the period ending September 30, 2021, the Company converted $1,250,000 of the July 20 Note at a conversion price of $6.00 and issued 208,333 shares of common stock. As of September 30, 2021, the Company had an outstanding balance under these notes and loans of $1,492,132. Of the $1,492,132 outstanding balance, $750,000 is convertible in accordance with the July 20 Note.

The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 the Company recorded a gain of ~~$4,846.~~$88,639.

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.

NOTE 910 – LINES OF CREDIT

A summary of the Company’s lines of credit as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020~~2021 is presented below:

	September 30, 2021		December 31, 2020		June 30, 2022			December 31, 2021
National	$	2,726,522	$	3,540,550	$	2,651,660		$	3,265,236
Alpha		1,033,174		1,106,894		811,432			947,333
Pancretan		481,759		0
Pancreta						790,193			489,985
National – COVID		425,869		429,240		314,885			407,174
Total	$	4,667,324	$	5,076,684
EGF						419,335			0
Subtotal						4,987,505			5,109,728
Reclassification of National-COVID – Long-term						(191,825	)		(366,171	)
Ending balance					$	4,795,680		$	4,743,557

The line of credit with National Bank of Greece is renewed annually with current interest rates of 6.00%, 4.35% (“COSME 2” facility) and 4.35% (plus the 6-month Euribor plus any contributions currently in force by law on certain lines of credit), (“COSME 1” facility).

The maximum borrowing allowed for the 6% line of credit was ~~$2,546,940~~$3,114,527 and ~~$2,690,600~~$2,489,960 as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The outstanding balance of the facility was ~~$1,699,167~~$1,685,579 and ~~$2,411,182,~~$2,185,413, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

The maximum borrowing allowed , for the 4.35% lines of credit, was ~~$1,157,700~~$1,046,900 and ~~$1,223,000~~$1,131,800 as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The outstanding balance of the facilities was ~~$1,027,355~~$966,081 and ~~$1,129,368~~$1,079,823 as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, 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 ~~$1,157,700~~$1,046,900 and ~~$1,123,000~~$1,131,800 as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively. The outstanding balance of the facility was ~~$1,033,174~~$811,432 and ~~$1,106,894,~~$947,333, as of ~~September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, respectively.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

The Company entered into a line of credit with Pancreta Bank on February ~~23,2021.~~23, 2021. The line of credit is renewed annually with a current interest rate of 6.10%. The maximum borrowing allowed as of ~~September~~June 30, 2022 and December 31, 2021 was ~~$578,850.~~$1,046,900 and $565,900, respectively. The outstanding balance of the facility as of ~~September~~June 30, 2022 and December 31, 2021, was ~~$481,759.~~$790,193 and $489,985, respectively.

The Company entered into a line of credit with EGF on June 06, 2022. The line of credit is renewed annually with a current interest rate of 4.49%. The maximum borrowing allowed as of June 30, 2022 was $418,760. The outstanding balance of the facility as of June 30, 2022 was $419,335.

Interest expense for the ~~three-month period~~three months ended ~~September 30,~~March 31, 2022 and 2021, was $17,175 and ~~2020, was $11,656~~$16,501, respectively and ~~$31,559, respectively.~~

~~Interest expense~~ for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, was $133,786 and ~~2020, was $165,245 and $141,979,~~$153,589, 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. As of ~~the periods ended September~~June 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company was in compliance with these ratios and covenants.

Table of Contents

The ~~Lines~~above lines of credit are guaranteed and backed by customer receivable checks and they are not considered to be a direct debt obligation for the Company. They are a type of factoring, where the postponed customer checks are assigned by the Company to the bank, in order to be financed at a pre-agreed rate.

COVID-19 Government Funding

On June 23, 2020, the Company’s subsidiary, Cosmofarm, 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 was paid in 3 equal monthly installments. 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 $425,869 and $429,240 at September 30, 2021 and December 31, 2020.

Interest expense for ~~the three and nine~~six months ended ~~September~~June 30, 2022 and 2021 was ~~$0.~~$378 and $0, respectively.

NOTE 1011 – CONVERTIBLE DEBT

A summary of the Company’s convertible debt ~~during the nine months ended September~~at June 30, ~~2021~~2022 and ~~the year ended~~ December 31, ~~2020~~2021 is presented below:

	2021			2020			June 30, 2022			December 31, 2021

Beginning balance convertible notes	$	1,447,000		$	1,500,000		$	640,000		$	1,447,000
New notes		625,000			540,000			0			625,000
Payments		(529,000	)		(593,000	)		0			(907,000	)
Conversion to common stock		(350,000	)					(15,000	)		(525,000	)
Subtotal notes		1,193,000			1,447,000			625,000			640,000
Debt discount at year end		(407,206	)		(494,973	)		(5,744	)		(258,938	)
Convertible note payable, net of discount	$	785,794		$	952,027		$	619,256		$	381,062

All of the convertible debt is classified as short-term within the condensed consolidated balance sheet as it all matures and will be paid back within fiscal year ~~2021.~~

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

~~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”), as amended on March 23. 2020 and September 23, 2020. 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.

On June 18, 2021, the Company modified the terms of its outstanding debt by entering into a Third Forbearance Agreement (the “Third 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. 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): November 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 November 16, 2021. The Scheduled Required Prepayments are $62,000 upon the first scheduled required prepayment and five (5) payments thereafter aggregating $287,000 with the remainder outstanding under the Note due on November 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 Company performed an analysis to determine if at least a 10% difference between the present value of the new loan’s cash flows and the present value of the old loan’s remaining cash flows and determined that yes there is more than a 10% difference. The Company will experience a cash flow increase of approximately 15% due to the modification; therefore, the cash flow is considered substantially different, and the Company has applied extinguishment accounting.

As of December 31, 2019, the Company had a principal balance of $907,000 on the May 2019 Note and the Company had accrued $15,420 in interest expense. During the nine months ended September 30, 2021, the Company repaid $529,000 such that as of September 30, 2021, the Company had a principal balance $378,000 on the May 2019 Note and the Company had accrued $9,570 in interest expense.2022.

December 21, 2020 Securities Purchase Agreement

On December 21, 2020 ~~(the “Issue Date”), Cosmos Holdings, Inc. (“Cosmos”,~~ the ~~“Borrower” or the “Company”)~~Company entered into a convertible promissory note with Platinum Point Capital, LLC (the “Holder”, “Lender” or “Platinum”) pursuant to a Securities Purchase Agreement (the “SPA”).

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~~had not been converted or have not been otherwise satisfied in full or (ii) an Event of Default (as defined in the SPA) 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)~~in the SPA) or (iii), an Event of Default ~~(as defined below)~~ (collectively, the “Maturity Date”).

~~On July 14, 2021 and August 16,~~During the year ended December 31, 2021, the Company converted an aggregate total of ~~$350,000~~$525,000 in principal and ~~$24,144~~$25,144 in accrued interest and fees into ~~126,501~~213,382 shares of the Company’s common stock at an average price per share of ~~$2.98. As~~$2.58. Upon conversion, the 213,382 shares were issued at a fair value of ~~September 30, 2021,~~$959,024 which was recorded as equity. Accordingly, upon conversion, the Company ~~had~~reduced its outstanding debt by $550,144, reduced its derivative liability by $284,169, and recorded a ~~principal balance~~loss on extinguishment of ~~$190,000 and had accrued $3,156 in interest expense.~~$124,711.

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes~~On May 1, 2022 the Company issued 39,339 shares of common stock to ~~Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~convert $26,515 principal and accrued interest. Following the conversion, the outstanding balance of the above Note is $0. Upon conversion, the 39,339 shares were issued at a fair value of $38,144 which was recorded as equity. Accordingly, upon conversion, the Company reduced its derivative liability by $11,629 (see Note 8).

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~~determined a derivative liability exists 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. ~~For~~As of June 30, 2022 and December 31, 2021 the ~~three and nine months ended September 30, 2021, $71,641 and $109,865, respectively~~full amount of the debt discount has been amortized. As of ~~September~~June 30, 2022 and December 31, 2021, the fair value of the derivative liability was ~~$88,576. The Company recorded a decrease in~~$0 and $5,822, respectively. For the ~~derivative of $194,784 related to the conversion, which was recorded to additional paid-in capital and for the three and nine~~six months ended ~~September~~June 30, 2022 and 2021, the Company ~~recorded~~record a ~~gain of $111,581 and $177,369, respectively from~~loss on the change in fair value of the derivative ~~liability as other income in the consolidated statements~~ of ~~operations~~$5,807 and ~~comprehensive income (loss).~~$65,787, respectively.

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~~matured on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or (ii) October 31, 2021.

Table of Contents

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. As of ~~September~~June 30, ~~2021,~~2022, the Company had a principal balance of $100,000 and had accrued ~~$5,736~~$11,739 in interest expense.

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 January 7, 2021 and determined that the~~ embedded derivative ~~was~~ valued at $62,619 which was recorded as a debt discount and additional paid-in capital and is being amortized over the life of the loan. ~~For~~As of June 30, 2022 and December 31, 2021, $62,619 of the ~~nine months ended September 30, 2021, $29,223~~debt discount has been amortized. As of ~~September~~June 30, 2022 and December 31, 2021, the fair value of the derivative liability was ~~$26,497~~$41,292 and ~~for~~$39,843, respectively. For the ~~three and nine~~six months ended ~~September~~June 30, ~~2021,~~2022, the Company recorded a ~~gain~~loss of ~~$14,040 and $36,122, respectively~~$1,449 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss). compared to a gain of $22,082 for the 6 month period ended June 30, 2021.

Convertible Promissory Note and Securities Purchase Agreement

On September 17, 2021 (the “Issue Date”), the Company entered into a convertible promissory note and securities purchase agreement with an unaffiliated third party.

Convertible Promissory Note

The Company issued the convertible promissory note for a purchase price of $525,000 in principal amount for cash proceeds of $500,000. The note was issued with an original issue discount (“OID”) of $25,000, bears an interest rate of 10% per annum and matures on the earlier of (i) the consummation of the Company listing its common shares on the Nasdaq Stock ~~Exchange~~Market or (ii) September 17, 2022.

Upon the consummation of a Nasdaq listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 30% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the Nasdaq listing, subject to a conversion floor of $3.00. The Company determined that the embedded conversion feature of the convertible promissory note meets the definition of a beneficial conversion feature which is accounted for ~~separately.~~separately as of December 31, 2021. The Company measured the beneficial conversion feature’s intrinsic value on September 17, 2021, at $294,000 which, together with the OID of $25,000 was recorded as a debt discount and is being amortized over the life of the loan. On January 1, 2022, the Company adopted ASU 2020-06 using the modified retrospective method. As a result of the adoption, on January 1, 2022, the Company recorded an increase to additional paid-in capital of $294,000 and a decrease to accumulated deficit of $53,248. For the ~~nine months~~year ended ~~September 30,~~December 31, 2021, ~~$7,161~~$60,063 of the debt discount has been amortized. As of ~~September 30,~~December 31, 2021, the Company had accrued a principal balance of $525,000, had accrued ~~$2,041~~$15,166 in interest expense, and had remaining debt discount of ~~$311,839~~$258,938 which resulted in a net convertible note payable of ~~$213,161.~~

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~$266,063.

~~Securities Purchase Agreement~~For the six months ended June 30, 2022, $294,000 of the debt discount was reduced and recorded as a reduction to additional paid-in capital and has been amortized. As of June 30, 2022, the Company had accrued a principal balance of $525,000, had accrued $41,416 in interest expense, and had remaining debt discount of $5,744 which resulted in a net convertible note payable of $519,256.

On September 17, 2021, the Company entered into a Securities Purchase Agreement (the “SPA”) with the third party whereby the Company agree to issue 5,000,000 shares of Series A Preferred Stock at a purchase price of $1.00 per share or $5,000,000 in the aggregate, and a Warrant (the “Warrant”) to purchase 100% of the number of shares of the Company’s Common Stock issuable upon conversion of the Series A Preferred Stock. The Series A Preferred Stock will be convertible into the Company’s Common Stock as determined by multiplying the number of shares of Series A Preferred Stock to be converted by the lower of (i) $4.00 or (ii) 80% of the average volume weighted average price for the Company’s Common Stock for the five (5) days prior to the date of Uplisting, subject to a floor of $3.00 per share. The shares of common stock issuable upon conversion of Series A Preferred Stock and exercise of the Warrants are subject to a Registration Right Agreement. The Warrant has an exercise price equal to 110% of the Conversion Price of the Series A Preferred Stock and expires five (5) years from the date of issuance.

The SPA is subject to certain conditions to close. As of September 30, 2021 and the date of this filing, the conditions to close had not been met, the funds have not been transferred, the preferred shares and the warrant was not issued.

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 three ~~and nine~~ months ended ~~September~~June 30, ~~2021:~~2022:

	Amount			Amount
Balance on December 31, 2020	$	460,728
Balance on January 1, 2022				$	45,665
Issuances to debt discount		62,619			0
Reduction of derivative related to conversions		(194,784	)		(11,629	)
Change in fair value of derivative liabilities		(213,490	)		7,255
Balance on September 30, 2021	$	115,073
Balance on June 30, 2022				$	41,291

The fair value of the derivative conversion features and warrant liabilities as of ~~September~~June 30, 2022 and December 31, 2021 were calculated using a Monte-Carlo option model valued with the following assumptions:

	~~September 30,~~ ~~2021~~
~~Dividend yield~~		0	%
~~Expected volatility~~		~~70.3%-139.0~~	%
~~Risk free interest rate~~		~~0.15%-0.18~~	%
~~Contractual terms (in years)~~		~~0.08 – 0.75~~

	June 30,			December 31,
	2022			2021
Dividend yield		0	%		0	%
Expected volatility		113.3	%	106.8%-107.3%
Risk free interest rate		2.37	%	0.41%-0.44%
Contractual terms (in years)		.50		.50 – .52

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

NOTE 1112 – DEBT

A summary of the Company’s third-party debt ~~during the nine months ended September~~as of June 30, ~~2021~~2022 and ~~the year ended~~ December 31, ~~2020 is~~2021 presented below:

September 30, 2021	Loan Facility			Trade Facility			Third Party			COVID Loans			Total
June 30, 2022																Loan Facility			Trade Facility			Third Party			COVID Loans			Total
Beginning balance	$	3,302,100		$	6,446,000		$	12,631,284		$	435,510		$	22,814,594		$	1,299,784		$	6,207,010		$	10,077,977		$	234,117		$	17,818,888
Proceeds		0			0			578,850			0			578,850			0			0			335,008			0			335,008
Payments		(266,271	)		0			(32,159	)		(1,935	)		(300,365	)		(157,663	)		(207,035	)		(2,085,132	)					(2,449,830	)
Conversion of debt		(1,606,500	)		0			(3,010,000	)		0			(4,616,500	)		(1,190,000	)		0						0			(1,190,000	)
Recapitalized upon debt modification																	0			(129,002	)		(1,003,200	)		0			(1,132,202	)
Accretion of debt																	77,551			0						0			77,751
Foreign currency translation		(132,705	)		(130,600	)		(33,172	)		(20,497	)		(316,974	)		45,676			(105,056	)		(80,863	)		(19,109	)		(159,352	)
Subtotal		1,296,624			6,315,400			10,134,803			412,778			18,159,605			75,348			5,765,917			7,243,790			215,008			13,300,063
Reclass of long-term portion of debt					(2,083,860	)		(936,986	)		0			(3,020,846	)
Ending Balance	$	1,296,624		$	4,231,540		$	9,197,817		$	424,470		$	15,138,759
Notes payable - long-term																	0			0			(992,289	)		(187,337	)		(1,179,626	)
Notes payable - short-term																$	75,348		$	5,765,917		$	6,251,501		$	27,671		$	12,120,437

December 31, 2020	Loan Facility			Bridge Loans			Trade Facility			Third Party			COVID Loans		Total
December 31, 2021																		Loan Facility			Trade Facility			Third Party			COVID Loans			Total
Beginning balance	$	3,078,442		$	191,287		$	6,245,400		$	2,514,595		$	0	$	12,029,724		$	3,302,100		$	6,446,000		$	12,631,284		$	435,210		$	22,814,594
Proceeds		0			0			0			16,121,500			435,210		16,556,710			0			0			565,900			0			565,900
Payments		0			(191,287	)		0			(5,006,115	)		0		(5,230,725	)		(141,475	)		(57,835	)		(62,878	)		(3,233	)		(265,421	)
Conversion of debt											(807,795	)				(807,795	)		(1,606,500	)		0			(3,010,000	)		0			(4,616,500	)
Debt extinguishment		(12,066	)		0			0			(192,205	)		0		(204,271	)
Recapitalized upon debt modification																			(86,670	)		0			0			0			(86,670	)
Debt forgiveness																			0			0			0			(169,770	)		(169,770	)
Foreign currency translation		269,047			0			200,600			1,304			0		470,951			(167,671	)		(181,155	)		(46,329	)		(28,090	)		(423,245	)
Subtotal		3,302,100			0			6,446,000			12,631,284			435,210		22,814,594			1,299,784			6,207,010			10,077,977			234,117			17,818,888
Reclass of long-term portion of debt		(2,843,475	)		0			(2,384,850	)		(5,543,557	)		0		(10,771,882	)
Ending Balance	$	458,625		$	0		$	4,061,150		$	7,087,727		$	435,210	$	12,042,712
Notes payable - long-term																			0			(2,450,000	)		(9,854,906	)		(51,478	)		(12,356,384	)
Notes payable - short-term																		$	1,299,784		$	3,757,010		$	223,071		$	182,639		$	5,462,504

Our outstanding debt as of June 30, 2022 is repayable as follows:
	June 30, 2022
2022	$	3,140,672
2023		10,264,053
2024		338,399
2025		342,531
2026 and thereafter		340,992
Total debt		14,426,647
Less: fair value adjustments to assumed debt obligations		(1,126,584	)
Less: notes payable - current portion		(12,120,437	)
Notes payable - long term portion	$	1,179,626

Table of Contents

Loan Facility Agreement

On June 30, 2020, SkyPharm entered into a settlement agreement on an existing loan facility agreement with Synthesis Peer-to-Peer Income Fund, whereby the Company agreed to make certain payments to the creditor and the creditor will accept such payments as full discharge of outstanding debt. 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 10^th day of each calendar month. If any amount of 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 that the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the $3,828,630 of principal and accrued interest of $168,732, or an aggregate of $3,997,362 was written off and the new debt was recorded at fair value in the amount of $3,033,990.

On August 4, 2021, the Company entered into an exchange agreement for the existing loan facility agreement with Synthesis Peer-to-Peer Income Fund, whereby the Company agreed to the following:

	·	Issue on August 4, 2021, 321,300 shares of common stock to settle $1,606,500 (€1,350,000) of debt. The Company recorded a gain on settlement of $292,383 upon the issuance of the 321,300 shares

	·	Agreed to issue no more than 238,000 shares of common stock upon approval of the listing of the Company’s common stock ~~to the~~on Nasdaq to settle $1,190,000 (€1,000,000) of debt. The Company issued these shares on February 28, 2022. Upon issuance of the 238,000 shares of common stock, the Company recorded a gain on extinguishment of debt in the amount of $216,580 determined using the fair value of the Company’s common stock at the commitment date of $4.09 per share.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

The Company evaluated the August 4, 2021, exchange agreement for debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment because a substantial conversion feature was added to the debt terms. Upon extinguishment, the Company recorded a ~~gain~~loss upon extinguishment in the amount of ~~$48,189~~$6,642 and recorded the new debt at fair value based on the present value of future cash flows using a discount rate of 11.66%. As of June 30, 2022 and December 31, ~~2020,~~2021, the Company has accrued interest expense of ~~$33,021~~$17,244 and $4,414, respectively, 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. As of September 30, 2021, the Company has accrued interest of $22,518, repaid $266,271 of principal$75,271 and ~~the principal balance of the debt is $1,263,107,~~$1,299,784, respectively, which is classified as Notes payable on the unaudited condensed 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.

During Q2 2022, the Company informally agreed with the Lender to extend the maturity of the facility to September 30, 2022. The Company reassessed and adjusted accordingly the accretion of the debt extinguishment effect described above.

Trade Facility Agreements

On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility”) with Synthesis Structured Commodity Trade Finance Limited (the “Lender”) as amended on November 16, 2017, and May 16, 2018.

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~~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~~USD $4,000,000 loan ~~matures~~matured on August 31, 2021. ~~The~~On March 3^rd 2022, the Company ~~evaluated~~entered into an extension to the ~~amended~~facility agreement. Based on the updated repayment terms, the facility’s final repayment date was extended to January 2023. During June 2022, the Company agreed with the Lender to postpone the repayment of an installment of $500,000 due on June 30, 2022 (based on the extension agreement ~~under ASC 470-50~~signed on March 3^rd, 2022) and ~~concluded that~~settle it ~~did not meet~~with the ~~10% cash flow test and recorded debt modification expense of $138,110.~~balloon repayment in January 2023.

AsOn 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.

During the year ended December 31, 2021, the Company repaid €50,000 ($56,508) of the €2,000,000 balance such that as of December 31, ~~2020,~~2021, the Company had principal balances of ~~€2,000,000~~€1,950,000 ($~~2,446,000),~~2,207,010) and $4,000,000 under the agreements, of which ~~$2,384,850~~$2,450,000 is classified as ~~Notes payable – long~~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,~~$10,466 in interest expense related to these agreements. As

Table of Contents

On March 3, 2022, the Company entered into a modification agreement to extend the maturity date to January 10, 2023 and payments under the $4,000,000 loan. The loan was considered a modification under ASC 470-50 because the change in the present value of ~~September~~cash flows is less than 10%. During June 2022, the Company agreed with the Lender to postpone the repayment of an installment of $500,000 due on June 30, ~~2021,~~2022 (based on the extension agreement signed on March 3^rd, 2022) and settle it with the balloon repayment in January 2023. Based on the updated cash flow test performed, the change in the present value of the cash flows was again less than 10% and the change is considered a modification. The Company capitalized fees paid upon modification of €200,000 that are being amortized over the life of the loan. During the six months ended June 30, 2022, the Company repaid €100,000 ($104,690) of the €1,950,000 balance and $50,000 of the $4,000,000 balance such that as of June 30, 2022, the Company had principal balances of ~~€2,000,000~~€1,850,000 ($~~2,315,400), of which $2,083,860 is classified as Notes payable – long term portion on the consolidated balance sheet,~~1,936,765) and ~~$4,000,000~~$3,829,235 under the agreements ~~and~~which are recorded as short term. As of June 30, 2022, the Company had accrued ~~$10,993 and $57,026 respectively,~~$17,434 in interest expense related to these agreements.

Third Party Debt

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, ~~2020, the Company had an outstanding principal balance of €8,000 ($9,784) and accrued interest of €4,785 ($5,852). As of September 30,~~ 2021, the Company had an outstanding principal balance of €8,000 ($~~9,262)~~9,054) and accrued interest of ~~€6,192~~€6,318 ($~~7,168)~~7,151). As of June 30, 2022, the Company had an outstanding principal balance of €8,000 ($8,375) and accrued interest of €6,557 ($6,865).

~~Conversion of Prior Year Senior Promissory Notes~~

In the years ending December 31, 2019 and 2020, the Company executed Senior Promissory Notes (the “Debt”) in an aggregate total of $3,010,000 to an unaffiliated third-party lender (the “Lender”). As of December 31, 2020, the Company had a principal balance of $3,010.00 on this Debt and the Company had accrued $527,604 in interest expense. As of February 5, 2021, The Company entered into an Amended and Restated Debt Exchange Agreement (the “Agreement”) with the “Lender that provided 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 of existing loans made by the Lender to the Company. The market price at the time this Agreement was negotiated was $3.28 per share and the Company recorded a gain on debt extinguishment of $445,636.

All accrued and unpaid interest, $563,613 as of September 30, 2021, 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.

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

May 18, 2020, ~~and~~ July 3, 2020, and August 4, 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 ~~$2,000,000payable~~$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 ~~September 30, 2021 and~~ December 31, ~~2020,~~2021 the Company had a principal balance of $2,000,000 on this ~~note.~~note, which is classified as Notes payable long-term portion on the consolidated balance sheet.

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 ~~$5,000,000payable~~$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 18 Note ($2,000,000), the May 18 Note ($2,000,000), and the February Note ($1,000,000). As of ~~September 30, 2021 and~~ December 31, ~~2020,~~2021, the Company had a principal balance of $5,000,000 on this ~~note.~~note, which is classified as Notes payable – long term portion on the consolidated balance sheet.

As of ~~September 30, 2021 and~~ December 31, ~~2020,~~2021, the Company ~~has~~had accrued an aggregate total of ~~$151,427~~$210,574 in ~~prepaid interest and $146,685 in accrued~~ interest expense ~~respectively,~~ 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 matured on December 31, ~~2020 unless in default. The note is not in default and the Company is in negotiations with the lender to extend the maturity date.~~2020.

Table of Contents

The August 4 Note is subject to acceleration in an Event of Default (as defined). 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~~continued 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. As of ~~September 30,~~December 31, 2021, the Company had a principal balance of $2,000,000 on this note, which is classified as Notes payable – long term portion on the consolidated balance sheet, and ~~$129,072~~$60,166 in ~~prepaid~~accrued interest expense. ~~The note is not in default~~

Modification of May 18, 2020, July 3, 2020, and August 4, 2020 Senior Promissory Notes

On February 23, 2022, the Company ~~is in negotiations with the lender~~entered into modification agreements to extend the ~~maturity date.~~

~~Table of Contents~~

~~COSMOS HOLDINGS, INC.~~

~~Notes~~due dates of the May 18 Note, July 3 Note, and August 4 Note to ~~Unaudited Condensed Consolidated Financial Statement~~

~~September~~June 30, ~~2021~~2023 of $9,000,000, in the aggregate. The Company paid restructuring fees totaling $506,087 upon modification. The Company determined the modification should be recorded as debt extinguishment in accordance with ASC 470 because the present value of the remaining cash flows under the terms of the new debt instrument is at least 10% different from the present value of the remaining cash flows under the terms of the original instrument. The Company recorded the new debt at fair value in the amount of $7,706,369 and a gain upon extinguishment in the amount of $787,544. During the six months ended June 30, 2022, the Company made principal payments in the amount of $2,000,000 and recorded non-cash interest expense in the amount of $290,431 for the accretion of debt. As of June 30, 2022, the Company had a principal balance of $5,996,800 in relation to the May 18 Note, July 3 Note, and August 4 Note, in the aggregate. As of June 30, 2022, the Company has accrued an aggregate total of $757,478 of accrued interest on these notes, in the aggregate.

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 principal repayment. The principal is to be repaid in 18 quarterly installments of ~~€27,000~~€27,778 with the first payment due 9 months from the first deposit. AsDuring the year ended December 31, 2021, the Company repaid €55,556 ($62,878) of the principal and as of December 31, ~~2020,~~2021, the Company ~~had no~~has accrued interest of $5,642 related to this note and a principal balance of ~~€500,000~~€444,444 ($~~611,500)~~503,022), of which ~~$543,557~~$377,270 is classified as Notes payable – long term portion on the consolidated balance sheet. ~~As of September~~During the six months ended June 30, ~~2021,~~2022, the Company repaid ~~$32,158~~€55,556 ($58,161) of the principal and as of June 30, 2022, the Company has accrued interest of ~~$5,642~~$8,850 related to this note and a principal balance of ~~€472,222~~€388,889 ($~~546,692)~~407,128), of which ~~$418,062~~$290,806 is classified as Notes payable – long term portion on the accompanying condensed consolidated balance ~~sheet.~~sheet

July 30, 2021 Debt Agreement

On July 30, 2021, the Company entered into an agreement with a third-party lender in the principal amount of €500,000 ($578,850). The note matures on August 5, 2026 and bears an annual interest rate that applies to 60% of the principal of the note that is based on a 365-day year, of 5.84% plus 3-month Euribor when Euribor is positive. Pursuant to the terms of the agreement, there is a six-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 18 quarterly installments of ~~€27,000~~€27,778 commencing three months from the end of the grace period. As of ~~September 30,~~December 31, 2021, the Company has accrued interest of ~~$3,167~~$3,100 and a principal balance of €500,000 ($~~578,850)~~565,900), of which ~~$518,924~~$477,637 is classified as Notes payable – long term portion on the consolidated balance sheet. As of June 30, 2022, the Company has accrued interest of $2,721 and a principal balance of €474,231 ($496,473), of which $386,181 is classified as Notes payable – long term portion on the accompanying condensed consolidated balance sheet.

Table of Contents

June 9, 2022 Debt Agreement

On June 9, 2022 the Company entered into an agreement with a third-party lender in the principal amount of €320,000 ($335,008). The Note matures on June 16, 2027 and bears an annual interest of 3.89% plus levy of 0.60% plus the 3-month Euribor (when positive). Pursuant to the agreement, there is a twelve-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 17 equal quarterly installments of €18,824 commencing on June 30, 2023. As of June 30, 2022 the Company has accrued interest of $618 and an outstanding balance of €320,000 ($335,008), of which $315,302 is classified as Notes payable – long term portion on the accompanying condensed consolidated balance sheet.

COVID-19 Government Loans

On May 12, 2020, the ~~Company~~Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($~~337,110)~~366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly ~~instalments~~installments beginning on ~~January 1, 2022 and bears an interest rate of 0.94% per annum.~~July 29, 2022. As a condition to the loan, the ~~company is~~Company was required to retain the same number of employees until October 31, 2020. ~~The~~During the year ended December 31, 2021, the Company received a waiver of 50% forgiveness of the loan and recorded $177,450 as other income. As of December 31, 2021 the principal balance aswas $169,770. As of ~~September~~June 30, ~~2021~~2022, the principal balance was ~~$347,310.~~$157,035.

On June 24, 2020,the Company received a loan £50,000 ($~~61,845)~~68,310) from the United Kingdom government. The loan has a ~~six-year~~ten-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. The Company repaid ~~$1,935~~£2,335 ($3,233) of principal during the ~~nine months~~year ended ~~September 30,~~December 31, 2021, and the balance as of ~~September 30,~~December 31, 2021 was ~~$65,468.~~£47,665 ($64,347). As of June 30, 2022, the principal balance was £47,665 ($57,974).

Distribution and Equity Agreement

As discussed in Note 3 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 ~~$6,500,000and~~$6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000.

As discussed in Note 3, 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, 2019, the Company would be required to issue ~~337,949~~2,506,127 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

financial instruments issued by the Company were not affected.

None of the above loans were made by any related parties.

3132

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

NOTE 1213 – LEASES

The Company has various lease agreements with terms up to 10 years, comprising leases of office ~~space.~~space, cars leases for the distribution of pharmaceutical products, equipment hires, etc. 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 on the date of inception.

Operating Leases

The Company’s weighted-average remaining lease term relating to its operating leases is ~~6.63~~5.83 years, with a weighted-average discount rate of 6.74%.

The Company incurred lease expense for its operating leases of ~~$146,831~~$108,198 and ~~$148,218~~$99,610 which was included in “General and administrative expenses,” for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of ~~September~~June 30, ~~2021.~~2022.

Maturity of Lease Liability
Remainder of 2021	$	63,464
2022		223,010
Remainder of 2022				$	104,097
2023		198,872			208,195
2024		116,255			208,195
2025		112,144			136,952
Thereafter		421,509			380,823
Total undiscounted operating lease payments	$	1,135,254		$	1,038,262
Less: Imputed interest		(221,621	)		(180,239	)
Present value of operating lease liabilities	$	913,633			858,023

Finance leases

The Company’s weighted-average remaining lease term relating to its finance leases is ~~3.44~~1.92 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 ~~September~~June 30, ~~2021.~~2022.

Maturity of Lease Liability
Remainder of 2021	$	26,268
2022		93,492
Remainder of 2022				$	48,385
2023		80,119			87,349
2024		62,191			71,591
2025		31,959			43,547
Thereafter		2,005			24,868
Total undiscounted finance lease payments	$	296,034		$	275,740
Less: Imputed interest		(32,795	)		(28,403	)
Present value of finance lease liabilities	$	263,239		$	247,337

The Company incurred interest expense on its finance leases of $7,333 which was included in “Interest expense,” for the six months ended June 30, 2022. The Company incurred amortization expense on its finance leases of $39,606 which was included in “Depreciation and amortization expense,” for the six months ended June 30, 2022. The total cash used for the Company’s finance leases for the three months ended June 30, 2022 amounted to $43,804.

3233

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

The Company incurred interest expense on its finance leases of $9,995 which was included in “Interest expense,” for the nine months ended September 30, 2021. The Company incurred amortization expense on its finance leases of $80,287 which was included in “Depreciation and amortization expense,” for the nine months ended September 30, 2021.

NOTE 1314 – 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 ~~September~~June 30, ~~2021, there~~2022, the following litigations were ~~no pending or threatened lawsuits that could reasonably be~~pending. None of the below is expected to have a material ~~effect on~~financial or operational impact.

Solgar Inc. is suing SkyPharm SA for product homogeneity regarding the ~~results~~nutraceutical line “Sky Premium Life”. As a result, Solgar requested the prohibition for SkyPharm to manufacture, import and sell, market or in any way possess and distribute, including Internet sales and advertise in any way in the Greek market of “Sky Premium Life” due to homogeneity with Solgar’s products. Lawsuit with data no 4545/2021 of the ~~Company’s operations.~~company “Solgar Inc.” against SkyPharm before the Court of First Instance of Thessaloniki, according to which Solgar Inc. requests to prohibit SkyPharm SA’s use of the nutraceutical line “Sky Premium Life” packages as its characteristics are similar to Solgar Inc.’s and is also seeking the withdrawal of existing ones from the market. Solgar Inc. has further requested to be awarded compensation for non-pecuniary damage amounting to 20,000€ (financial obligation). The case was heard on January 28, 2022 and the Company is awaiting a decision.

Compilation and submission of a memorandum against the National Medicines Agency with no. 127351/16.12.2021 document. On July 22, 2015, the National Medicines Agency approved the license of wholesale sale of pharmaceutical products of the pharmaceutical company under the name SkyPharm SA with set validity at five years and an expiration date of July 22, 2020. Subsequently, SkyPharm SA on June 15, 2020, legally and timely submitted the application for renewal of the wholesale license of pharmaceutical products to the National Medicines Agency even though the period under review is characterized by the COVID - 19 pandemic The National Medicines Agency did not respond, therefore the Company asked from the lawyer to immediately ask for the decision of the renewal. Two months after the filing of no. 3459 / 15.01.2021 letter of the attorney and almost nine months after the no. 627615.06.2020 company application for the renewal and the National Medicines Agency replied by rejecting the renewal request on March 9, 2021 (ref. 62769 / 20-25.02.2021). In addition, document No. 127351-16.12.2021 of EOF to SkyPharm states that after an inspection of EOF at the premises of the company “Doc Pharma”, SkyPharm did not have a wholesale license in force in violation of article 106 par. 1b and par. 1c of the ministerial decision D.YG3a / GP.32221 / 29-4-2019 and issued invoices dated February 26, 2021 and March 8, 2021). The National Medicines Agency has not yet replied to the renewal request.

Order for payment by the court which derived from a fine related to tax audit that concerns financial year 2014. The ruling with no. 483/16.12.2020 was against Cosmofarm SA. The defendant appealed against the decision by the ruling with no.11541/09.03.2021.This appeal was dismissed due to inactive passage of 120 days. Because of this inactive passage, Cosmofarm appealed against Greek tax authorities, no.6704/29.11.2021. There was an obligation of additional tax and fines imposition of 91,652.27€ that Cosmofarm has already paid and claim back through the appeal (financial claim). The trial is pending.

Advisory Agreements

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.

On July 1, 2021, the Company entered into a two-year advisory agreement with a third party (the “Consultant”) for advisory and consulting services related to the Company’s intention to become listed on NASDAQ. Peter Goldstein, a then director of the Company is a principal of the Consultant. As consideration for services rendered, the Company will pay the consultant $4,000 a month until the Company commences trading on NASDAQ. Upon NASDAQ listing, the Company shall pay $10,000 per month, with $4,000 per month paid on a monthly basis and $6,000 per month accrued until such time as the Company raises an aggregate of $10,000,000. In addition, the consultant will receive a $100,000 bonus upon NASDAQ listing and when the Company has raised an aggregate of $10,000,000. Finally, the Company has agreed that the Consultant shall receive a total of 250,000 shares of the Company’s common stock, 50,000 of such shares that have been previously issued pursuant to previous agreements and 200,000 shares to be issued when the Company commences trading on NASDAQ. As of June 30, 2022, 50,000 additional shares have been issued to the Consultant concerning the Company’s listing on Nasdaq.

Table of Contents

On July 7, 2021, the Company entered into an agreement with a non-exclusive financial advisor and placement agent. The term of the agreement is a minimum of 45 days and will continue until 5 business days following the date in which a party receives written notice from the other party of termination. As consideration for services rendered, the Company shall pay: a) a cash fee equal to 10% of the gross proceeds of any securities sold in the offering payable at closing of the offering from the gross proceeds of the offering; b) 1% of the gross proceeds of any securities sold in the offering payable at closing of the offering from the gross proceeds of the offering for unaccountable expenses; c) warrants to purchase shares of the Company’s common stock equal to 10% of the number of shares issued in the offering or to be issued thereafter upon conversion of any convertible securities issued in the offering. These warrants will have a 5-year term and an exercise price equal to the price per share of common stock sold in the offering or conversion or exercise price into common stock of any convertible security sold and will have the same provisions, terms, conditions, rights and preferences as the securities sold in the offering; d) a cash fee equal to 10% of the exercise price of all securities constituting warrants, options or other rights to purchase securities sold in the offering payable only upon exercise.

On July 7, 2021, the Company entered into a 6-month agreement with a non-exclusive agent, advisor or underwriter in any offering of securities of the Company. At the closing of any offering the Company will compensate the agent: a) a cash fee or as an underwritten offering an underwriter discount equal to 7% of the aggregate gross proceeds raised in each offering. For all investors referred directly to the Company by the agent, a cash fee or as an underwritten offering an underwriter discount equal to 5% of the aggregate gross proceeds invested by such investors. b) ~~The~~the Company shall issue to the agent or its designees at each closing, warrants to purchase shares of the Company’s common stock equal to 5% of the aggregate number of shares of common stock placed in each offering. c) ~~Out~~out of the proceeds of each closing, the Company also agreed to pay the agent up to $35,000 for non-accountable expenses (up to $50,000 for a public offering) along with up to $50,000 for fees and expenses of legal counsel and other out-of-pocket expenses (increase to up to $100,000 for public offerings) plus additional miscellaneous costs. The agent would also have the right of first refusal from the date of the agreement until the 12-month anniversary following consummation of any offerings for total proceeds of at least $3 million raised by investors introduced by the agent.

Research & Development Agreements

On June 26, 2022 the Company signed an R&D agreement with a third party, through which the Company assigns the third party the support of the Research and Development department with the implementation of two projects related to the development of new products and services in the field of health focusing on the human intestinal microbiome. The cost of the project amounts to EUR 820,000 and is allocated to certain phases of the projects. It will be due and payable upon completion of the corresponding phases.

3335

Table of Contents

~~COSMOS HOLDINGS, INC.~~

~~Notes to Unaudited Condensed Consolidated Financial Statement~~

~~September 30, 2021~~

NOTE 1415 – STOCK OPTIONS AND WARRANTS

As of ~~September~~June 30, ~~2021,~~2022, there were ~~37,000~~0 options outstanding and ~~37,000 options exercisable with expiration dates of January 2022.~~exercisable.

A summary of the Company’s option activity during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 is presented below:

						Weighted									Weighted
				Weighted		Average							Weighted		Average
				Average		Remaining		Aggregate					Average		Remaining		Aggregate
	Number of			Exercise		Contractual		Intrinsic		Number of			Exercise		Contractual		Intrinsic
Options	Shares			Price		Term		Value		Shares			Price		Term		Value
Balance outstanding, December 31, 2020		62,000		$	1.19		0.60	$	242,200
Balance outstanding, January 1, 2022											37,000		$	1.32		0.01	$	75,850
Granted		-			-		-		-		-			-		-		-
Forfeited		-			-		-		-		-			0		0		0
Exercised		-			-		-		-		0			-		-		-
Expired		(25,000	)		-		-		-		(37,000	)		-		-		-
Balance outstanding, September 30, 2021		37,000		$	1.32		0.26	$	123,050
Balance outstanding, June 30, 2022											-		$	-		-	$	-

Exercisable, September 30, 2021		37,000		$	1.32		0.26	$	123,050
Exercisable, June 30, 2022											-		$	-		-	$	-

As of ~~September~~June 30, ~~2021,~~2022, there were ~~1,164,673~~10,862,527 warrants outstanding and ~~1,164,673~~10,862,527 warrants exercisable with expiration dates from May 2023 through ~~March 2024.~~August 2027.

A summary of the Company’s warrant activity during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 is presented below:

Weighted

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Warrants

Shares

Price

Term

Value

Balance outstanding, December 31, 2020

1,164,673

$ 6.41

3.01

$ 5,360

Granted

-

-

-

-

Forfeited

0

0

-

-

Exercised

-

-

-

-

Expired

-

-

-

-

Balance outstanding, September 30, 2021

1,164,673

$ 6.41

2.26

$ -

Exercisable, September 30, 2021

1,164,673

$ 6.41

2.26

$ -

34
~~Table of Contents~~
~~COSMOS HOLDINGS, INC.~~
~~Notes to Unaudited Condensed Consolidated Financial Statement~~
~~September 30, 2021~~

Weighted

Weighted

Average

Average

Remaining

Aggregate

Number of

Exercise

Contractual

Intrinsic

Warrants

Shares

Price

Term

Value

Balance outstanding, January 1, 2022

3,698,238

$ 2.02

2.03

$ 4,992,621

Granted

10,652,460

0.63

-

-

Forfeited

0

0

-

-

Exercised

(3,488,171 )

-

-

-

Expired

-

-

-

-

Balance outstanding, June 30, 2022

10,862,527

$ 0.66

5.09

$ -

Exercisable, June 30, 2022

10,862,527

$ 0.66

5.09

$ -

NOTE 1516 – 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 three months ended:

September 30,

September 30,

Country

2021

2020

France

$ 0

179

Germany

(102 )

155,742

Greece

13,555,718

13,405,280

Hungary

0

641

Ireland

0

730

Italy

(118 )

5,217

Jordan

0

10,389

Denmark

(488 )

229,929

Cyprus

13,982

5,343

UK

23,318

419,025

Croatia

3,107

23

Libya

0

872

Netherlands

0

118.140

Poland

0

589

Total

$ 13,595,418

$ 14,352,099

~~The following table presents our revenue disaggregated by country for the nine months ended:~~

June 30,

June 30,

Country

September 30,
2021

September 30,
2020

2022

2021

Croatia

$ 15,010

$ 8,796

Denmark

54,291

229,929

France

0

1,113

Germany

13,515

948,282

0

3

Greece

39,514,083

36,062,729

13,152,257

14,504,869

Hungary

0

36,881

Ireland

0

35,833

Italy

15,613

27,265

0

4

Jordan

0

19,710

Libya

0

42,844

Netherlands

0

156,392

Poland

0

28,941

Denmark

0

14

Cyprus

92,930

5,343

0

64,225

UK

355,977

1,501,261

40,831

265,828

Croatia

15,416

11,982

Total

$ 40,061,419

$ 39,105,318

$ 13,208,504

$ 14,846,925

3536
Table of Contents

The following table presents our revenue disaggregated by country for the six months ended:
~~COSMOS HOLDINGS, INC.~~
~~Notes to Unaudited Condensed Consolidated Financial Statement~~
~~September 30, 2021~~

June 30,

June 30,

Country

2022

2021

Germany

0

13,617

Greece

26,161,295

25,958,364

Italy

0

15,731

Denmark

0

54,700

Cyprus

0

78,948

UK

92,257

332,659

Croatia

26,752

11,982

Total

$ 26,280,304

$ 26,466,001

NOTE 1617 – SUBSEQUENT EVENTS

Acquisition of Pharmaceutical Company
On ~~and effective October 4, 2021,~~July 19, 2022, the Company ~~amended~~entered into a binding letter of intent (the “LOI”) to acquire a pharmaceutical company, organized under the laws of Greece through the purchase of one hundred (100%) percent of the shares of an SPV. Total consideration for the proposed acquisition consists of €1,700,000 in cash and ~~restated its articles~~433,334 shares of ~~incorporation (the Amended and Restated Articles”) and filed a certificate~~Cosmos common stock, subject to adjustment at an issuance price of ~~designation (the “COD”) for its Series A Preferred Stock (the “Series A Preferred Stock”) with~~$3.00 per share ($1,300,000 in total), both paid to the ~~state~~shareholders of ~~Nevada.~~the SPV.

~~The Amended~~Acquisition of Health Products portfolio
On July 6, 2022, the Company announced that it has entered into an agreement to acquire a third party’s product portfolio, including Bone-Vio® and ~~Restated Articles allow~~Bone-X, related to bone health targeting the human gastrointestinal microbiome.
Amendment of Corporate Name
On July 29, 2022, the Company applied to the Secretary of State of Nevada informing that it will be doing business as “Cosmos Health, Inc.” to better reflect the Company’s ~~Board of Directors the authority to authorize the issuance~~evolution into an innovative global healthcare group with a focus on improving people’s lives.
Conversion of preferred ~~stock from time to time in one or more classes or series by resolution.~~shares

~~The Series A Preferred Stock is convertible into~~During July 2022, following the Company’s Common Stock as determined by multiplying the number of shares of Series A Preferred Stock to be converted by the lower of (i) $4.00 or (ii) 80% of the average volume weighted average price for the Company’s Common Stock for the five (5) days prior to the date of Uplisting, subject to a floor of $3.00 (the “Conversion Price”).
~~The holders~~February 28, 2022 Offering, 822 of the Series A ~~Preferred Stock are not entitled to dividends or to receive distributions~~Shares were converted into 1,322,564 shares of common stock in accordance with the ~~event of liquidation, dissolution or winding up~~terms of the ~~Company, either voluntary or involuntary.~~agreements.

3637
Table of Contents

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Available Information

The following discussion should be read in conjunction with our interim Condensed Consolidated Financial Statements and the related notes and other financial information appearing elsewhere in this report as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, ~~2020~~2021 (“Form 10-K”) and this Quarterly Report on Form 10-Q for the quarter ended ~~September~~June 30, ~~2021.~~2022.

Forward-Looking Statements

Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions.

We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise. Further information concerning our business, including additional factors that could materially affect our financial results, is included herein and in our other filings with the SEC.

Overview

Summary

Cosmos Holdings, Inc. was formed as a Nevada incorporation on July 07, 2009, under the name of Prime Estates & Developments Inc. Effective September 27, 2013, we acquired 100% ownership of Amplerissimo Ltd., a private company whose principal activities included providing consulting services to various industries. 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 Amplerissimo Ltd, formed SkyPharm S.A. on August ~~01,~~1, 2014, a Greek ~~Corporation~~corporation which focuses on ~~pharmaceutical products and is engaged in~~ the trading of ~~branded and branded pharmaceutical products and medicines across the European Union member states.~~nutraceutical products. On February 10, 2017, we acquired 100% ownership of Decahedron Ltd., a United Kingdom company, ~~whose principal~~which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the ~~same as the business~~trading, distribution, import and export of ~~SkyPharm S.A.~~pharmaceuticals and nutraceuticals. In addition, on December 19, 2018, the Company acquired 100% ownership of Cosmofarm Ltd, a Greek company which is a pharmaceutical wholesaler and networks with over 1,500 pharmacies.

~~Business Segments~~
Cosmos Holdings Inc is a healthcare group pharmaceutical company with a proprietary line of nutraceuticals and distributor pharmaceuticals. The Company ~~operates~~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 its corporate strategy are designed to enable the Company to achieve sustainable growth and create added value for our shareholders. In particular, the Company aims to enhance its pharmaceutical and over-the-counter product lines by acquiring or licensing rights to additional products and regularly evaluate selective company acquisition opportunities. The Company, through its subsidiaries, is operating within the healthcare sector and in order to compete successfully in the ~~wholesale distribution~~healthcare industry, must demonstrate that its products offer medical benefits as well as cost advantages. Currently, most of ~~branded pharmaceutical~~the products ~~over~~that the ~~counter (OTC)~~Company is trading, compete with other products ~~medical devices, vitamins~~already on the market in the same therapeutic category, and ~~a variety of nutraceuticals, including its proprietary label.~~are subject to potential competition from new products that competitors may introduce in the future.

3738
Table of Contents

The Company continues to rapidly expand its distribution network worldwide and open new markets for its proprietary line of nutraceuticals and licensed pharmaceuticals through its distribution channels and ecommerce marketplace. The Company uses its extensive network with direct access to Europe’s primary sales channels for pharmaceuticals and nutraceuticals, which includes over 160 pharmaceutical wholesale distributors in Europe’s largest markets, over 40,000 pharmacies in Europe and 1,500 pharmacies in Greece. The Company achieves stable supply of pharmaceuticals from Doc Pharma which enhances its ability to scale its expansion. It receives full priority in the production of nutraceuticals and volumes. Its full production in Greece ensures a decisive production cost advantage whilst it secures additional discounts by leveraging its purchasing scale.
Revenue sources
The Company operates in nutraceuticals industry, distribution of pharmaceuticals and healthcare distribution.
~~Wholesale Import/Export~~Pharmaceuticals

We ~~conduct wholesale import~~are engaged in the promotion, distribution and ~~export~~sale of licensed branded ~~pharmaceutical~~generics and OTC products throughout Europe by our subsidiaries ~~SkyPharm S.A. and Decahedron Ltd. We source licensed pharmaceuticals from wholesalers at a lower cost, primarily~~ in Greece and ~~the U.K.~~UK. Our capital efficient business model is based on infrastructure, efficiency and ~~sell to other European wholesalers.~~
scale. There is a significant growth on opportunities through product additions and geographic expansion.
~~Full-line Wholesale~~
Healthcare Distribution
We conduct direct distribution and sales of pharmaceuticals, medical devices, branded ~~pharmaceuticals~~generics and OTC ~~products through our subsidiary, Cosmofarm S.A.~~products. Our automated and GDP licensed distribution facilities ensure all medications reach their destination daily on an efficient and secure way. Our network exceeds over 1,500 pharmacies in Greece. We have created an upgraded and high-end distribution center in Greece due to our Robotic systems and integrated automations ~~(ROWA~~(“ROWA” robotics).

Nutraceutical

We have created and developed our own proprietary branded nutraceutical products, named “Sky Premium ~~Life~~^®Life®” which was launched in ~~2018. Our~~2018 and “Mediterranation®” which was launched in 2022. Utilizing unique formulations, and specialized extraction processes which follow strict pharmaceutical standards, our proprietary lines of nutraceuticals aim for excellence. We have a full portfolio ~~includes at least 87~~of fast moving and specialty formulas with more than 80 product codes including vitamins, minerals and other herbal extracts. ~~We expect to reach the number of 150 product codes by the end of 2021.~~ Our nutraceutical products are manufactured exclusively by Doc Pharma, ~~S.A.,~~ a related party of the Company. Our nutraceutical products have penetrated several markets within 2021 and 2022 through digital channels such as Amazon and Tmall.
We focus on nutraceutical products because we foresee it as a ~~relatively under-penetrated~~ market ~~throughout Europe~~ with ~~potential of~~ high ~~growth~~grow opportunities due to its large market size and margin contribution as the demand for nutraceutical products is increasing globally.

~~Branded pharmaceuticals~~
We are engaged in the promotion, distribution and sale of branded pharmaceutical products throughout Europe. Through our related company, Doc Pharma, we have the distribution rights to over 47 fast-moving pharmaceutical products.
Regulations and Licenses
Our subsidiaries’ licenses help us establish and enhance our market share. 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 at least the end of 2021 and expects to receive a temporary license by the end of 2021.~~

Our subsidiary, Decahedron, was granted the license for the wholesale of medicinal products for human use in February 2021 pursuant to the regulation of 18 of The Human Medicines Regulations 2012 (SI 2012/1916). It fulfills the guidelines of the Wholesale Distribution Authorisation (Human). Finally, our subsidiary, Cosmofarm S.A., was granted the license for the wholesale of pharmaceutical products for human use on February 2019 pursuant to the EU directive of (2013/C 343/01). It fulfils the Guidelines of the Good Distribution Practices of medical products for human use. All licenses were granted based on inspections and are valid unless current inspections occur which will revise their status.

3839
Table of Contents
The Company uses a differentiated operating model based on a lean, nimble and decentralized structure, an emphasis on low-risk license acquisition, as well as research & development and our ability to be better owners of pharmaceutical assets than others. This operating model and the execution of our Corporate Strategy are enabling the Company to achieve sustainable growth and create shareholder value.
We are currently focusing our existing operations on expanding the business of our subsidiaries. Our operating model and the execution of our corporate strategy are designed to enable the Company to achieve sustainable growth and create shareholder value.

Risks

Supply chain disruption is a growing concern for the European pharmaceutical industry as it increasingly looks to cut costs by relying on ‘emerging markets’, where standards can be lower in terms of compliance, ethics and health and safety.

Hikes in the price of medicine and their impact on the sustainability of the healthcare systems are garnering more and more attention. European regulators are willing to play their part in safeguarding continued access to safe and effective medicines. Regulators can speed up the approval of branded pharmaceuticals and biosimilars to boost competition and drive down prices.

Cuts in healthcare spending keep occurring since the financial crises of the late of 2000s. Europe’s slow recovery has been uneven, with austerity and economic uncertainty, especially in the EU’s poorer member states, such as Greece.

The Effects of COVID-19 on Our ~~2021~~2022 Operations

The World Health Organization ~~(WHO)~~(“WHO”) declared the coronavirus outbreak a pandemic on March 11, 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 adversely affected by the following ~~Covid-19~~COVID-19 risks:

Adverse Risks

·o
Drug shortages due to ban of exports

·o
Problems/restrictions in supply chain

·o
Logistics delays o Restrictions on employees’ ability to work o Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms

·o
National or EU long lasting recession

·
~~Restrictions on employees’ ability to work~~
·
~~Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms~~
~~Subsequent to year-end, management~~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 and 2021.~~COVID-19. 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~~
·
~~Governmental financial support related to furlough schemes~~
39
~~Table of Contents~~
Management’s Expectations Regarding ~~Covid-19~~COVID-19

Management believes that there could be a positive long-term outcome from ~~Covid-19,~~COVID-19, which could result in an increase in sales of OTC branded products, nutraceuticals, antibacterial products, gloves, oximeters, thermometers 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.~~COVID-19. We have adapted our strategy in response to ~~Covid-19~~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.~~so.

What Effect Will ~~Covid-19~~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%~~95% of our staff continue to work on site and those staff who are working remotely have no impact on our disclosure controls.
40
Table of Contents

Results of Operations

Three Months and ~~Nine-Months~~six months Period Ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021

Revenue

The Company had revenue of ~~$13,595,418~~$13,208,504 and ~~$14,352,098~~$14,846,925 (a decrease of ~~5.27%~~11.0%) for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively and ~~$40,061,419~~$26,280,304 and ~~$39,105,318 (an increase~~$26,466,001 (a decrease of ~~2.44%~~0.7%) for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020, respectively.~~The increase in the 9-month period is mainly due to the organic growth attributed to our subsidiary, Cosmofarm, which continued the expansion and sales programs in local level, which is in line with the increase in the full-line wholesale revenue stream.. The decrease in the 3-month period is attributable to the decrease of the wholesale import/export revenue stream. The Company had a net loss of $1,936,543 on revenue of $13,595,418 versus a net profit of $757,866 on revenue of $14,352,098 for the three months ended September 30, 2021, ~~and 2020,~~ respectively. The Company had a net loss of ~~$6,489,502~~$1,241,256 on revenue of ~~$40,061,419~~$13,208,504 versus a net ~~income~~loss of ~~$1,651,867~~$2,379,056 on revenue of ~~$39,105,318~~$14,846,25 for the ~~nine~~three months ended ~~September~~June 30, 2022 and 2021, respectively. Also, the Company had a net loss of $1,037,909 on revenue of $26,280,304 versus a net loss of $4,552,959 on revenue of $26,466,001for the six months ended June 30, 2022 and ~~2020,~~2021, respectively.

Cost of Goods Sold

The Company had costs of goods sold of ~~$11,249,848~~$11,362,632 versus ~~$11,954,788~~$12,810,082 (a decrease of ~~5.9%~~11.3%) for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. In addition, the Company had costs of goods sold of ~~$34,677,671~~$22,542,500 versus ~~$33,166,706 (an increase~~$23,427,823 (a decrease of ~~4.56%~~3.78%) for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~increase~~decrease in the ~~9-month period~~6-month is ~~in line with the revenue variance~~primarily due to the ~~significant~~ increase in revenue of ~~the full-line wholesale revenue stream. The decrease in cost of goods sold during the 3-month period is attributable to the decline of the wholesale import/export revenue stream.~~own branded nutritional supplements named “Sky Premium Life”.

Our future revenue growth is expected to 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 branded pharmaceutical products that will be available over the next few years’ price increases and price deflation, general economic conditions, including the effects of the current conflict in the Ukraine, the coronavirus in the United Kingdom and 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.

40
~~Table of Contents~~
Gross Profit

The Company had gross profit of ~~$2,345,570~~$1,845,872 versus ~~$2,397,310~~$2,036,843 (a decrease of ~~2.16%~~9.38%) for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. In addition, the Company had gross profit of ~~$5,383,748~~$3,737,804 versus ~~$5,938,612 (a decrease~~$3,038,178 (an increase of ~~9.34%~~23.03%) for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The ~~decrease~~increase in gross profit for the ~~9-month~~6-month period is attributable to the ~~increase~~transition of ~~COGs~~SkyPharm’s operational strategy from pharmaceuticals wholesale and distribution revenue ~~for the full-line wholesale revenue stream, which is considered~~ to ~~be low margin. The decrease in gross~~own branded nutritional supplements “Sky Premium Life” where profit ~~for the 3-month period is attributable to the revenue decrease, specifically due to the decline in the wholesale import/export stream.~~margins are greater.

Operating Expenses

The Company had general and administrative costs of ~~$2,427,085~~$988,465 and ~~$543,776,~~$2,586,670, salaries and wages expenses of ~~$683,129~~$577,479 and ~~$473,910,~~$578,598, sales and marketing expenses of ~~$41,715~~$245,443 and ~~$211,874~~$139,633 and depreciation and amortization expense of ~~$108,192~~$108,848 and ~~$87,747~~$108,413 for a net operating loss of ~~$914,551~~$74,363 and ~~income~~loss of ~~$1,080,003~~$1,376,471 (a decrease of ~~184.68%~~94.60%) for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020~~2021 respectively. The decrease in operating expenses is primarily ~~a result of~~attributed to the ~~increase in~~ stock-based compensation related to a consulting agreement entered into in February 2021 ~~as well as an increase in legal, consulting~~ and ~~outsourced accounting costs~~included in the ~~current year.~~general and administrative expenses for the period ended June 30, 2021.

The Company had general and administrative costs of ~~$6,708,796~~$1,857,104 and ~~$1,340,602,~~$4,281,367, salaries and wages expenses of ~~$1,786,954~~$1,098,950 and ~~$1,361,657,~~$1,104,169, sales and marketing expenses of ~~$586,440~~$392,392 and ~~$645,930~~$544,725 and depreciation and amortization expense of ~~$323,678~~$221,470 and ~~$298,543~~$215,486 for ~~a net operating loss of $4,022,120 and~~ a net operating income of ~~$2,291,880~~$167,888 and loss of $3,107,569 (a decrease of ~~275.49%~~105.40%) for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021 ~~and 2020~~ respectively. ~~The increase in expenses is mainly due to the stock-based compensation ($5,147,077) consulting agreement entered into during the nine months ended September 30, 2021.~~

Other Income (Expense)

The Company’s other income (expense) was primarily comprised of interest expense related to notes payable and convertible notes payable ~~$670,282~~$620,914 versus ~~$789,426,~~$780,607, non-cash interest expense related to the amortization of debt discount of ~~$353,303~~$215,807 versus ~~$0,~~$88,979, a ~~gain~~loss on equity investments of ~~$38~~$1,622 versus ~~a loss of $46,883, a gain on extinguishment of debt of $350,008 due to a debt exchange agreement that took place on August 4, 2021 versus a gain of $16,194,~~$161, a change in fair value of derivative liability of ~~$125,621~~$22,256 versus $0$26,496 due to agreements on convertible debentures, interest income of $60,271 versus interest income of $0 and a foreign currency loss of ~~$183,036~~$356,687 versus a gain of ~~$427,289~~$96,584 for the three months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Also, The Company’s other expense was ~~$122,477~~$315 versus other ~~income~~expense of ~~$75,124~~$39,415 for the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ respectively.
41
Table of Contents

The Company’s other income (expense) was primarily comprised of interest expense related to notes payable and convertible notes payable ~~$2,182,715~~$1,079,992 versus ~~$1,853,414,~~$1,512,433, non-cash interest expense related to the amortization of debt discount of ~~$492,391~~$476,334 versus ~~$29,509,~~$139,088, a gain on equity investments of ~~$317~~$56 versus ~~a loss of $36,637,~~$279, a gain on extinguishment of debt of ~~$795,644 versus $795,418~~$1,004,124 due to ~~an amended debt exchange agreement dated as of February 5, 2021 and~~ a debt ~~exchange agreement~~extension that took place on ~~August 4, 2021,~~March 3rd, 2022 versus a gain of $445,636, a change in fair value of derivative liability of ~~$213,490~~$7,255 versus $0$87,869 due to agreements on convertible debentures and a foreign currency loss of ~~$392,472~~$516,039 versus a ~~gain~~loss of ~~$394,983~~$209,436 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. Also, The Company’s other expense was ~~$340,103~~$55,127 versus other ~~income~~expense of ~~$103,073~~$217,626 for the ~~nine-months~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

Unrealized Foreign Currency losses

The Company had an unrealized foreign currency loss of ~~$214,216~~$1,028,875 versus a gain of ~~$79,882~~$284 and a net comprehensive loss of ~~$2,150,759~~$19,292,832 versus ~~profit~~loss of ~~$837,748~~$2,378,772 for the three months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ respectively.
The Company had an unrealized foreign currency loss of ~~$687,510~~$1,434,104 versus ~~gain~~a loss of ~~$118,960~~$473,294 and a net comprehensive loss of ~~$7,177,012~~$25,283,207 versus ~~profit~~loss of ~~$1,770,827~~$5,026,253 for the ~~nine~~six months ended ~~September~~June 30, 2022 and 2021, ~~and 2020,~~ respectively.
41
~~Table of Contents~~

Liquidity and Capital Resources

As of ~~September~~June 30, ~~2021,~~2022, the Company had working capital of ~~$6,856,340~~$4,128,418 compared to ~~$5,979,870~~$10,950,492 as of December 31, ~~2020.~~2021.

The Company had cash of ~~$1,033,875~~$562,320 versus ~~$628,395~~$286,487 as of ~~September~~June 30, ~~2021~~2022 and December ~~2020,~~2021, respectively. The Company had net cash used in operating activities of ~~$5,498,368~~$3,023,685 and ~~$10,342,115~~$2,519,394 for the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. The Company has devoted substantially all of its cash resources to expand through organic business growth and has incurred significant general and administrative expenses in order to enable the financing and growth of its business and operations.

The Company had net cash used in investing activities of ~~$835,425~~$160,307 and ~~$113,845~~net cash used in investing activities of $12,100 during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively. For the ~~nine~~six months ended ~~September~~June 30, ~~2021 and 2021 this~~2022 the net cash provided by investing activities was ~~due~~mainly attributable to the ~~purchase of fixed assets.~~proceeds from the loan receivable from a third party.

The Company had net cash provided by financing activities of ~~$6,475,402~~$3,473,197 versus ~~$10,984,011~~$2,724,871 during the ~~nine~~six months ended ~~September~~June 30, ~~2021~~2022 and ~~2020,~~2021, respectively.

For the period ended ~~September~~June 30, ~~2021,~~2022, the Company also received proceeds from lines of credit of ~~$18,139,012~~$5,779,114 and payments of lines of credit of ~~$18,281,863,~~$6,244,162, for a net decrease on the line of credit of ~~$142,851.~~$465,048.

We anticipate using cash in our bank account as of ~~September~~June 30, ~~2021,~~2022, cash generated ~~from the operations of the Company and its operating subsidiaries and~~ from debt or equity financing, from investing activities or from ~~a loan from~~ management loans, 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. If we fail to meet these requirements, we may lose the qualification for quotation and our securities would no longer trade on the over-the-counter markets. Further, as a consequence we would fail to satisfy our reporting obligations with the Securities and Exchange Commission (“SEC”), and investors would then own stock in a company that does not provide the disclosure available in quarterly and annual reports filed with the SEC and investors may have increased difficulty in selling their stock as we will be non-reporting.

~~Plan of Operation in the Next Twelve Months~~
The pharmaceutical industry is a dynamic industry full of challenges. The fast-changing environment requires our company to have effective strategic planning and monitoring in order to be responsive and adaptable to such challenges.
Our multi-targeted approach is trying to mitigate obstacles by setting out an objective evaluation of the organization’s goals. We set achievable future targets based on past performance, segments and drivers. In addition, we plan and model different scenarios and assess the impact of later strategic decisions on the business in both short and long term.
~~Our focus for the next twelve months is intended to be as follows:~~
~~Full Line Wholesale~~
We are planning to develop and expand our business organically by securing new clients, as well as, expanding the amount of business we do with our existing clients. Our resources, industry knowledge, skills, equipment and long-term relationships with clients provide us the opportunity to focus on the increase of our distribution channels. In addition, our organic growth will be driven by distributing more profitable pharmaceutical products, OTC medicines, and nutraceuticals. We are committed to capitalizing on sales growth opportunities by expanding our customer pipeline across the European market, as well as entering markets outside the European Union.
We also intend to acquire additional companies that are operating in the pharmaceutical industry which would add value to our Company and its shareholders giving us the opportunity to penetrate into new markets and products.

42
Table of Contents

~~Nutraceutical Products~~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 expect to further expand our market shares. However, during the course of further organizational optimization there may be associated extraordinary additional costs.
Our plan for our own branded nutraceuticals is to enlarge our portfolio up to 150 SKUs by the end of 2022 including more basic line formulas to cover more customer needs of any age, advanced formulations, formulas based on herbs and further clinical studies with R&D for further products. Our plan for geographic expansion in distributing and market penetration in EU, Asia, USA, and Canada is based on exclusive distributors, wholesalers, ecommerce, development of franchising model, alliances and acquisitions of nutraceutical companies.
In addition, our plan for branded generics and OTC products is geographic expansion across the world, especially in the EU and UK, as well as in third world countries with fast registration and developed markets with liberalized OTC policies for online pharmacies and supermarkets. We also intend to enhance our exclusive distribution rights with a growing basis of cooperating partners while purchasing generics’, biosimilar drugs and OTC licenses. We also intend to enhance our product expectance by registered copyrights and trademarks in all OTC drugs. In addition, it remains committed to strategic research and development across each business unit with a particular focus on assets with inherently lower risk. Our plan for our healthcare distribution is to expand in the Greek territory, enlarge our customer portfolio and integrate of established sales network of pharmacies through the use of B2B and B2C ecommerce platforms and exclusive distributors. We are also aiming in increasing the exports of branded pharmaceuticals as we focus on higher profit margins categories (OTC and VMS), deliver 3PL services to pharma companies, put in force loyalty programs, provide added value services to pharmacies and emergency deliveries to VIP customers. 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.

The Company ~~intends~~is growing its business through organic growth, market penetration, geographic expansion and acquisitions which would add value to its business and its Shareholders. The Company is also committed to pursuing various forms of business development; this can include trading, alliances, joint ventures and dispositions. Moreover, it hopes to continue to build on its portfolio of pharmaceutical products and expand its OTC and ~~enhance~~nutraceutical product portfolio. Thus, the Company is developing a sound sales ofdistribution network specializing in its own branded nutraceutical ~~products, Sky Premium Life~~^®, across Europe, Asia and third countries through exclusive wholesale distributors. Also, the plan for the next twelve months is to penetrate further into the UK market and utilize the current distribution channel of our UK subsidiary, Decahedron. Moreover, we plan to significantly increase our sales through the digital sales channel and placing our brand in several e-commerce platforms as well. The existing portfolio of our own branded nutraceutical products reached the number of 83 SGUs as of today and we plan to increase it to 150 SGUs within the next twelve months Moreover, we plan to expand the brand Sky Premium Life^® ~~by providing.~~
~~Branded Pharmaceuticals~~
We intend to expand our business within the branded pharmaceutical products market and obtain more exclusive distribution rights in Europe. 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. Through our related party, Doc Pharma which is the owner of 47 plus fast-moving product codes we will use innovative products distribution.
~~B2B/B2C Platforms~~
We intend to develop platforms for Business-to-Business and Business-to-Customers transactions. We expect our relationships with our customers and suppliers to be redefined, our supply chain management to be improved and our customers loyalty to be increased, as a result, improved sales. We hope the platforms will lead to lower costs and errors avoidance through the automated process.
~~Robotic Automation Systems~~products.

The Company’s main objective is expanding the business operations of its subsidiaries. The Company ~~acquired within current quarter one more robotic system~~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 ~~fast move items which will essentially result in cost savings, time efficiency, errors avoidance and effectiveness. This~~its businesses. The Company’s objective is ~~expected to lead us to increased productivity, minimization~~the optimization of ~~delivery time by 2/3, improved safety and make our subsidiary, Cosmofarm S.A., one~~operating expenses across all entities without compromising the quality of the ~~leaders~~Company’s services and products.
Changes in the behavior and spending patterns of purchasers of pharmaceutical and healthcare products ~~distribution.~~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.

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. WeThe Company will continue to encounter ~~the~~ competition in the market by product, service, reliability, and a high level of quality. On the procurement side, wethe Company can access a wide range of supply possibilities. To minimize business risks, ~~we diversify our~~the Company diversifies its sources of supply all over Europe. ~~We secure our~~It secures its high-quality demands through careful supplier qualification and selection, as well as active suppliers’ system management.
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.
We also intend to acquire additional companies that are operating in the pharmaceutical and nutraceutical industry which would add value to our Company and its shareholders giving us the opportunity to penetrate into new markets and products.
We still see the risks for the future development in a difficult and competitive environment, increasing purchase prices and the stagnating selling price level. On the background of our financial stability we however see ourselves as being well-equipped for managing the future risks. Risks that could endanger the survival of the Company are currently not able to be identified.
~~Off Balance Sheet Arrangements~~
~~As of September 30, 2021, there were no off-balance sheet arrangements.~~

43
Table of Contents
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 reallocation 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 working capital, inventories, 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.
Off Balance Sheet Arrangements
As of June 30, 2022, 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” under the Management’s Discussion and Analysis section. 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.

Revenue Recognition: The Company adopted Topic 606 Revenue from Contracts with Customers on January 1, 2018. As a result, it has changed its accounting policy for revenue recognition as detailed above.

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. 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. The corporate income tax rate is 22% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 19% in United Kingdom. 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.

44
Table of Contents
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 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.

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. 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. Losses may also be subject to limitation under certain rules regarding change of ownership.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable. A smaller reporting company is not required to provide the information required by this Item.

44
~~Table of Contents~~
Item 4. 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/~~Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Principal Executive Officer and 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 and remediated some of the existing internal controls and processes. The Company has hired one more person~~Management is committed to ~~join the internal audit team within current quarter in order to empower the reassurance of regulatory compliance with SEC reporting requirements.~~
~~Changes in Internal Controls Over Financial Reporting~~
~~The Company has increased its personnel resources in order to eliminate~~remediate the material weaknesses identified in the Form 10K, which ~~have been identified so far. The Company~~include lack of segregation of duties and lack of internal controls structure review. As part of this commitment, the Management has ~~hired an Internal Auditor Assistant~~assigned to finance personnel responsibilities on key processes in order to ~~remediate and strengthen existing procedures,~~ examine and improve operating practices, perform extensive financial control and financial risk management processes, as well as to define and develop new policies and controls in order to improve the accuracy of the disclosures.
~~We have appointed a new member on board within~~ In addition, the ~~fiscal year ending December 31, 2021~~Internal Auditors of the Company are in ~~order to advise and help us~~the process of developing further procedures to ensure the ~~completeness, integrity, reliability and accuracy~~effectiveness of ~~our systems,~~internal controls and ~~procedures.~~ the accuracy and completeness of financial reporting. The Company will evaluate the controls and procedures on a quarterly basis and judge what weaknesses to be remediated based on materiality and circumstances.
45
Table of Contents
Changes in Internal Controls Over Financial Reporting
During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect it.
Our ~~existing~~ Audit Committee is in process of evaluating our existing controls and procedures, ~~whilst~~while communicating with the Management on quarterly basis. ~~We are in process of appointing Nominate and Compensation Committees and preparing the relevant procedures and charters.~~

Audit Committee

We have a separately-designated standing audit committee, which is appointed by the Board of Directors of Cosmos Holdings Inc. On April 28, 2022, Dr Anastasios Aslidis was elected to serve on the Board of Directors and was appointed as a chair of the Audit Committee, replacing Mr Peter Goldstein, who submitted his resignation on the same date. Our three independent directors, Anastasios Aslidis, John Hoidas and Demetrios Demetriades ~~and Peter Goldstein~~ serve on the Audit Committee. ~~Primary~~The 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.

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.

4546
Table of Contents

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

~~As previously disclosed on~~There have been no changes since the filing of the Company’s Form ~~10-Q filed on May 17, 2021, Company entered into a Debt Exchange Agreement (the “Agreement”) dated as of May 10, 2021, with Grigorios Siokas, its Chief Executive Officer. Under~~10-K for the Agreement, which was filed as Exhibit 10.1 to the Form 10-Q, Mr. Siokas agreed to forego repayment of $600,000 of indebtedness owed to him by the Company pursuant to a September 18, 2020 Settlement of a Section 16(b) lawsuit. Mr. Siokas settled the lawsuit in an effort to avoid the uncertainty of litigation and further legal expenses. During the quarteryear ended ~~September 30, 2021, the Company received $600,000 of additional paid-in-capital and decreased the related party loan by $600,000.~~December 31, 2021.

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None. Previously reported on Form 8-K.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

4647
Table of Contents

Item 6. Exhibits.

(a) Exhibits.

Exhibit No.
Document Description

31.1*

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*
Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS
XBRL Instance Document**

101.SCH
XBRL Taxonomy Extension Schema Document**

101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF
XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB
XBRL Taxonomy Extension Label Linkbase Document**

101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document**
_____________
*
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

**
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

4748
Table of Contents

SIGNATURES

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.

Cosmos Holdings Inc.

Date: ~~November 15, 2021~~August 19, 2022
By:
/s/ Grigorios Siokas
Grigorios Siokas

Chief Executive Officer

(Principal Executive Officer)

Date: ~~November 15, 2021~~August 19, 2022
By:
/s/ Georgios Terzis

Georgios Terzis

Chief Financial Officer

(Principal Financial Officer,
And Principal Accounting
Officer)

4849
Table of Contents

EXHIBIT INDEX

Exhibit No.
Document Description

31.1*

Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*

Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*

Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*
Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS
XBRL Instance Document**

101.SCH
XBRL Taxonomy Extension Schema Document**

101.CAL
XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF
XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB
XBRL Taxonomy Extension Label Linkbase Document**

101.PRE
XBRL Taxonomy Extension Presentation Linkbase Document**

Exhibit 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.**
___________
*
This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

**
XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

4950

	September 30,			September 30,
Country	2021			2020
France	$	0			179
Germany		(102	)		155,742
Greece		13,555,718			13,405,280
Hungary		0			641
Ireland		0			730
Italy		(118	)		5,217
Jordan		0			10,389
Denmark		(488	)		229,929
Cyprus		13,982			5,343
UK		23,318			419,025
Croatia		3,107			23
Libya		0			872
Netherlands		0			118.140
Poland		0			589
Total	$	13,595,418		$	14,352,099

	·o	Drug shortages due to ban of exports
	·o	Problems/restrictions in supply chain
	·o	Logistics delays o Restrictions on employees’ ability to work o Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms
	·o	National or EU long lasting recession

	·	~~Restrictions on employees’ ability to work~~
	·	~~Liquidity issues (AR/AP) – payment delays and new government regulations for freezing payment terms~~

~~Subsequent to year-end, management~~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 and 2021.~~COVID-19. 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~~
	·	~~Governmental financial support related to furlough schemes~~

Exhibit No.		Document Description

31.1*		Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of CEO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2*		Certification of CFO pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document**

101.SCH		XBRL Taxonomy Extension Schema Document**

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document**

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document**

101.LAB		XBRL Taxonomy Extension Label Linkbase Document**

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document**

*	This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

**	XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

	Cosmos Holdings Inc.

Date: ~~November 15, 2021~~August 19, 2022	By:	/s/ Grigorios Siokas
		Grigorios Siokas
		Chief Executive Officer
		(Principal Executive Officer)

Date: ~~November 15, 2021~~August 19, 2022	By:	/s/ Georgios Terzis
		Georgios Terzis
		Chief Financial Officer
		(Principal Financial Officer, And Principal Accounting Officer)