XML 28 R18.htm IDEA: XBRL DOCUMENT
v3.19.1

CONVERTIBLE DEBT | 12 Months Ended
--- | ---
Dec. 31, 2018
Notes to Financial Statements |
NOTE 12 - CONVERTIBLE DEBT | November 15, 2017 Securities Purchase Agreement On November 15, 2017, the Company entered into a Securities Purchase Agreement with two institutional investors (the “Buyers”), pursuant to which the Company issued on November 16, 2017 for a purchase price of $3,000,000, $3,350,000 in aggregate principal amount of Senior Convertible Notes (the “Existing Notes”) to the Buyers, convertible into approximately 670,000 shares of the Company’s common stock, par value $.001 per share (the “Common Stock”) at $5.00 per Share and five-year warrants (the “Warrants”) to purchase an aggregate of 536,000 shares of Common Stock exercisable at $7.50 per share. The Notes contained an original issue discount of $350,000. Of the $3,000,000 purchase price, $240,000 went directly to financing costs (see below) and $74,000 went directly to legal fees such that the Company received net proceeds of $2,686,000. On February 20, 2018, the Company entered into two separate Amendment and Exchange Agreements (“Exchange Agreements”) with the Buyers for new senior convertible notes (“New Notes”) in exchange for existing notes. Each New Note is identical in all material respects to the Existing Note, except that (i) the New Note was not convertible into shares of the Company’s common stock (the “Common Stock”) until April 20, 2018; (ii) all future cash installment payments under such New Note will be made at a redemption price equal to 112% of the applicable installment amount; (iii) the Company’s existing obligation to initially deliver pre-delivery shares of its common stock to the holder of such New Note was deferred until April 20, 2018; and (iv) at any time on or before June 20, 2018, the Company had the right, at its option, to redeem all, or any part, of the amounts then outstanding under such New Note in cash at a redemption price equal to 125% of such amounts then outstanding under such New Note. The Company will repay the principal amount of the Notes in equal monthly installments beginning on January 1, 2018 and repeating on the first business day of each calendar month thereafter until the fourteenth (14th) month anniversary date of issue. On September 26, 2018, the Company entered into a second amendment which extended the maturity dates of the notes to February 1, 2019. No interest shall accrue under the Notes unless and until an Event of Default (as defined) has occurred and is not cured. As of December 31, 2018, no such event of default had occurred. On April 24, 2018, 670,001 per-delivery shares were issued. Eighty-five (85%) percent of any cash proceeds received by the holders of the Notes from the sale of pre-delivery shares issued as collateral shall be applied against the particular installment amount then due. The Notes are senior in right of payment to all existing and future indebtedness except Permitted Indebtedness which includes $12 million of senior secured indebtedness of the Company and its subsidiaries under the above described Synthesis loan agreements, plus a defined amount of purchase money indebtedness in connection with bona fide acquisitions. The Company evaluated the debt modification in accordance with ASC 470-50 and concluded that the debt qualified for debt extinguishment as the 10% cash flow test was met. As a result, the Existing Notes were written off and the New Notes were recorded at fair value as of February 20, 2018. The Company wrote off the remaining principal balance of $2,871,429 of the Existing Notes along with the remaining $2,596,838 of debt discounts related to the Existing Notes of which $1,140,711 was a reduction to additional paid-in-capital representing the intrinsic value of the existing beneficial conversion feature. The Company recorded the New Notes in the amount of $3,216,000 and a total debt discount of $3,216,000 in relation to the intrinsic value of the new beneficial conversion feature of $2,880,000 and an original issue discount of $336,000. This resulted in a net loss on extinguishment of debt in the amount of $1,464,698 and additional net equity related to the beneficial conversion feature of $1,739,289. The Notes were not convertible until April 18, 2018 pursuant to the February 20, 2018 amendment. Beginning April 20, 2018, the Holder may convert the Notes into shares of Common Stock at the rate of $5.00 per share. In the event of an issuance of Common Stock for a consideration less than the Conversion Price (other than Excluded Securities, as defined) the Conversion Price shall be reduced to the price of the dilutive issuance, (the “Conversion Price”). Upon an Event of Default (as defined), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the Volume-Weighted Average Price (as defined, the “VWAP”). The Company valued the beneficial conversion feature of the Existing Notes at intrinsic value and recorded $1,140,711 to debt discount, of which $405,743 was amortized through February 19, 2018. On February 20, 2018, the remaining debt discount was written off and the Company recorded a new debt discount as discussed above. The Notes are senior in right of payment to all existing and future indebtedness of the Company except Permitted Indebtedness (as defined in the Note), including $12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions. The Notes include customary Events of Default and provide that the Buyers may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Notes at a redemption premium of one hundred twenty-five (125%) percent, multiplied by the greater of the conversion rate and the then current market price. The Buyers may also require redemption of the Notes upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. On December 12, 2018, the Company entered into a Third Amendment and Exchange Agreement (“Third Exchange Agreement”) with the Buyers whereby the existing 536,000 warrants issued to such investors in connection with the November 15, 2017 Securities Purchase Agreement were retired in exchange for 727,683 new warrants. Additionally, the investors agreed to convert $1,333,333 of the debt related to the September 4, 2018 Securities Purchase Agreement at a reduced conversion price of $3.478. The Company issued those 383,363 shares on December 13, 2018. The Third Exchange agreement was considered to be an inducement to conversion and accounted for in accordance with ASC 470-20. Accordingly, the Company recorded a modification expense of $1,778,952 for the year ended December 31, 2018. The modification expense was based on the change in the fair value of the warrants and conversion feature before and after the modification using the Black-Scholes option-pricing model on the date of the modification using the following assumptions: pre-modification: (a) exercise price of $7.50 and, (b) fair value of common stock of $6, (c) expected volatility of 243.69%, (d) dividend yield of 0%, (e) risk-free rate of 2.77%, (f) expected life of 3.93 years; and post-modification (a) exercise price of $6, (b) fair value of common stock of $6, (c) expected volatility of 113.62%, (d) dividend yield of 0%, (e) risk-free rate of 2.77%, (f) expected life of 5 years. The Warrants had a five-year term and were exercisable into 536,000 shares of Common Stock beginning May 16, 2018, which was six months after the issue date. The Warrants were exercisable at $7.50 per share subject to full ratchet anti-dilution protection (see above). As of December 31, 2018, there were no anti-dilution trigger events. The Warrants would have been exercisable on a cashless basis if a registration statement was not effective covering the resale of the underlying Warrant Shares. The Company calculated the warrants at relative fair value of $1,545,288, which was recognized as a discount to the Existing Notes of which $347,418 was amortized as interest expense through February 19, 2018. On February 20, 2018, the remaining balance was reversed due to the Exchange Agreement as discussed above. On December 12, 2018, pursuant to the Third Amendment and Exchange Agreement, the 536,000 warrants were retired in exchange for the issuance of 727,683 new warrants that are exercisable at $6.00 per share and have the same rights and privileges as the original warrants and expire on December 11, 2023. Conversion of the Notes and exercise of the Warrants are each subject to a blocker provision which prevents any holder from converting or exercising, as applicable, the Notes or the Warrants, into shares of Common Stock if its beneficial ownership of the Common Stock would exceed 4.99% (subject to adjustment not to exceed 9.99%) of the Company’s issued and outstanding Common Stock (each, a “Blocker”). The Company filed, within thirty (30) days of the Closing, a registration statement covering one hundred fifty (150%) percent of the maximum number of shares, underlying the Notes and Warrants pursuant to a registration rights agreement with the Buyers (the “Registration Rights Agreement”). The Post-Effective Amendment to the registration statement (No. 333-222061) was declared effective on May 14, 2018. As a condition to the closing of the Financing, each Buyer, severally, was required to execute a leak-out agreement (each, a “Leak-Out Agreement”) restricting such Buyer’s sale of shares of Common Stock underlying the Notes and Warrants on any Trading Day to not more than such Buyer’s pro rata allocation of the greater of (x) sales with net proceeds of an aggregate of $20,000 or (y) twenty-five (25%) percent of the daily average trading volume of the Company’s Common Stock. If after the closing of the Financing there is no Event of Default under the Notes, the VWAP of the Company’s Common Stock for three (3) trading days is less than $1.50 per share, the Company may further restrict the Buyers from selling at less than $1.50 per share; provided that the portion of the Notes subject to redemption on each Installment Date shall thereafter double. On November 15, 2017, in connection with the $3,350,000 Securities Purchase Agreement, Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for the transaction equal to eight (8%) percent of the total gross proceeds of the offering, or $240,000 and the issuance of five-year warrants to purchase eight (8%) percent of the shares of common stock issued or issuable in this offering (excluding shares of common stock issuable upon exercise of any warrants issued to investors), or 53,600 shares; and, will receive eight (8%) percent of any cash proceeds received from the exercise of any warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six months after the issue date or May 16, 2018 and were valued at a fair value of $386,003 which was fully expensed during the year ended December 31, 2017. The $240,000 cash commission was recorded as debt discount and will be amortized over the term of the Notes. During the year ended December 31, 2018, there were principal conversions in the amount of $386,062 and the Company repaid principal in the amount of $2,919,286, such that the remaining outstanding principal balance of the Notes as of December 31, 2018 is $149,938. The Company recorded a total of $3,350,000 of debt discounts related to the above Existing Notes in the year ended December 31, 2017. A total of $360,890 was amortized during the year ended December 31, 2017 and an additional $392,272 related to the debt discount of the Existing Notes was amortized through February 19, 2018. As a result of the Exchange Agreement discussed above, the debt discounts of the Existing Notes were written off and a total of $3,169,672 of debt discounts were recorded during the year ended December 31, 2018. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts of the New Notes for the year ended December 31, 2018 was $3,124,058. September 4, 2018 Securities Purchase Agreement On September 4, 2018, the Company entered into a Securities Purchase Agreement with two institutional investors (the “Buyers”) pursuant to which the Company issued for a purchase price of $2,000,000, $2,233,333 in aggregate principal amount of Senior Convertible Notes (the “September 2018 Notes”) to the Buyers, convertible into 372,223 shares of the Company’s common stock, par value $.001 per share at $6.00 per share (with the exception of the conversion related to the Third Exchange Agreement), and warrants to purchase an aggregate of 357,334 shares of Common Stock exercisable at $7.50 per share (the “Warrants”). The Notes contained an original issue discount of $233,332. Of the $2,000,000 purchase price, $140,000 went directly to financing costs (see below) and $15,000 went directly to legal fees such that the Company received net proceeds of $1,845,000. The September 2018 Notes provide that the Company will repay the principal amount of Notes in equal monthly installments including a 5% installment fee, which is recorded as interest expense, beginning on November 1, 2018 and repeating on the first business day of each calendar month thereafter until May 1, 2019. During the year ended December 31, 2018, the Company has recorded $31,905 in installment fees. No annual interest will accrue under the Notes unless and until an Event of Default has occurred and is not cured and will then accrue interest at 18% per annum. The Notes are convertible at any time by the Holder into shares of Common Stock at the rate of $6.00 per share (with the exception of the conversion pursuant to the Third Exchange Agreement), subject to full ratchet anti-dilution adjustment (the “Conversion Price”). According to the original terms of the agreement, the Company was to pre-deliver up to 372,222 shares of common stock to the Buyers. Eighty-five percent (85%) of any cash proceeds received by the Buyers from the sale of the Pre-Delivery Shares would then be applied against the particular installment amount due on such Installment Date under the Note. The Company had three months to deliver the Pre-Delivery shares, however the debt was repaid prior to the opportunity to deliver those shares. The Registration Statement (No. 333-22781 covering 150% of the number of shares underlying the Notes and warrants was declared effective on November 1, 2018. Upon an Event of Default (regardless of whether such event has been cured), the Buyers may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company valued the beneficial conversion feature of the Existing Notes at intrinsic value and recorded $934,922 to debt discount, which will be amortized over the life of the Notes. The Notes are pari passu in right of payment to the November Notes and senior in right of payment to all other existing and future indebtedness of the Company except Permitted Indebtedness (as defined in the Note), including $12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions. The Notes include customary Events of Default and provide that the Buyers may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Notes at a redemption premium of one hundred twenty-five (125%) percent, multiplied by the greater of the conversion rate and the then current market price. The Buyers may also require redemption of the Notes upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the Notes at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount. The Warrants are exercisable into 357,334 shares of Common Stock equal to eighty (80%) percent of the number of shares of common stock the Buyers would receive if the Notes were fully converted (at an assumed price of $5.00 per share) upon the date of issuance of the Notes. The Warrants are exercisable at $7.50 per share for a five-year term commencing March 1, 2019 subject to full ratchet anti-dilution protection. The Warrants will be exercisable on a cashless basis if a registration statement is not effective covering the resale of the underlying Warrant Shares. The Company calculated the warrants at relative fair value of $910,078, which was recognized as a discount to the Notes and is being amortized as interest expense over the remaining term of the Notes. Conversion of the Notes and exercise of the Warrants are each subject to a blocker provision which prevents any holder from converting or exercising, as applicable, the Notes or the Warrants, into shares of common stock if its beneficial ownership of the common stock would exceed 9.99% of the Company’s issued and outstanding common stock (a “Blocker”). As a condition to the closing of the Financing, each Buyer executed a leak-out agreement which replaced the leak-out agreements entered into in November 2017 (each, a “Leak-Out Agreement”) restricting such Buyer’s sale of shares of common stock underlying the Notes and Warrants on any trading day to not more than such Buyer’s pro rata allocation of the greater of (x) sales with net proceeds of an aggregate of $20,000 or (y) twenty-five (25%) percent of the daily average trading volume of the Company’s Common Stock. If after the closing of the Financing the VWAP of the Company’s common stock for three (3) trading days is less than $1.50 per share, the Company may further restrict the Buyers from selling at less than $1.50 per share; provided that the portion of the Notes subject to redemption on each Installment Date shall thereafter double. Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to seven (7%) percent of the total gross proceeds of the offering, or $140,000, and the issuance of five-year warrants to purchase seven (7%) percent of the shares of common stock issued or issuable in this offering (excluding shares of Common Stock issuable upon exercise of any Warrants issued to investors), or 26,056 shares; and will receive seven (7%) percent of any cash proceeds received from the exercise of any Warrants sold in the offering with an expiration equal to or less than twenty-four (24) months. The warrants are exercisable six months after the issue date or March 4, 2019, at $6.00 per share and were valued at a fair value of $157,969 which was fully expensed during the nine months ended September 30, 2018. The $140,000 cash commission was recorded as debt discount and will be amortized over the term of the Notes. During the year ended December 31, 2018 there were principal conversions in the amount of $1,333,333 at a conversion price of $3.478 pursuant to the Third Exchange Agreement and the Company repaid principal of $638,095, such that the remaining outstanding principal balance of the Notes as of December 31, 2018 was $261,903. The Company recorded a total of $2,233,332 of debt discounts related to the above Notes during the year ended December 31, 2018. The debt discounts are being amortized over the term of the debt. Amortization of the debt discounts for the year ended December 31, 2018 was $2,049,232.

X
- References No definition available. + Details
Name: | COSM_ConvertibleDebtDisclosureTextBlock
Namespace Prefix: | COSM_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration

X
- References No definition available. + Details
Name: | COSM_NotesToFinancialStatementsAbstract
Namespace Prefix: | COSM_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration