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The Company does not have the ability to exercise significant influence over ICC.0 0 0 0 2000000 5000000 Since no value was attributed to the 33 1/3% equity ownership interest in Marathon received as consideration for the distribution services, the Company would receive variable consideration in future for its services under the Distribution and Equity Acquisition Agreement 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 P5Y 141490 P360Y 300000000 1000000 3010000 1000000 1250000 3.85 3000000 455636 1000000 1250000 1314117 10 550144 65000 250000 40000 3.85 781819 781819 500000 166667 208333 3.28 5.00 4.03 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 subject to limitation under IRC Section 382. Of the $12.5 million Federal NOL carryforwards, $2.5 million are pre-2018 and begin to expire in 2031. 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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 with the first payment due 9 months from the first deposit 0.18 2020-04-30 0.18 2020-12-31 0.18 42832 5862 524094 402 2450000 0.06 104220 January 2023 16185 5852 7151 210574 148685 3100 1000000 3000000 1000000 321300 259741 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, 2021, the Company would be required to issue 431,270 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. 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As filed with the Securities and Exchange Commission on May 25, 2022

Registration No. 333-[●]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

____________________________

FORM S-1

REGISTRATION STATEMENT UNDER

THE SECURITIES ACT OF 1933

COSMOS HOLDINGS INC.
(Exact name of registrant as specified in its charter)

Nevada |  | 5122 |  | 27-0611758
(State or other jurisdiction of incorporation or organization) |  | (Primary Standard Industrial Classification Code Number) |  | (I.R.S. Employer Identification Number)

__________________________

141 West Jackson Blvd, Suite 4236,

Chicago, 60604, IL

(312) 536-3102

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

____________________________

Greg Siokas

Chief Executive Officer

141 West Jackson Blvd, Suite

4236, Chicago, 60604, IL

(312) 536-3102

(Name, address, including zip code, and telephone number, including area code, of agent for service)

____________________________

Ross Carmel, Esq.

Carmel, Milazzo & Feil LLP

55 West 39th Street, 18th Floor

New York, NY 10018

(212) 658-0458

Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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 | ☐ | 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 comply with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of Securities Act. ☐

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities, nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

PRELIMINARY PROSPECTUS, SUBJECT TO COMPLETION, DATED MAY 25, 2022

44,914,285 shares of common stock

This prospectus relates to the resale from time to time of up to 44,914,285 shares of our common stock, $0.001 par value per share (the “Common Stock”), issuable upon the conversion of outstanding shares of Series A Preferred Stock and the exercise of outstanding warrants held by the selling stockholders named herein (the “Selling Stockholders”).

The Selling Stockholders may offer the shares of Common Stock from time to time directly or through underwriters, broker-dealers or agents in one or more public or private transactions at market prices prevailing at the time of sale, at fixed prices, at negotiated prices, at various prices determined at the time of sale or at prices related to prevailing market prices, as further described herein. If the shares of Common Stock are sold through underwriters, broker-dealers or agents, the Selling Stockholders or purchasers of the shares will be responsible for underwriting discounts or commissions or agents’ commissions. The timing and amount of any sale is within the sole discretion of the Selling Stockholders.

We will not receive any proceeds from the sale of these shares by the Selling Stockholders.

Our Common Stock is listed on the Nasdaq Capital Market under the symbol “COSM.” On May 24, 2022, the last reported sales price of our Common Stock was $1.05.

Investing in our Common Stock involves a high degree of risk. Before buying any of our securities, you should carefully read “Risk Factors” on page 8 of this prospectus, and under similar headings in the other documents that are incorporated by reference into this prospectus.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The date of this prospectus is May 25, 2022

TABLE OF CONTENTS

| Page No. |
ABOUT THIS PROSPECTUS |  | 3 |
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS |  | 4 |
PROSPECTUS SUMMARY |  | 5 |
RISK FACTORS |  | 6 |
USE OF PROCEEDS |  | 21 |
MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS |  | 22 |
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 23 |
BUSINESS |  | 37 |
MANAGEMENT |  | 47 |
EXECUTIVE COMPENSATION |  | 50 |
PRINCIPAL STOCKHOLDERS |  | 52 |
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |  | 53 |
SELLING STOCKHOLDERS |  | 56 |
PLAN OF DISTRIBUTION |  | 58 |
DESCRIPTION OF SECURITIES |  | 60 |
LEGAL MATTERS |  | 64 |
EXPERTS |  | 64 |
WHERE YOU CAN FIND MORE INFORMATION |  | 64 |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS |  | 66 |

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About This Prospectus

You should rely only on the information we have provided in this prospectus, any applicable prospectus supplement and any related free writing prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus, any applicable prospectus supplement or any related free writing prospectus. You must not rely on any unauthorized information or representation. This prospectus is an offer to sell only the Shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. You should assume that the information in this prospectus, any applicable prospectus supplement or any related free writing prospectus is accurate only as of the date on the front of the document, regardless of the time of delivery of this prospectus or any sale of a security.

The Selling Stockholders are offering the Common Stock only in jurisdictions where such issuances are permitted. The distribution of this prospectus and the issuance of the Common Stock in certain jurisdictions may be restricted by law. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the issuance of the Common Stock and the distribution of this prospectus outside the United States. This prospectus does not constitute, and may not be used in connection with, an offer to sell, or a solicitation of an offer to buy, the Shares offered by this prospectus by any person in any jurisdiction in which it is unlawful for such person to make such an offer or solicitation.

This prospectus is part of a registration statement that we filed with the SEC, under which the Selling Stockholders may offer from time to time up to an aggregate of 44,914,285 shares of our Common Stock in one or more offerings. If required, each time a Selling Stockholder offers shares of our Common Stock, in addition to this prospectus, we will provide you with a prospectus supplement that will contain specific information about the terms of that offering. We may also authorize one or more free writing prospectuses to be provided to you that may contain material information relating to that offering. We may also use a prospectus supplement and any related free writing prospectus to add, update or change any of the information contained in this prospectus. This prospectus, together with any applicable prospectus supplements and any related free writing prospectuses, includes all material information relating to this offering. To the extent that any statement that we make in a prospectus supplement is inconsistent with statements made in this prospectus, the statements made in this prospectus will be deemed modified or superseded by those made in a prospectus supplement. Please carefully read both this prospectus and any prospectus supplement.

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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains “forward-looking statements” that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, strategy and plans, and our expectations for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. We have attempted to identify forward-looking statements by terminology including “anticipates,” “believes,” “can,” “continue,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “should,” or “will” or the negative of these terms or other comparable terminology. Although we do not make forward looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. Forward-looking statements included or incorporated by reference in this prospectus or our other filings with the Securities and Exchange Commission, or the SEC, include, but are not necessarily limited to, those relating to uncertainties relating to:

| · | our ability to raise capital when needed;
| · | difficulties or delays in the product development process, including the results of preclinical studies or clinical trials;
| · | financing and strategic agreements and relationships;
| · | difficulties or delays in the regulatory approval process;
| · | adverse side effects or inadequate therapeutic efficacy of our drug candidates that could slow or prevent product development or commercialization;
| · | dependence on third party suppliers;
| · | uncertainties relating to manufacturing, sales, marketing and distribution of our drug candidates that may be successfully developed and approved for commercialization;
| · | the uncertainty of protection for our patents and other intellectual property or trade secrets; and
| · | competition.

These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under “Risk Factors” or elsewhere in this prospectus, which may cause our or our industry’s actual results, levels of activity, performance or achievements expressed or implied by these forward-looking statements.

Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from what is expressed in or suggested by the forward-looking statements.

Forward-looking statements speak only as of the date they are made. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. We caution you not to give undue weight to such projections, assumptions and estimates.

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PROSPECTUS SUMMARY

This summary highlights selected information that is presented in greater detail elsewhere in this prospectus or incorporated by reference in this prospectus. Because it is only a summary, it does not contain all of the information you should consider before investing in our Common Stock and it is qualified in its entirety by, and should be read in conjunction with, the more detailed information included elsewhere in this prospectus. Before you decide whether to purchase shares of our Common Stock, you should read this entire prospectus carefully, including the sections of this prospectus entitled “Risk Factors” and similar headings in the other documents that are incorporated by reference in this prospectus. You should also carefully read the information incorporated by reference into this prospectus, including our financial statements, and the exhibits to the registration statement of which this prospectus is a part. Unless otherwise indicated herein, the terms “Cosmos,” “we,” “our,” “us,” or “the Company” refer to Cosmos Holdings Inc. and “this offering” refers to the offering contemplated in this prospectus.

Our Company

Cosmos Holdings Inc. together with its subsidiaries (hereinafter referred to collectively as “us”, “we”, or the “Company”) is an international pharmaceutical company, with a proprietary line of nutraceuticals and a distributor of branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices which we sell through an extensive, established EU distribution network. The Company identifies, acquires, develops and commercializes products that improve patients' lives and outcomes and has developed a global distribution platform and is currently expanding throughout Europe, Asia and North America. Cosmos Holdings has offices and distribution centers in Chicago, USA, Athens and Thessaloniki, Greece and Harlow, UK.

See the section entitled “Risk Factors” in this prospectus for a discussion of some of the risks related to our business.

Corporate Information

Our principal executive offices are located at is located at 141 W. Jackson Blvd, Suite 4236, Chicago, Illinois 60604. and our telephone number is (312) 536-3102. Our website address is www.cosmoshold.com. Any information contained on, or that can be accessed through, our website is not incorporated by reference into, nor is it in any way part of this prospectus and should not be relied upon in connection with making any decision with respect to an investment in our securities. We are required to file annual, quarterly and current reports, proxy statements and other information with the SEC. You may obtain any of the documents filed by us with the SEC at No cost from the SEC’s website at http://www.sec.gov.

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RISK FACTORS

Investing in our Common Stock involves a high degree of risk. You should carefully consider the risks described below and under “Risk Factors” in our most recent Annual Report on Form 10-K together with all of the other information contained or incorporated by reference in this prospectus. Our business, financial condition, results of operations and prospects could be materially and adversely affected by these risks. The occurrence of any of these risks might cause you to lose all or part of your investment in the offered securities.

Risks Related to Our Business

History of significant losses and risk of losing entire investment.

We have a history of significant losses. We expect to continue to incur increasing net losses for the foreseeable future, and we may never achieve or maintain profitability. For the year ended December 31, 2021, we had revenue of $56,239,667, net loss of $7,961,649 and net cash used in operations of $7,097,174. Additionally, as of December 31, 2021, we had working capital of $10,950,492, an accumulated deficit of $34,345,506, and stockholders’ equity of $4,379,463. We have financed our operations primarily through the sale of equity securities and warrants and the issuance of convertible debt securities. There can be no assurance we will not have losses and negative cash flows in the near future as we continue to grow. Therefore, there is a significant risk that public investors may lose some or all of their investment.

Our financial statements have been prepared assuming that the Company will continue as a going concern.

Our audited financial statements for the fiscal year ended December 31, 2021 have been prepared assuming the Company will continue as a going concern. As discussed in Note 1 to the financial statements for the period ended December 31, 2021, the continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders and the ability to raise adequate equity or debt financing, to fund operating losses until it becomes profitable. Our independent registered public accounting firm has included an explanatory paragraph expressing substantial doubt about our ability to continue as a going concern in their audit report for the fiscal year ended December 31, 2021. If that were to occur the Company would be forced to suspend or terminate operations and, in all likelihood, cause investors to lose their entire investment.

Limited Revenues, with substantial losses and no guarantee of continued profitability.

The Company has a limited relevant operating history upon which an evaluation of its prospects can be made. Such prospects must be considered in light of the risks, expenses and difficulties frequently encountered in establishing a new business in the evolving and heavily-regulated pharmaceuticals industry, which is characterized by an ever-increasing number of market entrants, intense competition and high failure rate. In addition, significant challenges are often encountered in shifting from developmental to commercial activities.

We are subject to many business risks, including but not limited to, unforeseen capital requirements, failure of market acceptance, failure to establish business relationships, and competitive disadvantages against larger and more established companies. There can be no assurance that the Company will be profitable, or that the Company will be able to obtain sufficient additional funds to continue its planned activities. Therefore, prospective investors may lose all or a portion of their investment.

Our revenues are concentrated in the distribution and sale of branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices. When these markets experience a downturn, demand for our products and revenues may be adversely affected.

Our business and revenues, depend on favorable conditions in the markets for branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices. Adverse changes in the economies where we sell our products, such as economic downturns, inflation, decreased employment levels, and reductions in consumer confidence could have a material adverse impact on our revenues and results of operation.

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Grigorios Siokas, our Chief Executive Officer and our other officers and directors own approximately 42% of our outstanding shares of common stock which gives them the ability to control matters submitted to our stockholders for approval.

The Company’s officers, directors and principal stockholders may be able to significantly influence matters requiring stockholder approval because they own approximately forty-two (42%) percent of the Company’s outstanding shares.

For example, these stockholders, acting together, will be able to significantly influence elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction which could adversely affect the market price of our Common Stock.

If we lose the services of our Chief Executive Officer, our operations would be disrupted and our business could be harmed.

Our business plan relies significantly on the continued services of our CEO, Grigorios Siokas. If we were to lose his services, including through death or disability, our ability to continue to execute our business plan would be materially impaired. The Company has not entered into an employment agreement with Mr. Siokas.

We do not have the financial resources necessary to successfully complete product development, marketing and certain acquisitions.

As of December 31, 2021, we had net cash of $286,487. In order to complete product development, marketing and certain acquisitions; we are attempting to obtain sufficient additional capital. Even if we do find such financing, it may be on terms that are unfavorable or dilutive, to owners of the Company’s equity securities.

Our drug development program will require substantial additional capital to successfully complete it, arising from costs to:

| · | complete research, preclinical testing and human studies;
| · | establish pilot scale and commercial scale manufacturing processes; and
| · | establish and develop quality control, regulatory, marketing, sales and administrative capabilities to support these programs.

Our future operating and capital needs will depend on many factors, including, but not limited to:

| · | the pace of scientific progress in our research and development programs and the magnitude of these programs;
| · | the scope and results of preclinical testing and human studies;
| · | the time and costs involved in obtaining regulatory approvals;
| · | the time and costs involved in preparing, filing, prosecuting, maintaining and enforcing patent claims;
| · | competing technological and market developments;
| · | our ability to establish additional collaborations;
| · | our ability to establish additional collaborations;
| · | changes in our existing collaborations; and,
| · | the cost of manufacturing scale-up.

We base our outlook regarding the need for funds on many uncertain variables. Such uncertainties include regulatory approvals, the timing of events outside our direct control such as negotiations with potential strategic partners and other factors. Any of these uncertain events can significantly change our cash requirements as they determine such one-time events as the achievement of major milestones and other payments.

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We cannot be certain that additional funding will be available on acceptable terms, or at all. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that impact our ability to conduct our business. If we are unable to raise additional capital, when required, or on acceptable terms, we may have to significantly delay, scale back or discontinue the development and/or the commercialization of one or more of our product candidates. Accordingly, any failure to raise adequate capital in a timely manner would be expected to have a material adverse effect on our business, operating results, financial condition and future growth prospects.

Additional funds are required to support our operations but we may be unable to obtain them on favorable terms, we would be required to cease or reduce further development or commercialization of our potential products.

Our success is highly dependent on attracting and retaining key scientific and management personnel, however, we may be unable to do so.

Our future depends on the service of our scientific and management teams and other key personnel. We may be unable to attract highly qualified personnel, especially if are not able to demonstrate to those individuals that we have sufficient funding to adequately compensate them either through current cash salary or with equity that could eventually have substantial value. If we are not able to attract highly qualified individuals, we may be unable to continue development or commercialization efforts of our proposed products which would have a material adverse effect on our operations.

We are subject to various regulations and compliance requirements under both the European Union, the European Medicines Agency (the “EMA”), the Hellenic Ministry of Health and other related regulatory agencies.

We believe that the health care industry will continue to be subject to increasing regulation, as well as political and legal action, as future proposals to reform the health care system are considered by the European Union, the United Kingdom, and the Hellenic Republic of Greece. Our services and products are subject to rigorous regulation by the EMA, the Hellenic Ministry of Health and the Hellenic Organization of Medicine. The process of obtaining regulatory approvals to market a drug or medical device can be costly and time-consuming, and approvals might not be granted for future products, or additional indications or uses of existing products, on a timely basis, if at all. Delays in the receipt of, or failure to obtain approvals for, future products, or new indications and uses, could result in delayed realization of product revenues, reduction in revenues, and in substantial additional costs. In addition, no assurance can be given that we will remain in compliance with European Union, MHRA the Hellenic Ministry of Health and other regulatory requirements if and when approval or marketing authorization has been obtained for a product. Regulatory requirements include, among other things, regulations regarding manufacturing practices, product labeling, and advertising and post marketing reporting, including adverse event reports and field alerts due to manufacturing quality concerns. Many of our facilities and procedures and those of our suppliers are subject to ongoing regulation, including periodic inspection by the applicable regulatory authorities. We must incur expense and spend time and effort to ensure compliance with these complex regulations. Possible regulatory actions for non-compliance could include warning letters, fines, damages, injunctions, civil penalties, recalls, seizures of our products, and criminal prosecution. These actions could result in, among other things, substantial modifications to our business practices and operations; refunds, recalls, or seizures of our products; a total or partial shutdown of production in one or more of our facilities while we or our suppliers remedy the alleged violation; the inability to obtain future pre-market approvals or marketing authorizations; and withdrawals or suspensions of current products from the market. Any of these events could disrupt our business and have a material adverse effect on our revenues, profitability and financial condition.

Any future acquisitions that we may make could disrupt our business, cause dilution to our stockholders and harm our business, financial condition or operating results.

Any future acquisitions that we may make could subject us to a number of risks, including, but not limited to:

| · | the purchase price we pay and/or unanticipated costs could significantly deplete our cash reserves or result in increased indebtedness and/or dilution to our existing stockholders;
| · | we may find that the acquired company or technologies do not improve our market position as planned;
| · | we may have difficulty integrating the operations and personnel of the acquired company, as the combined operations will place significant demands on the Company’s management, technical, financial and other resources;

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| · | key personnel and customers of the acquired company may terminate their relationships with the acquired company as a result of the acquisition;
| · | we may experience additional financial and accounting challenges and complexities in areas such as tax planning and financial reporting;
| · | we may assume or be held liable for risks and liabilities (including environmental-related costs) as a result of our acquisitions, some of which we may not be able to discover during our due diligence investigation or adequately adjust for in our acquisition arrangements;
| · | our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises;
| · | we may incur one-time write-offs or restructuring charges in connection with the acquisition;
| · | we may acquire goodwill and other intangible assets that are subject to amortization or impairment tests, which could result in future charges to earnings; and,
| · | we may not be able to realize the cost savings or other financial benefits we anticipated.

We cannot assure you that, following any acquisition, we will achieve sales levels, profitability, efficiencies or synergies that justify the acquisition, or that the acquisition will result in increased earnings for us in any future period. These factors could have a material adverse effect on our business, financial condition and operating results.

Holders of convertible promissory notes have certain rights upon an event of default under their respective agreements that could harm our business, financial condition and results of operations and could require us to curtail or cease our operations.

Holders of promissory notes having an outstanding principal balance of approximately $640,000, as of March 31, 2022, have certain rights upon an event of default.

Events of Default under the Notes, none of which have occurred as of the date of this prospectus, are defined under the Notes to include among others: (i) failure to pay principal, interest, late charges or any other amounts when due after any applicable cure period, under the Notes or any other instrument delivered in connection with the transaction; (ii) any default of at least $75,000 of indebtedness other than with respect to the Note and/or the entry of a final judgment concerning the foregoing; (iii) any bankruptcy, liquidation or other similar proceeding not dismissed within thirty (30) days of its initiation, or any voluntary bankruptcy or similar proceeding commenced by the Company or any subsidiary, or an admission in writing of its inability to pay its debts generally as they become due; (iv) the entry by a court of a decree, order, judgment or similar document in respect of the Company or any subsidiary of a voluntary or involuntary bankruptcy or similar proceeding; (v) any breach of a representation, warranty, covenant or other term or condition of any document in connection with this transaction except if curable, the breach remains uncured for two consecutive trading days; (vi) a Material Adverse Effect (as defined in the SPA) occurs; (vii) failure to meet filing and effectiveness deadlines concerning this registration statement; (viii) failure to convert the Notes or deliver underlying Common Stock on a timely basis; (ix) suspension from trading or listing of the Common Stock for five consecutive trading days; (x) failure to reserve at least 150% of the number of shares of Common Stock issuable upon conversion of the Notes and/or exercise of the Warrants; and (xi) any Event of Default occurs with respect to the November Notes which was exchanged in February for new notes.

The Notes provide that upon an Event of Default, 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 exercise of any of the above rights upon an event of default could substantially harm our financial condition and force us to curtail, or even cease our operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

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If we are unable to comply with certain financial and operating restrictions required by the Synthesis Loan Agreements and Senior Convertible Notes, we may be limited in our business activities and access to credit or may default under the Synthesis Loan Agreements.

Provisions in the Synthesis Loan Agreements impose restrictions or require prior approval on our ability, and the ability of certain of our subsidiaries to, among other things:

(i) incur any financial indebtedness with any third party without Synthesis’s prior written consent; (ii) create, or permit to subsist, any security on or over any of its assets other than permitted security; (iii) sell, transfer or otherwise dispose of any of its assets on terms whereby such assets are or may be leased to or reacquired by it; (iv) sell, transfer or otherwise dispose of any of its receivable on recourse terms; (v) enter into any arrangement under which money or the benefit of a bank or other account may be applied, set off or made subject to a combination of accounts; (vi) enter into any other preferential arrangement having a similar effect; (vii) restrictions in circumstances where the arrangement or transaction is entered into primarily as a method of raising Borrowed Money or of financing the acquisition of an asset; (viii) it will not incur or permit to subsist any obligation for Borrowed Money other than as permitted or required under the Loan Agreement; and (ix) failure to promptly forward customer payments within sixty (60) days when required, will cause the Company to maintain a pledged bank account.

Provisions in the Senior Convertible Notes (the “Notes”) impose restrictions or require prior approval on our ability and the ability of our subsidiaries to, among other things: (i) the Notes shall be senior to all other indebtedness other than Permitted Indebtedness (including Synthesis and certain acquisitions); (ii) create any indebtedness, other than Permitted Indebtedness; (iii) create any liens other than Permitted Liens; (iv) make payments on indebtedness; (v) redeem or declare cash dividends or distributions on the capital stock; (vi) transfer any assets or rights other than in the ordinary course of business; (vii) permit any indebtedness to mature prior to maturity other than Permitted Indebtedness; (viii) material change in nature of business; (ix) maintain property, intellectual property and insurance; or (x) engage in certain related party transactions.

The Synthesis Loan Agreements also contain other customary covenants. We may not be able to comply with above-described covenants in the future. Our failure to comply with these covenants may result in the declaration of an event of default which, if not cured or waived, may result in the acceleration of the maturity of indebtedness outstanding under the Synthesis Loan Agreements and the Notes, which would require us to pay all amounts outstanding. If the maturity of our indebtedness is accelerated, we do not currently have sufficient funds available for repayment and we may not have the ability to borrow or obtain sufficient funds to replace the accelerated indebtedness on terms acceptable to us or at all. Our failure to repay the indebtedness would result in Synthesis and/or the Noteholders foreclosing on all or a portion of our assets and force us to curtail, or even to cease, our operations.

We are exposed to potential product liability or similar claims, and insurance against these claims may not be available to us at a reasonable rate in the future.

Our business exposes us to potential product liability related to our business of marketing distribution of branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices. We currently carry product liability but we may not be able to maintain such insurance or the amount of such insurance may not be adequate to cover claims. We could be materially and adversely affected if we were required to pay damages or incur defense costs in connection with a claim outside the scope of insurance coverage or if our liability exceeds the amount of applicable insurance. In addition, insurance may not continue to be available on terms acceptable to us, if at all, or if obtained, the insurance coverage may be insufficient to cover any potential claims or liabilities. Similar risks, but with larger potential liability amounts, would exist upon the commercialization or marketing of any products by our collaborators or us.

Regardless of their merit or eventual outcome, product liability claims may result in:

| · | decreased demand for our products;
| · | injury to our reputation and significant negative media attention;
| · | costs of litigation;
| · | distraction of management; and,
| · | substantial monetary awards to plaintiffs.

Should any of these events occur, it could have a material adverse effect on our reputation and financial condition.

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Discovery of safety issues with our products could create product liability and could cause additional regulatory scrutiny and requirements for additional labeling, withdrawal of products from the market, and the imposition of fines or criminal penalties.

Discovery of safety issues with our products could create product liability and could cause additional regulatory scrutiny and requirements for additional labeling, withdrawal of products from the market, and the imposition of fines or criminal penalties. Adverse safety events may also damage physician and patient confidence in our products and our reputation. Any of these could result in liabilities, loss of revenue, material write-offs of inventory, material impairments of intangible assets, goodwill and fixed assets, material restructuring charges and other adverse impacts on our results of operations. Regulatory authorities are making greater amounts of stand-alone safety information directly available to the public through periodic safety update reports, patient registries and other reporting requirements. The reporting of adverse safety events involving our products or products similar to ours and public rumors about such events may increase claims against us and may also cause our product sales or stock price to decline or experience periods of volatility. Restrictions on use or significant safety warnings that may be required to be included in the label of our products may significantly reduce expected revenues for such products and require significant expense and management time.

We are subject to Anti-corruption laws

We are subject to the U.S. Foreign Corrupt Practices Act and similar anti-corruption laws in other European Union countries, including Greece. These laws generally prohibit companies and their intermediaries from engaging in bribery or making other prohibited payments to government officials for the purpose of obtaining or retaining business, and some have record keeping requirements. The failure to comply with these laws could result in substantial criminal and/or monetary penalties. We operate in jurisdictions that have experienced corruption, bribery, pay-offs and other similar practices from time-to-time and, in certain circumstances, such practices may be local custom. We have implemented internal control policies and procedures that mandate compliance with these anti-corruption laws. However, we cannot be certain that these policies and procedures will protect us against liability. There can be no assurance that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or agents are found to have engaged in such practices, we could suffer severe criminal or civil penalties and other consequences that could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

We are subject to evolving and complex tax regulations in the US, Greece and in the European Union

We are subject to evolving and complex tax laws in the jurisdictions in which we operate. Significant judgment is required for determining our tax liabilities, and our tax returns are periodically examined by various tax authorities. We believe that our accrual for tax contingencies is adequate for all open years based on past experience, interpretations of tax law, and judgments about potential actions by tax authorities; however, due to the complexity of tax contingencies, the ultimate resolution of any tax matters may result in payments greater or less than amounts accrued. In December 2017, the U.S. Congress passed the Tax Cuts and Jobs Act of 2016 (the “TCJA”), which made significant changes to the existing tax law applicable to individuals and corporations. In addition, the U.S. Congress is currently legislation that undo many of the changes made by the TCJA as well as provisions that would expand entitlement programs. Changes to the U.S. international tax laws could have a significant impact on our financial results. In addition, we may be affected by changes in tax laws, including tax rate changes, changes to the laws related to the remittance of foreign earnings (deferral), or other limitations impacting the U.S. tax treatment of foreign earnings, new tax laws, and revised tax law interpretations in domestic and foreign jurisdictions. This prospectus does not discuss any such tax legislation or the manner in which it might affect purchasers of our Common Stock. We urge you to consult with your legal and tax advisors with respect to any such legislation and the potential tax consequences of investing in our Common Stock.

We may not be able to obtain regulatory approval for new products

Obtaining and maintaining regulatory approval has been and will continue to be increasingly difficult, time-consuming and costly. There may be situations in which demonstrating the efficacy and safety of a product candidate may not be sufficient to gain regulatory approval unless superiority to comparative products can be shown. Also, legislative bodies or regulatory agencies could enact new laws or regulations or change existing laws or regulations at any time, which could affect our ability to obtain or maintain approval of our products or product candidates. For example, the EU has finalized legislation, which relate to the conduct of clinical trials. While the aim of the new legislation is improvement in operational efficiency and a streamlining of the overall clinical trial authorization process, the new requirements also provide for increased transparency of clinical trial results and submission of quality data relating to the products and product candidates used for such trials. Failure to comply with new laws or regulations could result in significant monetary penalties as well as reputational and other harms. We are unable to predict when and whether any further changes to laws or regulatory policies affecting our business could occur, such as efforts to reform medical device regulation or the pedigree requirements for medical products or to implement new requirements for combination products, and whether such changes could have a material adverse effect on our business and results of operations. Regulatory authorities may also question the sufficiency for approval of the endpoints we select for our clinical trials. Regulatory authorities could also add new requirements, such as the completion of an outcomes study or a meaningful portion of an outcomes study, as conditions for obtaining approval or obtaining an indication. The imposition of additional requirements may delay our clinical development and regulatory filing efforts, and delay or prevent us from obtaining regulatory approval for new product candidates, new indications for existing products or maintenance of our current labels.

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Difficulty in developing new products

We believe, based on our knowledge of the industry, that our future strategy relies on the acquisition of new operating subsidiaries and the subsequent launch of new products and technologies. To accomplish this, we may need to commit substantial efforts, funds, and other resources to research and development. A high rate of failure is inherent in the research and development of new products and technologies. Failure can occur at any point in the process, including after significant funds have been invested. We cannot state with certainty when or whether any of our products will be developed and/or launched, whether we will be able to develop, license, or otherwise acquire compounds or products, or whether any products will be commercially successful.

We face significant competition, including competition from larger and better funded enterprises.

Our pharmaceutical businesses are conducted in intensely competitive and often highly regulated markets. Many of our pharmaceutical products face competition in the form of branded or generic drugs that treat similar diseases or indications. Our competitors include other trading companies, smaller companies, with generic drug and consumer healthcare products. We compete with other companies that manufacture and sell products that treat diseases or indications similar to those treated by our trading pharmaceutical products.

Our competitive position in pharmaceutical sector is affected by several factors including among others, the amount and effectiveness of our and our competitors’ promotional resources; customer acceptance; product quality; our and our competitors’ introduction of new products, ingredients, claims, dosage forms, or other forms of innovation; and pricing, regulatory and legislative matters (such as product labeling, patient access and prescription).

The branded pharmaceutical industry is highly competitive. Our products compete with products manufactured by many other companies in highly competitive markets throughout the EU territory and internationally as well. Competitors include many of the major brand name and generic manufacturers of pharmaceutical products. If competitors introduce new products, delivery systems or processes with therapeutic or cost advantages, our products can be subject to progressive price reductions or decreased volume of sales, or both.

In the generic pharmaceutical market, we might face intense competition from other generic drug manufacturers, brand name pharmaceutical companies, existing brand equivalents and manufacturers of therapeutically similar drugs.

Newly introduced generic products with limited or no other generic competition typically garner higher prices. At the expiration of the exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug. Consequently, the maintenance of profitable operations in generic pharmaceuticals depends, in part, on our ability to select, develop and launch new generic products in a timely and cost-efficient manner and to maintain efficient, high quality business capabilities.

We compete in the nutritional industry with our own branded nutraceutical products against companies that sell through retail stores, as well as against other direct selling companies. We compete against manufacturers and retailers of nutraceutical products which are distributed through supermarkets, drug stores, health food stores, vitamin outlets and mass market retailers, among others. We believe that the principal components of competition in nutraceutical products are expertise and service, high product quality, diversification and differentiation, price, and brand recognition.

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Operating conditions have become more challenging under the mounting global pressures of competition, industry regulation and cost containment. We continue to take measures to evaluate, adapt and improve our organization and business practices to better meet customer and public needs. We also seek to continually enhance the organizational effectiveness of all of our functions, including efforts to accurately and ethically launch and promote our products.

If we are not able to overcome these competitive challenges, our prospects, results of operations, and financial condition could be harmed.

Concentration of Suppliers and Production

A substantial portion of our capacity, as well as our current production, is attributable to a limited number of manufacturing facilities and certain third-party suppliers. A significant disruption at any one of such facilities within our internal or third party supply chain, even on a short-term basis, whether due to a labor strike, failure to reach acceptable agreement with labor and unions, adverse quality or compliance observation, infringement of intellectual property rights, act of God, civil or political unrest, export or import restrictions, or other events could impair our ability to trade, produce and ship products to the market on a timely basis and could, among other consequences, subject us to exposure to claims from customers. Any of these events could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

The Company is subject to market perceptions

Market perceptions of us are very important to our business, especially market perceptions of our Company and brands and the safety and quality of our products. If we, our partners and suppliers, or our brands suffer from negative publicity, or if any of our products or similar products which other companies distribute are subject to market withdrawal or recall or are proven to be, or are claimed to be, ineffective or harmful to consumers, then this could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price. Also, because we are dependent on market perceptions, negative publicity associated with product quality, patient illness, or other adverse effects resulting from, or perceived to be resulting from, our products, or our partners’ and suppliers’ manufacturing facilities, could have a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

International Risks

Our business is subject to risks associated with doing business internationally. Sales outside of the U.S. make up 100% percentage of our net sales. Additional risks associated with our international operations include: differing local product preferences and product requirements; trade protection measures and import or export licensing requirements; difficulty in establishing, staffing, and managing operations; differing labor regulations; potentially negative consequences from changes in or interpretations of tax laws; political and economic instability, including sovereign debt issues; price controls, limitations on participation in local enterprises, expropriation, nationalization, and other governmental action; inflation, recession, and fluctuations in interest rates; compulsory licensing or diminished protection of intellectual property; and potential penalties or other adverse consequences for violations of the General Data Protection Rules (“GDPR”) and anti-corruption, anti-bribery, and other similar laws and regulations, including the Foreign Corrupt Practices Act and the U.K. Bribery Act. Events contemplated by these risks may, individually or in the aggregate, have a material adverse effect on our revenues and profitability.

International Economic Conditions

Criticism of excessive national debt of Greece has led to credit downgrades of the sovereign debt of Greece, and uncertainty about the future status of the Euro. Destabilization of the European economy could lead to a decrease in consumer confidence, which could cause reductions in discretionary spending and demand for our subsidiaries’ products. Furthermore, sovereign debt issues could also lead to further significant, and potentially longer-term, economic issues, such as reduced economic growth and devaluation of the Euro against the U.S. Dollar, any of which could adversely affect our and each of our subsidiaries’ business, financial condition and operating results.

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Our international operations could be affected by currency fluctuations, capital and exchange controls, expropriation and other restrictive government actions, changes in intellectual property legal protections and remedies, trade regulations and procedures and actions affecting approval, production, pricing, and marketing of, reimbursement for and access to our products, as well as by political unrest, unstable governments and legal systems and inter-governmental disputes. Any of these changes could adversely affect our business.

The outbreak of the novel coronavirus and subsequent global pandemic has and continues to cause disruption in the U.S. and global economy and has caused extreme fluctuations in U.S. and global markets, which could have a negative impact on our business and results of operations.

The outbreak of the novel coronavirus (“COVID-19”) and subsequent global pandemic has and continues to cause disruption in the U.S. and global economy and has caused extreme fluctuations in U.S. and global markets, which has the potential to negatively our business and operations. The duration and extent of COVID-19 over the long-term cannot be reasonably estimated at this time. There have been no comparable recent events that provide guidance as to the effect the spread of COVID-19 as a global pandemic may have on our business and results operations in the future.

Market disruptions, supply-chain disruptions, geopolitical conflicts, including acts of war, macroeconomic events, and inflation, could create market volatility that negatively impact our business and operations.

Various social and political tensions in the United States and around the world may contribute to increased market volatility, may have long-term effects on the U.S. and worldwide markets and may cause further economic uncertainties in the United States and worldwide.

The occurrence of events similar to those in recent years, such as localized wars, instability, new and ongoing pandemics (such as COVID-19), epidemics or outbreaks of infectious diseases in certain parts of the world, natural/environmental disasters, supply-chain disruptions, terrorist attacks in the United States and around the world, social and political discord, increasingly strained relations between the United States and a number of foreign countries, new and continued political unrest in various countries, continued changes in the balance of political power among and within the branches of the U.S. Government, government shutdowns, among others, may result in market volatility, may have long term effects on the U.S. and worldwide financial markets, and may cause further economic uncertainties in the United States and worldwide. In particular, the escalation of the conflict between Russia and Ukraine, including international sanctions, potential impact on inflation and increased disruption to supply-chains may negatively impact our business, results of operations and the market price of our Common Stock.

Conversion to Euros

Although we report our financial results in US. Dollars, a significant portion of our revenues, indebtedness and other liabilities and our costs are denominated in Euros. Our results of operations and, in some cases, cash flows, have in the past been and may in the future be adversely affected by certain movements in currency exchange rates. In particular, the risk of a debt default by one or more European countries and related European or national financial restructuring efforts may cause volatility in the value of the Euro. Defaults or restructurings in other countries could have a similar adverse impact. From time to time, we may implement currency hedges intended to reduce our exposure to changes in foreign currency exchange rates. However, our hedging strategies may not be successful, and any of our unhedged foreign exchange exposures will continue to be subject to market fluctuations. The occurrence of any of the above risks could cause a material adverse effect on our business, financial condition, results of operations, cash flows, and/or share price.

We may not be able to defend or protect our intellectual property.

We do not hold any patents at this time and we rely on trade secrets, know-how and other proprietary information. We seek to protect this information, in part, through the use of confidentiality agreements with employees, consultants, advisors and others. Nonetheless, there can be no assurance that those agreements will provide adequate protection for our trade secrets, know-how or other proprietary information and prevent their unauthorized use or disclosure. While we are not aware of any challenges to our intellectual property, once any patents are issued to us litigation may ensue. There is also the risk that our employees, consultants, advisors or others will not maintain confidentiality of such trade secrets or proprietary information, or that this information may become known in some other way or be independently developed by the Company’s competitors.

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We may be sued by third parties who claim that our products infringe on their intellectual property rights.

We may be exposed to future litigation by third parties based on claims that our products or activities infringe on their intellectual property rights or that we have misappropriated their trade secrets. Any litigation or claims against us, whether or not valid, could result in substantial costs, could place a significant strain on our financial and managerial resources, and could harm our reputation. In addition, intellectual property litigation or claims could force us to do one or more of the following, any of which could have a material adverse effect on us, our results of operations and could cause us to curtail or cease its operations:

| · | Cease testing, developing, using and/or commercializing products that it may develop; or,
| · | Obtain a license from the holder of the infringed intellectual property right, which could also be costly or may not be available on reasonable terms.

We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

We may be subject to litigation and damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of their former employers. Although no claims against us are currently pending or threatened, we may be subject to claims that our employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of former employers of our employees. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management. If we fail in defending such claims, in addition to paying money claims, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper or prevent our ability to commercialize certain product candidates, which could severely harm our business.

Governmental and third-party payors may impose sales and pharmaceutical pricing restrictions or controls on our products that could limit our future product revenues and adversely affect profitability.

The commercial success of our products is substantially dependent on whether third-party reimbursement is available for the ordering of our products by the medical profession for use by their patients. Medicare, Medicaid, health maintenance organizations and other third-party payors may not cover or provide adequate payment for our products. They may not view our products as cost-effective and reimbursement may not be available to consumers or may not be sufficient to allow our products to be marketed on a competitive basis. Likewise, legislative or regulatory efforts to control or reduce health care costs or reform government health care programs could result in lower prices or rejection of our products. Changes in reimbursement policies or health care cost containment initiatives that limit or restrict reimbursement for our products may cause our revenue to decline.

The commercial success of our products will depend upon the degree of market acceptance of these products among physicians, patients, health care payors and the medical community.

Even if a product candidate is approved for sale by the appropriate regulatory authorities, physicians may not prescribe our product candidates, in which case we would not generate revenue or become profitable. Market acceptance by physicians, healthcare payors and patients will depend on a number of factors, including:

| · | acceptance by physicians and patients of each such product as a safe and effective treatment;
| · | cost effectiveness;
| · | adequate reimbursement by third parties;
| · | potential advantages over alternative treatments; and
| · | relative convenience and ease of administration.

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We are subject to critical accounting policies, and we may interpret or implement required policies incorrectly.

We follow generally accepted accounting principles (“U.S. GAAP”) for the United States in preparing our financial statements. As part of this work, we must make many estimates and judgments about future events. These affect the value of the assets and liabilities, contingent assets and liabilities, and revenue and expenses that we report in our financial statements. We believe these estimates and judgments are reasonable, and we make them in accordance with our accounting policies based on information available at the time. However, actual results could differ from our estimates, and this could require us to record adjustments to expenses or revenues that could be material to our financial position and results of operations in future periods.

Foreign currency risks.

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

Risks related to income taxes.

The Company accounts for income taxes under the asset and liability method, as required by the accounting standard for income taxes, ASC 740 “Accounting for Income Taxes.” Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis, as well as net operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

We regularly review deferred tax assets to assess their potential realization and establish a valuation allowance for portions of such assets to reduce the carrying value if we do not consider it to be more likely than not that the deferred tax assets will be realized. Our review includes evaluating both positive (e.g., sources of taxable income) and negative (e.g., recent historical losses) evidence that could impact the realizability of our deferred tax assets.

We recognize the impact of an uncertain tax position in our financial statements if, in management’s judgment, the position is not more-likely-then-not sustainable upon audit based on the position’s technical merits. This involves the identification of potential uncertain tax positions, the evaluation of applicable tax laws and an assessment of whether a liability for an uncertain tax position is necessary. We operate and are subject to audit in multiple taxing jurisdictions.

We record interest and penalties related to income taxes as a component of interest and other expense, respectively.

Potential benefits of income tax losses are not recognized in the accounts until realization is more likely than not. The Company has adopted ASC 740 “Accounting for Income Taxes” as of its inception. Pursuant to ASC 740, the Company is required to compute tax asset benefits for net operating losses carried forward. The potential benefits of the U.S. net operating losses have not been recognized in this financial statement because the Company cannot be assured it is more likely than not it will utilize the net operating losses carried forward in future years.

The Company has net operating loss carry-forwards in our parent, Cosmos Holdings Inc., which are applicable to future taxable income in the United States (if any). Additionally, the Company has income tax liabilities in the United Kingdom of England. The income tax assets and liabilities are not able to be netted. We therefore reserve the income tax assets applicable to the United States, but recognize the income tax liabilities in Greece and the United Kingdom of England. Losses may also be subject to limitation under certain rules regarding change of ownership.

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Risks related to internal controls

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. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that, as of the end of the last reporting period, the Company’s disclosure controls and procedures were partially effective. The Management is committed to remediate the material weaknesses identified, which include lack of segregation of duties and lack of internal controls structure review. The Internal Auditors of the Company are in the process of developing further procedures to ensure the effectiveness of internal controls and 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.

Risks Related to Our Securities

Nevada Anti-Takeover Law, May Discourage Acquirers and eliminate potentially beneficial sale for our Shareholders

Provisions of our charter, bylaws, and Nevada law may make an acquisition of us or a change in our management more difficult.

Certain provisions of our articles of incorporation and Bylaws that are in effect could discourage, delay or prevent a merger, acquisition or other change in control that shareholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares. These provisions also could limit the price that investors might be willing to pay in the future for shares of our Common Stock. Shareholders who wish to participate in these transactions may not have the opportunity to do so.

Furthermore, these provisions could prevent or frustrate attempts by our shareholders to replace or remove our management. These provisions:

| · | allow the authorized number of directors to be changed only by resolution of our board of directors;
| · | authorize our board of directors to issue without shareholder approval blank check preferred stock that, if issued, could operate as a “poison pill” to dilute the stock ownership of a potential hostile acquirer to prevent an acquisition that is not approved by our board of directors;
| · | establish advance notice requirements for shareholder nominations to our board of directors or for shareholder proposals that can be acted on at shareholder meetings;
| · | authorize the Board of Directors to amend the Bylaws;
| · | limit who may call shareholder meetings; and,
| · | require the approval of the holders of a majority of the outstanding shares of our capital stock entitled to vote in order to amend certain provisions of our certificate of incorporation.

Section 78.438 of the Nevada Revised Statutes (“NRS”) prohibits a publicly held Nevada corporation from engaging in a business combination with an interested stockholder, generally a person that together with its affiliates owns or within the last two years has owned 10% of voting stock, for a period of two years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner, or falls within certain exemptions under the NRS. As a result of these provisions in our charter documents under Nevada law, the price investors may be willing to pay in the future for shares of our Common Stock may be limited.

We do not anticipate paying cash dividends on our Common Stock, and accordingly, shareholders must rely on stock appreciation for any return on their investment.

We have not declared or paid any cash dividend on our Common Stock and do not currently intend to do so for the foreseeable future. We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Therefore, the success of an investment in shares of our Common Stock will depend upon any future appreciation in their value. There is no guarantee that shares of our Common Stock will appreciate in value or even maintain the price at which our shareholders have purchased their shares.

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If we are not able to comply with the applicable continued listing requirements or standards of Nasdaq, Nasdaq could delist our securities.

We cannot assure you that our Common Stock will continue to be listed on Nasdaq in the future. In order to maintain that listing, we must satisfy minimum financial and other continued listing requirements and standards, including those regarding director independence and independent committee requirements, minimum stockholders’ equity, minimum share price, and certain corporate governance requirements. We may not be able to comply with the applicable listing standards and Nasdaq could delist our Common Stock as a result.

We cannot assure you that our Common Stock, if delisted from Nasdaq, will be listed on another national securities exchange. If our common stock is delisted by Nasdaq, our common stock would likely trade on the OTCQX where an investor may find it more difficult to sell our shares or obtain accurate quotations as to the market value of our common stock.

The obligations associated with being a public company require significant resources and management attention, which may divert from our business operations.

We are subject to the reporting requirements of the Exchange Act and the Sarbanes-Oxley Act of 2002 or the Sarbanes-Oxley Act. The Exchange Act requires that we file annual, quarterly and current reports, proxy statements, and other information. The Sarbanes-Oxley Act requires, among other things, that we establish and maintain effective internal controls and procedures for financial reporting. Our Chief Executive Officer and Chief Financial Officer are required to certify that our disclosure controls and procedures are effective in ensuring that material information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. We will need to hire additional financial reporting, internal controls and other financial personnel in order to enhance appropriate internal controls and reporting procedures. As a result, we will incur significant legal, accounting and other expenses. Furthermore, the need to establish the corporate infrastructure demanded of a public company may divert management’s attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. We have made, and will continue to make, changes to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a public company. However, the measures we take may not be sufficient to satisfy our obligations as a public company. In addition, we cannot predict or estimate the amount of additional costs we may incur in order to comply with these requirements. We anticipate that these costs will materially increase our selling, general and administrative expenses.

Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting. In connection with the implementation of the necessary procedures and practices related to internal control over financial reporting, we may identify deficiencies. Additionally, in the event we are no longer a smaller reporting company, as defined under the Exchange Act, and we are unable to comply with the internal controls requirements of the Sarbanes-Oxley Act of 2002, then we may not be able to obtain the independent registered public accountants’ certifications required by that act, which may preclude us from keeping our filings with the SEC current, and interfere with the ability of investors to trade our securities and our shares to continue to be listed on Nasdaq.

If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately or prevent fraud. Any inability to report and file our financial results accurately and timely could harm our reputation and adversely impact the trading price of our Common Stock.

Effective internal controls are necessary for us to provide reliable financial reports and prevent fraud. If we cannot provide reliable financial reports or prevent fraud, we may not be able to manage our business as effectively as we would if an effective control environment existed, and our business and reputation with investors may be harmed. With each prospective acquisition we may make we will conduct whatever due diligence is necessary or prudent to assure us that the acquisition target can comply with the internal control requirements of the Sarbanes-Oxley Act. Notwithstanding our diligence, certain internal controls deficiencies may not be detected. As a result, any internal control deficiencies may adversely affect our financial condition, results of operations and access to capital. We have not performed an in-depth analysis to determine if historical undiscovered failures of internal controls exist, and may, in the future, discover areas of our internal controls that need improvement.

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Public company compliance may make it more difficult to attract and retain officers and directors.

The Sarbanes-Oxley Act and rules implemented by the SEC have required changes in corporate governance practices of public companies. As a public company, these rules and regulations increase our compliance costs and make certain activities more time consuming and costly. As a public company, these rules and regulations make it more difficult and expensive for us to obtain such insurance and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same. As a result, it may be more difficult for us to attract and retain qualified persons to serve on our Board of Directors or as executive officers, and to maintain insurance at reasonable rates, or at all.

Our stock price may be volatile.

The market price of our Common Stock has been and may continue to be volatile and could fluctuate widely in price in response to various factors, many of which are beyond our control, including the following:

| · | our ability to execute our business plan and complete prospective acquisitions;
| · | changes in the nutraceutical & pharmaceutical industries;
| · | competitive pricing pressures;
| · | our ability to obtain additional capital financing;
| · | additions or departures of key personnel;
| · | limited “public float” in the hands of a small number of persons whose sales or lack of sales could result in positive or negative pricing pressure on the market price for our Common Stock;
| · | sales of our Common Stock by existing shareholders, noteholders and warrant holders;
| · | operating results that fall below expectations;
| · | regulatory developments;
| · | economic and other external factors;
| · | period-to-period fluctuations in our financial results;
| · | our inability to acquire pending acquisitions;
| · | the public’s response to press releases or other public announcements by us or third parties, including filings with the SEC;
| · | changes in financial estimates or ratings by any securities analysts who follow our Common Stock, our failure to meet these estimates or failure of those analysts to initiate or maintain coverage of our Common Stock; and,
| · | the development and sustainability of an active trading market for our Common Stock.

In addition, the securities markets have from time to time experienced significant price and volume fluctuations that are unrelated to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our Common Stock.

Our shares of Common Stock are thinly traded, and the price may not reflect our value, and there can be no assurance that there will be an active market for our shares of Common Stock either now or in the future.

Our shares of Common Stock are thinly traded, our Common Stock is available to be traded and is held by a small number of holders, and the price may not reflect our actual or perceived value. There can be no assurance that there will be an active market for our shares of Common Stock either now or in the future. The market liquidity will be dependent on the perception of our operating business, among other things. We will take certain steps to increase awareness of our business. There can be no assurance that there will be any awareness generated or the results of any efforts will result in any impact on our trading volume. Consequently, investors may not be able to liquidate their investment or liquidate it at a price that reflects the value of the business, and trading may be at an inflated price relative to the performance of the Company due to, among other things, the availability of sellers of our shares. If an active market should develop, the price may be highly volatile. Because there is currently a relatively low per-share price for our Common Stock, many brokerage firms or clearing firms are not willing to effect transactions in the securities or accept our shares for deposit in an account. Many lending institutions will not permit the use of low priced shares of Common Stock as collateral for any loans.

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Offers or availability for sale of a substantial number of shares of our Common Stock may cause the price of our Common Stock to decline.

Offers or availability for sale of a substantial number of shares of our Common Stock upon the expiration of any statutory holding period under Rule 144, could create a circumstance commonly referred to as an “overhang” and, in anticipation of which, the market price of our Common Stock could fall. The existence of an overhang, whether or not sales have occurred or are occurring, also could make it more difficult for us to raise additional financing through the sale of equity or equity-related securities in the future at a time and price that we deem reasonable or appropriate.

There may be future sales or other dilution of our equity, which may adversely affect the market price of our Common Stock.

We are generally not restricted from issuing additional Common Stock, including any securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock. The market price of our Common Stock could decline as a result of sales of Common Stock or securities that are convertible into or exchangeable for, or that represent the right to receive, Common Stock after this offering or the perception that such sales could occur.

If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our Common Stock relies in part on the research and reports that equity research analysts publish about us and our business. We do not control these analysts. The price of our Common Stock could decline if one or more equity research analysts downgrade our Common Stock or if they issue other unfavorable commentary or cease publishing reports about us or our business.

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USE OF PROCEEDS

We will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. However, to the extent that warrants to purchase Common Stock are exercised for cash, based upon an exercise price of $3.30 per share, we will receive proceeds of up to $6,600,000 from the exercise of warrants held by the Selling Stockholders. We intend to use any cash proceeds received from exercise of the warrants for working capital and other general corporate purposes.

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Market for Registrant’s Common Equity and Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

Our common stock has been quoted through various over-the-counter systems at various times since 2009. Our common stock became listed on the Nasdaq Capital Market on February 28, 2022 under the symbol “COSM.” Our common stock was previously quoted on the OTCQX.

Holders of Our Common Stock

As of December 31, 2021, we had 17,544,509 shares of our common stock issued and 17,157,085 shares outstanding, held by approximately 184 stockholders of record. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of various broker-dealers and registered clearing agencies.

Dividends

We have not paid any cash dividends to date, nor does the Company anticipate paying such dividends for the foreseeable future. Rather, future earnings, if any, will be used to finance the expansion of our business. Any potential future payment of dividends will depend on our earnings, capital requirements, expansion plans, financial condition and other relevant factors that our board of directors may deem relevant. Our accumulated deficit currently limits our ability to pay dividends.

Penny Stock

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a market price of less than $5.00, other than securities registered on certain national securities exchanges, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. While our common stock is currently listed on the Nasdaq Capital Market and not subject to the penny stock rules, should we not be able to maintain our listing on Nasdaq, the penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the SEC, that: (a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation of such duties or other requirements of the securities laws; (c) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form, including language, type size and format, as the SEC shall require by rule or regulation.

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with (a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction; (c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (d) a monthly account statement showing the market value of each penny stock held in the customer’s account.

In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement as to transactions involving penny stocks, and a signed and dated copy of a written suitability statement.

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Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following should be read in conjunction with our financial statements and related notes appearing elsewhere in this prospectus. The following discussion contains “Forward-Looking Statements” that reflect our future plans, estimates, beliefs and expectations. We caution that assumptions, expectations, projections, intentions or beliefs about future events may vary materially from actual results. Some of the key factors which could cause actual results to vary from our expectations include the timing of planned capital expenditures, the condition of the capital markets generally, as well as our ability to access them, and uncertainties regarding environmental regulations or litigation and other legal or regulatory developments affecting our business, as well as those factors discussed below and elsewhere in this prospectus, all of which are difficult to predict. In light of these risks, uncertainties and assumptions, the forward-looking events discussed may not occur. “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” (included elsewhere in this prospectus) contain important information. We do not undertake obligation to publicly update any forward-looking statements except as otherwise required by applicable law.

Forward-Looking Statements

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

We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain.

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

Presentation of Information

As used in this prospectus, the terms “we,” “us” “our” and the “Company” mean Cosmos Holdings Inc. unless the context requires otherwise. The following discussion and analysis should be read in conjunction with our audited (and unaudited) financial statements and the related notes that appear elsewhere in this prospectus. All dollar amounts in this registration statement refer to U.S. dollars unless otherwise indicated.

Overview

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 1, 2014, a Greek corporation which focuses on the trading of nutraceutical products. On February 10, 2017, we acquired 100% ownership of Decahedron Ltd., a United Kingdom company, which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the trading, distribution, import and export of 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.

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Cosmos Holdings Inc is an international pharmaceutical company with a proprietary line of nutraceuticals and distributor of branded and generic pharmaceuticals, nutraceuticals, OTC medications and medical devices. The Company uses a differentiated operating model based on a lean, nimble and decentralized structure, with an emphasis on acquisitions of established companies and our ability to maintain better pharmaceutical assets than others. This operating model and the execution of 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 pharmaceutical industry and in order to compete successfully in the healthcare industry, must demonstrate that its products offer medical benefits as well as cost advantages. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.

The Company continues to rapidly expand its distribution network worldwide and open new markets for its proprietary line of branded pharmaceuticals, nutraceuticals, and nutraceuticals 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 the wholesale distribution of branded pharmaceutical products, over the counter (“OTC”) products, medical devices, vitamins and a variety of nutraceuticals, including its proprietary label.

Import/Export of Branded pharmaceuticals

We conduct wholesale import and export of branded pharmaceutical products throughout Europe by our subsidiaries. We source licensed pharmaceuticals from wholesalers at a lower cost, primarily in Greece and the U.K. and sell to other European wholesalers. Our capital efficient business model is based on infrastructure, efficiency and scale.

Full-line Wholesale

We conduct direct distribution and sales of pharmaceuticals, medical devices, branded pharmaceuticals and OTC products. Our distribution 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” robotics).

Nutraceutical

We have created and developed our own proprietary branded nutraceutical products, named “Sky Premium Life®” which was launched in 2018. We have a full portfolio of fast moving and specialty formulas with at least 75 product codes including vitamins, minerals and other herbal extracts. We expect to reach the number of 150 product codes by the end of 2022. Our nutraceutical products are manufactured exclusively by Doc Pharma, a related party of the Company. Our nutraceutical products have penetrated several markets within 2021 through digital channels such as Amazon and Tmall.

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We focus on nutraceutical products because we foresee it as a relatively under-penetrated market throughout Europe with potential of high growth 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 a related company, we have the distribution rights to over 70 fast-moving pharmaceutical products. There is a significant growth on opportunities through product additions and geographic expansion

Regulations and Licenses

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.

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 Operations

The World Health Organization (“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 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

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| Subsequent to year-end, management has identified opportunities as listed below, that could balance, at least in part, the adverse effects of COVID-19 during the fiscal year-end 2020 and 2021. However, there can be no assurance that this will occur prior to a vaccine and treatment becoming effective.
| Opportunities

Management’s Expectations Regarding COVID-19

Management believes that there could be a positive long-term outcome from 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. We have adapted our strategy in response to COVID-19 and will continue to do so, since we are expecting the impact of COVID-19 to continue for the next 12 months.

What Effect Will COVID-19 Have on the Company’s Disclosure Controls

Management does not believe COVID-19 will have a significant effect on our disclosure controls as there have been no changes to date. Our operations have continued at a normal pace, at least 95% of our staff continue to work on site and those staff who are working remotely have no impact on our disclosure controls.

Results of Operations

Three Months Period Ended March 31, 2022 and 2021

Revenue

The Company had revenue of $13,071,800 and $11,619,076 (an increase of 12.5%) for the three months ended March 31, 2022 and 2021, respectively. The increase in the 3-month period is mainly due to the organic growth attributed to our subsidiary, Cosmofarm, which continued the expansion and sales programs at the local level, and to the significantly higher sales volume of SkyPharm, due to the increased demand for its own branded nutritional supplements named (“Sky Premium Life®”), which resulted in achieving $524,000 more in sales compared to Q1 2021 (an increase of 49.29%). The Company had a net income of $203,347 on revenue of $13,071,800 versus a net loss of $2,173,903 on revenue of $11,619,076 for the three months ended March 31, 2022 and 2021, respectively.

Cost of Goods Sold

The Company had costs of goods sold of $11,179,868 versus $10,617,741 (an increase of 5.29%) for the three months ended March 31, 2022 and 2021, respectively. The increase in the 3-month is primarily due to the increase in revenue. However, the costs of goods sold were increased by just 5.29% compared to a revenue increase of 12.5%, due to the higher dependence of the Company on the nutraceuticals’ revenue stream, which historically achieves higher margins than the wholesale one.

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 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.

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Gross Profit

The Company had gross profit of $1,891,932 versus $1,001,335 (an increase of 88.94%) for the three months ended March 31, 2022 and 2021, respectively. The increase in gross profit for the 3-month period is attributable to the revenue increase in conjunction with the higher gross profit margins achieved due to the significant increase in nutraceuticals revenue stream.

Operating Expenses

The Company had general and administrative costs of $868,639 and $1,688,712, salaries and wages expenses of $521,471 and $531,556, sales and marketing expenses of $146,949 and $405,092 and depreciation and amortization expense of $112,622 and $107,073 for a net operating income of $242,251 and loss of $1,731,098 (an increase of 114%) for the three months ended March 31, 2022 and 2021 respectively. The decrease in operating expenses is primarily attributed to the stock-based compensation related to a consulting agreement entered into in February 2021 and included in the general and administrative expenses for the period ended March 31, 2021, as well as the significant decrease in sales and marketing expenses of approximately 64%.

Other Income (Expense)

The Company’s other income (expense) was primarily comprised of interest expense related to notes payable and convertible notes payable $584,176 versus $731,826, non-cash interest expense related to the amortization of debt discount of $260,527 versus $50,109, a gain on extinguishment of debt of $1,004,124 due to a debt extension that took place on March 3rd, 2022 versus a gain of $445,636, a change in fair value of derivative liability of $15,001 versus $61,373 due to agreements on convertible debentures, interest income of $64,827 versus $0 and a foreign currency loss of $159,352 versus a gain of $306,020 for the three months ended March 31, 2022 and 2021, respectively. Also, The Company’s other expense was $54,812 versus other expense of $178,211 for the three months ended March 31, 2022 and 2021, respectively.

Unrealized Foreign Currency losses

The Company had an unrealized foreign currency loss of $405,229 versus a loss of $473,578 and a net comprehensive loss of $5,990,375 versus loss of $2,647,481 for the three months ended March 31, 2022 and 2021, respectively.

Liquidity and Capital Resources

As of March 31, 2022, the Company had working capital of $11,831,133 compared to $10,950,492 as of December 31, 2021.

The Company had cash of $1,010,427 versus $286,487 as of March 31, 2022 and December 2021, respectively. The Company had net cash used in operating activities of $2,337,276 and $665,339 for the three months ended March 31, 2022 and 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 provided by investing activities of $94,550 and net cash used in investing activities of $2,310 during the three months ended March 31, 2022 and 2021, respectively. For the three months ended March 31, 2022 the net cash provided by investing activities was mainly attributable to the proceeds from the loan receivable from a third party.

The Company had net cash provided by financing activities of $2,914,441 versus $380,118 during the three months ended March 31, 2022 and 2021, respectively. The net cash increase in the 3-month period ended on March 31, 2022 is mainly attributable to the net proceeds of $5,452,300 of the preferred stock offering on February 28, 2022 less the payments made for the loans and notes payable.

For the period ended March 31, 2022, the Company also received proceeds from lines of credit of $5,779,114 and payments of lines of credit of $6,244,162, for a net decrease on the line of credit of $465,048.

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We anticipate using cash in our bank account as of March 31, 2022, cash generated from debt or equity financing, from investing activities or 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.

Results of Operations

Year ended December 31, 2021 versus December 31, 2020

For the year ended December 31, 2021, the Company had a net loss of $7,961,649 on revenue of $56,239,667, versus net income of $820,786 on revenue of $55,406,337, for the year ended December 31, 2020.

Revenue

Revenue during the Company’s year ended December 31, 2021, increased by 1.5% as compared to revenues in the year ended December 31, 2020.

Our future revenue growth will continue to be affected by various factors such as industry growth trends, including drug utilization, the introduction of new innovative brand therapies, the likely increase in the number of generic drugs that will be available over the next few years as a result of the expiration of certain drug patents held by brand-name pharmaceutical manufacturers and the rate of conversion from brand products to those generic drugs, price increases and price deflation, general economic conditions in the member states of European Union, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third party reimbursement rates to our customers, and changes in government rules and regulations.

Cost of Goods Sold

For the year ended December 31, 2021, we had direct costs of goods sold of $47,909,180 associated to cost of goods sold versus $47,345,957 from the prior fiscal year ended December 31, 2020. Cost of goods sold year over year increased by 1.19% in 2021 as compared to 2020, in proportion to the increase in revenue.

Gross Profit

Gross profit for the year ended December 31, 2021 was $8,330,487 compared with the $8,060,380 for the year ended December 31, 2020. Gross profit increased by $270,107 or 3.35% from the prior fiscal year. The increase in the gross profit was primarily due to the increase sales of our own brand of nutraceuticals; SkyPremium Life.

Operating Expenses

For the year ended December 31, 2021, we had general and administrative costs of $9,208,701, salaries and wages expenses of $2,472,953 sales and marketing expenses of $732,545 and depreciation and amortization expense of $449,692 for a net operating loss of $4,533,404. For the year ended December 31, 2020, we had general and administrative costs of $2,102,869, salaries and wages of $2,082,453, sales and marketing expenses of $763,170 and depreciation and amortization expense of $397,595 for a net operating profit of $2,714,293.

The approximate 140.62% increase in operating expenses in the year ended December 31, 2021, versus the prior year ended, is mainly attributable to the share-based compensation of $5.9 million and provisions for doubtful accounts of $1,087,339.

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Interest Expenses

For the year ended December 31, 2021, we had interest expense of $2,823,842 and non-cash interest expenses of $757,021 related to extinguishment of debt and the amortization of debt discount, versus the year ended December 31, 2020, where we had interest expense of $2,761,004 and non-cash interest expenses of $34,106 related to the fair value of warrants for services, extinguishment of debt and the amortization of debt discount.

Unrealized Foreign Currency Losses

Additionally, we had an unrealized foreign currency translation loss of $1,006,517 for the year ended December 31, 2021, such that our net comprehensive loss for the period was $16,601,199 versus unrealized foreign currency income of $871,235 such that our net comprehensive income for the period was $1,692,021 for the year ended December 31, 2020. The increase relates to the significant transactions within the intercompany entities and the volatility/fluctuation from the prior year of the Euro to USD exchange.

Going Concern

The Company’s consolidated financial statements are prepared using U.S. GAAP applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company had net loss of $7,961,649, and net cash used in operations of $7,097,174 during the year ended December 31, 2021; and working capital of $10,950,492 and an accumulated deficit of $34,345,506 as of December 31, 2021. During the fiscal year, the Company has undergone a strategic review process to help find a definitive solution to the Company’s accumulated deficit constraints. Options under consideration in the strategic review process include, but are not limited to, securing new debt, exchange debt for equity, restructuring current debt facilities from short term into long-term making the proper actions for new fund raising.

In order to continue as a going concern, develop a reliable source of revenues, and achieve a profitable level of operations the Company will need, among other things, additional capital resources. Management’s plans to continue as a going concern include raising additional capital through increased sales of product and by sale of common shares. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans. The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

Liquidity and Capital Resources

As of December 31, 2021, the Company had working capital of $10,950,492 versus a working capital of $6,482,739 as of December 31, 2020. This increase in the working capital surplus is primarily attributed to the Company’s operating profit in the year ending as of December 31, 2021.

As of December 31, 2021, the Company had net cash of $286,487 versus $628,395 as of December 31, 2020. For the year ended December 31, 2021, net cash used in operating activities was $7,097,174 versus $11,501,718 net cash used in operating activities for the year ended December 31, 2020. The Company has devoted substantially all of its cash resources to apply its investment program to expand through organic business growth and, where appropriate, the execution on selective company and license acquisitions, and incurred significant general and administrative expenses to enable it to finance and grow its business and operations.

During the year ended December 31, 2021, there was $826,817 net cash used in investing activities versus $117,744 used in during the year ended December 31, 2020. In the year ending December 31, 2021 this was due to the purchase of fixed assets and licenses. In the year ending December 31, 2020, this was due to the purchase of fixed assets.

During the year ended December 31, 2021, there was $7,267,777 of net cash and cash equivalents provided by financing activities versus $12,460,541 provided by financing activities during the year ended December 31, 2020.

We believe that our current cash in our bank account and working capital as of December 31, 2021 will satisfy our estimated operating cash requirements for the next twelve months. However, the Company will require additional financing in fiscal year 2022 in order to continue at its expected level of operations and potential acquisitions. If the Company is unable to raise additional funds in the future on acceptable terms, or at all, it may be forced to curtail its development activities.

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We anticipate using cash in our bank account as of December 31, 2021, cash generated from the operations of the Company and its operating subsidiaries and from debt or equity financing, or from loans from management, to the extent that funds are available to do so to conduct our business in the upcoming year. Management is not obligated to provide these or any other funds.

Debt Obligations

January 7, 2021 Convertible Promissory Note

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. The outstanding balance as of December 31, 2021 was $100,000.

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. As of December 31, 2021, the Company has accrued interest of $3,100 and a principal balance of €500,000 ($565,900), of which $477,637 is classified as Notes payable - long term portion on the consolidated balance sheet.

September 17, 2021 Convertible Promissory Note

On September 17, 2021 (the “Issue Date”), the Company entered into a convertible promissory note and securities purchase agreement with an unaffiliated third party 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%. The outstanding balance as of December 31, 2021 was $525,000.

January 27, 2020 Senior Promissory Note

During 2019 and 2020 the Company executed various Senior Promissory Notes payable to an unaffiliated third-party lender in an aggregate total of $3,010,000 with annual interest rates of 15% and 5%. On February 5, 2021, the Company converted the entire outstanding balance into shares of the Company’s common stock.

May 18, 2020 Senior Promissory Note

On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender. The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023. The outstanding balance of the Note as of December 31, 2021 was $2,000,000.

June 30, 2020 Note

On June 30, 2020, SkyPharm entered into a settlement agreement on an existing loan facility agreement with a third-party lender, whereby SkyPharm 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.

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On August 4, 2021, the Company entered into an exchange agreement 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 Nasdaq to settle $1,190,000 (€1,000,000) of debt. The Company issued these shares subsequent to December 31, 2021.

As of December 31, 2021, the Company has accrued interest expense of $4,414 and the principal balance of the debt is $1,299,784, which is classified as notes payable 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 $5,000,000 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. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023. The outstanding balance of the Note as of December 31, 2021 was $5,000,000.

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. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023.

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 outstanding balance of the Note as of December 31, 2021 was $2,000,000.

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. During the year ended December 31, 2021, the Company repaid €55,556 ($62,878) of the principal and as of December 31, 2021, the Company has accrued interest of $5,642 related to this note and a principal balance of €444,444 ($503,022), of which $377,270 is classified as Notes payable - long term portion on the consolidated balance sheet.

December 21, 2020 Convertible Promissory Note

On December 21, 2020 the Company entered into a convertible promissory note with a third-party lender. 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 8% per annum, compounded annually (the “Interest Rate”), will be paid to the Lenders on or before the Maturity Date (December 31, 2021). The Company has converted a total of $525,000 of the Note to shares of common stock and the outstanding balance as of December 31, 2021 was $15,000.

May 15, 2019 Senior Convertible Note

On May 15, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”). Upon the closing of this financing, on May 17, 2019, the Company issued for a purchase price of $1,500,000 in principal amount a Senior Convertible Note (the “May 2019 Note”) to the Buyer.

The May 2019 Note provides that the Company will repay the principal amount of the May 2019 Note on the ten (10) month anniversary date of the date of issue. The maturity date was amended on March 23, 2020 to September 16, 2020 and further amended on September 23, 2020 to June 16, 2021. Interest at the rate of nineteen (19%) percent per annum shall be payable on the first day of each calendar month.

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On March 23, 2020, the Company entered into a Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Company entered into a Securities Purchase Agreement (the “SPA”) with the Buyer on May 15, 2019, pursuant to which the Company issued the May 2019 Note in the principal amount of $1,500,000. The May 2019 Note was due on or before March 15, 2020 and was not paid (the “Existing Default”). The May 2019 Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the May 2019 Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00 per share) and the then current market price.

On September 23, 2020, the Company entered into a Second Forbearance and Amendment Agreement (the “Agreement”) with the above-described Buyer. The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): June 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. The Scheduled Required Prepayments are $63,000 upon signing the Agreement and eight (8) monthly payments thereafter aggregating $480,000 with the remaining $607,000 outstanding under the Note due on June 16, 2021.

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 May 2019 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.

The May 2019 Note was fully repaid on November 16, 2021.

Trade Facility Agreements

On May 12, 2017, SkyPharm entered into a Trade Finance Facility Agreement (the “SkyPharm Facility” or “TFF”) 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 on the USD balance. The original loan of the USD $4,000,000 matured on August 31, 2021.

On March 3rd 2022, the Company signed an extension to the facility agreement relating to the USD $4,000,000. Based on the updated repayment terms the facility’s final repayment date was extended to January 2023.

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During the year ended December 31, 2021, the Company repaid $56,508 of the €2,000,000 balance such that as of December 31, 2021, the Company had principal balances of €1,950,000 ($2,207,010) and $4,000,000 under the agreements, of which $2,450,000 is classified as Notes payable-long term on the consolidated balance sheet and the Company had accrued $10,466 and $104,220 respectively, in interest expense related to these agreements.

COVID-19 Government Loans

On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. 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 was $169,770.

On June 24, 2020, the Company received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid £2,335 ($3,152) of principal during the year ended December 31, 2021, and the balance as of December 31, 2021 was £47,665 ($64,347).

Related Party Indebtedness

Grigorios Siokas

From time to time, Grigorios Siokas loans the Company funds in the form of non-interest bearing, no-term loans.

During year ended December 31, 2021 the Company borrowed additional proceeds of $4,061,215, €1,803,000 ($2,040,635) and €230,000 ($275,306) and repaid and repaid €118,000 ($133,552) of these loans. Included in the $4,061,215 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”). During the year ending December 31, 2021, the Company converted $2,250,000 of the July 20 Note at a conversion price of $6.00 and issued 375,000 shares of common stock. As of December 31, 2021, the Company had an outstanding balance under these notes and loans of $1,293,472. Of the $1,293,472 outstanding balance, $0 is convertible in accordance with the July 20 Note.

Debt exchanges with Grigorios Siokas

On May 10, 2021, 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 and as a shareholder 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 $600,000, 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. 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.

On June 23, 2021, the Company entered into a Debt Exchange Agreement (the “June Debt Exchange Agreement”) to exchange various loans with Greg Siokas, in the aggregate principal amount of $3,000,000 (the “Debt”). The Company agreed to issue Mr. Siokas 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. On June 23, 2021, the fair value of the Company’s shares of common stock was $5.00 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. 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, the fair value of the Company’s shares of common stock was $4.03 per share

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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. 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.

On December 8, 2021, the Company entered into a Debt Exchange Agreement (the “December 8 Agreement”) with the Company’s Chief Executive Officer. The December 8 Agreement provided for the issuance by the Company of 125,000 shares of common stock, at the rate of $6.00 per share, or an aggregate of $750,000, in exchange for $750,000 of existing loans by Mr. Siokas to the Company. On December 8, 2021, the fair value of the Company’s shares of common stock was $3.44 per share.

December 20, 2018 Note

On December 20, 2018, the €1,500,000 ($1,718,400) note payable, originally borrowed by SkyPharm pursuant to a Loan Agreement with a third-party lender, dated March 16, 2018, was transferred to Grigorios Siokas. The note bears an interest rate of 4.7% per annum and had a maturity date of March 18, 2019. As of December 31, 2021, the Company had an outstanding balance of €400,000 ($452,720) and accrued interest of €177,313 ($200,683).

Grigorios Siokas is the Company’s CEO and principal shareholder and is hence considered a related party to the Company.

Dimitrios Goulielmos

On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer, and a current director of the Company, pursuant to which the Company borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan bore an interest rate of 2% per annum and was due and payable in full on May 11, 2015. As of December 31, 2021, the Company had an outstanding principal balance of €10,200 ($11,544) and €0 ($0) accrued interest.

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 pharmaceuticals is geographic expansion across the world, especially in EU and UK, as well as in third 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 whilst 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 full line wholesale 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.

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The Company 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 nutraceutical product portfolio. Thus, the Company is developing a sound sales distribution network specializing in its own branded nutraceutical products.

The Company’s main objective is expanding the business operations of its subsidiaries by concentrating its efforts on becoming an international pharmaceutical Company. The Company views its business development activity as an enabler of its strategies, and it seeks to generate earnings growth and enhance shareholder value by pursuing a disciplined, strategic, and financial approach to evaluating business development opportunities. Under these principles the Company assesses businesses and assets as part of its regular, ongoing portfolio review process and continues to consider trading development activities for its businesses. The Company’s objective is the optimization of operating expenses across all entities without compromising the quality of the Company’s services and products.

Changes in the behavior and spending patterns of purchasers of pharmaceutical and healthcare products and services, including delaying medical procedures, rationing prescription medications, reducing the frequency of doctor visits, and foregoing healthcare insurance coverage, may impact the Company’s business.

The pharmaceutical sector offers a large growth potential within the European pharmaceutical market, if service, price and quality are strictly directed towards the customer requirements. The Company will continue to encounter competition in the market by product, service, reliability, and a high level of quality. On the procurement side, the Company can access a wide range of supply possibilities. To minimize business risks, the Company diversifies its sources of supply all over Europe. It secures its high-quality demands through careful supplier qualification and selection, as well as active suppliers’ system management.

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 March 31, 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.

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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.

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.

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BUSINESS

Company Overview

Cosmos Holdings Inc. together with its subsidiaries (hereinafter referred to collectively as “us”, “we”, or the “Company”) is an international pharmaceutical company with a proprietary line of nutraceuticals and distributor of branded and generic pharmaceuticals, nutraceuticals, over-the-counter (“OTC”) medications and medical devices through an extensive, established EU and UK distribution network. The Company identifies, acquires, develops and commercializes products that improve patients’ lives and outcomes. We have developed a global distribution platform which is currently expanding throughout Europe, Asia and North America. Currently, the Company has offices and distribution centers through its three wholly-owned subsidiaries: (i) Cosmos Holdings Inc., the parent company headquartered in Chicago, USA (ii) SkyPharm S.A., headquartered in Thessaloniki, Greece; (iii) Decahedron Ltd., head-quartered in Harlow, United Kingdom; and (iv) Cosmofarm S.A., headquartered in Athens, Greece.

The Company’s cross-border pharmaceutical business serves wholesale pharmaceutical distributors and independent retail pharmacies across the EU through a network of two strategic distribution centers, one in Greece and one in the UK, as well as an additional warehousing facility. The Company focuses on leveraging its growing purchasing scale and supplier relationships to secure discounts and provide pharmaceuticals at reduced prices and on continuing to drive organic growth at attractive margins for its cross-border pharmaceutical wholesale business.

The Company operates in the business of full-line pharmaceutical wholesale distribution and serves approximately 1,500 independent retail pharmacies and 40 pharmaceutical wholesalers in Greece region by providing brand-name and generic pharmaceuticals, over-the-counter medicines, vitamins and nutraceuticals. We invest in technology to enhance safety, distribution and warehousing efficiency and reliability. Specifically, the Company operates a fully automated warehouse system with three robotic systems, two ROWA™ types and one A-frame type, that ensure 0% error selection rate, accelerate order fulfillment, and yield higher cost-efficiency in our distribution center.

The Company regularly evaluates and undertakes strategic initiatives to expand its distribution reach, improve its profit margins, and strengthen its competitive position. Taking into consideration the growing demand of various vitamins and nutraceuticals, the Company entered the market with its own brand of nutraceuticals: Sky Premium Life® (“SPL”). Our current business has provided us with access to wholesalers both from the sourcing and the sales division of our wholesale business. We sell our products to vendors that supply us with pharmaceutical products as well as to our clients to whom we currently sell pharmaceutical products. We serve this demand by offering quality products to our existing network of wholesalers and pharmacies. Pharmacies are still the key channels for distribution and sales of nutraceuticals in the European market. The development and manufacturing of our own line is assigned to a related party which operates according to our specifications and GMP protocols.

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 added to our portfolio. We intend to continue to bring Sky Premium Life® products to market primarily through our existing network of over 160 pharmaceutical wholesale clients and vendors and approximately 100 independent retail pharmacies within the EU market. Moreover, we have penetrated several markets through digital sale channels. There is growing demand for vitamins and nutraceuticals and we are committed to developing quality products and creating enhanced customer value.

We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of pharmaceutical products that we currently distribute. We believe that the demand for reasonably-priced medicines, delivered on time and in the highest quality is set to increase in the years to come, as the population’s life expectancy increases. With our product portfolio of patented and non-patented medicines, we contribute to the optimization of efficient medicinal care, and thereby lowering cost for health insurance funds, companies, and patients. We also believe that the demand for non-prescription wellness products such as food and dietary supplements will continue to increase as individuals are increasingly supplementing their nutritional intake.

We believe the EU pharmaceutical import/export market will continue to grow in conjunction with the demand for nutritional products. 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.

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Business Environment

The Company conducts its business within the pharmaceutical and the healthcare industry and is active in branded pharmaceuticals, generics and nutraceutical product markets. The pharmaceutical industry is highly competitive and is subject to comprehensive government regulations. Many factors may significantly affect the Company’s sales of its products, including, but not limited to, efficacy, safety, price and cost-effectiveness, marketing effectiveness, product labeling, quality control and quality assurance. Currently, most of the products that the Company is trading, compete with other products already on the market in the same therapeutic category, and are subject to potential competition from new products that competitors may introduce in the future.

Generic medicines are the pharmaceutical and therapeutic equivalents of branded pharmaceutical products and are generally marketed under their generic (chemical) names rather than by brand names. Typically, a generic drug may not be marketed until the expiration of applicable patent(s) on the corresponding branded product, unless a resolution of patent litigation results in an earlier opportunity to enter the market. Generic drugs are the same as branded products in dosage form, safety, efficacy, route of administration, quality, performance characteristics and intended use, but they are sold generally at prices below those of the corresponding branded products. Generic drugs provide a cost-effective alternative for consumers, while maintaining the same high quality, efficacy, safety profile, purity and stability of the branded product.

The Company also conducts its business within the global nutraceuticals market with our own brand which considered to be highly qualitative and competitive. Nutraceuticals are defined as products that contain at least one dietary ingredient within them and can be consumed orally. Some of the purposes of nutraceuticals are used for immune system defense, energy, stress, bones and joints, The global nutraceutical market has shown rise for demand and growth within the last several years. The global market is driven by the rising popularity of sports-based performance enhancement supplements and the focus on preventive healthcare measures. The COVID-19 pandemic has also driven the global market to a high demand for immunity boosting nutraceutical products.

Corporate Strategy

The main strategy initiative is focused on continuing our progress in becoming a global pharmaceutical wholesale and import/export company through the development of a lean and efficient operating model, as well as, to expand our portfolio of our own branded nutraceutical products, grow our customer base and achieve our growth stabilization in this new market and gain an adequate size in the global nutraceuticals market. We are committed to serving our customers while continuing to innovate and provide products that make a difference in the lives of individuals. We strive to maximize our shareholders’ value by adapting to market realities and customer needs. Our strategy involves building a multinational network or wholesalers, distributors, and pharmacies and simultaneously continuing to expand the portfolio of products that we distribute to that network.

We are committed to driving organic growth at attractive margins by improving execution, optimizing cash flow and leveraging our strong market position, while maintaining a streamlined cost structure throughout each of our businesses. We continue to further align our organization to our customers’ needs in a more seamless and unified way, while supporting corporate strategy and accelerating growth. Implementing this disciplined, focused strategy has allowed us to significantly expand our business, and we believe we are well-positioned to grow revenue and increase operating income through the execution of the following key elements of our business:

| · | Optimize and Grow Our Pharmaceutical Sourcing and Distribution Businesses. We believe we are well-positioned in size and market breadth to continue to grow our trading businesses of pharmaceutical products as we invest to improve our operating and capital efficiencies through further automated systems. Sourcing and distribution, including specialty pharmaceuticals, anchors our growth and position in the pharmaceutical supply channel as we provide superior services and deliver value-added products, which improve the efficiency and competitiveness of healthcare providers, thus allowing the pharmaceutical supply channel to better deliver healthcare to patients.

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| · | Product Expansion of Branded Pharmaceuticals: Branded pharmaceutical products are the primary product category that we distribute, import and export. We constantly evaluate product availability, pricing, demand trends, and patent expirations to maximize our performance. As the patents for branded products near expiration, the generic equivalents enter the marketplace and the demand for those branded products start to decrease. We monitor these cycles closely and always look to find value in pricing fluctuations caused by the patent expirations as the generic equivalents enter the market.

| · | Geographic Expansion of Generic Pharmaceuticals: Generic pharmaceutical products are the secondary product category that we import and export. We apply the same discipline to generics that we do to the branded. We evaluate the demand and supply dynamics of branded products as their patents expire. This insight sheds light on the demand for generic products that take their place. Understanding the historical and market specific characteristics of generic product demand provides insight that we use to give guidance to our vendors that source our generic drug exports.
| · | Nutraceuticals & Health Products: The industry of nutraceuticals is a highly promising market that offers high margins. We are always looking to expand the portfolio of products along with an increase of point of sales coverage level. We also convenience our customers by providing them a larger portfolio of products that they can source from a single vendor. In addition to being wholesalers for nutraceuticals and related products we also created our own brand of products to sell to our current customer base. Our wholesale business gives insight to what products are in demand and we communicate with our customer base to identify which products to develop. Our own branded nutraceuticals carry significantly higher margins than simply serving as a wholesaler for other brands.
| · | Research & Development: We are committed to strategic R&D across each business unit with a particular focus for nutraceuticals with inherently lower risk profiles and clearly defined regulatory pathways. We are constantly evaluating the demand for nutraceuticals in the markets that we currently distribute pharmaceutical products to. This research and analysis determine which nutritional supplements we choose to develop as well as their formulations. This approach maximizes the probability of successfully competing with other brands in the marketplace.
| · | Acquisitions: We regularly evaluate acquisition targets that would allow us to expand our distribution reach and/or vertically integrate into the supply chain of the products that we currently distribute. In addition to focusing on organic growth drivers, we are also actively pursuing accretive acquisitions that offer long-term revenue growth, margin expansion through synergies, and the ability to maintain a flexible capital structure.
| · | Clientele Expansion of Direct to Pharmacy Wholesale Network: We are aiming to expand the full-line wholesale distribution business through acquisitions. By expanding our pharmaceutical distribution business, we expect to have a better ability to source more branded and generic products directly from manufacturers and sell our vitamins, nutraceuticals and cosmetic products directly to pharmacies for better prices. We expect this expansion to increase our sales and profit margins as we vertically integrate into the supply chain.

To successfully execute our corporate strategy, we believe that the Company must adopt, incorporate and maintain the aforementioned core strengths, although no assurances can be made that the Company will be able to effectively implement these strategies.

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Products & Services

Products

The current principal activity of the Company is the creation, development and trading of its own proprietary branded nutraceutical products line “Sky Premium Life®”. The Company’s portfolio currently includes 75 product codes including vitamins, minerals and other herbal extracts used for health prevention and care needs. We also use our subsidiaries, as a distribution centers for SPL in order to penetrate UK and EU markets. However, the leading activity of Decahedron is the trading of branded and generic pharmaceutical products and medicines across the UK and European Union member states. We also buy from pharmacies and other wholesale pharmaceutical companies and resell these products to other EU countries or in the UK. We purchase excess inventories at a discount from wholesalers and export pharmaceutical product codes to EU member states capturing contract price differentials in the process. The Company only purchases stock with purchase orders at hand, limiting inventory risk. EU countries have put into force new legal frameworks and mandates that boost the parallel trade market in order to deflate healthcare pricing across the region.

Product Categories

Our product portfolio includes medicines, OTC medicines, nutraceutical products, health care products, medical devices, baby products and others. Total revenues from the product categories of our total consolidated revenues during the year ended December 31, 2021 are as follow;

Product Categories |  | Percentage of total Revenue |
Medicines |  |  | 71.28 | %
OTC Medicines |  |  | 4.59 | %
Vitamins, Minerals and Dietary Products |  |  | 16.39 | %
Heath Care Products |  |  | 1.04 | %
Medical Devices |  |  | 5.61 | %
Baby Products |  |  | 0.38 | %
Others |  |  | 0.71 | %
Total |  |  | 100 | %

Our proprietary nutraceutical line “Sky Premium Life” which has over 75 SKUs, is classified into two different main Categories, Products per Benefit and Products per Nutrient.

Products per Benefit |  | Products per Nutrient
General Wellbeing |  | Amino Acids
Immunity |  | Botanicals, Herbs & Extracts
Heart |  | Vitamins & Minerals
Bones & Joints |  | Specialized Formulas & Complexes
Men’s Health |  | Omegas & Fatty Acids
Women’s Health |  | Specialized Nutrients
Beauty |  |
Digestion |  |
Brain |  |
Vision |  |
Energy |  |
Sports |  |
Mood/Stress/Sleep |  |
Antioxidant Activity |  |

Services

The principal activity of our services is the distribution of a full range of branded pharmaceutical products, over-the-counter products, cosmetics, nursery, and nutraceutical products to pharmacies across Greece. We utilize the latest technology in pharmaceutical storage and retrieval systems to ensure the quality and accuracy of its distribution. Our facility utilizes ROWA™ (German pharmacy robotics) technologies to automate our procurement, a German fully automated warehouse system, inventory management, and order execution. Therefore, we achieve a zero-error rate, faster order picking, automated order picking process, higher cost-efficiency. We stay in the forefront of quality assurance and accuracy by investing in the most innovative machinery and software available to pharmaceutical distributors. Our company supports all its customers with special product offerings, seasonal products, and all the top brands and trending products.

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We believe that the entire aforementioned product life cycle would take approximately six weeks to two months, from the demand list to the payment for the shipment.

Distribution and Marketing

The majority of our products are represented directly and indirectly through a dedicated sales force team. Our sales force targets mainly wholesale distributors and other healthcare providers. We sell our products principally through independent wholesale distributors, but we also sell directly to other healthcare providers such as; clinics, government agencies, independent retail and specialty pharmacies and independent specialty distributors. Customer service representatives are centralized in order to respond to customer needs in a timely and effective manner. We seek to motivate and provide incentives to our sales force team by offering high quality products and providing them with product support, training seminars, sales convention and financial incentives.

Our products in Europe and in the UK are shipped directly from our warehouse facilities and in foreign markets we have contracted third-parties to distribute our products.

We are formulating a broader and more diversified pharmaceutical product portfolio and a greater selection of targets for potential development. We target products with limited competition for reasons such as trading complexity or the market size, which make our pharmaceutical products a key growth driver of our portfolio and complementary to other product offerings.

Patents, Trademarks, Licenses and Proprietary Property

We have developed or acquired various proprietary pharmaceutical and nutraceutical products, nutraceutical products licenses, wholesale licenses, processes, software, and other intellectual property that are used either to facilitate the conduct of our business or that are made available as products or services to customers.

At present, besides the above licenses we do not have any intellectual property or other licenses, including, but not limited to, patents, trademarks, franchises, concessions, and royalty agreements or other proprietary interests.

We have obtained trademark registrations for “Sky Premium Life®”, and related logos for all of our “Sky Premium Life®” products product lines. We hold trademark registrations in Europe.

We rely on confidentiality agreements with our employees, consultants and other parties to protect, among other things, trade secrets and other proprietary technology. There can be no assurance that these agreements will not be breached, that we will have adequate remedies for any breach, that others will not independently develop equivalent proprietary information or that other third parties will not otherwise gain access to our trade secrets and other intellectual property.

Product Insurance

We have insurance in place for our warehouses and the products in stock against any damage or theft, but we do not insure our products after the sale, since we are working under an Ex-works policy, and thus our clients are responsible for the transportation and the insurance of the products against any damage. In the future, we will continue to reevaluate our decision and may purchase product liability insurance to cover some of or all of our product liability risk.

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Customers

Through our subsidiaries, we primarily sell pharmaceutical products directly to pharmacies and a limited number of large wholesale drug distributors who, in turn, supply-sell the products to other wholesalers, hospitals, pharmacies, and governmental agencies across the European Union member state. Total revenues from the customers that accounted for 10% or more of our total consolidated revenues during the years ended December 31, 2021 and 2020 are as follows:

|  | 2021 |  |  | 2020 |
Medihelm SA |  |  | 15.33 | % |  |  | 14.82 | %

No other customer generated over 10% of our total revenue.

We have a diverse customer base that includes wholesalers and retail healthcare providers. We make a significant amount of our sales to a relatively small number of pharmaceutical wholesalers. These customers represent an essential part of the distribution chain of our products. Pharmaceutical wholesalers have undergone, and are continuing to undergo, significant consolidation in a worldwide basis. This consolidation resulted in these groups gaining additional purchasing leverage and consequently increasing the product pricing pressures facing our business.

Geographic Markets

All of our revenues are generated from operations in the European Union and UK, or otherwise earned outside the U.S. All of our foreign operations are subject to risks inherent in conducting business abroad, including price and currency exchange controls, fluctuations in the relative values of currencies, political and economic instability and restrictive governmental actions including. Our geographical market sales distribution of our total consolidated revenues during the years ended December 31, 2021 and 2020 are as follows:

|  | 2021 |  |  | 2020 |
Greece |  |  | 98.80 | % |  |  | 92.31 | %
Germany |  |  | 0.02 | % |  |  | 2.51 | %
UK |  |  | 0.82 | % |  |  | 3.34 | %
Netherlands |  |  | 0 | % |  |  | 0.34 | %
Ireland |  |  | 0 | % |  |  | 0.07 | %
Libya |  |  | 0 | % |  |  | 0.08 | %
Poland |  |  | 0 | % |  |  | 0.05 | %
Italy |  |  | 0.03 | % |  |  | 0.14 | %
France |  |  | 0 | % |  |  | 0.03 | %
Denmark |  |  | 0.10 | % |  |  | 0.97 | %
Croatia |  |  | 0.03 | % |  |  | 0.04 | %
Jordan |  |  | 0 | % |  |  | 0.05 | %
Cyprus |  |  | 0.20 | % |  |  | 0.07 | %
Total |  |  | 100.00 | % |  |  | 100.00 | %

We currently sell the products to wholesalers through our own sales force. We do not sell directly to large drug store chains or through distributors in countries where we do not have our own sales staff. As part of our sales marketing and promotion program, we use direct advertising, direct mailings, trading techniques, direct and personal contacts, exhibition of products at medical conventions and sponsor medical education symposia.

Competition

Our pharmaceutical businesses are conducted in intensely competitive and often highly regulated markets. Many of our trading of pharmaceutical products face competition in the form of branded or generic drugs that treat similar diseases or indications. The principal forms of competition include efficacy, safety, ease of use, and cost effectiveness. The means of competition vary across product categories and business groups, demonstrating that the value of our trading products is a critical factor for success in all of our principal businesses.

Our competitors include other trading companies, smaller companies, with generic drug and consumer healthcare products. We compete with other companies that manufacture and sell products that treat diseases or indications similar to those treated by our trading pharmaceutical products.

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Our competitive position in pharmaceutical sector is affected by several factors including among others, the amount and effectiveness of our and our competitors’ promotional resources; customer acceptance; product quality; our and our competitors’ introduction of new products, ingredients, claims, dosage forms, or other forms of innovation; and pricing, regulatory and legislative matters (such as product labeling, patient access and prescription).

The branded pharmaceutical industry is highly competitive. Our products compete with products manufactured by many other companies in highly competitive markets throughout the EU territory and internationally as well. Competitors include many of the major brand name and generic manufacturers of pharmaceutical products. If competitors introduce new products, delivery systems or processes with therapeutic or cost advantages, our products can be subject to progressive price reductions or decreased volume of sales, or both.

In the generic pharmaceutical market, we might face intense competition from other generic drug manufacturers, brand name pharmaceutical companies, existing brand equivalents and manufacturers of therapeutically similar drugs.

By specializing in high barrier to entry products, we endeavor to market more profitable and longer-lived products relative to commodity generic products. We believe that our competitive advantages include our integrated team-based approach to product development that combines our formulation, regulatory, legal and commercial capabilities; our ability to introduce new generic equivalents for brand-name drugs; our ability to meet customer expectations; and the breadth of our existing generic product portfolio offering.

Newly introduced generic products with limited or no other generic competition typically garner higher prices. At the expiration of the exclusivity period, other generic distributors may enter the market, resulting in a significant price decline for the drug. Consequently, the maintenance of profitable operations in generic pharmaceuticals depends, in part, on our ability to select, develop and launch new generic products in a timely and cost-efficient manner and to maintain efficient, high quality business capabilities.

We compete in the nutritional industry with our own branded nutraceutical products against companies that sell through retail stores, as well as against other direct selling companies. We compete against manufacturers and retailers of nutraceutical products which are distributed through supermarkets, drug stores, health food stores, vitamin outlets and mass market retailers, among others. We believe that the principal components of competition in nutraceutical products are expertise and service, high product quality, diversification and differentiation, price and brand recognition.

Operating conditions have become more challenging under the mounting global pressures of competition, industry regulation and cost containment. We continue to take measures to evaluate, adapt and improve our organization and business practices to better meet customer and public needs. We also seek to continually enhance the organizational effectiveness of all of our functions, including efforts to accurately and ethically launch and promote our products.

Information Systems

The Company operates its full-service wholesale pharmaceutical distribution facilities in Europe on one primary enterprise resource planning (“ERP”) system that provides for, among other things, electronic order entry by customers, invoice preparation and purchasing, and inventory tracking. We are currently making significant investments to enhance and upgrade the ERP system.

Additionally, we are improving our entity-wide infrastructure environment to drive efficiency, capabilities, and speed to market. We will continue to invest in advanced information systems and automated warehouse technology. For example, in an effort to comply with future pedigree and other supply chain custody requirements we have made significant investments in our secure supply chain information systems.

The Company processes a substantial portion of its purchase orders, invoices, and payments electronically. However, it continues to make substantial investments to expand its electronic interface with its suppliers. The Company has integrated warehouse operating system, which are used to manage the majority of transactional volume. The warehouse operating system has improved the distribution services productivity and operating leverage.

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Government Regulations

Government authorities in the EU and in other countries extensively regulate, among other things, the research, development, testing, approval, manufacturing, labeling, post-approval monitoring and reporting, packaging, advertising and promotion, storage, distribution, marketing and export and import of pharmaceutical products. As such, our branded pharmaceutical products and the generic product candidates are subject to extensive regulation both before and after approval. The process of obtaining regulatory approvals and the subsequent compliance with applicable state, local and foreign statutes and regulations require the expenditure of substantial time and financial resources. Failure to comply with these regulations could result in, among other things, warning letters, civil penalties, delays in approving or refusal to approve a pharmaceutical product.

Our business is mainly the trading of branded and generic pharmaceutical products and medicines within the EU member states. In order to be able to operate our business, we need to comply with EU regulations, as well as EU member states regulations that govern various operations of our business. The most important government regulation that applies to our business is the granting to our companies SkyPharm and Decahedron of the Authorization for Wholesale Distribution of Medicinal Products for human use. In order for this Authorization to be granted the companies need to always comply with certain Good Distribution Practices (“GDP”) that mainly assure the proper storage, handling, distribution and trade of the pharmaceutical products.

As of July 22, 2015, the Hellenic Ministry of Health and more specifically the National Organization for Medicines granted to SkyPharm a license for the wholesale of pharmaceutical products for human use. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/02). SkyPharm is subject to the Guidelines of the Good Distribution Practices of the European Union (the “Good Distribution Practices”) for the sale and distribution of medical products for human use. 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.” The Company is now focused on its own proprietary nutraceuticals line SPL and therefore is not subject to the Guidelines of the Good Distribution Practice of Medicinal Products for Human Use. The Company has not submitted any renewal of the license and any potential needs for such services can be provided by the other subsidiaries which are subject to the Guidelines of the Good Distribution Practice of Medicinal Products for Human Use and their licenses are valid.

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 provisions of those Regulations and the Medicines Act 1971. This License will continue to remain in force from the date of issue by the Licensing Authority unless cancelled, suspended, revoked or varied as to the period of its validity or relinquished by the authorization holder.

Cosmofarm received its Wholesale Distribution Authorization for human use on February 15, 2019, from the National Organization for Medicines. The license is valid for a period of five years and pursuant to the EU directive of (2013/C343/01). Also, Cosmofarm was granted with GDP certificate on November 11, 2019.

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 need to be compliant with the General Data Protection Regulation (“GDPR”) adopted by the European Union in May 2018. GDPR applies to the processing of personal data of persons in the EU by a controller or processor.

Research and Development Expenditures

The Company entered into a Research & Development agreement with Doc Pharma S.A. on May 17, 2021. Under this agreement, 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®.

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Distribution & Trade Agreements

On July 1st, 2021 the Company’s subsidiary SkyPharm SA, entered into an exclusive distribution agreement with a company based in Germany the “Distributor A”, whereas SkyPharm appointed the Distributor A to be the responsible Partner for the distribution, promotion, trade marketing, logistics and sale of the nutraceuticals manufactured and supplied by SkyPharm (Sky Premium Life®), in the territories of Austria & Germany. The Distributor A places purchase orders with SkyPharm at the company’s address and the purchase order is necessary to initiate any shipment.

On July 7th, 2021 SkyPharm SA signed a trade agreement with a company specializing in e-commerce mall advice and operation, henceforward referred as “Distributor B”. Based on the agreement, SkyPharm will sell its own branded products Sky Premium Life ® to final consumers through the e-commerce store opened by Distributor B on Tmall International MALL and Distributor B will provide platform operation services to SkyPharm. The services provided by Distributor B will include mall construction, mall operation and network promotion, along with collection, settlement, customer service, logistics and distribution.

On November 25, 2021 SkyPharm SA signed a trade agreement with a wholesaler which operates in the storage, distribution, trading & promotion of pharmaceutical products) henceforward referred as “Distributor C”. Based on the agreement Distributor C is appointed as the exclusive representative for the promotion & distribution of our proprietary nutraceutical products Sky Premium Life®, in Greece.

During July 2021, the Company’s subsidiary Decahedron Ltd, created a distribution page on Amazon UK, through which it sells, advertises and promotes our own proprietary branded nutraceutical product line “Sky Premium Life®, directly to final consumers.

International Cannabis Corp. (f/k/a Kaneh Bosm Biotechnology Inc.) - Cannabis

Distribution and Equity Agreement

On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of Cannabis, cannabidiol (“CBD”) and/or any Cannabis Extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.

The Distribution and Equity Acquisition Agreement is to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five (5) years of the agreement. The transaction closed on May 22, 2018 after the due diligence period, following which the Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000. The Company was also given the right to nominate one director to the Marathon board of directors.

Share Exchange Agreements

On May 17, 2018, the Company entered into a Share Exchange Agreement with Marathon, Kaneh Bosm Biotechnology Inc. (n/k/a International Cannabis Corp. (OTC: KNHBF)) and certain other sellers of Marathon capital stock. Under the Share Exchange Agreement, the Company agreed to transfer 2.5 million shares in Marathon to KBB, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of KBB. On July 16, 2018, the Company completed a new Share Exchange Agreement (the “New SEA”) by and among Marathon, KBB, and certain other sellers of Marathon capital stock. Pursuant to the terms of the New SEA, the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB. The Company received an additional five million shares of KBB. Completion of the New SEA by the Company was subject to satisfaction of various conditions precedent all of which were satisfied. The ten million shares of KBB owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over KBB.

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Employees

As of December 31, 2021, we had 95 full-time employees in total, of which 16 engaged in sales department, 3 in procurement department, 2 in marketing department, 21 in warehouse services, 15 in logistics/transportation works, 3 in quality assurance, 7 in finance & accounting department, 4 in management, 3 in cleaning, 5 in administration, 10 in call center, 4 in B2B e-shop and 2 in IT department. Our employees are not members of any unions. We consider our relations with our employees to be good and have not experienced any work stoppages, slowdowns or other serious labor problems that have materially impeded our business operations.

We have a team with a significant track record in the pharmaceutical business. In order to achieve our strategic objectives, we have, and will remain, focused on hiring and retaining a highly skilled management team that has extensive experience and specific skill sets relating to the sales, selection, development and commercialization of pharmaceutical products. We intend to continue our efforts to build and expand this team as we grow our business. No assurances can be given that the Company will be able to retain any additional persons.

Available Information

Our internet address is http://www.cosmoshold.com. We post links on our website to the following filings as soon as reasonably practicable after they are electronically filed or furnished to the SEC: annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendment to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended. All such filings are available through our website free of charge. The information on our Internet website is not incorporated by reference into this Form 10-K or our other securities filings and is not a part of such filings.

Information about the operation of the Public Reference Room can be obtained by calling the SEC at 1-800-SEC-0330 or 1-202-551-8090. You can also access our filings through the SEC’s internet address site: www.sec.gov, under our NASDAQ Capital Market under the symbol COSM.

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MANAGEMENT

Directors, Executive Officers and Corporate Governance

Our current directors, officers and managers are listed below. Each of our managers will serve for one year or until their respective successors are elected and qualified. Our officers serve at the pleasure of the Board.

Name |  | Age |  | Position
Grigorios Siokas |  | 56 |  | CEO and Director
Pavlos Ignatiades |  | 59 |  | Chief Operating Officer
Georgios Terzis |  | 40 |  | CFO
Demetrios G. Demetriades |  | 55 |  | Secretary and Audit Committee Member
Dimitrios Goulielmos |  | 54 |  | Director
John J. Hoidas |  | 56 |  | Director Audit Committee Member
Dr. Anastasios Aslidis |  | 59 |  | Director Audit Committee Member

Grigorios Siokas joined us as CEO, CFO and Director on February 26, 2016. He has over 15 years’ experience in the pharmaceutical industry. Since 2014, he has served as the CEO and Operations Manager of SkyPharm SA a wholly-owned subsidiary of the Company. SkyPharm SA is a pharmaceutical company located in Greece that mainly exports medicines from Greece to other European countries, such as Germany, England and Denmark. Prior to 2014, Mr. Siokas worked in a variety of sectors of the pharmaceutical industry mostly in the trading of medicines in Greece and other European countries. Additionally, since 2000 he has been a major shareholder in various pharmaceutical companies such as: Ippokratis Pharmaceuticals, (annual sales of over € 78 million); Thrakis Pharmaceuticals, (annual sales of over € 20 million); Thessalias Pharmaceuticals, (annual sales of over € 18 million); and ZED Pharma SA, (annual sales of over € 35 million). During the 1990s, Mr. Siokas founded and operated a marble wholesale import - export company in Germany. Within a period of two years he became the 4th biggest Greek marble importer in Germany. He also ran a Tour Operation with many different airlines, serving millions of customers. Grigorios Siokas has a Bachelor’s Degree in Geology from the Aristotle University of Thessaloniki, Greece. He received a Master’s in management and finance from the University of Stuttgart and the University of Tuebigen, Germany.

Pavlos Ignatiades was elected COO on November 11, 2020. He has been a senior portfolio manager and the CEO of INVESTMENT ANALYSIS S.A for over 10 years operating in the Athens Stock Exchange. He worked as an independent financial analyst for listed companies in Greece and abroad while he oversaw foreign funds (American and Asian) targeted at Greek innovative companies. Since the beginning of Cosmos Holdings, he is in charge of the daily activities of all subsidiaries and overviews all strategic tasks of the organization.

Georgios Terzis was elected CFO on November 11, 2020. Prior thereto he was employed by the Company as International Finance Manager. He has served as an Executive Consultant to several multinational advisory firms where, he achieved commitments of more than €50mil funding, financing and state incentives to a numerus investment in healthcare, logistics, RES and manufacturing industries. George holds an MBA from Alba Graduate Business school and a Bachelor’s Degree in Financial Management from University of Attica. He is certified as an independent valuator of companies and private investments by the European Commission.

Demetrios G. Demetriades was elected as Secretary and Director of the Company effective January 13, 2014. Since January 2003, Mr. Demetriades has been Director of Highlander Spring Trading Ltd, a trading company. From November 2000 to December 2002 he was Marketing Director of Eurolink Securities Ltd which was involved in trading in the Cyprus Stock Exchange. From January 1995 to November 2000 he was Supervising Officer of Laiki Factors Ltd a financing company. As a member of the board, Mr. Demetriades contributes the benefits of his trading, executive leadership and management experience. Mr. Demetriades will be compensated for his service from time-to-time as the Board of Directors will determine. He was also on the Audit Committee during the fiscal year 2021.

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Dimitrios Goulielmos joined us as CEO, CFO and Director on September 27, 2013 and resigned as an officer as of February 26, 2016 but retained his position as a Director of the Company. Since 1991, he has been principal attorney at the law firm of Goulielmos D. & Partners. He contributes to the Board the benefits of his legal, academic, and business background. Mr. Goulielmos is a fourth-generation attorney. He received his law degree with Excellency from the Aristotle University of Thessaloniki in 1988. He did post graduate studies for International transactions and Company law at Paris France and at the LSE of London, England. In 2004 he was elected Vice-president of EUROPECHE the organization that was established by the European Committee for the consultation and proposal of solutions in the sector of Community Fishery. The same year he was also elected as National representative of Hellas in the MEDISAMAK, the organization responsible for all Mediterranean countries, in the sector of Fishery. In year 2007 he was reelected as Vice-President of EUROPECHE. He is a member of the social dialogue group of ACFA, of EU on labor affairs. He is an honorary lifetime member of International Who’s Who Historical Society. Mr. Goulielmos has extensive experience in law, international deals, mergers, acquisitions, negotiations, international application of licenses, and real estate management which he will contribute to the Board.

John J. Hoidas was appointed a Member of the Company’s Board of Directors on November 18, 2016 and he became the fourth member of the Board of Directors of the Company. Mr. Hoidas is a wealth management professional with extensive experience in the capital markets and specifically in the financing of pharmaceutical companies. He is currently the senior vice president of Uhlmann Price Securities based in Chicago. Over the previous years he achieved to raise significant amounts of capital for late stage pre-IPO companies such as Organovo (“ONVO”), Invivo Therapeutics (“NVIV”) and Matinas BioPharma (“MTNB”) to name a few. He has served as a broker dealer to the following firms: Kingsbury Capital Investment Advisors, Kingsbury Capital LLC, Spencer Trask Ventures. He was also on the Audit Committee during the fiscal year 2021.

Dr. Anastasios Aslidis was appointed a member of the Company’s Board of Directors and as a member of the Audit Committee of the Board of Directors on April 29, 2022. Dr. Aslidis is currently, and has been since May 5, 2018, the Chief Financial Officer and Treasurer and a member of the Board of Directors of EuroDry (Nasdaq: EDRY). He is also member of the Board of Directors, Treasurer and Chief Financial Officer of Euroseas since September 2005. (Nasdaq: ESEA). Prior to joining Euroseas, Dr. Aslidis was a partner at Marsoft Inc., an international consulting firm focusing on investment and risk management in the maritime industry. Dr. Aslidis has more than 30 years of experience in the maritime industry. He also served as consultant to the Boards of Directors of companies (public and private) advising on strategy development, asset selection and investment timing. Dr. Aslidis holds a Ph.D. in Ocean Systems Management (1989) from the Massachusetts Institute of Technology, M.S. in Operations Research (1987) and M.S. in Ocean Systems Management (1984) also from the Massachusetts Institute of Technology, and a Diploma in Naval Architecture and Marine Engineering from the National Technical University of Athens (1983).

Term of Office

Our directors are appointed for a one-year term to hold office until the next annual general meeting of our shareholders or until removed from office in accordance with our bylaws. Our officers are appointed by our board of directors and hold office until removed by the board.

Family Relationships

There are no family relationships between or among the directors, executive officers or persons nominated or chosen by us to become directors or executive officers.

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Legal Proceedings

No officer, director, or persons nominated for such positions, promoter or significant employee has been involved in the last ten years in any of the following:

| · | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time,
| · | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses),
| · | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities,

| · | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated,
| · | Having any government agency, administrative agency, or administrative court impose an administrative finding, order, decree, or sanction against them as a result of their involvement in any type of business, securities, or banking activity,
| · | Being the subject of a pending administrative proceeding related to their involvement in any type of business, securities, or banking activity, or,
| · | Having any administrative proceeding been threatened against you related to their involvement in any type of business, securities, or banking activity.

Audit Committee

We have a separately-designated standing audit committee, which is appointed by the Board of Directors of Cosmos Holdings Inc. Our three directors, John Hoidas, Demetrios Demetriades and Peter Goldstein serve on the Audit Committee. Primary function of the committee is to assist the Board of Directors in overseeing (1) the financial reporting and accounting processes of the Company, and (2) the financial statements audits of the Company. The Committee also prepares a written report to be included in the annual proxy statement of the Company pursuant to the applicable rules and regulations of the Securities and Exchange Commission (the “SEC”). In furtherance of these purposes, the Committee shall maintain direct communication among the Company’s independent auditors and the Board of Directors. The independent auditors and any other registered public accounting firm engaged in preparing or issuing an audit report or performing other audit review or attest services for the Company shall report directly to the Committee and are ultimately accountable to the Committee and the Board of Directors.

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.

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Director Independence

Our board of directors has determined that John Hoidas, Dimitrios Goulielmos and Demetrios G. Demetriades qualify as an “independent board member” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(15) of the NASDAQ Marketplace Rules.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our directors and executive officers and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of common stock and other equity securities of the Company. Officers, directors and greater than ten percent beneficial shareholders are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. To the best of our knowledge based solely on a review of Forms 3, 4, and 5 (and any amendments thereof) received by us during or with respect to the year ended December 31, 2021, no person failed to file, on a timely basis, any identified report required by Section 16(a) of the Exchange Act during fiscal year ended December 31, 2021.

Code of Ethics

We have adopted a Code of Ethics for Financial Executives, which includes our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of our Code of Ethics has previously been filed as an exhibit with the SEC.

EXECUTIVE COMPENSATION

Summary Compensation Table

The table below summarizes all compensation awarded to, earned by, or paid to both to our officers and to our directors for all services rendered in all capacities to us for our fiscal year ended December 31, 2021 and 2020.

SUMMARY COMPENSATION TABLE

Name |  | YE 12/31 |  | Salary ($) |  |  | Bonus ($) |  |  | Stock Awards ($) |  |  | Option Awards ($) |  |  | Non-Equity Incentive Plan Compensation ($) |  |  | Nonqualified Deferred Compensation Earnings ($) |  |  | All Other Compensation ($) |  |  | Total ($) |
Grigorios |  | 2021 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Siokas (1) |  | 2020 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Georgios |  | 2021 |  |  | 42,843 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 42,843 |
Terzis (2) |  | 2020 |  |  | 6,200 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,200 |

________________

(1) | Mr. Siokas became the Company’s Chief Executive Officer and Director of the Company in 2016.
(2) | Mr. Terzis became the Company’s Chief Financial Officer on November 11, 2020.

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Narrative Discl osure to the Summary Compensation Table

There are no arrangements or plans in which we provide pension, retirement or similar benefits for executive officers.

Outstanding Equity Awards at Fiscal Year-End

The table below summarizes all unexercised options, stock that has not vested, and equity incentive plan awards for each named executive officer as of December 31, 2021.

OUTSTANDING EQUITY AWARDS AT YEAR END

|  | Option Awards |  |  | Stock Awards |
|  | Number of Securities Underlying Unexercised Options |  |  | Option Exercise |  |  | Option Expiration |  |  | No. of Shares or Units of Stock that Have Not |  |  | Market Value of Shares or Units of Stock that Have Not |  |  | Equity Incentive Plan Awards: No. of Unearned Shares, Units or Other Rights That Have Not |
Name |  | Exercisable |  |  | Un-exercisable |  |  | Price ($) |  |  | Date |  |  | Vested (#) |  |  | Vested ($) |  |  | Vested |
Grigorios Siokas |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Georgios Terzis |  |  | 25,000 |  |  |  | - |  |  | $ | 1.00 |  |  | 01/01/22 |  |  |  | - |  |  |  | - |  |  |  | - |
Dimitrios Goulielmos |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
John Hoidas |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Demetrios G. Demetriades |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |

Director Compensation

During the fiscal year ended December 31, 2021, no compensation was awarded to, earned by, or paid to our current director for services rendered in any capacities to us.

In the future we may grant options to our directors to purchase shares of common stock as determined by our Board of Directors or a compensation committee that may be established.

Stock Option Plans

We did not have a stock option plan as of December 31, 2021.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding the beneficial ownership of our common stock as of May 19 2022, for each of the following persons, after giving effect to the transaction under the Exchange Agreement:

| · | all such directors and executive officers as a group; and
| · | each person who is known by us to own beneficially five percent or more of our common stock prior to the change of control transaction.

Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission. Unless otherwise indicated in the table, the persons and entities named in the table have sole voting and sole investment power with respect to the shares set forth opposite the shareholder’s name. The percentage of class beneficially owned set forth below is based on 19,106,645 shares of common stock issued and outstanding on May 25, 2022. We calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act of 1934, as amended as of that date (the “Exchange Act”). Shares of our Common Stock issuable upon exercise of options or warrants or conversion of Notes that are exercisable or convertible within sixty (60) days of May 25, 2022 are included as beneficially owned by the holder, but not deemed outstanding for computing the percentage of any other Stockholder for Percentage of Common Stock Beneficially Owned Immediately. Beneficial ownership generally includes voting and dispositive power with respect to securities. Unless otherwise indicated below, the persons and entities named in the table have sole voting and sole dispositive power with respect to all shares beneficially owned.

Name and Address of Beneficial Owners of Common Stock (1) |  | Title of Class |  | Amount and Nature of Beneficial Ownership |  |  | % of Common Stock |
Grigorios Siokas (2) |  | Common |  |  | 6,834,168 |  |  |  | 38.95 | %
Pavlos Ignatiades |  |  |  |  |  |  |  |  |  |
Georgios Terzis |  |  |  |  |  |  |  |  |  |
Demetrios G. Demetriades |  |  |  |  |  |  |  |  |  |
Dimitrios Goulielmos (3) |  | Common |  |  | 540,000 |  |  |  | 3.1 | %
John J. Hoidas, Director |  |  |  |  | - |  |  |  | - |
Dr. Anastasios Aslidis |  |  |  |  |  |  |  |  |  |
DIRECTORS AND OFFICERS |  |  |  |  | 7,374,168 |  |  |  | 42.05 | %
5% SHAREHOLDERS |  |  |  |  |  |  |  |  |  |
None |  |  |  |  |  |  |  |  |  |

(1) | Unless otherwise indicated, the address for each person is 141 West Jackson Boulevard, Suite 4236, Chicago, IL 60604
(2) | Does not include 2,307,692 shares of common stock issuable upon conversion of Series A Preferred shares and 500,000 shares of common stock issuable upon exercise of warrants.
(3) | Mr. Goulielmos is the owner of Jaron Trading Limited a company that holds 40,000 common shares. Therefore Mr. Goulielmos, in addition to the 500,000 common shares that he personally owns, he controls the 40,000 that belongs to Jaron Trading Limited. Attributing these shares to Mr. Goulielmos gives him a voting block of 540,000 shares, or 3.1% of the issued and outstanding common stock of the Company on May 25, 2022.

Other than the shareholders listed above, we know of no other person who is the beneficial owner of more than five percent (5%) of our common stock.

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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Grigorios Siokas

On May 10, 2021, 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 and as a shareholder 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 $600,000, 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. 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.

During the year ended December 31, 2021, the Company entered into various agreements with Mr. Siokas whereby the Company exchanged an aggregate total of $6,000,000 of debt into 1,000,000 shares of Common Stock at above market prices.

During the year ended December 31, 2021, the Company borrowed additional proceeds of €1,803,000 ($2,040,635), €230,000 ($275,306) and $4,061,215 and repaid €118,000 ($133,552) of these loans. Included in the $4,061,215 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 any time 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 year ending December 31, 2021, the Company converted $2,000,000 of the July 20 Note at a conversion price of $6.00 and issued 333,333 shares of common stock. As of December 31, 2021, the Company had an outstanding balance under these notes and loans of $1,293,472. Of the $1,293,472 outstanding balance, $0 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 years ended December 31, 2021 and 2020, the Company recorded a loss of $21,446 and $27,114, respectively.

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

Grigorios Siokas is the Company’s CEO and principal shareholder and is hence considered a related party to the Company.

Doc Pharma

As of December 31, 2021, the Company has a prepaid balance of $3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $2,645,021 and an accounts payable balance of $458,611. As of December 31, 2020, the Company has a prepaid balance of $3,468,653 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of $3,468,564.

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During the years ended December 31, 2021 and 2020, the Company purchased a total of $3,022,714 and $5,983,809 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2021 and 2020 the Company had $974,745 and $2,843,260 revenue from Doc Pharma S.A., respectively.

On October 10, 2020, the Company entered into a contract manufacturer outsourcing (“CMO”) agreement with Doc Pharma whereby 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 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 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 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”) 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 December 31, 2021, the Company has purchased €1,699,507 ($2,010,517) in inventory related to this agreement.

On May 17, 2021, Doc Pharma and the Company entered into a Research and Development (“R&D”) agreement whereby Doc Pharma is 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 year ended December 31, 2021, SkyPharm bought 67 licenses at value of €261,300 ($295,739) from Doc Pharma which was the 18.33% 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.

Dimitrios Goulielmos

On November 21, 2014, SkyPharm entered into a Loan Agreement with Dimitrios Goulielmos, former Chief Executive Officer, and a current director of the Company, pursuant to which the Company borrowed €330,000 ($401,115) from Mr. Goulielmos. The Loan bore an interest rate of 2% per annum and was due and payable in full on May 11, 2015. As of December 31, 2021, the Company had an outstanding principal balance of €10,200 ($11,544) and €0 ($0) accrued interest.

Dimitrios Goulielmos is a current director and former CEO of the Company, and is hence considered a related party to the Company.

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Private Placements of Preferred Stock and Warrants

As described in a Form 8-K filed on March 1, 2022 (which is incorporated herein by reference), on February 28, 2022, pursuant to the terms of a securities purchase agreement dated February 28, 2022, we issued and sold to certain of the Selling Stockholders in a private placement, 6,000 shares of our Series A Convertible Preferred Stock (“Series A Shares”), at a price of $1,000.00 per share, and warrants exercisable to purchase up to 2,000,000 shares of our Common Stock (“Warrants”) for aggregate gross proceeds of approximately $6 million.

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SELLING STOCKHOLDERS

The shares of Common Stock being offered by the Selling Stockholders are those previously issued to the Selling Stockholders, and those issuable to the Selling Stockholders, upon conversion of Series A Shares and exercise of the Warrants. For additional information regarding the issuances of Series A Shares and Warrants, see “Private Placement of Preferred Stock and Warrants” above. We are registering the shares of Common Stock in order to permit the Selling Stockholders to offer the shares for resale from time to time. Except for the ownership of the Series A Shares and the Warrants, the Selling Stockholders, other than Grigorios Siokas, our Chief Executive Officer, have not had any material relationship with us within the past three years.

The table below lists the Selling Stockholders and other information regarding the beneficial ownership of the shares of Common Stock by each of the Selling Stockholders. The first column lists the number of shares of Common Stock beneficially owned by each Selling Stockholder, assuming full conversion of their Series A Preferred, based upon an estimated adjusted conversion price of $0.35 and exercise of their Warrants on an exercise price of $0.25, without regard to any limitation on exercise. The second column shows their percentage ownership, based on its ownership of shares of Common Stock, Series A Shares and Warrants, as of May 25, 2022, assuming full conversion of Series A Shares and the exercise of the Warrants held by the Selling Stockholders on that date, without regard to any limitations on exercises.

The third column lists the shares of Common Stock being offered by this prospectus by the Selling Stockholders.

In accordance with the terms of registration rights agreements with the Selling Stockholders, this prospectus generally covers the resale of the sum of (i) the number of shares of Common Stock, Series A Shares and Warrants issued to the Selling Stockholders as described in the “Private Placement of Preferred Stock and Warrants” above and (ii) the maximum number of shares of Common Stock issuable upon conversion of the Series A Shares and exercise of the related Warrants, determined as if the outstanding warrants were exercised in full as of the trading day immediately preceding the date this registration statement was initially filed with the SEC, each as of the trading day immediately preceding the applicable date of determination and all subject to adjustment as provided in the registration right agreement, without regard to any limitations on the exercise of the warrants. The last column assumes the sale of all of the shares offered by the Selling Stockholders pursuant to this prospectus.

Under the terms of the Series A Shares and Warrants, a Selling Stockholder may not exercise warrants to the extent such exercise would cause such Selling Stockholder, together with its affiliates and attribution parties, to beneficially own a number of shares of Common Stock which would exceed 4.99% or 9.99%, as applicable, of our then outstanding shares of Common Stock following such exercise, excluding for purposes of such determination shares of Common Stock issuable upon exercise of such warrants which have not been exercised. The number of shares in the second and fourth columns do not reflect this limitation. The Selling Stockholders may sell all, some or none of their shares in this offering. See “Plan of Distribution.”

|  | Shares of Common Stock Beneficially Owned Prior to Offering(1) |  |  | Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus(2) |  |  | Shares of Common Stock Owned After Offering |
Name of Selling Stockholder |  | Number |  |  | Percentage |  |  |  |  |  | Number |  |  | Percentage |
Grigorios Siokas(3) |  |  | 18,062,738 |  |  |  | 59.54 | % |  |  | 11,228,571 |  |  |  | 6,834,168 |  |  |  | 35.77 | %
BPY Limited(4) |  |  | 4,491,429 |  |  |  | 19.03 | % |  |  | 4,491,429 |  |  |  | 0 |  |  | - | %
Nomis Bay Ltd(5) |  |  | 6,737,143 |  |  |  | 26.07 | % |  |  | 6,737,143 |  |  |  | 0 |  |  | - | %
Anson Investments Master Fund LP(6) |  |  | 8,982,857 |  |  |  | 31.98 | % |  |  | 8,982,857 |  |  |  | 0 |  |  | - | %
Anson East Master Fund LP(7) |  |  | 2,245,714 |  |  |  | 10.52 | % |  |  | 2,245,714 |  |  |  | 0 |  |  | - | %
3i LP(8) |  |  | 11,228,571 |  |  |  | 37.01 | % |  |  | 11,228,571 |  |  |  | 0 |  |  | - | %
Total |  |  | 51,748,452 |  |  |  |  |  |  |  | 44,914,285 |  |  |  | 6,834,168 |  |  |  |  |

(1) | Based on 19,106,645 shares of Common Stock issued as of May 25, 2022. In accordance with Rule 13d-3 under the Exchange Act, shares of Common Stock issuable upon exercise of Warrants and conversion of Notes are included as beneficially owned by the Selling Stockholder, but not deemed outstanding for computing the percentage of Common Stock for any other Selling Securityholder.

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(2) | We do not know when or in what amounts a Selling Stockholder may offer shares for sale. The Selling Stockholders may choose not to sell any or all of the shares offered by this prospectus. Because the Selling Stockholders may offer all or some of the Shares pursuant to this offering, we cannot estimate the number of the Shares that will be held by the Selling Stockholders after completion of the offering. However, for purposes of this table, we have assumed that, after completion of the offering, all of the Shares covered by this prospectus will be sold by the Selling Stockholders and that the Selling Stockholders do not acquire beneficial ownership of any additional shares.
(3) | Consists of 6,834,168 shares of Common Stock, 4,628,571 shares of Common Stock issuable upon the conversion of Series A Shares and 6,600,000 shares issuable upon the exercise of Warrants Mr. Siokas’ address is c/o Cosmos Holdings, Inc., 141 West Jacksonville Blvd., Suite 4236, Chicago, IL.
(4) | Consists of 1,851,429 shares of Common Stock issuable upon conversion of Series A Shares and 2,640,000 shares of Common Stock issuable upon exercise of Warrants. Murchinson Ltd. (“Murchinson”), as sub-advisor to BPY Limited, has voting and investment power with respect to these shares. Marc Bistricer, in his capacity as CEO of Murchinson, may also be deemed to have investment discretion and voting power over the shares held by BPY Limited. Each of Mr. Bistricer and Murchinson disclaims any beneficial ownership of these shares except of any pecuniary interests therein. The principal business address of Murchinson Ltd. 400-145 Adelaide Street West, Toronto ON M5H4E5.
(5) | Consists of 2,777,143 shares of Common Stock issuable upon conversion of Series A Shares and 3,960,000 shares of Common Stock issuable upon exercise of Warrants. Murchinson Ltd. (“Murchinson”), as sub-advisor to Nomis Bay Ltd., has voting and investment power with respect to these shares. Marc Bistricer, in his capacity as CEO of Murchinson, may also be deemed to have investment discretion and voting power over the shares held by Nomis Bay Ltd. Each of Mr. Bistricer and Murchinson disclaims any beneficial ownership of these shares except of any pecuniary interests therein. The principal business address of Murchinson Ltd. 400-145 Adelaide Street West, Toronto ON M5H4E5.
(6) | Consists of 3,702,857 shares of Common Stock issuable upon conversion of Series A Shares and 5,280,000 shares of Common Stock issuable upon exercise of Warrants. Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson Investments Master Fund LP (“AIMF”) hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to the extent of their pecuniary interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.
(7) | Consists of 925,714 shares of Common Stock issuable upon conversion of Series A Shares and 1,320,000 shares of Common Stock issuable upon exercise of Warrants. Anson Advisors Inc. and Anson Funds Management LP, the Co-Investment Advisers of Anson East Master Fund LP (“AEMF”) hold voting and dispositive power over the Common Shares held by Anson. Bruce Winson is the managing member of Anson Management GP LLC, which is the general partner of Anson Funds Management LP. Moez Kassam and Amin Nathoo are directors of Anson Advisors Inc. Mr. Winson, Mr. Kassam and Mr. Nathoo each disclaim beneficial ownership of these Common Shares except to the extent of their pecuniary interest therein. The principal business address of Anson is Walkers Corporate Limited, Cayman Corporate Centre, 27 Hospital Road, George Town, Grand Cayman KY1-9008, Cayman Islands.
(8) | Consists of 4,628,571 shares of Common Stock issuable upon conversion of Series A Shares and 6,600,000 shares of Common Stock issuable upon exercise of Warrants. The business address of 3i, LP is 140 Broadway, 38th Floor, New York, NY 10005. 3i, LP's principal business is that of a private investor. Maier Joshua Tarlow is the manager of 3i Management, LLC, the general partner of 3i, LP, and has sole voting control and investment discretion over securities beneficially owned directly or indirectly by 3i Management, LLC and 3i, LP. Mr. Tarlow disclaims any beneficial ownership of the securities beneficially owned directly by 3i, LP and indirectly by 3i Management, LLC.

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PLAN OF DISTRIBUTION

Each Selling Shareholder (the “Selling Shareholder”) of the securities and any of their pledgees, assignees and successors-in-interest may, from time to time, sell any or all of their securities covered hereby on the principal Trading Market or any other stock exchange, market or trading facility on which the securities are traded or in private transactions. These sales may be at fixed or negotiated prices. A Selling Shareholder may use any one or more of the following methods when selling securities:

| ● | ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;
| ● | block trades in which the broker-dealer will attempt to sell the securities as agent but may position and resell a portion of the block as principal to facilitate the transaction;
| ● | purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
| ● | an exchange distribution in accordance with the rules of the applicable exchange;
| ● | privately negotiated transactions;
| ● | settlement of short sales;
| ● | in transactions through broker-dealers that agree with the Selling Shareholders to sell a specified number of such securities at a stipulated price per security;
| ● | through the writing or settlement of options or other hedging transactions, whether through an options exchange or otherwise;
| ● | a combination of any such methods of sale; or,
| ● | any other method permitted pursuant to applicable law.

The Selling Shareholders may also sell securities under Rule 144 or any other exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”), if available, rather than under this prospectus.

Broker-dealers engaged by the Selling Shareholders may arrange for other brokers-dealers to participate in sales. Broker-dealers may receive commissions or discounts from the Selling Shareholders (or, if any broker-dealer acts as agent for the purchaser of securities, from the purchaser) in amounts to be negotiated, but, except as set forth in a supplement to this Prospectus, in the case of an agency transaction not in excess of a customary brokerage commission in compliance with FINRA Rule 2121; and in the case of a principal transaction a markup or markdown in compliance with FINRA Rule 2121.

In connection with the sale of the securities or interests therein, the Selling Shareholders may enter into hedging transactions with broker-dealers or other financial institutions, which may in turn engage in short sales of the securities in the course of hedging the positions they assume. The Selling Shareholders may also sell securities short and deliver these securities to close out their short positions, or loan or pledge the securities to broker-dealers that in turn may sell these securities. The Selling Shareholders may also enter into option or other transactions with broker-dealers or other financial institutions or create one or more derivative securities which require the delivery to such broker-dealer or other financial institution of securities offered by this prospectus, which securities such broker-dealer or other financial institution may resell pursuant to this prospectus (as supplemented or amended to reflect such transaction).

The Selling Shareholders and any broker-dealers or agents that are involved in selling the securities may be deemed to be “underwriters” within the meaning of the Securities Act in connection with such sales. In such event, any commissions received by such broker-dealers or agents and any profit on the resale of the securities purchased by them may be deemed to be underwriting commissions or discounts under the Securities Act. Each Selling Shareholders has informed the Company that it does not have any written or oral agreement or understanding, directly or indirectly, with any person to distribute the securities.

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The Company is required to pay certain fees and expenses incurred by the Company incident to the registration of the securities. The Company has agreed to indemnify the Selling Shareholders against certain losses, claims, damages and liabilities, including liabilities under the Securities Act.

We agreed to keep this prospectus effective until the earlier of (i) the date on which the securities may be resold by the Selling Shareholders without registration and without regard to any volume or manner-of-sale limitations by reason of Rule 144, without the requirement for the Company to be in compliance with the current public information under Rule 144 under the Securities Act or any other rule of similar effect or (ii) all of the securities have been sold pursuant to this prospectus or Rule 144 under the Securities Act or any other rule of similar effect. The resale securities will be sold only through registered or licensed brokers or dealers if required under applicable state securities laws. In addition, in certain states, the resale securities covered hereby may not be sold unless they have been registered or qualified for sale in the applicable state or an exemption from the registration or qualification requirement is available and is complied with.

Under applicable rules and regulations under the Exchange Act, any person engaged in the distribution of the resale securities may not simultaneously engage in market making activities with respect to the shares of Common Stock for the applicable restricted period, as defined in Regulation M, prior to the commencement of the distribution. In addition, the Selling Shareholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including Regulation M, which may limit the timing of purchases and sales of the shares of Common Stock by the Selling Shareholders or any other person. We will make copies of this prospectus available to the Selling Shareholders and have informed them of the need to deliver a copy of this prospectus to each purchaser at or prior to the time of the sale (including by compliance with Rule 172 under the Securities Act).

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DESCRIPTION OF SECURITIES

Authorized and Outstanding Capital Stock

The following description of our capital stock and provisions of our articles of incorporation and by-laws are summaries and are qualified by reference to our articles of incorporation and by-laws. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. All share and per share data give retroactive effect to a 1 for 10 reverse split effective on November 21, 2017.

We have 400,000,000 shares of capital stock, par value $0.001 per share, authorized of which 300,000,000 are shares of Common Stock and 100,000,000 are shares of “blank check” preferred stock.

As of December 31, 2021, we had 17,544,509 shares of our common stock issued and 17,157,085 shares outstanding, held by approximately 184 stockholders of record. The number of record holders does not include beneficial owners of common stock whose shares are held in the names of various broker-dealers and registered clearing agencies.

Common Stock

The holders of our Common Stock are entitled to one vote per share. In addition, the holders of our Common Stock will be entitled to receive dividends ratably, if any, are declared by our board of directors out of legally available funds; however, the current policy of our board of directors is to retain earnings, if any, for operations and growth. Upon liquidation, dissolution or winding-up, the holders of our Common Stock are entitled to share ratably in all assets that are legally available for distribution. The holders of our Common Stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of our Common Stock are subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock, which may be designated solely by action of our board of directors and issued in the future.

Preferred Stock

Our board of directors are authorized, subject to any limitations prescribed by law, without further vote or action by our stockholders, to issue from time to time shares of preferred stock in one or more series. Each series of preferred stock will have the number of shares, designations, preferences, voting powers, qualifications and special or relative rights or privileges as shall be determined by our board of directors, which may include, among others, dividend rights, voting rights, liquidation preferences, conversion rights and preemptive rights.

It is not possible to state the actual effect of the issuance of any shares of preferred stock upon the rights of holders of our Common Stock until the board of directors determines the specific rights of the holders of our preferred stock. However, the effects might include, among other things:

| · | Impairing dividend rights of our Common Stock;
| · | Diluting the voting power of our Common Stock;
| · | Impairing the liquidation rights of our Common Stock; and
| · | Delaying or preventing a change of control without further action by our stockholders.

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Series A Convertible Preferred Shares

We have designated 6,000,000 shares of our preferred stock as Series A Convertible Preferred (the “Series A Shares”). As of May 25, 2022, there were 6,480 Series A Shares issued and outstanding. The Series A Shares are convertible into shares of the Company’s common stock at the lower of (i) $3.00 or (ii) 80% of the average VWAP for the Company’s common stock for the five (5) trading days immediately following the effectiveness of the resale registration statement. 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 shares of Series A Shares. Immediately upon effectiveness of a registration statement registering for resale all of the Series A Shares, all outstanding shares of Series A Preferred Shares shall automatically convert into Common Stock, subject to certain beneficial ownership limitations.

Blank Check Preferred Stock

The ability to authorize “blank check” preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights or preferences that could impede the success of any attempt to acquire us. These and other provisions may have the effect of deferring hostile takeovers or delaying changes in control or management of our Company.

Warrants

As of May 25, 2022 there were 2,210,067 Warrants issued and outstanding exercisable to purchase by the holders thereof of up to 26,610,067 shares of Common Stock.

Exercisability. The Warrants are exercisable at any time for a period of 5 and one-half years after their original issuance. The Warrants are exercisable, at the option of each holder, in whole or in part by delivering to us a duly executed exercise notice and, at any time a registration statement registering the issuance of the Common Stock underlying the Warrants under the Securities Act is effective and available for the issuance of such shares, or an exemption from registration under the Securities Act is available for the issuance of such shares, by payment in full in immediately available funds for the number of shares of Common Stock purchased upon such exercise. If a registration statement registering the issuance of the Common Stock underlying the Warrants under the Securities Act is not effective or available and an exemption from registration under the Securities Act is not available for the issuance of such shares, the holder may, in its sole discretion, elect to exercise the Warrants through a cashless exercise, in which case the holder would receive upon such exercise the net number of shares of Common Stock determined according to the formula set forth in the Warrant. No fractional common shares will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, we will pay the holder an amount in cash equal to the fractional amount multiplied by the exercise price.

Exercise Limitation. A holder will not have the right to exercise any portion of the Warrants if the holder (together with its affiliates) would beneficially own in excess of 4.99% (or, upon election by a holder prior to the issuance of any pre-funded warrants, 9.99%) of the number of shares of Common Stock outstanding immediately after giving effect to the exercise, as such percentage ownership is determined in accordance with the terms of the Warrants. However, any holder may increase or decrease such percentage to any other percentage not in excess of 9.99%, upon at least 61 days’ prior notice from the holder to us with respect to any increase in such percentage.

Exercise Price. The exercise prices for the Warrants vary from $2.02 to $3.30 per share. The exercise price and number of shares of Common Stock issuable upon exercise will adjust in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the Common Stock, as well as, in the case of the Warrants, certain issuances of equity securities at an effective price per share lower than the then applicable exercise price per share.

Transferability. Subject to applicable laws, the Warrants may be offered for sale, sold, transferred or assigned without our consent.

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Rights as a Shareholder. Except as otherwise provided in the Warrants or by virtue of such holder’s ownership of our Common Stock, the holder of a Warrant does not have the rights or privileges of a holder of Common Stock, including any voting rights, until the holder exercises the Warrant.

Fundamental Transactions. In the event of a fundamental transaction, as described in the Warrants and generally including, with certain exceptions, any reorganization, recapitalization or reclassification of the Common Stock, the sale, transfer or other disposition of all or substantially all of our properties or assets, our consolidation or merger with or into another person, the acquisition of more than 50% of our outstanding shares of Common Stock, or any person or group becoming the beneficial owner of 50% of the voting power represented by our outstanding shares of Common Stock, the holders of the Warrants will be entitled to receive upon exercise of the Warrants the kind and amount of securities, cash or other property that the holders would have received had they exercised the warrants immediately prior to such fundamental transaction. Additionally, as more fully described in the Warrants, in the event of certain fundamental transactions, the holders of the Warrants will be entitled to receive consideration in an amount equal to the Black Scholes value of the Warrants on the date of consummation of such transaction.

Convertible Notes

As of May 25, 2022, we have outstanding unsecured convertible notes with an aggregate principal balance of $625,000 convertible into 272,919 shares of our Common Stock. Information about the convertible notes is provided below.

Senior Convertible Notes

January 7, 2021 Subscription Agreement

On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $100,000 in principal amount, a convertible promissory note. The note bears an interest rate of 8% per annum and matures on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or (ii) October 31, 2021.

Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. In the event that a NEO listing is not consummated on or before October 31, 2021, the note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion.

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. As of March 31, 2022 and December 31, 2021, $62,619 of the debt discount has been amortized. As of March 31, 2022 and December 31, 2021, the fair value of the derivative liability was $26,716 and $39,843, respectively. For the three months ended March 31, 2022, the Company recorded a gain of $13,127 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss).

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Convertible Promissory Note

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

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 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. 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. For year ended December 31, 2021, $60,063 of the debt discount has been amortized. As of December 31, 2021, the Company had accrued a principal balance of $525,000, had accrued $15,166 in interest expense, and had remaining debt discount of $258,937 which resulted in a net convertible note payable of $266,063.

Transfer Agent

Our transfer agent for our Common Stock is Globex Transfer, LLC, located at 780 Deltona Blvd., Suite 202, Deltona, Florida, 32725.

Indemnification of Directors and Officers

We have not entered into separate indemnification agreements with any of our directors or officers. The Nevada Revised Statutes provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director or officer must not have had reasonable cause to believe his/her conduct was unlawful.

Under applicable sections of the Nevada Revised Statutes, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined the officer or director did not meet the standards.

Our Bylaws include certain indemnification provisions under which we are required to indemnify any of our current or former directors or officers against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment inactive criminal or administrative action or proceeding to which he is or they are made a party by reason of his or her being or having been a director of the Company. In addition, our Articles of Incorporation provide that no director or officer of the Company shall be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer; provided, however, that these provisions do not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of the law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes.

At present, there is no pending litigation or proceeding involving any of our directors or officers regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification. We do not maintain insurance policies that indemnify our directors and officers against various liabilities, including liabilities arising under the Securities Act, which might be incurred by any director or officer in his or her capacity as such.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than payment by us for expenses incurred or paid by a director, officer or controlling person of ours in successful defense of any action, suit, or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy in the Securities Act and will be governed by the final adjudication of such issue.

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Disclosure of Commission Position on Indemnification for Securities Act Liabilities

Insofar as indemnification for liabilities under the Securities Act may be permitted to officers, directors or persons controlling our Company pursuant to the foregoing provisions, we have been informed that is it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in such Securities Act and is, therefore, unenforceable.

LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed upon for us by Carmel, Milazzo & Feil LLP, New York, New York.

EXPERTS

The consolidated financial statements as of and for the years ended December 31, 2021 and 2020 incorporated by reference in this prospectus constituting a part of the registration statement on Form S-1 have been so incorporated in reliance on the report of Armanino LLP, an independent registered public accounting firm, incorporated herein by reference, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act with respect to the securities offered by this prospectus. This prospectus, which is part of the registration statement, omits certain information, exhibits, schedules and undertakings set forth in the registration statement. For further information pertaining to us and the securities offered hereby, reference is made to the registration statement and the exhibits and schedules to the registration statement. Statements contained in this prospectus as to the contents or provisions of any documents referred to in this prospectus are not necessarily complete, and in each instance where a copy of the document has been filed as an exhibit to the registration statement, reference is made to the exhibit for a more complete description of the matters involved.

You may read and copy all or any portion of the registration statement without charge at the public reference room of the Securities and Exchange Commission at 100 F Street, N.E., Washington, D.C. 20549. Copies of the registration statement may be obtained from the Securities and Exchange Commission at prescribed rates from the public reference room of the Securities and Exchange Commission at such address. You may obtain information regarding the operation of the public reference room by calling 1-800-SEC-0330. In addition, registration statements and certain other filings made with the Securities and Exchange Commission electronically are publicly available through the Securities and Exchange Commission’s website at www.sec.gov. The registration statement, including all exhibits and amendments to the registration statement, has been filed electronically with the Securities and Exchange Commission. You may also read all or any portion of the registration statement and certain other filings made with the Securities and Exchange Commission on our website at www.cosmoshold.com The information contained in, and that can be accessed through, our website is not incorporated into and is not part of this prospectus.

We are subject to the information and periodic reporting requirements of the Exchange Act and, accordingly, are required to file annual reports containing financial statements audited by an independent public accounting firm, quarterly reports containing unaudited financial data, current reports, proxy statements and other information with the Securities and Exchange Commission. You will be able to inspect and copy such periodic reports, proxy statements and other information at the Securities and Exchange Commission’s public reference room, the website of the Securities and Exchange Commission referred to above, and our website at www.cosmoshold.com. Except for the specific incorporated reports and documents listed above, no information available on or through our website shall be deemed to be incorporated in this prospectus or the registration statement of which it forms a part.

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Documents incorporated by reference are available from us, without charge. You may obtain documents incorporated by reference in this prospectus by requesting them in writing or by telephone at the following address:

Cosmos Holdings Inc.

141 West Jackson Blvd., Suite 4236

Chicago, Illinois 60604

Attn: Corporate Secretary

Phone: (312) 536-3102

You also may access these filings on our web site at www.cosmoshold.com. Our web site and the information contained on that site, or connected to that site, are not incorporated into this prospectus or the registration statement of which this prospectus is a part.

Neither we nor the Selling Stockholders authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus prepared by or on behalf of us or to which we have referred you. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares of Common Stock offered hereby, but only under the circumstances and in the jurisdictions where it is lawful to do so. The information contained in this prospectus or in any applicable free writing prospectus is current only as of its date, regardless of its time of delivery or any sale of shares of our Common Stock. Our business, financial condition, results of operations and prospects may have changed since that date. We are not, and the Selling Stockholders are not, making an offer of these securities in any jurisdiction where such offer is not permitted.

Item 8. Financial Statements and Supplementary Data

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|  | Page No. |
Consolidated Balance Sheets at March 31, 2022 (unaudited) and December 31, 2021 |  | F-2 |
Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the three months ended March 3l, 2022 and 2021 (unaudited) |  | F-3 |
Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 (unaudited) |  | F-5 |
Notes to Unaudited Consolidated Financial Statements |  | F-6 |
Report of Independent Registered Public Accounting Firm |  | F-35 |
Consolidated Balance Sheets at December 31, 2021 and 2020 |  | F-37 |
Consolidated Statements of Operations and Other Comprehensive Income (Loss) for the years ended December 31, 2021 and 2020 |  | F-38 |
Consolidated Statement of Changes in Stockholders’ Deficit for the years ended December 31, 2021 and 2020 |  | F-40 |
Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020 |  | F-41 |
Notes to Consolidated Financial Statements |  | F-42 |

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COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

|  | March 31, 2022 |  |  | December 31, 2021 |
|  | (Unaudited) |  |  |  |
ASSETS |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 1,010,427 |  |  | $ | 286,487 |
Accounts receivable, net |  |  | 26,094,450 |  |  |  | 26,858,114 |
Accounts receivable - related party |  |  | 2,844,572 |  |  |  | 2,901,300 |
Marketable securities |  |  | 12,551 |  |  |  | 11,468 |
Inventory |  |  | 4,007,977 |  |  |  | 3,147,276 |
Loans receivable |  |  | 375,195 |  |  |  | 377,590 |
Prepaid expenses and other current assets |  |  | 1,944,720 |  |  |  | 2,987,687 |
Prepaid expenses and other current assets - related party |  |  | 4,368,794 |  |  |  | 3,263,241 |
Operating lease right-of-use asset |  |  | 775,545 |  |  |  | 834,468 |
Financing lease right-of-use asset |  |  | 192,822 |  |  |  | 211,099 |
TOTAL CURRENT ASSETS |  |  | 41,627,053 |  |  |  | 40,878,730 |
Property and equipment, net |  |  | 1,777,889 |  |  |  | 1,888,052 |
Goodwill and intangible assets, net |  |  | 464,630 |  |  |  | 485,767 |
Loans receivable - long term portion |  |  | 4,227,268 |  |  |  | 4,410,689 |
Other assets |  |  | 909,581 |  |  |  | 915,250 |
Deferred tax assets |  |  | 767,267 |  |  |  | 850,774 |
TOTAL ASSETS |  | $ | 49,773,688 |  |  | $ | 49,429,262 |
LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 11,781,189 |  |  | $ | 12,126,626 |
Accounts payable and accrued expenses - related party |  |  | 220,887 |  |  |  | 599,125 |
Accrued interest |  |  | 1,033,866 |  |  |  | 1,019,889 |
Lines of credit |  |  | 4,362,327 |  |  |  | 4,743,557 |
Convertible notes payable, net of unamortized discount of $191,085 and $258,938, respectively |  |  | 448,915 |  |  |  | 381,062 |
Derivative liability - convertible note |  |  | 30,664 |  |  |  | 45,665 |
Notes payable |  |  | 6,143,075 |  |  |  | 5,462,504 |
Notes payable - related party |  |  | 455,035 |  |  |  | 464,264 |
Loans payable |  |  | 1,000,000 |  |  |  | 1,000,000 |
Loans payable - related party |  |  | 1,703,881 |  |  |  | 1,293,472 |
Taxes payable |  |  | 1,192,178 |  |  |  | 1,324,722 |
Operating lease liability, current portion |  |  | 158,359 |  |  |  | 138,450 |
Financing lease liability, current portion |  |  | 71,861 |  |  |  | 73,078 |
Other current liabilities |  |  | 1,193,683 |  |  |  | 1,255,824 |
TOTAL CURRENT LIABILITIES |  |  | 29,795,920 |  |  |  | 29,928,238 |
Share settled debt obligation |  |  | 1,554,590 |  |  |  | 1,554,590 |
Lines of credit - long-term portion |  |  | 185,872 |  |  |  | 366,171 |
Notes payable - long term portion |  |  | 6,885,806 |  |  |  | 12,356,384 |
Operating lease liability, net of current portion |  |  | 617,183 |  |  |  | 696,015 |
Financing lease liability, net of current portion |  |  | 131,016 |  |  |  | 148,401 |
TOTAL LIABILITIES |  |  | 39,170,387 |  |  |  | 45,049,799 |
Commitments and Contingencies (see Note 14) |  |  | - |  |  |  | - |
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; 6,000 and 0 shares issued and outstanding as of March 31, 2022 and December 31, 2021; liquidation preference of $6,000,000 and $0, respectively |  |  | 5,452,300 |  |  |  | - |
STOCKHOLDERS' EQUITY: |  |  |  |  |  |  |  |
Common stock, $0.001 par value; 300,000,000 shares authorized; 18,611,980 and 17,544,509 shares issued and 18,224,556 and 17,157,085 outstanding as of March 31, 2022 and December 31, 2021, respectively |  |  | 18,611 |  |  |  | 17,544 |
Additional paid-in capital |  |  | 40,648,106 |  |  |  | 39,675,753 |
Treasury stock, 387,424 and 387,424 shares as of March 31, 2022 and December 31, 2021 |  |  | (816,707 | ) |  |  | (816,707 | )
Accumulated deficit |  |  | (34,142,159 | ) |  |  | (34,345,506 | )
Accumulated other comprehensive loss |  |  | (556,850 | ) |  |  | (151,621 | )
TOTAL STOCKHOLDERS' EQUITY |  |  | 5,151,001 |  |  |  | 4,379,463 |
TOTAL LIABILITIES, MEZZANINE EQUITY AND STOCKHOLDERS' EQUITY |  | $ | 49,773,688 |  |  | $ | 49,429,262 |

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

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COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(Unaudited)

|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
REVENUE |  | $ | 13,071,800 |  |  | $ | 11,619,076 |
COST OF GOODS SOLD |  |  | 11,179,868 |  |  |  | 10,617,741 |
GROSS PROFIT |  |  | 1,891,932 |  |  |  | 1,001,335 |
OPERATING EXPENSES |  |  |  |  |  |  |  |
General and administrative expenses |  |  | 868,639 |  |  |  | 1,688,712 |
Salaries and wages |  |  | 521,471 |  |  |  | 531,556 |
Sales and marketing expenses |  |  | 146,949 |  |  |  | 405,092 |
Depreciation and amortization expense |  |  | 112,622 |  |  |  | 107,073 |
TOTAL OPERATING EXPENSES |  |  | 1,649,681 |  |  |  | 2,732,433 |
INCOME (LOSS) FROM OPERATIONS |  |  | 242,251 |  |  |  | (1,731,098 | )
OTHER INCOME (EXPENSE) |  |  |  |  |  |  |  |
Other expense, net |  |  | (54,812 | ) |  |  | (178,211 | )
Interest expense |  |  | (584,176 | ) |  |  | (731,826 | )
Interest income |  |  | 64,827 |  |  |  | - |
Non-cash interest expense |  |  | (260,527 | ) |  |  | (50,109 | )
Gain on equity investments, net |  |  | 1,678 |  |  |  | 440 |
Gain on extinguishment of debt |  |  | 1,004,124 |  |  |  | 445,636 |
Change in fair value of derivative liability |  |  | 15,001 |  |  |  | 61,373 |
Foreign currency transaction, net |  |  | (159,352 | ) |  |  | (306,020 | )
TOTAL OTHER INCOME (EXPENSE), NET |  |  | 26,763 |  |  |  | (758,717 | )
INCOME (LOSS) BEFORE INCOME TAXES |  |  | 269,014 |  |  |  | (2,489,815 | )
BENEFIT FROM (PROVISION FOR) INCOME TAXES |  |  | (65,667 | ) |  |  | 315,912 |
NET INCOME (LOSS) |  |  | 203,347 |  |  |  | (2,173,903 | )
Deemed dividend on warrants |  |  | (5,788,493 | ) |  |  | - |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |  |  | (5,585,146 | ) |  |  | (2,173,903 | )
OTHER COMPREHENSIVE LOSS |  |  |  |  |  |  |  |
Foreign currency translation adjustment, net |  |  | (405,229 | ) |  |  | (473,578 | )
TOTAL COMPREHENSIVE LOSS |  | $ | (5,990,375 | ) |  | $ | (2,647,481 | )
BASIC NET LOSS PER SHARE |  | $ | (0.31 | ) |  | $ | (0.14 | )
DILUTED NET LOSS PER SHARE |  | $ | (0.31 | ) |  | $ | (0.14 | )
Basic |  |  | 17,755,516 |  |  |  | 15,034,219 |
Diluted |  |  | 17,755,516 |  |  |  | 15,034,219 |

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

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COSMOS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) AND MEZZANINE EQUITY

|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Preferred Stock |  |  | Common Stock |  |  | Additional |  |  | Treasury Stock |  |  |  |  |  | Other |  |  | Total |
|  | No. of Shares |  |  | Value |  |  | No. of Shares |  |  | Value |  |  | Paid-in Capital |  |  | No. of Shares |  |  | Value |  |  | Accumulated Deficit |  |  | Comprehensive 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 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (473,578 | ) |  |  | (473,578 | )
Sale of treasury stock to third party |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 249,350 |  |  |  | 65,000 |  |  |  | 650 |  |  |  | - |  |  |  | - |  |  |  | 250,000 |
Restricted stock issued to a consultant |  |  | - |  |  |  | - |  |  |  | 1,800,000 |  |  |  | 1,800 |  |  |  | 1,187,650 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1,189,450 |
Conversion of notes payable into shares of common stock |  |  | - |  |  |  | - |  |  |  | 781,819 |  |  |  | 782 |  |  |  | 2,563,582 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,564,364 |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (2,173,903 | ) |  |  | - |  |  |  | (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 | )
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Accumulated |  |  |  |
|  | Preferred Stock |  |  | Common Stock |  |  | Additional |  |  | Treasury Stock |  |  |  |  |  | Other |  |  | Total |
|  | No. of Shares |  |  | Value |  |  | No. of Shares |  |  | Value |  |  | Paid-in Capital |  |  | No. of Shares |  |  | Value |  |  | Accumulated Deficit |  |  | Comprehensive Loss |  |  | Stockholders' Equity |
Balance at January 1, 2022 |  |  | - |  |  | $ | - |  |  |  | 17,544,509 |  |  | $ | 17,544 |  |  | $ | 39,675,753 |  |  |  | (387,424 | ) |  | $ | (816,707 | ) |  | $ | (34,345,506 | ) |  | $ | (151,621 | ) |  | $ | 4,379,463 |
Foreign currency translation adjustment, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (405,229 | ) |  |  | (405,229 | )
Issuance of Series A preferred stock, net of issuance costs of $547,700 |  |  | 6,000 |  |  |  | 5,452,300 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Conversion of notes payable into shares of common stock |  |  | - |  |  |  | - |  |  |  | 238,000 |  |  |  | 238 |  |  |  | 973,182 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 973,420 |
Cashless exercise of warrants |  |  | - |  |  |  | - |  |  |  | 829,471 |  |  |  | 829 |  |  |  | (829 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 203,347 |  |  |  | - |  |  |  | 203,347 |
Balance at March 31, 2022 |  |  | 6,000 |  |  | $ | 5,452,300 |  |  |  | 18,611,980 |  |  | $ | 18,611 |  |  | $ | 40,648,106 |  |  | $ | (387,424 | ) |  | $ | (816,707 | ) |  | $ | (34,142,159 | ) |  | $ | (556,850 | ) |  | $ | 5,151,001 |

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

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COSMOS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|  | Three Months Ended March 31, |
|  | 2022 |  |  | 2021 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |
Net income (loss) |  | $ | 203,347 |  |  | $ | (2,173,903 | )
Adjustments to Reconcile Net Income (Loss) to Net Cash Used In Operating Activities: |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 93,042 |  |  |  | 80,318 |
Amortization of right-of-use assets |  |  | 19,580 |  |  |  | 26,755 |
Amortization of debt discounts and accretion of debt |  |  | 260,527 |  |  |  | 50,109 |
Lease expense |  |  | 54,124 |  |  |  | 64,543 |
Interest on finance leases |  |  | 3,507 |  |  |  | 4,453 |
Stock-based compensation |  |  | - |  |  |  | 1,189,450 |
Deferred income taxes |  |  | 62,594 |  |  |  | (329,586 | )
Gain on extinguishment of debt |  |  | (1,004,124 | ) |  |  | (445,636 | )
Change in fair value of the derivative liability |  |  | (15,001 | ) |  |  | (61,373 | )
(Gain) loss on change in fair value of equity investments |  |  | (1,678 | ) |  |  | 440 |
Changes in Assets and Liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | 226,934 |  |  |  | 729,802 |
Accounts receivable - related party |  |  | (10,967 | ) |  |  | 197,334 |
Inventory |  |  | (934,400 | ) |  |  | (246,664 | )
Prepaid expenses and other assets |  |  | 141,119 |  |  |  | (1,088,881 | )
Prepaid expenses and other current assets - related party |  |  | (1,183,403 | ) |  |  | (196,436 | )
Other assets |  |  | - |  |  |  | 157,915 |
Accounts payable and accrued expenses |  |  | 300,913 |  |  |  | 847,525 |
Accounts payable and accrued expenses - related party |  |  | (370,694 | ) |  |  | 25,996 |
Accrued interest |  |  | 20,356 |  |  |  | 438,149 |
Lease liabilities |  |  | (54,241 | ) |  |  | (36,772 | )
Taxes payable |  |  | (107,462 | ) |  |  | - |
Other current liabilities |  |  | (23,438 | ) |  |  | 122,081 |
Other liabilities |  |  | (17,911 | ) |  |  | (20,958 | )
NET CASH USED IN OPERATING ACTIVITIES |  |  | (2,337,276 | ) |  |  | (665,339 | )
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Proceeds from loan receivable |  |  | 91,661 |  |  |  | - |
Purchase of property and equipment |  |  | (4,438 | ) |  |  | (2,310 | )
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES |  |  | 87,223 |  |  |  | (2,310 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Payment of convertible note payable |  |  | - |  |  |  | (180,000 | )
Proceeds from convertible note payable |  |  | - |  |  |  | 100,000 |
Payment of note payable |  |  | (2,263,471 | ) |  |  | - |
Payment of related party loan |  |  | (22,432 | ) |  |  | (65,761 | )
Proceeds from related party loan |  |  | 460,034 |  |  |  | 398,457 |
Payment of lines of credit |  |  | (6,244,162 | ) |  |  | (6,219,899 | )
Proceeds from lines of credit |  |  | 5,779,114 |  |  |  | 6,123,067 |
Proceeds from issuance of Series A Preferred Stock |  |  | 5,452,300 |  |  |  | - |
Payments of finance lease liability |  |  | (22,622 | ) |  |  | (25,746 | )
Financing fees |  |  | (224,320 | ) |  |  | - |
Proceeds from sale of treasury stock |  |  | - |  |  |  | 250,000 |
NET CASH PROVIDED BY FINANCING ACTIVITIES |  |  | 2,914,441 |  |  |  | 380,118 |
Effect of exchange rate changes on cash |  |  | 59,552 |  |  |  | 90,943 |
NET CHANGE IN CASH |  |  | 723,940 |  |  |  | (196,588 | )
CASH AT BEGINNING OF PERIOD |  |  | 286,487 |  |  |  | 628,395 |
CASH AT END OF PERIOD |  | $ | 1,010,427 |  |  | $ | 431,807 |
Supplemental Disclosure of Cash Flow Information |  |  |  |  |  |  |  |
Cash paid during the period: |  |  |  |  |  |  |  |
Interest |  | $ | 281,889 |  |  | $ | 208,565 |
Income tax |  | $ | - |  |  | $ | - |
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 issuance of Series A preferred stock |  | $ | 5,788,493 |  |  | $ | - |

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

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 March 31, 2022 and unaudited condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 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 months ended March 31, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022, or any other period. These unaudited consolidated financial statements and notes should be read in conjunction with the financial statements for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 (“Form 10-K”). The accompanying condensed consolidated balance sheet as of December 31, 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

The Company is a publicly traded international pharmaceutical company with extensive and established distribution network across the EU through its subsidiaries, Decahedron (UK), SkyPharm (Greece) and Cosmofarm (Greece). We are a diversified and vertically integrated broad line pharmaceutical company with our own proprietary line of branded nutraceuticals.

The Company was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009, and on November 14, 2013, we changed our name to Cosmos Holdings, Inc. 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 products. In February 2017, the Company acquired Decahedron Ltd., a UK Company (“Decahedron”) which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the distribution, import and export of pharmaceuticals.

On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of issued and outstanding shares of common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the consolidated financial statements.

On December 19, 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece.

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”), which contemplates the continuation of the Company as a going concern. For the three months ended March 31, 2022, the Company had revenue of $13,071,800, net income of $203,347 and net cash used in operations of $2,337,276. Additionally, as of March 31, 2022, the Company had working capital of $11,831,133, an accumulated deficit of $34,142,159, and stockholders’ equity of $5,151,001. 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.

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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with 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 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.

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 March 31, 2022, and December 31, 2021, there were no cash equivalents.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece 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. As of December 31, 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 assets to marketable securities on the unaudited condensed consolidated balance sheet. For the three months ended March 31, 2021, $531,556 was reclassified from general and administrative expenses to salaries and wages on the unaudited condensed consolidated statements of operations and comprehensive income. Additionally, for the three months ended March 31, 2021, $1,333 was reclassified from customer deposits to other current liabilities on the unaudited condensed consolidated statement of 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. At March 31, 2022 and December 31, 2021, the Company’s allowance for doubtful accounts was $1,668,893 and $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. As of March 31, 2022 and December 31, 2021, the Company had a VAT net payable balance of $376,656 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 $84,884 and $71,471 for the three months ended March 31, 2022 and 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.

On December 19, 2018, as a result of the acquisition of Cosmofarm, the Company 49,697 of goodwill.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 March 31, 2022, no revision to the remaining amortization period of the intangible assets was made.

Amortization expense was $8,158 and $8,158 for the three months ended March 31, 2022 and 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 March 31, 2022, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp and 16,666 shares which traded at a closing price of $0.41 per share or value of $6,822 of National Bank of Greece. Additionally, the Company has $5,729 in equity securities of Pancreta Bank, which are revalued annually. See Note 3, for additional investments in equity securities.

Fair Value Measurement

The Company applies ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

ASC 820 defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

Level 3: Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The following tables presents assets that are measured and recognized at fair value as of March 31, 2022 and December 31, 2021, on a recurring basis:

|  | M arch 31, 2022 |  |  | Total Carrying |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Value |
Marketable securities - ICC International Cannabis Corp. |  | $ | - |  |  | $ | - |  |  |  | - |  |  | $ | - |
Marketable securities - National Bank of Greece |  |  | 6,822 |  |  |  | - |  |  |  | - |  |  |  | 6,822 |
Equity securities - Pancreta Bank |  |  | - |  |  |  | 5,729 |  |  |  | - |  |  |  | 5,729 |
|  | $ | 6,822 |  |  | $ | 5,729 |  |  |  |  |  |  | $ | 12,551 |

|  | December 31, 2021 |  |  | Total Carrying |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Value |
Marketable securities - ICC International Cannabis Corp. |  | $ | - |  |  | $ | - |  |  |  | - |  |  | $ | - |
Marketable securities - National Bank of Greece |  |  | 6,696 |  |  |  | - |  |  |  | - |  |  |  | 6,696 |
Equity securities - Pancreta Bank |  |  | - |  |  |  | 4,772 |  |  |  | - |  |  |  | 4,772 |
|  | $ | 6,696 |  |  | $ | 4,772 |  |  |  |  |  |  | $ | 11,468 |

In addition, FASB ASC 825-10-25, Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.

Derivative Instruments

Derivative financial instruments are recorded in the accompanying condensed consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations.

Customer Advances

The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as customer advances until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer advances balance and credit the Company’s revenues.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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.

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 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 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 March 31, 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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.

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.

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 M arch 31, |
|  | 2022 |  |  | 2021 |
Weighted average number of common shares outstanding-Basic |  |  | 17,755,516 |  |  |  | 15,034,219 |
Potentially dilutive common stock equivalents |  |  | - |  |  |  | - |
Weighted average number of common and equivalent shares outstanding - Diluted |  |  | 17,755,516 |  |  |  | 15,034,219 |

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

On 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of 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 public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effects of the adoption of ASU No. 2021-04 on 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.

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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 March 31, 2022 of $0. The value of the investments as of March 31, 2022 and December 31, 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 future for its services under the Distribution and Equity Acquisition Agreement, if certain milestones are achieved. Refer to Note 12 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 March 31, 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.

As of March 31, 2022, in addition to the 3,000,000 ICC shares valued at $0, as noted above, marketable securities also consisted of the following: 16,666 shares which traded at a closing price of 0.41 per share or value of $6,822 of National Bank of Greece. Additionally, the Company has $5,729 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 $1,678 during the three months ended March 31, 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 March 31, 2022 and December 31, 2021 was $166,395 and $169,770, respectively, and is included in “Other assets” in the accompanying condensed consolidated balance sheet.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

|  | M arch 31, 2022 |  |  | December 31, 2021 |
Leasehold improvements |  | $ | 508,920 |  |  | $ | 519,278 |
Vehicles |  |  | 94,735 |  |  |  | 96,657 |
Furniture, fixtures and equipment |  |  | 2,027,470 |  |  |  | 2,065,100 |
Computers and software |  |  | 140,452 |  |  |  | 141,490 |
|  |  | 2,771,577 |  |  |  | 2,822,525 |
Less: Accumulated depreciation and amortization |  |  | (993,688 | ) |  |  | (934,473 | )
Total |  | $ | 1,777,889 |  |  | $ | 1,888,052 |

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

NOTE 5 - GOODWILL AND INTANGIBLE ASSETS

Intangible assets consist of the following at:

|  | M arch 31, 2022 |  |  | December 31, 2021 |
License |  | $ | 339,860 |  |  | $ | 345,739 |
Trade name / mark |  |  | 36,997 |  |  |  | 36,997 |
Customer base |  |  | 176,793 |  |  |  | 176,793 |
|  |  | 553,650 |  |  |  | 559,529 |
Less: Accumulated amortization |  |  | (138,717 | ) |  |  | (123,459 | )
Subtotal |  |  | 414,933 |  |  |  | 436,070 |
Goodwill |  |  | 49,697 |  |  |  | 49,697 |
Total |  | $ | 464,630 |  |  | $ | 485,767 |

NOTE 6 - LOAN RECEIVABLE

On October 30, 2021, the Company entered into an agreement for a ten-year loan with a third-party to 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 three months ended March 31, 2022, the Company received €81,696 ($90,626) in principal payments such that as of March 31, 2022, the Company had a short-term receivable balance of $375,195 and a long-term receivable balance of $4,227,268 under this loan.

NOTE 7 - 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 months ended March 31, 2022 and 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 March, 31 2022 and 2021, the Company’s effective tax rate differs from the U.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 March 31, 2022 and December 31, 2021, the Company has maintained a valuation allowance against all net deferred tax assets in the United States only. Foreign valuation allowances were reversed on December 31, 2020.

For the three months ended March 31, 2022 and 2021, the Company has recorded a tax benefit (expense) in any jurisdiction where it is subject to income tax, in the amount of ($65,667) and $315,912, respectively, on the condensed consolidated statement of operations and comprehensive income (loss).

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

NOTE 8 - CAPITAL STRUCTURE

Preferred Stock

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

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.

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 by resolution.

The Series A Preferred Stock is 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 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 of the Series A Preferred Stock are not entitled to receive distributions in the event of liquidation, dissolution or winding up of the Company, either voluntary or involuntary.

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 are 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 income (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 is required to file its initial registration statement within 45 days following February 28, 2022. The Effectiveness Date is 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.

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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 because 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.

Common Stock

The Company is authorized to issue 300 million shares of common stock. As of March 31, 2022 and December 31, 2021, the Company had 18,611,980 and 17,544,509 shares of our common stock issued, respectively, and 18,224,556 and 17,157,085 shares outstanding, respectively.

Consulting Agreement

The Company entered into a Consulting Agreement (the “Agreement”) effective as of February 5, 2021, with a non-affiliated consultant (the “Consultant”). The Company engaged the Consultant to perform consulting services relating to Company management, debt structure, business plans and business development in connection with any capitalization transactions involving the Company and any newly created or existing entities. The Agreement is for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement is terminable by the Company for any reason upon written notice at any time after the Initial Term.

The Company agreed to pay Consultant and its assignees an aggregate of 1,800,000 restricted shares of Common Stock, 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 shares were valued on the date of the agreement at $3.28 per share or $5,904,000, which was be amortized over the term of the agreement. As of March 31, 2022 and 2021, the Company has expensed $0 and $1,189,451 under the agreement.

Debt Exchange Agreements

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 (See Note 11). 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 during the three months ended March 31, 2021. As of March 31, 2021, the Company recorded $2,564,363 as an equity increase related to the extinguishment of debt.

Debt Conversions

During the three months ended March 31, 2022, the Company issued 238,000 shares of common stock upon the conversion of $1,190,000 of notes payable. The Company recorded $973,420 as a capital contribution and an increase in equity related to the conversion of the $1,190,000 reduced by $216,580 recorded as a gain upon extinguishment of debt upon modification. The $216,580 gain upon extinguishment was determined using the fair value of the Company of $4.09 per share at the extinguishment commitment date.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

Exercise of Warrants

During the three months ended March 31, 2022, the Company issued 829,471 shares of common stock upon the cashless exercise of 2,748,797 warrant shares.

Potentially Dilutive Securities

No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of March 31, 2022.

NOTE 9 - RELATED PARTY TRANSACTIONS

Doc Pharma S.A.

As of March 31, 2022, the Company has a prepaid balance of $4,368,794 and an accounts payable balance of $220,518, resulting in a net prepaid balance of $4,148,276 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $2,844,572. As of December 31, 2021, the Company has a prepaid balance of $3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of $2,901,300 and an accounts payable balance of $565,756

During the three months ended March 31, 2022 and 2021, the Company purchased a total of $687,382 and $589,261 of products from Doc Pharma S.A., respectively. During the three months ended March 31, 2022 and 2021 the Company had $383,688 and $290,598, in revenue from Doc Pharma S.A., respectively.

On October 10, 2020, the Company entered into a contract manufacturer outsourcing “CMO” agreement with DocPharma whereby 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 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 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 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” 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 March 31, 2022, the Company has purchased € 461,453 ($517,566) in inventory related to this agreement.

On May 17, 2021, Doc Pharma and the Company entered into a Research and Development “R&D” agreement whereby 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 year ended December 31, 2021, SkyPharm bought 67 licenses at value of €261,300 ($289,860) from Doc Pharma which was the 18.33% of the total cost. The agreement will be terminated on December 31, 2025.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

Doc Pharma S.A is considered a related party to the Company due to the fact that the CEO of Doc Pharma is the wife of Grigorios Siokas, the Company’s CEO and principal shareholder, who also served as a principal of Doc Pharma S.A. in the past.

Notes Payable - Related Party

A summary of the Company’s related party notes payable as of March 31, 2022 and December 31, 2021 is presented below:

|  | March 31, 2022 |  |  | December 31, 2021 |
Beginning balance |  | $ | 464,264 |  |  | $ | 501,675 |
Foreign currency translation |  |  | (9,229 | ) |  |  | (37,411 | )
Ending balance |  | $ | 455,035 |  |  | $ | 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, matured on March 18, 2019 pursuant to the original 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, 2023. As of December 31, 2021 the Company had an outstanding balance of €400,000 ($452,720) and accrued interest of €177,313 ($200,683). As of March 31, 2022, the Company has an outstanding balance of €400,000 ($443,720) and accrued interest of €181,948 ($201,835).

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

Dimitrios Goulielmos

On November 21, 2014, the Company entered into an agreement with Dimitrios Goulielmos, as amended on November 4, 2016. Pursuant to the amendment, this loan has no maturity date and is non-interest bearing. As of December 31, 2021, the Company had a principal balance of €10,200 ($11,544). A principal balance of €10,200 ($11,315) remained as of March 31, 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 three months ended March 31, 2022, the Company recorded a gain of $9,229.

Loans Payable - Related Party

A summary of the Company’s related party loans payable during the three months ended March 31, 2022, and the year ended December 31, 2021 is presented below:

|  | March 31, 2022 |  |  | December 31, 2021 |
Beginning balance |  | $ | 1,293,472 |  |  | $ | 1,629,246 |
Proceeds |  |  | 456,085 |  |  |  | 6,377,156 |
Payments |  |  | (22,186 | ) |  |  | (133,552 | )
Conversion of debt |  |  | - |  |  |  | (6,000,000 | )
Settlement of lawsuit |  |  | - |  |  |  | (600,000 | )
Foreign currency translation |  |  | (23,490 | ) |  |  | 20,623 |
Ending balance |  | $ | 1,703,881 |  |  | $ | 1,293,472 |

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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

During the three months ended March 31, 2022, the Company borrowed additional proceeds of €321,000 ($356,085), and $100,000 and repaid €20,000 ($22,186) of these loans.

The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the three months ended March 31, 2022 the Company recorded a gain of $23,490.

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 10 - LINES OF CREDIT

A summary of the Company’s lines of credit as of March 31, 2022 and December 31, 2021 is presented below:

|  | March 31, 2022 |  |  | December 31, 2021 |
National |  | $ | 2,887,143 |  |  | $ | 3,265,236 |
Alpha |  |  | 927,008 |  |  |  | 947,333 |
Pancreta |  |  | 417,671 |  |  |  | 489,985 |
National - COVID |  |  | 316,377 |  |  |  | 407,174 |
Subtotal |  |  | 4,548,199 |  |  |  | 5,109,728 |
Reclassification of National-COVID - Long-term |  |  | (185,872 | ) |  |  | (366,171 | )
Ending balance |  | $ | 4,362,327 |  |  | $ | 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 $3,300,168 and $2,489,960 as of March 31, 2022 and December 31, 2021, respectively. The outstanding balance of the facility was $1,833,394 and $2,185,413, as of March 31, 2022 and December 31, 2021, respectively.

The maximum borrowing allowed for the 4.35% lines of credit, was $1,109,300 and $1,131,800 as of March 31, 2022 and December 31, 2021, respectively. The outstanding balance of the facilities was $1,053,749 and $1,079,823 as of March 31, 2022 and December 31, 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 $1,109,300 and $1,131,800 as of March 31, 2022 and December 31, 2021, respectively. The outstanding balance of the facility was $927,008 and $947,333, as of March 31, 2022 and December 31, 2021, respectively.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The Company entered into a line of credit with Pancreta Bank on February 23, 2021. The line of credit is renewed annually with a current interest rate of 6.10%. The maximum borrowing allowed as of March 31, 2022 and December 31, 2021 was $554,650 and $565,900, respectively. The outstanding balance of the facility as of March 31, 2022 and December 31, 2021, was $417,671 and $489,985, respectively.

Interest expense for the three months ended March 31, 2022 and 2021, was $17,175 and $16,501, 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 March 31, 2022 and December 31, 2021, the Company was in compliance with these ratios and covenants.

The 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

Interest expense for three months ended March 31, 2022 and 2021 was $413 and $0, respectively.

NOTE 11 - CONVERTIBLE DEBT

A summary of the Company’s convertible debt at March 31, 2022 and December 31, 2021 is presented below:

|  | March 31, 2022 |  |  | December 31, 2021 |
Beginning balance convertible notes |  | $ | 640,000 |  |  | $ | 1,447,000 |
New notes |  |  | - |  |  |  | 625,000 |
Payments |  |  | - |  |  |  | (907,000 | )
Conversion to common stock |  |  | - |  |  |  | (525,000 | )
Subtotal notes |  |  | 640,000 |  |  |  | 640,000 |
Debt discount at year end |  |  | (191,085 | ) |  |  | (258,938 | )
Convertible note payable, net of discount |  | $ | 448,915 |  |  | $ | 381,062 |

All of the convertible debt is classified as short-term within the consolidated balance sheet as it all matures and will be paid back within fiscal year 2022.

December 21, 2020 Securities Purchase Agreement

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

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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) 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 in the SPA) or (iii), an Event of Default (collectively, the “Maturity Date”).

During the year ended December 31, 2021, the Company converted an aggregate total of $525,000 in principal and $25,144 in accrued interest and fees into 213,382 shares of the Company’s common stock at an average price per share of $2.58. Upon conversion, the 213,382 shares were issued at a fair value of $959,024 which was recorded as equity. Accordingly, upon conversion, the Company reduced its outstanding debt by $550,144, reduced its derivative liability by $284,169, and recorded a loss on extinguishment of $124,711. As of March 31, 2022 and December 31, 2021, the Company had a principal balance of $15,000 each period and had accrued approximately $7,000 in interest expense each period.

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 determined a beneficial conversion feature and derivative liability exists because The Company measured the beneficial conversion feature’s intrinsic value on December 16, 2020, and determined that the embedded derivative was valued at $456,570 which was recorded as a debt discount, and together with the original issue discount and transaction expenses of $43,000, in the aggregate of $499,570, is being amortized over the life of the loan. As of March 31, 2022 and December 31, 2021 and $568,826 and $494,973, respectively, of the debt discount has been amortized. As of March 31, 2022 and December 31, 2021, the fair value of the derivative liability was $3,949 and $5,822, respectively. For the three months ended March 31, 2022 and 2021, the Company record a gain on the change in fair value of the derivative of $1,873 and $44,215, 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 on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or (ii) October 31, 2021.

Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. In the event that a NEO listing is not consummated on or before October 31, 2021, the note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion.

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. As of March 31, 2022 and December 31, 2021, $62,619 of the debt discount has been amortized. As of March 31, 2022 and December 31, 2021, the fair value of the derivative liability was $26,716 and $39,843, respectively. For the three months ended March 31, 2022, the Company recorded a gain of $13,127 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss).

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 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. 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. For the year ended December 31, 2021, $60,063 of the debt discount has been amortized. As of December 31, 2021, the Company had accrued a principal balance of $525,000, had accrued $15,166 in interest expense, and had remaining debt discount of $258,937 which resulted in a net convertible note payable of $266,063.

For the three months ended March 31, 2022, $127,916 of the debt discount has been amortized. As of March 31, 2022, the Company had accrued a principal balance of $525,000, had accrued $28,291 in interest expense, and had remaining debt discount of $191,084 which resulted in a net convertible note payable of $333,916.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 months ended March 31, 2022:

|  | Amount |
Balance on January 1, 2022 |  | $ | 45,665 |
Issuances to debt discount |  |  | - |
Reduction of derivative related to conversions |  |  | - |
Change in fair value of derivative liabilities |  |  | (15,001 | )
Balance on March 31, 2022 |  | $ | 30,664 |

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

|  | March 31, |  |  | December 31, |
|  | 2022 |  |  | 2021 |
Dividend yield |  |  | 0 | % |  |  | 0 | %
Expected volatility |  |  | 87.9 | % |  | 106.8%-107.3 | %
Risk free interest rate |  |  | 1.40 | % |  | 0.41%-0.44 | %
Contractual terms (in years) |  |  | 0.50 |  |  | 0.50 - 0.52 |

NOTE 12 - DEBT

A summary of the Company’s third-party debt as of March 31, 2022 and December 31, 2021 presented below:

March 31, 2022 |  | Loan Facility |  |  | Trade Facility |  |  | Third Party |  |  | COVID Loans |  |  | Total |
Beginning balance |  | $ | 1,299,784 |  |  | $ | 6,207,010 |  |  | $ | 10,077,977 |  |  | $ | 234,117 |  |  | $ | 17,818,888 |
Proceeds |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Payments |  |  | (124,242 | ) |  |  | (107,894 | ) |  |  | (2,030,814 | ) |  |  |  |  |  |  | (2,262,950 | )
Conversion of debt |  |  | (1,190,000 | ) |  |  | - |  |  |  |  |  |  |  | - |  |  |  | (1,190,000 | )
Recapitalized upon debt modification |  |  | - |  |  |  | (198,040 | ) |  |  | (1,204,356 | ) |  |  | - |  |  |  | (1,402,396 | )
Accretion of debt |  |  | 78,445 |  |  |  | - |  |  |  |  |  |  |  | - |  |  |  | 78,445 |
Foreign currency translation |  |  | 54,861 |  |  |  | (41,505 | ) |  |  | (21,433 | ) |  |  | (5,029 | ) |  |  | (13,106 | )
Subtotal |  |  | 118,848 |  |  |  | 5,859,571 |  |  |  | 6,821,374 |  |  |  | 229,088 |  |  |  | 13,028,881 |
Notes payable - long-term |  |  | - |  |  |  | - |  |  |  | (6,664,025 | ) |  |  | (221,781 | ) |  |  | (6,885,806 | )
Notes payable - short-term |  | $ | 118,848 |  |  | $ | 5,859,571 |  |  | $ | 157,349 |  |  | $ | 7,307 |  |  | $ | 6,143,075 |

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

December 31, 2021 |  | Loan Facility |  |  | Trade Facility |  |  | Third Party |  |  | COVID Loans |  |  | Total |
Beginning balance |  | $ | 3,302,100 |  |  | $ | 6,446,000 |  |  | $ | 12,631,284 |  |  | $ | 435,210 |  |  | $ | 22,814,594 |
Proceeds |  |  | - |  |  |  | - |  |  |  | 565,900 |  |  |  | - |  |  |  | 565,900 |
Payments |  |  | (141,475 | ) |  |  | (57,835 | ) |  |  | (62,878 | ) |  |  | (3,233 | ) |  |  | (265,421 | )
Conversion of debt |  |  | (1,606,500 | ) |  |  | - |  |  |  | (3,010,000 | ) |  |  | - |  |  |  | (4,616,500 | )
Recapitalized upon debt modification |  |  | (86,670 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (86,670 | )
Debt forgiveness |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (169,770 | ) |  |  | (169,770 | )
Foreign currency translation |  |  | (167,671 | ) |  |  | (181,155 | ) |  |  | (46,329 | ) |  |  | (28,090 | ) |  |  | (423,245 | )
Subtotal |  |  | 1,299,784 |  |  |  | 6,207,010 |  |  |  | 10,077,977 |  |  |  | 234,117 |  |  |  | 17,818,888 |
Notes payable - long-term |  |  | - |  |  |  | (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 March 31, 2022 is repayable as follows:
|  | March 31, 2022 |
2022 |  | $ | 4,116,483 |
2023 |  |  | 9,699,419 |
2024 |  |  | 253,694 |
2025 |  |  | 227,261 |
2026 and thereafter |  |  | 140,923 |
Total debt |  |  | 14,437,780 |
Less: fair value adjustments to assumed debt obligations |  |  | (1,408,899 | )
Less: notes payable - current portion |  |  | (6,143,075 | )
Notes payable - long term portion |  | $ | 6,885,806 |

Loan Facility Agreement

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 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.

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 loss upon extinguishment in the amount of $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 March 31, 2022 and December 31, 2021, the Company has accrued interest expense of $16,849 and $4,414, respectively, and the principal balance of the debt is $118,848 and $1,299,784, respectively, which is classified as Notes payable on the unaudited condensed consolidated balance sheet.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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.

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 on the USD balance.

The USD $4,000,000 loan matured on August 31, 2021. On March 3rd 2022, the Company entered into an extension to the facility agreement. Based on the updated repayment terms, the facility’s final repayment date was extended to January 2023.

On December 30, 2020, the Company transferred the Euro €2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at 5.5% per annum plus Euribor. The principal is to be repaid in a total of five quarterly installments beginning October 31, 2021 of 50,000 Euro each with a final repayment of 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022.

During the year ended December 31, 2021, the Company repaid $56,508 of the €2,000,000 balance such that as of December 31, 2021, the Company had principal balances of €1,950,000 ($2,207,010) and $4,000,000 under the agreements, of which $2,450,000 is classified as notes payable-long term on the consolidated balance sheet and the Company had accrued $10,466 in interest expense related to these agreements.

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 cash flows is less than 10%. The Company capitalized fees paid upon modification of $200,000 that are being amortized over the life of the loan. During the three months ended March 31, 2022, the Company repaid $55,465 of the €1,950,000 balance and $50,059 of the $4,000,000 balance such that as of March 31, 2022, the Company had principal balances of €1,900,000 ($2,107,670) and $3,751,901 under the agreements which are recorded as short term. As of March 31, 2022, the Company had accrued $81,813 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, 2021, the Company had an outstanding principal balance of €8,000 ($9,054) and accrued interest of €6,318 ($7,151). As of March 31,2022, the Company had an outstanding principal balance of €8,000 ($8,874) and accrued interest of €6,439 ($7,143).

May 18, 2020, 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 $2,000,000 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

The May 18 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 18 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 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.

July 3, 2020 Senior Promissory Note

On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $5,000,000 payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on June 30, 2022 unless in default.

The July 3 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July 3 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.

The Company used the proceeds from the July 3 Note to repay the principal outstanding on the May 5 Note ($2,000,000), the May 8 Note ($2,000,000), and the February Note ($1,000,000). As of December 31, 2021, the Company had a principal balance of $5,000,000 on this note, which is classified as Notes payable - long term portion on the consolidated balance sheet.

As of December 31, 2021, the Company had accrued an aggregate total of $210,574 in interest expense related to these loans.

August 4, 2020 Senior Promissory Note

On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $3,000,000 payable to an unaffiliated third-party lender. The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The August 4 Note matured on December 31, 2020.

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 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 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 $60,166 in accrued interest expense.

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

On February 23, 2022, the Company entered into modification agreements to extend the due dates of the May 18 Note, July 3 Note, and August 4 Note to June 30, 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 three months ended March 31, 2022, the Company made principal payments in the amount of $2,000,000 and recorded non-cash interest expense in the amount of $89,275 for the accretion of debt. As of March 31, 2022, the Company had a principal balance of $5,795,644 in relation to the May 18 Note, July 3 Note, and August 4 Note, in the aggregate. As of March 31, 2022, the Company has accrued an aggregate total of $443,341 of accrued interest on these notes, in the aggregate.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 with the first payment due 9 months from the first deposit. During the year ended December 31, 2021, the Company repaid €55,556 ($62,878) of the principal and as of December 31, 2021, the Company has accrued interest of $5,642 related to this note and a principal balance of €444,444 ($503,022), of which $377,270 is classified as Notes payable - long term portion on the consolidated balance sheet. During the three months ended March 31, 2022, the Company repaid €27,778 ($30,814) of the principal and as of March 31, 2022, the Company has accrued interest of $4,815 related to this note and a principal balance of €416,667 ($462,208), of which $429,582 is classified as Notes payable - long term portion on the consolidated balance 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 commencing three months from the end of the grace period. As of December 31, 2021, the Company has accrued interest of $3,100 and a principal balance of €500,000 ($565,900), of which $477,637 is classified as Notes payable - long term portion on the consolidated balance sheet. As of March 31, 2022, the Company has accrued interest of $3,042 and a principal balance of €500,000 ($554,650), of which $438,799 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’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly installments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020. 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 was $169,770. As of March 31, 2022, the principal balance was $166,395.

On June 24, 2020, the Company received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid £2,335 ($3,233) of principal during the year ended December 31, 2021, and the balance as of December 31, 2021 was £47,665 ($64,347). As of March 31, 2022, the principal balance was £47,665 ($62,693).

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 $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 635,829 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

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

NOTE 13 - LEASES

The Company has various lease agreements with terms up to 10 years, comprising leases of office 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 6.47 years, with a weighted-average discount rate of 6.74%.

The Company incurred lease expense for its operating leases of $54,124 and $65,577 which was included in “General and administrative expenses,” for the three months ended March 31, 2022 and 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 March 31, 2022.

Maturity of Lease Liability |  |  |
Remainder of 2022 |  | $ | 154,095 |
2023 |  |  | 177,914 |
2024 |  |  | 108,485 |
2025 |  |  | 108,485 |
Thereafter |  |  | 408,810 |
Total undiscounted operating lease payments |  | $ | 957,789 |
Less: Imputed interest |  |  | (182,247 | )
Present value of operating lease liabilities |  |  | 775,542 |

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

Finance leases

The Company’s weighted-average remaining lease term relating to its finance leases is 2.93 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 March 31, 2022.

Maturity of Lease Liability |  |  |
Remainder of 2022 |  | $ | 62,941 |
2023 |  |  | 73,387 |
2024 |  |  | 56,654 |
2025 |  |  | 26,870 |
Thereafter |  |  | 3,694 |
Total undiscounted finance lease payments |  | $ | 223,546 |
Less: Imputed interest |  |  | (20,669 | )
Present value of finance lease liabilities |  | $ | 202,877 |

The Company incurred interest expense on its finance leases of $3,507 which was included in “Interest expense,” for the three months ended March 31, 2022. The Company incurred amortization expense on its finance leases of $19,580 which was included in “Depreciation and amortization expense,” for the three months ended March 31, 2022. The total cash used for the Company’s finance leases for the three months ended March 31, 2022 amounted to $22,358.

NOTE 14 - 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 March 31, 2022, the following litigations were pending. None of the below is expected to have a material financial or operational impact.

Solgar Inc. is suing SkyPharm SA for product homogeneity regarding the 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 "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. The lawyer assesses that the outcome of the trial's decision will be positive for SkyPharm SA.

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, 2022. 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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 Cosmfarm has already paid and claim back through the appeal (financial claim). The trial is pending. The lawyer assesses that they cannot assume the final outcome of this case.

Advisory Agreements

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.

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 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 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

NOTE 15 - STOCK OPTIONS AND WARRANTS

As of March 31, 2022, there were 0 options outstanding and exercisable.

A summary of the Company’s option activity during the three months ended March 31, 2022 is presented below:

|  |  |  |  |  |  |  | Weighted |  |  |  |
|  |  |  |  | Weighted |  |  | Average |  |  |  |
|  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  | Number of |  |  | Exercise |  |  | Contractual |  |  | Intrinsic |
Options |  | Shares |  |  | Price |  |  | Term |  |  | Value |
Balance outstanding, January 1, 2022 |  |  | 37,000 |  |  | $ | 1.32 |  |  |  | 0.01 |  |  | $ | 75,850 |
Granted |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Expired |  |  | (37,000 | ) |  |  | - |  |  |  | - |  |  |  | - |
Balance outstanding, March 31, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |
Exercisable, March 31, 2022 |  |  | - |  |  | $ | - |  |  |  | - |  |  | $ | - |

As of March 31, 2022, there were 2,949,411 warrants outstanding and 2,949,411 warrants exercisable with expiration dates from May 2023 through August 2027.

A summary of the Company’s warrant activity during the three months ended March 31, 2022 is presented below:

|  |  |  |  |  |  |  | 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 |  |  | 2,000,000 |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | (2,748,797 | ) |  |  | - |  |  |  | - |  |  |  | - |
Expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance outstanding, March 31, 2022 |  |  | 2,949,441 |  |  | $ | 2.89 |  |  |  | 4.24 |  |  | $ | 113,933 |
Exercisable, March 31, 2022 |  |  | 2,949,411 |  |  | $ | 2.89 |  |  |  | 4.24 |  |  | $ | 113,933 |

NOTE 16 - 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.

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COSMOS HOLDINGS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2022

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

|  | March 31, |  |  | March 31, |
Country |  | 2022 |  |  | 2021 |
Germany |  |  | - |  |  |  | 13,613 |
Greece |  |  | 13,009,038 |  |  |  | 11,453,496 |
Italy |  |  | - |  |  |  | 15,727 |
Denmark |  |  | - |  |  |  | 54,686 |
Cyprus |  |  | - |  |  |  | 14,723 |
UK |  |  | 51,426 |  |  |  | 66,831 |
Croatia |  |  | 11,336 |  |  |  | - |
Total |  | $ | 13,071,800 |  |  | $ | 11,619,076 |

NOTE 17 - SUBSEQUENT EVENTS

Conversion of Principal and Accrued Interest

On May 1, 2022 the Company issued 39,339 shares of common stock to convert $26,515 principal and accrued interest in accordance with a convertible promissory note issued to Platinum Point Capital LLC. Following the conversion, the outstanding balance of the above Note is $0.

Departure and Appointment of Board Members

Effective April 28, 2022, Peter Goldstein resigned from the Board of Directors (the “Board”) the Company and from the Board’s audit committee. Mr. Goldstein’s resignation did not result from any disagreement concerning any matter relating to the Company’s operations, policies or practices.

On April 28, 2022, the Board appointed Dr. Anastasios Aslidis to the Board of Directors and as a member of the Board’s audit committee.

Exercise of Warrants

On April 27, 2022, the Company issued 455,316 shares of common stock upon the cashless exercise of 739,374 warrant shares.

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COSMOS HOLDINGS, INC.

FINANCIAL STATEMENTS

DECEMEMBER 31, 2021 AND 2020

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |  | F-35 |
CONSOLIDATED BALANCE SHEETS |  | F-37 |
CONSOLIDATED STATEMENTS OF OPERATIONS |  | F-38 |
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY |  | F-39 |
CONSOLIDATED STATEMENTS OF CASH FLOWS |  | F-40 |
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |  | F-41 |

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and Board of Directors of

Cosmos Holdings, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Cosmos Holdings, Inc. and its subsidiaries (collectively the “Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive income (loss), changes in stockholders’ equity (deficit), and cash flows, for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of their operations and their cash flows for each of the years in the two-year period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

Going Concern Matter

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses and cash used in operations that raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

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Inventory Valuation - Refer to Note 1 to the Financial Statements

Critical Audit Matter Description

The Company computes inventory using the weighted average method and consists primarily of finished goods and packaging materials, i.e., packaged pharmaceutical products and the wrappers and containers they are sold in. The Company assesses inventory at each reporting date in order to assert that it valued at the lower-of-cost or net realizable value; and the estimation of excess, expired or obsolete inventory. Most of the Company’s inventory provisions are based on the Company’s inventory levels and forecasted demand as well as physical condition, expiration date and current market conditions. Most of the Company’s inventory items are eligible for return to suppliers when pre-agreed product requirements, including, but not limited to, physical condition and expiration date, are not met.

Significant judgment is exercised by the Company to determine inventory carrying value adjustments, specifically the provisions for excess or obsolete inventories, and includes the following:

| · | Developing assumptions such as forecasts of future sales quantities and the selling prices, which are sensitive to the competitiveness of product offerings, customer requirements, and product life cycles.

Given these factors and assumptions are forward-looking and could be affected by future economic and market conditions, the related audit effort to evaluate management’s inventory valuation adjustments was extensive and required a high degree of auditor judgment.

How the Critical Audit Matter Was Addressed in the Audit

Our principal audit procedures related to the Company’s inventory valuation methodology included the following:

| · | We selected a sample of inventory items and performed the following procedures:

| o | Tested the mathematical accuracy of Company’s inventory schedule by comparing the quantities and carrying value of on-hand inventories to related unit sales, both historical and forecasted.
| o | Assessed and tested the reasonableness of the significant assumptions (e.g., sales and marketing forecast and usage).
| o | Inquired with operations team and evaluated the adequacy of management’s adjustments to sales forecasts by analyzing potential changes in line with product life cycles and/or identified alternative customer uses.
| o | Assessed whether there were any potential sources of contrary information, including historical forecast accuracy or history of significant revisions to previously recorded inventory valuation adjustments, and performed sensitivity analyses over significant assumptions to evaluate the changes in inventory valuation that would result from changes in the assumptions.

We have served as the Company’s auditor since 2019.

| Armanino LLP
| San Francisco, California

April 15, 2022

(PCAOB ID 00032)

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COSMOS HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

|  | December 31, 2021 |  |  | December 31, 2020 |
ASSETS |  |  |  |  |  |
CURRENT ASSETS: |  |  |  |  |  |
Cash and cash equivalents |  | $ | 286,487 |  |  | $ | 628,395 |
Accounts receivable, net |  |  | 26,858,114 |  |  |  | 23,440,650 |
Accounts receivable - related party |  |  | 2,901,300 |  |  |  | 3,468,564 |
Marketable securities |  |  | 6,696 |  |  |  | 222,792 |
Inventory |  |  | 3,147,276 |  |  |  | 3,292,557 |
Loans receivable |  |  | 377,590 |  |  |  | - |
Prepaid expenses and other current assets |  |  | 2,992,459 |  |  |  | 5,148,441 |
Prepaid expenses and other current assets - related party |  |  | 3,263,241 |  |  |  | 3,468,653 |
Operating lease right-of-use asset |  |  | 834,468 |  |  |  | 833,763 |
Financing lease right-of-use asset |  |  | 211,099 |  |  |  | 269,131 |
TOTAL CURRENT ASSETS |  |  | 40,878,730 |  |  |  | 40,772,946 |
Property and equipment, net |  |  | 1,880,659 |  |  |  | 1,757,213 |
Goodwill and intangible assets, net |  |  | 493,160 |  |  |  | 230,506 |
Loans receivable - long term portion |  |  | 4,410,689 |  |  |  | - |
Other assets |  |  | 915,250 |  |  |  | 905,318 |
Deferred tax assets |  |  | 850,774 |  |  |  | 178,430 |
TOTAL ASSETS |  | $ | 49,429,262 |  |  | $ | 43,844,413 |
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |  |  |  |  |  |  |  |
CURRENT LIABILITIES: |  |  |  |  |  |  |  |
Accounts payable and accrued expenses |  | $ | 12,126,626 |  |  | $ | 11,973,981 |
Accounts payable and accrued expenses - related party |  |  | 599,125 |  |  |  | 1,733 |
Accrued interest |  |  | 1,019,889 |  |  |  | 742,374 |
Lines of credit |  |  | 4,743,557 |  |  |  | 4,573,815 |
Convertible notes payable, net of unamortized discount of $258,938 and $494,973, respectively |  |  | 381,062 |  |  |  | 952,027 |
Derivative liability - convertible note |  |  | 45,665 |  |  |  | 460,728 |
Notes payable |  |  | 5,462,504 |  |  |  | 12,042,712 |
Notes payable - related party |  |  | 464,264 |  |  |  | 501,675 |
Loans payable |  |  | 1,000,000 |  |  |  | - |
Loans payable - related party |  |  | 1,293,472 |  |  |  | 1,629,246 |
Taxes payable |  |  | 1,324,722 |  |  |  | 760,446 |
Operating lease liability, current portion |  |  | 138,450 |  |  |  | 200,204 |
Financing lease liability, current portion |  |  | 73,078 |  |  |  | 89,926 |
Other current liabilities |  |  | 1,255,824 |  |  |  | 361,340 |
TOTAL CURRENT LIABILITIES |  |  | 29,928,238 |  |  |  | 34,290,207 |
Share settled debt obligation |  |  | 1,554,590 |  |  |  | 1,554,590 |
Lines of credit - long-term portion |  |  | 366,171 |  |  |  | 502,869 |
Notes payable - long term portion |  |  | 12,356,384 |  |  |  | 10,771,882 |
Operating lease liability, net of current portion |  |  | 696,015 |  |  |  | 590,538 |
Financing lease liability, net of current portion |  |  | 148,401 |  |  |  | 188,172 |
Other liabilities |  |  | - |  |  |  | 107,168 |
TOTAL LIABILITIES |  |  | 45,049,799 |  |  |  | 48,005,426 |
Commitments and Contingencies (see Note 13) |  |  | - |  |  |  | - |
STOCKHOLDERS' EQUITY (DEFICIT): |  |  |  |  |  |  |  |
Preferred stock, $0.001 par value; 100,000,000 shares authorized; 0 shares issued and outstanding as of December 31, 2021 and 2020 |  |  | - |  |  |  | - |
Common stock, $0.001 par value; 300,000,000 shares authorized; 17,544,509 and 13,485,128 shares issued and 17,157,085 and 13,069,800 outstanding as of December 31, 2021 and 2020, respectively |  |  | 17,544 |  |  |  | 13,484 |
Additional paid-in capital |  |  | 39,675,753 |  |  |  | 14,333,285 |
Treasury stock, 387,424 and 415,328 shares as of December 31, 2021 and 2020, respectively |  |  | (816,707 | ) |  |  | (611,854 | )
Accumulated deficit |  |  | (34,345,506 | ) |  |  | (18,750,824 | )
Accumulated other comprehensive (loss) income |  |  | (151,621 | ) |  |  | 854,896 |
TOTAL STOCKHOLDERS' EQUITY (DEFICIT) |  |  | 4,379,463 |  |  |  | (4,161,013 | )
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) |  | $ | 49,429,262 |  |  | $ | 43,844,413 |

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

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COSMOS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |
REVENUE |  | $ | 56,239,667 |  |  | $ | 55,406,337 |
COST OF GOODS SOLD |  |  | 47,909,180 |  |  |  | 47,345,957 |
GROSS PROFIT |  |  | 8,330,487 |  |  |  | 8,060,380 |
OPERATING EXPENSES |  |  |  |  |  |  |  |
General and administrative expenses |  |  | 9,208,701 |  |  |  | 2,102,869 |
Salaries and wages |  |  | 2,472,953 |  |  |  | 2,082,453 |
Sales and marketing expenses |  |  | 732,545 |  |  |  | 763,170 |
Depreciation and amortization expense |  |  | 449,692 |  |  |  | 397,595 |
TOTAL OPERATING EXPENSES |  |  | 12,863,891 |  |  |  | 5,346,087 |
INCOME (LOSS) FROM OPERATIONS |  |  | (4,533,404 | ) |  |  | 2,714,293 |
OTHER INCOME (EXPENSE) |  |  |  |  |  |  |  |
Other income (expense), net |  |  | (88,882 | ) |  |  | 4,571 |
Interest expense |  |  | (2,823,842 | ) |  |  | (2,761,004 | )
Interest income |  |  | 46,316 |  |  |  | 65,865 |
Non-cash interest expense |  |  | (757,021 | ) |  |  | (34,106 | )
Gain (loss) on equity investments, net |  |  | 2,541 |  |  |  | (34,443 | )
Gain on extinguishment of debt |  |  | 606,667 |  |  |  | 942,029 |
Change in fair value of derivative liability |  |  | 193,513 |  |  |  | (4,158 | )
Foreign currency transaction, net |  |  | (493,527 | ) |  |  | 305,274 |
TOTAL OTHER EXPENSE, NET |  |  | (3,314,235 | ) |  |  | (1,515,972 | )
INCOME (LOSS) BEFORE INCOME TAXES |  |  | (7,847,639 | ) |  |  | 1,198,321 |
PROVISION FOR INCOME TAXES |  |  | (114,010 | ) |  |  | (377,535 | )
NET INCOME (LOSS) |  |  | (7,961,649 | ) |  |  | 820,786 |
Deemed dividend on warrants |  |  | (7,633,033 | ) |  |  | - |
NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS |  |  | (15,594,682 | ) |  |  | 820,786 |
OTHER COMPREHENSIVE INCOME(LOSS) |  |  |  |  |  |  |  |
Foreign currency translation adjustment, net |  |  | (1,006,517 | ) |  |  | 871,235 |
TOTAL COMPREHENSIVE INCOME (LOSS) |  | $ | (16,601,199 | ) |  | $ | 1,692,021 |
BASIC NET INCOME (LOSS) PER SHARE |  | $ | (0.95 | ) |  | $ | 0.06 |
DILUTED NET INCOME (LOSS) PER SHARE |  | $ | (0.95 | ) |  | $ | 0.06 |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING |  |  |  |  |  |  |  |
Basic |  |  | 16,423,335 |  |  |  | 13,270,097 |
Diluted |  |  | 16,423,335 |  |  |  | 13,307,794 |

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

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COSMOS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)

|  | Common Stock |  |  | Additional Paid-in |  |  | Treasury Stock |  |  | Accumulated |  |  | Accumulated Other Comprehensive |  |  | Total Stockholders' Equity |
|  | No. of Shares |  |  | Amount |  |  | Capital |  |  | No. of Shares |  |  | Amount |  |  | Deficit |  |  | Income (Loss) |  |  | (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 |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 871,235 |  |  |  | 871,235 |
Conversion of note payable into shares of common stock |  |  | 259,741 |  |  |  | 259 |  |  |  | 807,536 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 807,795 |
Purchase of treasury stock from third party |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (50,000 | ) |  |  | (200,000 | ) |  |  | - |  |  |  | - |  |  |  | (200,000 | )
Net income |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 820,786 |  |  |  | - |  |  |  | 820,786 |
Balance at December 31, 2020 |  |  | 13,485,128 |  |  |  | 13,484 |  |  |  | 14,333,285 |  |  |  | (415,328 | ) |  |  | (611,854 | ) |  |  | (18,750,824 | ) |  |  | 854,896 |  |  |  | (4,161,013 | )
Foreign currency translation adjustment, net |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (1,006,517 | ) |  |  | (1,006,517 | )
Conversions of convertible note payable |  |  | 213,382 |  |  |  | 214 |  |  |  | 958,811 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 959,025 |
Conversion of notes payable into shares of common stock |  |  | 1,103,119 |  |  |  | 1,103 |  |  |  | 3,877,377 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 3,878,480 |
Conversion of related party debt |  |  | 1,000,000 |  |  |  | 1,000 |  |  |  | 5,999,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 6,000,000 |
Beneficial conversion feature discount related to convertible notes payable |  |  | - |  |  |  | - |  |  |  | 294,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 294,000 |
Forgiveness of related party debt |  |  | - |  |  |  | - |  |  |  | 600,000 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 600,000 |
Restricted stock issued to a consultant |  |  | 1,800,000 |  |  |  | 1,800 |  |  |  | 5,902,200 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5,904,000 |
Sale of treasury stock to third party |  |  | - |  |  |  | - |  |  |  | 249,350 |  |  |  | 65,000 |  |  |  | 650 |  |  |  | - |  |  |  | - |  |  |  | 250,000 |
Cancellation of treasury shares |  |  | (57,120 | ) |  |  | (57 | ) |  |  | (171,303 | ) |  |  | 57,120 |  |  |  | 171,360 |  |  |  | - |  |  |  | - |  |  |  | - |
Purchase of treasury stock from third party |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (94,216 | ) |  |  | (376,863 | ) |  |  |  |  |  |  |  |  |  |  | (376,863 | )
Deemed dividend on warrants |  |  | - |  |  |  | - |  |  |  | 7,633,033 |  |  |  | - |  |  |  | - |  |  |  | (7,633,033 | ) |  |  | - |  |  |  | - |
Net loss |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (7,961,649 | ) |  |  | - |  |  |  | (7,961,649 | )
Balance at December 31, 2021 |  |  | 17,544,509 |  |  | $ | 17,544 |  |  | $ | 39,675,753 |  |  |  | (387,424 | ) |  | $ | (816,707 | ) |  | $ | (34,345,506 | ) |  | $ | (151,621 | ) |  | $ | 4,379,463 |

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

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COSMOS HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |
CASH FLOWS FROM OPERATING ACTIVITIES: |  |  |  |  |  |
Net loss |  | $ | (7,961,649 | ) |  | $ | 820,786 |
Adjustments to Reconcile Net Loss to Net Cash Used In Operating Activities: |  |  |  |  |  |  |  |
Depreciation and amortization expense |  |  | 352,422 |  |  |  | 274,062 |
Amortization of right-of-use assets |  |  | 97,270 |  |  |  | 123,533 |
Amortization of debt discounts and accretion of debt |  |  | 757,021 |  |  |  | 34,105 |
Bad debt expense |  |  | 1,087,339 |  |  |  | 96,237 |
Write-off of investment |  |  | 211,047 |  |  |  | - |
Lease expense |  |  | 260,663 |  |  |  | 188,400 |
Interest on finance leases |  |  | 11,576 |  |  |  | 13,759 |
Stock-based compensation |  |  | 5,904,000 |  |  |  | - |
Deferred income taxes |  |  | (714,108 | ) |  |  | (178,430 | )
Gain on extinguishment of debt |  |  | (606,667 | ) |  |  | (942,029 | )
Change in fair value of the derivative liability |  |  | (193,513 | ) |  |  | 4,158 |
(Gain) loss on change in fair value of equity investments |  |  | (2,541 | ) |  |  | 34,443 |
Changes in Assets and Liabilities: |  |  |  |  |  |  |  |
Accounts receivable |  |  | (6,256,072 | ) |  |  | (14,514,183 | )
Accounts receivable - related party |  |  | 463,504 |  |  |  | (1,299,818 | )
Inventory |  |  | (89,582 | ) |  |  | 393,154 |
Prepaid expenses and other current assets |  |  | (3,109,941 | ) |  |  | (3,332,839 | )
Prepaid expenses and other current assets - related party |  |  | (55,657 | ) |  |  | 2,800,862 |
Loan receivable |  |  | (2,663,676 | ) |  |  | - |
Other assets |  |  | 23,294 |  |  |  | (131,700 | )
Accounts payable and accrued expenses |  |  | 3,199,770 |  |  |  | 3,448,613 |
Accounts payable and accrued expenses - related party |  |  | 624,349 |  |  |  | (240,189 | )
Accrued interest |  |  | 292,392 |  |  |  | 654,297 |
Lease liabilities |  |  | (231,900 | ) |  |  | (217,210 | )
Taxes payable |  |  | 622,047 |  |  |  | 584,507 |
Other current liabilities |  |  | 1,005,685 |  |  |  | (56,776 | )
Other liabilities |  |  | (124,247 | ) |  |  | (59,460 | )
NET CASH USED IN OPERATING ACTIVITIES |  |  | (7,097,174 | ) |  |  | (11,501,718 | )
CASH FLOWS FROM INVESTING ACTIVITIES: |  |  |  |  |  |  |  |
Proceeds from loan receivable |  |  | 63,699 |  |  |  | - |
Purchase of property and equipment |  |  | (581,398 | ) |  |  | (117,744 | )
Purchase of licenses |  |  | (309,118 | ) |  |  | - |
NET CASH USED IN INVESTING ACTIVITIES |  |  | (826,817 | ) |  |  | (117,744 | )
CASH FLOWS FROM FINANCING ACTIVITIES: |  |  |  |  |  |  |  |
Payment of convertible note payable |  |  | (907,000 | ) |  |  | (593,000 | )
Proceeds from convertible note payable |  |  | 600,000 |  |  |  | 497,000 |
Payment of related party note payable |  |  | - |  |  |  | (996,136 | )
Payment of note payable |  |  | (512,561 | ) |  |  | (5,230,725 | )
Proceeds from note payable |  |  | 591,500 |  |  |  | 16,556,710 |
Payment of related party loan |  |  | (139,594 | ) |  |  | (149,695 | )
Proceeds from related party loan |  |  | 7,424,164 |  |  |  | 721,723 |
Payment of lines of credit |  |  | (24,006,784 | ) |  |  | (18,428,823 | )
Proceeds from lines of credit |  |  | 24,437,020 |  |  |  | 20,369,291 |
Payments of finance lease liability |  |  | (92,105 | ) |  |  | (85,804 | )
Purchase of treasury stock |  |  | (376,863 | ) |  |  | (200,000 | )
Proceeds from sale of treasury stock |  |  | 250,000 |  |  |  | - |
NET CASH PROVIDED BY FINANCING ACTIVITIES |  |  | 7,267,777 |  |  |  | 12,460,541 |
Effect of exchange rate changes on cash |  |  | 314,306 |  |  |  | (251,221 | )
NET CHANGE IN CASH |  |  | (341,908 | ) |  |  | 589,858 |
CASH AT BEGINNING OF YEAR |  |  | 628,395 |  |  |  | 38,537 |
CASH AT END OF YEAR |  | $ | 286,487 |  |  | $ | 628,395 |
Supplemental Disclosure of Cash Flow Information |  |  |  |  |  |  |  |
Cash paid during the period: |  |  |  |  |  |  |  |
Interest |  | $ | 2,059,305 |  |  | $ | 955,376 |
Income tax |  | $ | - |  |  | $ | 14,127 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities |  |  |  |  |  |  |  |
Cancellation of treasury shares |  | $ | 171,360 |  |  | $ | - |
Discounts related to beneficial conversion features of convertible debentures |  | $ | 294,000 |  |  | $ | - |
Conversion of convertible notes payable to common stock |  | $ | 649,711 |  |  | $ | - |
Conversion of notes payable to common stock |  | $ | 3,878,480 |  |  | $ | 807,795 |
Conversion of loans payable related party to common stock |  | $ | 6,600,000 |  |  | $ | - |
Conversion of derivative liability to additional paid-in capital |  | $ | 284,169 |  |  | $ | - |
Deemed dividend on warrants upon conversion of convertible debt |  | $ | 7,633,033 |  |  | $ | - |

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

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

NOTE 1 - ORGANIZATION AND NATURE OF BUSINESS

Cosmos Holdings Inc. (“us”, “we”, or the “Company”) is an international pharmaceutical company publicly traded with extensive and established distribution network across the EU through its subsidiaries, Decahedron (UK), Skypharm (Greece) and Cosmofarm (Greece). We are a diversified and vertically integrated broad line pharmaceutical company with our own proprietary line of branded nutraceuticals.

The Company was incorporated in the State of Nevada under the name Prime Estates and Developments, Inc. on July 21, 2009, and on November 14, 2013, we changed our name to Cosmos Holdings, Inc. 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 distribution of pharmaceutical products. In February 2017, the Company acquired Decahedron Ltd., a UK Company (“Decahedron”) which is a fully licensed wholesaler of pharmaceutical products, and its primary activity is the distribution, import and export of pharmaceuticals.

On November 21, 2017, the Company effected a one-for-ten (1:10) reverse stock split whereby the Company decreased, by a ratio of one-for-ten (1:10) the number of issued and outstanding shares of common stock. Proportional adjustments for the reverse stock split were made to the Company’s outstanding stock options, and warrants including all share and per-share data, for all amounts and periods presented in the consolidated financial statements.

On December 19, 2018, the Company completed the purchase of all of the capital stock of Cosmofarm Ltd., a pharmaceutical wholesaler based in Athens, Greece.

Going Concern

The Company’s consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which contemplates the continuation of the Company as a going concern. For the year ended December 31, 2021, the Company had revenue of $56,239,667, net loss of $7,961,649 and net cash used in operations of $7,097,174. Additionally, as of December 31, 2021, the Company had working capital of $10,950,492, an accumulated deficit of $34,345,506, and stockholders’ equity of $4,379,463. 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.

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 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.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

Summary of Significant Accounting Policies

Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated.

Basis of Financial Statement Presentation

The accompanying consolidated financial statements have been prepared in accordance with principles generally accepted in the United States of America.

Principles of Consolidation

Our consolidated accounts include our accounts and the accounts of our wholly-owned subsidiaries, SkyPharm S.A., Decahedron Ltd. and Cosmofarm Ltd. All significant intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

The Effects of COVID-19

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Annual Report on Form 10-K. These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Foreign Currency Translation and Other Comprehensive Income (Loss)

The functional currency of the Company’s subsidiaries is the Euro and British Pound. For financial reporting purposes, both the Euro (“EUR”) and British Pound (“GBP”) have been translated into United States dollars ($) and/or (“USD”) as the reporting currency. Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity (deficit) as “Accumulated other comprehensive income (loss)”. Gains and losses resulting from foreign currency transactions are included in the statements of operations and comprehensive loss as other comprehensive income (loss). There have been no significant fluctuations in the exchange rate for the conversion of EUR or GBP to USD after the balance sheet date.

Assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rates prevailing at the consolidated balance sheet date with any transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency included in the consolidated results of operations as incurred.

As of December 31, 2021 and 2020, the exchange rates used to translate amounts in Euros into USD and British Pounds into USD for the purposes of preparing the consolidated financial statements were as follows:

|  | December 31, 2021 |  |  | December 31, 2020 |
Exchange rate on balance sheet dates |  |  |  |  |  |
EUR: USD exchange rate |  |  | 1.1318 |  |  |  | 1.2230 |
GBP: USD exchange rate |  |  | 1.3500 |  |  |  | 1.3662 |
Average exchange rate for the period |  |  |  |  |  |  |  |
EUR: USD exchange rate |  |  | 1.1830 |  |  |  | 1.1410 |
GBP: USD exchange rate |  |  | 1.3764 |  |  |  | 1.2829 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. As of December 31, 2021 and December 31, 2020, there were no cash equivalents.

The Company maintains bank accounts in the United States denominated in U.S. Dollars and in Greece and in Bulgaria all of which are denominated in Euros. Additionally, the Company maintains a bank account in the United Kingdom denominated in British Pounds. As of December 31, 2021, the amounts in these accounts were $144,489, $101,589 and $4,061. As of December 31, 2020, the amounts in these accounts were $448,659, $134,935 and $1,651. Additionally, as of December 31, 2021 and 2020, the Company had cash on hand in the amount of $25,773 and $31,604, respectively.

Reclassifications to Prior Period Financial Statements and Adjustments

Certain reclassifications have been made in the Company’s financial statements of the prior period to conform to the current year presentation. $22,340 in customer deposits as of December 31, 2020, has been reclassified to other current liabilities and $502,869 was reclassified from lines of credit to lines of credit - long-term portion on the consolidated balance sheet. For the year ending December 31, 2020, $2,082,453 was reclassified from general and administrative expenses to salaries and wages on the consolidated statements of operations and comprehensive income. For the year ended December 31, 2020, 230,505 was reclassified from customer deposits to other current liabilities and $96,237 in bad debt expenses was reclassified from accounts receivable on the consolidated statement of cash flows. These reclassifications have no impact on previously reported net income.

Accounts Receivable, net

Accounts receivable are stated at their net realizable value. The allowance for doubtful accounts against gross accounts receivable reflects the best estimate of probable losses inherent in the receivables’ portfolio determined on the basis of historical experience, specific allowances for known troubled accounts and other currently available information. At December 31, 2021 and 2020, the Company’s allowance for doubtful accounts was $1,702,743 and $715,845, respectively.

Tax Receivables

The Company pays Value Added Tax (“VAT”) or similar taxes (“input VAT”), income taxes, and other taxes within the normal course of its business in most of the countries in which it operates related to the procurement of merchandise and/or services it acquires and/or on sales and taxable income. The Company also collects VAT or similar taxes on behalf of the government (“output VAT”) for merchandise and/or services it sells. If the output VAT exceeds the input VAT, this creates a VAT payable to the government. If the input VAT exceeds the output VAT, this creates a VAT receivable from the government. The VAT tax return is filed on a monthly basis offsetting the payables against the receivables. In observance of EU regulations for intra-EU cross-border sales, our subsidiaries in Greece, SkyPharm and Cosmofarm, do not charge VAT for sales to wholesale drug distributors registered in other European Union member states. The net VAT receivable is recorded in prepaid expense and other current assets on the consolidated balance sheets. As of December 31, 2021 and 2020, the Company had a VAT net payable balance of $400,616 and $159,198 respectively, recorded in the 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.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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 $319,337 and 240,886 for the years ended December 31, 2021 and 2020, respectively.

Impairment of Long-Lived Assets

In accordance with ASC 360-10, long-lived assets, which include property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable. For the years ended December 31, 2021 and 2020, the Company had no impairment of long-lived assets.

Goodwill and Intangibles, net

The Company periodically reviews the carrying value of intangible assets not subject to amortization, including goodwill, to determine whether impairment may exist. Goodwill and certain intangible assets are assessed annually, or when certain triggering events occur, for impairment using fair value measurement techniques. These events could include a significant change in the business climate, legal factors, a decline in operating performance, competition, sale or disposition of a significant portion of the business, or other factors. Specifically, goodwill impairment is determined using a two-step process. The first step of the goodwill impairment test is used to identify potential impairment by comparing the fair value of a reporting unit with its carrying amount, including goodwill. The Company uses level 3 inputs and a discounted cash flow methodology to estimate the fair value of a reporting unit. A discounted cash flow analysis requires one to make various judgmental assumptions including assumptions about future cash flows, growth rates, and discount rates. The assumptions about future cash flows and growth rates are based on the Company’s budget and long-term plans. Discount rate assumptions are based on an assessment of the risk inherent in the respective reporting units. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the goodwill impairment test is performed to measure the amount of impairment loss, if any. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. That is, the fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid to acquire the reporting unit.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 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 an import/export license. The Company evaluates the remaining useful life of intangible assets annually to determine whether events and circumstances warrant a revision to the remaining amortization period. If the estimate of the intangible asset’s remaining useful life is changed, the remaining carrying amount of the intangible asset will be amortized prospectively over that revised remaining useful life. As of December 31, 2021, no revision to the remaining amortization period of the intangible assets was made.

Amortization expense was $33,085 and $33,176 for the years ended December 31, 2021 and 2020, respectively.

Equity Method Investment

For those investments in common stock or in-substance common stock in which the Company has the ability to exercise significant influence over the operating and financial policies of the investee, the investment is accounted for under the equity method. The Company records its share in the earnings of the investee and is included in “Equity earnings of affiliate” in the consolidated statement of operations. The Company assesses its investment for other-than-temporary impairment when events or changes in circumstances indicate that the carrying amount of the investment might not be recoverable and recognizes an impairment loss to adjust the investment to its then current fair value.

Investments in Equity Securities

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 December 31, 2021, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp., 16,666 shares which traded at a closing price of 0.40 per share or value of 6,696 of National Bank of Greece. Additionally, the Company has $4,416 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. As of December 31, 2020, investments consisted of 3,000,000 shares, which traded at a closing price of $0 per share or a value of $0 of ICC International Cannabis Corp., 40,000 shares which traded at a closing price of $5.45 per share, or value of $218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. Additionally, the Company had $4,772 in equity securities of Pancreta bank, which are not publicly traded and recorded at cost. See Note 2, for additional investments in equity securities.

Fair Value Measurement

The Company applies FASB ASC 820, Fair Value Measurements and Disclosures, (“ASC 820”), for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements establishes a framework for measuring fair value and expands disclosure about such fair value measurements.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 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 table presents assets that are measured and recognized at fair value as of December 31, 2021 and 2020, on a recurring basis:

|  | December 31, 2021 |  |  | Total Carrying |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Value |
Marketable securities - ICC International Cannabis Corp. |  | $ | - |  |  |  | - |  |  |  | - |  |  | $ | - |
Marketable securities - Diversa S.A. |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Marketable securities - National Bank of Greece |  |  | 6,696 |  |  |  | - |  |  |  | - |  |  |  | 6,696 |
|  | $ | 6,696 |  |  |  |  |  |  |  |  |  |  | $ | 6,696 |

|  | December 31, 2020 |  |  | Total Carrying |
|  | Level 1 |  |  | Level 2 |  |  | Level 3 |  |  | Value |
Marketable securities - ICC International Cannabis Corp. |  | $ | - |  |  |  | - |  |  |  | - |  |  | $ | - |
Marketable securities - Diversa S.A. |  |  | 218,183 |  |  |  | - |  |  |  | - |  |  |  | 218,183 |
Marketable securities - National Bank of Greece |  |  | 4,609 |  |  |  | - |  |  |  | - |  |  |  | 4,609 |
|  | $ | 222,792 |  |  |  |  |  |  |  |  |  |  | $ | 222,792 |

In addition, FASB ASC 825-10-25, Fair Value Option, (“ASC 825-10-25”), expands opportunities to use fair value measurements in financial reporting and permits entities to choose to measure many financial instruments and certain other items at fair value. The Company did not elect the fair value options for any of its qualifying financial instruments.

Derivative Instruments

Derivative financial instruments are recorded in the accompanying consolidated balance sheets at fair value in accordance with ASC 815. When the Company enters into a financial instrument such as a debt or equity agreement (the “host contract”), the Company assesses whether the economic characteristics of any embedded features are clearly and closely related to the primary economic characteristics of the remainder of the host contract. When it is determined that (i) an embedded feature possesses economic characteristics that are not clearly and closely related to the primary economic characteristics of the host contract, and (ii) a separate, stand-alone instrument with the same terms would meet the definition of a financial derivative instrument, then the embedded feature is bifurcated from the host contract and accounted for as a derivative instrument. The estimated fair value of the derivative feature is recorded in the accompanying consolidated balance sheets separately from the carrying value of the host contract. Subsequent changes in the estimated fair value of derivatives are recorded as a gain or loss in the Company’s consolidated statements of operations.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

Customer Advances

The Company receives prepayments from certain customers for pharmaceutical products prior to those customers taking possession of the Company’s products. The Company records these receipts as customer advances until it has met all the criteria for recognition of revenue including passing control of the products to its customer, at such point, the Company will reduce the customer 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 delivery of the product.

Stock-based Compensation

The Company records stock-based compensation in accordance with ASC 718, Stock Compensation (“ASC 718”) and Staff Accounting Bulletin No. 107 (“SAB 107”) regarding its interpretation of ASC 718. ASC 718 requires the fair value of all stock-based employee compensation awarded to employees to be recorded as an expense over the related requisite service period. The Company values any employee or non-employee stock-based compensation at fair value using the Black-Scholes Option Pricing Model.

The Company accounts for non-employee share-based awards in accordance with the measurement and recognition criteria of ASU 2018-07, “Compensation-Stock Compensation-Improvements to Nonemployee Share-Based Payment Accounting.”

Foreign Currency Translations and Transactions

Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and the statements of operations are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity until the entity is sold or substantially liquidated.

Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in net earnings.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash investments and accounts receivable.

The following tables show the number of the Company’s clients which contributed 10% or more of revenue and accounts receivable, respectively:

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

|  | Year Ended December 31, |  |  | Year Ended December 31, |
|  | 2021 |  |  | 2020 |
Number of 10% clients |  |  | 1 |  |  |  | 1 |
Percentage of total revenue |  |  | 15.33 | % |  |  | 14.82 | %
Percentage of total AR |  |  | 35.08 | % |  |  | 14.65 | %

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 December 31, 2021 and 2020, the Company has maintained a valuation allowance against all net deferred tax assets in each jurisdiction in which it is subject to income tax.

The Company 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.

Retirement and Termination Benefits

Under Greek labor law, employees are entitled to lump-sum compensation in the event of termination or retirement. The amount depends on the employee’s work experience and renumeration as of the day of termination or retirement. If an employee remains with the company until full-benefit retirement, the employee is entitled to a lump-sum equal to 40% of the compensation to be received if the employee were to be dismissed on the same day. The Company periodically reviews the uncertainties and judgements related to the application of the relevant labor law regulations to determine retirement and termination benefits obligations of its Greek subsidiaries. The Company has evaluated the impact of these regulations and has identified a potential retirement and termination benefits liability. The amount of the liability as of December 31, 2021 and December 31, 2020, was $0 and $107,167, respectively, and has been recorded as a long-term liability within the consolidated balance sheets.

Basic and Diluted Net Income (Loss) per Common Share

Basic income per share is calculated by dividing income available to common stockholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per share is calculated by dividing income available to common stockholders by the weighted average number of common shares outstanding for the period and, when dilutive, potential shares from stock options and warrants to purchase common stock, using the treasury stock method. In accordance with ASC 260, Earnings Per Share, the following table reconciles basic shares outstanding to fully diluted shares outstanding.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

|  | Years Ended December 31, |
|  | 2021 |  |  | 2020 |
Weighted average number of common shares outstanding Basic |  |  | 16,423,335 |  |  |  | 13,270,097 |
Potentially dilutive common stock equivalents |  |  | - |  |  |  | 37,698 |
Weighted average number of common and equivalent shares outstanding - Diluted |  |  | 16,423,335 |  |  |  | 13,307,795 |

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

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.

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 Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of 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 public and nonpublic entities for fiscal years beginning after December 15, 2021, and interim periods with fiscal years beginning after December 15, 2021. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the effects of the adoption of ASU No. 2021-04 on 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.

NOTE 2 -MARKETABLE SECURITIES

Distribution and Equity Agreement

On March 19, 2018, the Company entered into a Distribution and Equity Acquisition Agreement (the “Distribution and Equity Acquisition Agreement”) with Marathon Global Inc. (“Marathon”), a company incorporated in the Province of Ontario, Canada. Marathon was formed to be a global supplier of cannabis, cannabidiol (CBD) and/or any cannabis extract products, extracts, ancillaries and derivatives (collectively, the “Products”). The Company was appointed the exclusive distributor of the Products initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. The Company has no present intention to distribute any Products under this Agreement in the United States or otherwise participate in cannabis operations in the United States. The Company intends to await further clarification from the U.S. Government on cannabis regulation prior to determining whether to enter the domestic market.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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.

Marathon is an entity with no assets and no activity, the Company attributed no value to the 5 million shares in Marathon which was received as consideration for the distribution services. As described below, the Company exchanged the Marathon shares in May and July 2018.

Share Exchange Agreements

On May 17, 2018, the Company entered into a Share Exchange Agreement (the “SEA”) with Marathon, ICC International Cannabis Corp (“ICC”) formerly known as Kaneh Bosm Biotechnology Inc. (“KBB”) and certain other sellers of Marathon capital stock. Under the SEA, the Company transferred 2.5 million shares in Marathon to ICC, a Company incorporated under the laws of the Province of British Columbia and a public reporting issuer on the Canadian Securities Exchange, in exchange for 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $1,953,000 included in “Gains on exchange of equity investments” in the consolidated statements of operations.

On July 16, 2018, the Company completed a Share Exchange Agreement (the “New SEA”) with Marathon, ICC, and certain other sellers of Marathon capital stock whereby the Company transferred its remaining one-half interest (2.5 million shares) in Marathon to KBB for an additional 5 million shares of ICC. The Company accounted for the exchange at fair value and recognized a gain on exchange of its investment in Marathon of $2,092,200 in the year ended December 31, 2018. The ten million shares of ICC owned by the Company constituted approximately 7% of the 141,219,108 shares of capital stock of KBB then issued and outstanding. The Company does not have the ability to exercise significant influence over ICC.

The Company determined the fair value of both exchanges based on an actively quoted stock price of ICC received in exchange for the Marathon shares. The Company continues to fair value its investment in ICC with changes recognized in earnings each period and was recorded as an unrealized gain on exchange of investment during the year ended December 31, 2021 of $0. The value of the investments as of December 31, 2021 and December 31, 2020, 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 future for its services under the Distribution and Equity Acquisition Agreement, if certain milestones are achieved. Refer to Note 11 for the accounting associated with the cash of CAD $2 million received upfront. Variable consideration to be received in the future upon achieving the gross sales milestones described above, is constrained as the Company estimates that it is probable that a significant reversal of revenue could occur. In assessing the constraint, the Company considered its limited experience with the Products, new geographic markets and similar transactions, which affect the Company’s ability to estimate the likelihood of a probable revenue reversal. Therefore, no revenue has been recognized for the years ended December 31, 2021 and 2020. The Company will continue to reassess variable consideration at each reporting period and update the transaction price when it becomes probable that a significant revenue reversal would not occur.

As of December 31, 2020, in addition to the 3,000,000 ICC shares valued at $0, as noted above, marketable securities also consisted of the following: 40,000 shares which traded at a closing price of $5.45 per share, or value of 218,183 of Diversa S.A. and 16,666 shares which traded at a closing price of $0.28 per share or value of $4,609 of National Bank of Greece. The Company recorded a net unrealized loss on the fair value of these investments of 2,246 during the year ended December 31, 2020.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

As of December 31, 2021, in addition to the 3,000,000 ICC shares valued at $0, as noted above, marketable securities also consisted of the following: 16,666 shares, which traded at a closing price of $0.40 per share or value of $6,696, of National Bank of Greece. The Company recorded a net unrealized gain on the fair value of these investments of $2,541 during the year ended December 31, 2021 and a realized loss of $211,047 related to the write off of the Diversa S.A. shares that were delisted.

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 December 31, 2021 and 2020, was $169,770 and 183,450, respectively, and is included in “Other assets” on the Company’s consolidated balance sheet.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment, net consists of the following at December 31,:

|  | 2021 |  |  | 2020 |
Leasehold improvements |  | $ | 519,278 |  |  | $ | 560,711 |
Vehicles |  |  | 96,657 |  |  |  | 105,057 |
Furniture, fixtures and equipment |  |  | 2,065,100 |  |  |  | 1,632,654 |
Computers and software |  |  | 141,490 |  |  |  | 149,005 |
|  |  | 2,822,525 |  |  |  | 2,447,427 |
Less: Accumulated depreciation and amortization |  |  | (941,866 | ) |  |  | (690,214 | )
Total |  | $ | 1,880,659 |  |  | $ | 1,757,213 |

NOTE 4 - GOODWILL AND INTANGIBLE ASSETS

Goodwill and intangible, net assets consist of the following at December 31,:

|  | 2021 |  |  | 2020 |
License |  | $ | 345,739 |  |  | $ | 50,000 |
Trade name /mark |  |  | 36,997 |  |  |  | 36,997 |
Customer base |  |  | 176,793 |  |  |  | 176,793 |
|  |  | 559,529 |  |  |  | 263,790 |
Less: Accumulated amortization |  |  | (116,066 | ) |  |  | (82,981 | )
Subtotal |  |  | 443,463 |  |  |  | 180,809 |
Goodwill |  |  | 49,697 |  |  |  | 49,697 |
Total |  | $ | 493,160 |  |  | $ | 230,506 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

NOTE 5 - LOAN RECEIVABLE

On October 30, 2021, the Company entered into an agreement for a ten-year loan with a third-party to 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. During the year ended December 31, 2021, the Company received €53,845 ($60,942) in principal payments. As of December 31, 2021, the Company has a short-term receivable balance of $377,590 and a long-term receivable balance of $4,410,689 under this loan.

NOTE 6 - CAPITAL STRUCTURE

Preferred Stock

The Company is authorized to issue 100 million shares of preferred stock, which have liquidation preference over the common stock and are non-voting. As of December 31, 2021, and 2020, no preferred shares have been issued.

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.

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 by resolution.

The Series A Preferred Stock is 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 (the “Conversion Price”).

The holders of the Series A Preferred Stock are not entitled to receive distributions in the event of liquidation, dissolution or winding up of the Company, either voluntary or involuntary.

Common Stock

The Company is authorized to issue 300 million shares of common stock. As of December 31, 2021 and 2020, the Company had 17,544,509 and 13,485,128 shares of our common stock issued, respectively, and 17,157,085 and 13,069,800 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 sell 65,000 shares of the Company’s common stock held in treasury at $3.85 per share or a total of $250,000.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 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.

Purchase of Treasury Shares

On July 31, 2020, the Company entered into a Stock Purchase Agreement (the “July SPA”) with a shareholder. The July SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. During the year ended December 31, 2020, the Company made $40,000 in payments.

On August 31, 2020, the Company entered into two Stock Purchase Agreements (the “August SPAs”) with a shareholder. The August SPAs provide for the Company’s purchase of an aggregate total of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. During the year ended December 31, 2020, the Company made $40,000 in payments.

On September 30, 2020, the Company entered into a Stock Purchase Agreement (the “September SPA”) with a shareholder. The September SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. During the year ended December 31, 2020, the Company made $40,000 in payments.

On October 31, 2020, the Company entered into a Stock Purchase Agreement (the “October SPA”) with a shareholder. The October SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. During the year ended December 31, 2020, the Company made $40,000 in payments.

On November 30, 2020, the Company entered into a Stock Purchase Agreement (the “November SPA”) with a shareholder. The November SPA provides for the Company’s purchase of 10,000 shares of the Company’s common stock at $4.00 per share or an aggregate of $40,000. During the year ended December 31, 2020, the Company made $40,000 in payments.

On December 29, 2021, the Company entered into a Stock Purchase Agreement (the “December SPA”) with a shareholder. The December SPA provides for the Company’s purchase of 94,216 shares of the Company’s common stock at $4.00 per share or an aggregate of $376,863.

Consulting Agreement

The Company entered into a Consulting Agreement (the “Agreement”) effective as of February 5, 2021, with a non-affiliated consultant (the “Consultant”). The Company engaged the Consultant to perform consulting services relating to Company management, debt structure, business plans and business development in connection with any capitalization transactions involving the Company and any newly created or existing entities. The Agreement is for a term of nine (9) months with an initial term of ninety (90) days (the “Initial Term”). The Agreement is terminable by the Company for any reason upon written notice at any time after the Initial Term.

The Company agreed to pay Consultant and its assignees an aggregate of 1,800,000 restricted shares of Common Stock, 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 shares were valued on the date of the agreement at $3.28 per share or $5,904,000, which was be amortized over the term of the agreement. As of December 31, 2021, the Company has recorded $5,904,000 in stock-based compensation for the 1,800,000 shares earned.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

Debt Exchange Agreements

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 (See Note 11). 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 during the year ended December 31, 2021. As of December 31, 2021, the Company recorded $2,564,363 as an equity increase related to the extinguishment of debt.

On June 23, 2021, the Company entered into a Debt Exchange Agreement (the “June Debt Exchange Agreement”) to exchange various loans with Greg Siokas (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. On June 23, 2021, the fair value of the Company’s shares of common stock was $5.00 per share. For the year ended December 31, 2021, the Company recorded $3,000,000 as an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2, 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 $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, the fair value of the Company’s shares of common stock was $4.03 per share. For the year ended December 31, 2021, the Company recorded $1,000,000 as an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2, 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 the exchange rate of $6.00 per share.

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 year ended December 31, 2021, the Company recorded $1,250,000 as an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2 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 ($3,302,100) (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 year ending December 31, 2021, the Company recorded a gain on the settlement of debt in the amount of $292,383 in the 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 December 31, 2021, the Company recorded $1,314,117 as an increase in equity related to the extinguishment of debt.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

On December 8, 2021, the Company entered into a Debt Exchange Agreement (the “December 8 Agreement”) with the Company’s Chief Executive Officer (See Note 8). The December 8 Agreement provided for the issuance by the Company of 125,000 shares of common stock, at the rate of $6.00 per share, or an aggregate of $750,000, in exchange for $750,000 of existing loans by Mr. Siokas to the Company. On December 8, 2021, the fair value of the Company’s shares of common stock was $3.44 per share. For the year ended December 31, 2021, the Company recorded $750,000 as a capital contribution and an increase in equity in accordance with ASC 850-10-20 due to the related party relationship and ASC 470-50-40-2 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 $3.44 per share and the exchange rate of $6.00 per share.

Debt Conversions

During the year ended December 31, 2021, the Company issued 213,382 shares of common stock to convert $550,144 of principal and accrued interest in accordance with a convertible promissory note issued to Platinum (as defined in Note 10). The Company recorded $959,025 as a capital contribution and an increase in equity related to the conversion of $550,144 of debt, $284,169 for the reduction of the derivative liability recorded as additional paid-in capital, and $124,711 recorded as a loss on debt extinguishment.

Potentially Dilutive Securities

No options warrants or other potentially dilutive securities other than those disclosed above have been issued as of December 31, 2021.

NOTE 7 - INCOME TAXES

The Company provides for income taxes using an asset and liability approach under which deferred income taxes are provided for based upon enacted tax laws and rates applicable to periods in which the taxes become payable.

The domestic and foreign components of income (loss) before (benefit) provision for income taxes were as follows:

|  | 12/31/2021 |  |  | 12/31/2020 |
Domestic |  | $ | (8,365,297 | ) |  | $ | (2,901,276 | )
Foreign |  |  | 517,659 |  |  |  | 4,099,597 |
|  | $ | (7,847,638 | ) |  | $ | 1,198,321 |

The components of the (benefit) provision for income taxes are as follows:

|  | 12/31/2021 |  |  | 12/31/2020 |
Current tax provision |  |  |  |  |  |
Federal |  | $ | - |  |  | $ | - |
State |  |  | - |  |  |  | - |
Foreign |  |  | 802,364 |  |  |  | 555,965 |
Total current tax provision |  | $ | 802,364 |  |  | $ | 555,965 |
Deferred tax provision |  |  |  |  |  |  |  |
Domestic |  | $ | - |  |  | $ | - |
State |  |  | - |  |  |  | - |
Foreign |  |  | (688,354 | ) |  |  | (178,430 | )
Total deferred tax provision |  | $ | (688,354 | ) |  | $ | (178,430 | )
Total current provision |  | $ | 114,010 |  |  | $ | 377,535 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

The reconciliation of income tax expense computed at the U.S. federal statutory rate to the income tax provision for the years ended December 31, 2021 and 2020 is as follows:

|  |  | 12/31/2021 |  |  | 12/31/2020 |
US |  |  |  |  |  |  |
Income (loss) before income taxes |  |  | $ | (7,847,639 | ) |  | $ | 1,198,321 |
Taxes under statutory US tax rates |  |  | $ | (1,648,004 | ) |  | $ | 251,647 |
Increase (decrease) in taxes resulting from: |  |  |  |  |  |  |  |  |
Increase in valuation allowance |  |  | $ | 3,001,899 |  |  | $ | 216,518 |
Foreign tax rate differential |  |  | $ | (24,977 | ) |  | $ | (55,540 | )
Permanent differences |  |  | $ | (734,428 | ) |  | $ | (218,216 | )
US tax on foreign income |  |  | $ | 493,028 |  |  | $ | 604,419 |
163(j) catch up |  |  |  | (76,888 | ) |  |  | - |
Prior period adjustments |  |  | $ | 52,034 |  |  | $ | (97,829 | )
State taxes |  |  | $ | (948,654 | ) |  | $ | (323,464 | )
Income tax expense |  |  | $ | 114,010 |  |  | $ | 377,535 |

Companies subject to the Global Intangible Low-Taxed Income provision (GILTI) have the option to account for the GILTI tax as a period cost if and when incurred, or to recognize deferred taxes for outside basis temporary differences expected to reverse as GILTI. We have elected to account for GILTI as a period cost.

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company’s deferred tax assets and liabilities consist of the following:

|  | 12/31/2021 |  |  | 12/31/2020 |
Net operating loss carryforward |  | $ | 4,515,900 |  |  | $ | 1,494,424 |
Capital loss carryforward |  |  | 801,744 |  |  |  | 801,744 |
Section 163(j) carryforward |  |  | - |  |  |  | - |
Nonqualified stock options |  |  | 96,104 |  |  |  | 170,297 |
Foreign exchange |  |  | 13,438 |  |  |  | - |
Allowance for doubtful accounts |  |  | 374,604 |  |  |  | - |
Accrued expenses |  |  | 528,895 |  |  |  | 7,389 |
Mark to market adjustment in securities |  |  | 358,761 |  |  |  | 357,829 |
Lease liability |  |  | 253,620 |  |  |  | 247,797 |
Gain on extinguishment of debt |  |  | - |  |  |  | 179,958 |
Depreciation |  |  | (6,765 | ) |  |  | 4,226 |
Total deferred tax assets |  |  | 6,936,211 |  |  |  | 3,263,664 |
Intangibles |  |  | (8,139 | ) |  |  | (10,729 | )
Inventory |  |  | (14,728 | ) |  |  | - |
Right of use asset |  |  | (243,207 | ) |  |  | (253,818 | )
Goodwill |  |  | (10,979 | ) |  |  | (14,473 | )
Total deferred tax liabilities |  |  | (277,053 | ) |  |  | (279,020 | )
Valuation allowance |  |  | (5,808,384 | ) |  |  | (2,806,214 | )
Net deferred tax assets (liabilities) |  | $ | 850,774 |  |  | $ | 178,430 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

At December 31, 2021, the Company had U.S. net operating loss ("NOL") carryforwards of approximately $12,513,177 that may be offset against future taxable income, subject to limitation under IRC Section 382. Of the $12.5 million Federal NOL carryforwards, $2.5 million are pre-2018 and begin to expire in 2031. The remaining balance of $10 million, are limited to utilization of 80% of taxable income but do not have an expiration. At December 31, 2021, the Company had fully utilized all the Greek NOL carryforwards and has an NOL of $546,683 in the UK. A valuation allowance exists for the U.S. operations, but not for the non-U.S. operations, based on a more likely than not criterion and in consideration of all available positive and negative evidence.

ASC 740 requires that the tax benefit of net operating losses ("NOLs"), temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is "more likely than not." Realization of the future tax benefits is dependent on the Company's ability to generate sufficient taxable income within the carryforward period. Because of the Company's history of domestic operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance, on our U.S. net domestic deferred tax assets. In 2020, foreign (Greece and United Kingdom) valuation allowances were released, aggregating $200,000. Management considered all available evidence to when evaluating the realizability of foreign deferred tax assets by jurisdiction and concluded primarily based upon a strong earnings history that these deferred tax assets were more-likely-than-not realizable.

The Company applied the "more-likely-than-not" recognition threshold to all tax positions taken or expected to be taken in a tax return, which resulted in no unrecognized tax benefits as of December 31, 2021 and December 31, 2020, respectively. We recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense.

The Company files income tax returns in Illinois, United States, and in foreign jurisdictions including Greece, and United Kingdom. As of December 31, 2021, all domestic tax years are open to tax authority examination due the availability of net operating loss deductions, 2010 through 2021. In Greece, the statute of limitations is open for five years, 2016 through 2021. In United Kingdom, the statute of limitations is open for four years, 2017 through 2021. Currently, there are no ongoing tax authority income tax examinations.

As of December 31, 2021, the Company had $1.7 million of undistributed earnings and profits for which no deferred tax liabilities have been recorded, since the Company intends to indefinitely reinvest such earnings to fund the international operations and certain obligations of the subsidiary. Should the above undistributed earnings be distributed in the form of dividends or otherwise, the distributions would result in $350.3 thousand of tax expense.

NOTE 8 - RELATED PARTY TRANSACTIONS

On the date of our inception, we issued 2 million shares of our common stock to our then three officers and directors which were recorded at no value (offsetting increases and decreases in common stock and additional paid-in capital).

Doc Pharma S.A.

As of December 31, 2021, the Company has a prepaid balance of $3,263,241 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company has a receivable balance of $2,901,300 and an accounts payable balance of $565,756. As of December 31, 2020, the Company has a prepaid balance of $3,468,653 to Doc Pharma S.A. related to purchases of inventory. Additionally, the Company had a receivable balance of $3,468,564.

During the years ended December 31, 2021 and 2020, the Company purchased a total of $3,084,805 and $5,983,809 of products from Doc Pharma S.A., respectively. During the years ended December 31, 2021 and 2020 the Company had $978,321 and $2,843,260 revenue from Doc Pharma S.A., respectively.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

On October 10, 2020, the Company entered into a contract manufacturer outsourcing (“CMO”) agreement with Doc Pharma whereby 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 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 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 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”) 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 December 31, 2021, the Company has purchased €1,699,507 ($2,010,517) in inventory related to this agreement.

On May 17, 2021, Doc Pharma and the Company entered into a Research and Development (“R&D”) agreement whereby Doc Pharma is 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 year ended December 31, 2021, SkyPharm bought 67 licenses at value of €261,300 ($295,739) from Doc Pharma which was the 18.33% 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.

Notes Payable - Related Party

A summary of the Company’s related party notes payable during the years ended December 31, 2021 and 2020 is presented below:

|  | 2021 |  |  | 2020 |
Beginning Balance |  | $ | 501,675 |  |  | $ | 1,375,532 |
Payments |  |  | - |  |  |  | (996,136 | )
Foreign currency translation |  |  | (37,411 | ) |  |  | 122,279 |
Ending Balance |  | $ | 464,264 |  |  | $ | 501,675 |

Grigorios Siokas

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

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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

Dimitrios Goulielmos

On November 21, 2014, the Company entered into an agreement with Dimitrios Goulielmos, as amended on November 4, 2016. Pursuant to the amendment, this loan has no maturity date and is non-interest bearing. As of December 31, 2020, the Company had a principal balance of €10,200 ($12,475). A principal balance of €10,200 ($11,544) remained as of December 31, 2021.

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 years ended December 31, 2021, and 2020, the Company recorded a foreign currency translation gain of $37,411 and a loss of $122,279, respectively.

Loans Payable - Related Party

A summary of the Company’s related party loans payable during the years ended December 31, 2021 and 2020 is presented below:

|  | 2021 |  |  | 2020 |
Beginning balance |  | $ | 1,629,246 |  |  | $ | 1,026,264 |
Proceeds |  |  | 6,377,156 |  |  |  | 725,563 |
Payments |  |  | (133,552 | ) |  |  | (149,695 | )
Conversion of debt |  |  | (6,000,000 | ) |  |  | - |
Settlement of lawsuit |  |  | (600,000 | ) |  |  | - |
Foreign currency translation |  |  | 20,623 |  |  |  | 27,114 |
Ending balance |  | $ | 1,293,472 |  |  | $ | 1,629,246 |

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

On May 10, 2021, 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 and as a shareholder 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 $600,000, 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. 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.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

During the year ended December 31, 2021, the Company entered into various agreements (as defined in Note 6) with Mr. Siokas whereby the Company exchanged an aggregate total of $6,000,000 of debt into 1,000,000 shares of Common Stock at above market prices.

During the year ended December 31, 2021, the Company borrowed additional proceeds of €1,803,000 ($2,040,635), €230,000 ($275,306) and $4,061,215 and repaid €118,000 ($133,552) of these loans. During the year ending December 31, 2021, the Company converted $2,250,000 of the July 20 Note at a conversion price of $6.00 and issued 375,000 shares of common stock. As of December 31, 2021, the Company had an outstanding balance under these notes and loans of $1,293,472.

The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2021 and 2020, the Company recorded a loss of $20,623 and $27,114, respectively.

Except as set forth above, we have not entered into any material transactions with any director, executive officer, and promoter, beneficial owner of five percent or more of our common stock, or family members of such persons.

NOTE 9 - LINES OF CREDIT

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

|  | December 31, 2021 |  |  | December 31, 2020 |
National |  | $ | 3,265,236 |  |  | $ | 3,540,550 |
Alpha |  |  | 947,333 |  |  |  | 1,106,894 |
Pancreta |  |  | 489,985 |  |  |  | - |
National - COVID |  |  | 407,174 |  |  |  | 429,240 |
Subtotal |  |  | 5,109,728 |  |  |  | 5,076,684 |
Reclassification of National-COVID - Long-term |  |  | (366,171 | ) |  |  | (502,869 | )
Ending balance |  | $ | 4,743,557 |  |  | $ | 4,573,815 |

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 $2,489,960 and $2,690,600 as of December 31, 2021 and 2020, respectively. The outstanding balance of the facility was $2,185,413 and $2,411,182, as of December 31, 2021 and 2020, respectively.

The maximum borrowing allowed for the 4.35% lines of credit, was $1,131,800 and $1,223,000 as of December 31, 2021 and 2020, respectively. The outstanding balance of the facilities was $1,079,823 and $1,129,368 as of December 31, 2021 and 2020, 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 $1,131,800 and $1,123,000 as of December 31, 2021 and 2020, respectively. The outstanding balance of the facility was $947,333 and $1,106,894, as of December 31, 2021 and 2020, respectively.

The Company entered into a line of credit with Pancreta Bank on February 23, 2021. The line of credit is renewed annually with a current interest rate of 6.10%. The maximum borrowing allowed as of December 31, 2021 was $565,900. The outstanding balance of the facility as of December 31, 2021, was $489,985.

Interest expense for the year ended December 31, 2021 and 2020, was $283,415 and $270,655, respectively.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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 years ended December 31, 2021 and 2020, the Company was in compliance with these ratios and covenants.

The 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 €359,758 ($407,174) and €350,973 ($429,240) at December 31, 2021 and 2020, respectively of which $366,171 is classified as Lines of credit - long-term portion on the consolidated balance sheet.

Interest expense for the years ended December 31, 2021 and 2020 was $1,753 and $3,910, respectively.

NOTE 10 - CONVERTIBLE DEBT

A summary of the Company’s convertible debt during the years ended December 31, 2021 and 2020 is presented below:

|  | 2021 |  |  | 2020 |
Beginning balance convertible notes |  | $ | 1,447,000 |  |  | $ | 1,500,000 |
New notes |  |  | 625,000 |  |  |  | 540,000 |
Payments |  |  | (907,000 | ) |  |  | (593,000 | )
Conversion to common stock |  |  | (525,000 | ) |  |  | - |
Subtotal notes |  |  | 640,000 |  |  |  | 1,447,000 |
Debt discount at year end |  |  | (258,938 | ) |  |  | (494,973 | )
Convertible note payable, net of discount |  | $ | 381,062 |  |  | $ | 952,027 |

All of the convertible debt is classified as short-term within the consolidated balance sheet as it all matures and will be paid back within fiscal year 2022.

Securities Purchase Agreement executed on May 15, 2019

On May 15, 2019, the Company entered into a Securities Purchase Agreement with an institutional investor (the “Buyer”). Upon the closing of this financing, on May 17, 2019, the Company issued a Senior Convertible Note (the “May 2019 Note”) to the Buyer in the principal amount of $1,500,000.

The May 2019 Note provided that the Company will repay the principal amount of the May 2019 Note on or before March 15, 2020.

On March 23, 2020, the Company entered into a Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”).

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): (September 16, 2020 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date”), (b) during the Forbearance Period waive the prepayment premium to any Company Optional Redemption, and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to September 16, 2020. The Scheduled Required Prepayments are $100,000 upon signing the Agreement and five (5) monthly payments thereafter aggregating $200,000 with all amounts outstanding under the Note due on September 16, 2020. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers and directors and advisors of the Company) or factoring and purchase order indebtedness, the Company shall affect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.

On September 23, 2020, the Company entered into a Second Forbearance and Amendment Agreement (the “Agreement”) with an institutional investor (the “Buyer”). The Note was due to be paid in full on or before September 16, 2020 and was not paid (the “Existing Default”). The Note provides that upon an Event of Default, the Buyer may, among other things, require the Company to redeem all or a portion of the Note at a redemption premium of 120%, multiplied by the product of the conversion rate ($6.00 per share) and the then current market price.

The Agreement provides that the Buyer will (a) forbear (i) from taking any action with respect to the Existing Default and (ii) from issuing any demand for redemption of the Note on the basis of the Existing Default until the earlier of: (1): June 16, 2021 (or, if earlier, such date when all amounts outstanding under the Note shall be paid in full or converted into shares of Common Stock in accordance therewith) and (2) the time of any breach by the Company of the Agreement or the occurrence of an Event of Default that is not an Existing Default (the “Forbearance Expiration Date), (b) during the Forbearance Period (as defined) waive the prepayment premium to any Company Optional Redemption (which will result in the 120% redemption premium effectively replaced with 100%), and (c) during the Forbearance Period, waive the repayment in full of the Note other than the Required Payments (as defined) prior to June 16, 2021. The Scheduled Required Prepayments are $63,000 upon signing the Agreement and eight (8) monthly payments thereafter aggregating $480,000 with the remaining $607,000 outstanding under the Note due on June 16, 2021. In addition, there are mandatory prepayments in the event the Company completes a Subsequent Placement (as defined) or long-term debt (other than from the Buyer or from officers, directors and 10% or greater shareholders of the Company) or factoring and purchase order indebtedness, the Company shall affect a Company Optional Redemption amount equal to 50% of the gross proceeds (less reasonable expenses of counsel and any investment bank) together with all Scheduled Required Payments.

On 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.

The May 2019 Note is convertible at any time by the Holder into 250,000 shares of common stock, par value $0.001 per share at the rate of $6.00 per share, subject to adjustment (the “Conversion Price”). Upon an Event of Default (regardless of whether such event has been cured), the Buyer may convert at an alternative conversion price equal to the lower of the then applicable Conversion Price or seventy-five (75%) percent of the then Volume-Weighted Average Price (as defined, the “VWAP”). The Company considered the need for the conversion feature to be bifurcated under ASC 815 and determined that it does not meet the requirements. Additionally, the Company determined the effective conversion rate under ASC 470-20 and determined that the instrument is out of the money and no beneficial conversion feature was recorded.

The May 2019 Note is senior in right of payment to all other existing and future indebtedness of the Company except Permitted Senior Indebtedness (as defined in the May 2019 Note), including $12 million of senior secured indebtedness of the Company and its subsidiaries under an existing senior loan agreement, plus defined amounts of purchase money indebtedness in connection with bona fide acquisitions.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

The May 2019 Note includes customary Events of Default and provides that the Buyer may require the Company to redeem (regardless of whether the Event of Default has been cured) all or a portion of the Note at a redemption premium equal to the greater of: (i) the product of the redemption premium of one hundred twenty-five (125%) percent, multiplied by the conversion amount, and (ii) the product of the conversion rate ($6.00 per share) multiplied by the product of 125% multiplied by the then current market price. The Buyer may also require redemption of the May 2019 Note upon a Change of Control (as defined) at a premium of one hundred twenty-five (125%) percent. The Company has the right to redeem the May 2019 Note at any time, in whole or in part, in cash at a price equal to 120% of the then outstanding conversion amount.

Conversion of the May 2019 Note is subject to a blocker provision which prevents any holder from converting the May 2019 Note into shares of common stock if its beneficial ownership of the common stock would exceed 9.99% of the Company’s issued and outstanding common stock.

During the year ended December 31, 2020, the Company repaid $593,000 such that as of December 31, 2020, the Company had a principal balance $907,000 on the May 2019 Note and the Company had accrued $15,420 in interest expense. During the year ended December 31, 2021, the Company repaid all outstanding principal and accrued interest on the May 2019 Note.

Roth Capital Partners, LLC (“Roth”), as the Company’s exclusive placement agent, received a cash commission for this transaction equal to six (6%) percent of the total gross proceeds of the offering. This 6% fee or $90,000 was recorded as debt discount along with the $30,000 in legal fees associated with the May 2019 Note. These fees will be amortized over the term of the note. $29,509 was amortized during the year ended December 31, 2020 resulting in the full amortization of the fees.

December 21, 2020 Securities Purchase Agreement

On December 21, 2020 (the “Issue Date”), Cosmos Holdings, Inc. (“Cosmos”, the “Borrower” or the “Company”) entered into a convertible promissory note with Platinum Point Capital, LLC (the “Holder”, “Lender” or “Platinum”) 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) 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 in the SPA) or (iii), an Event of Default (collectively, the “Maturity Date”).

On July 14, 2021, August 16, 2021 and December 21, 2021 the Company converted an aggregate total of $525,000 in principal and $25,144 in accrued interest and fees into 213,382 shares of the Company’s common stock at an average price per share of $2.58. As of December 31, 2021, the Company had a principal balance of $15,000 and had accrued $6,568 in interest expense. Upon conversion, the 213,382 shares were issued at a fair value of $959,024 which was recorded as equity. Accordingly, upon conversion, the Company reduced its outstanding debt by $550,144, reduced its derivative liability by $284,169, and recorded a loss on extinguishment of $124,711.

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 determined a beneficial conversion feature and derivative liability exists because The Company measured the beneficial conversion feature’s intrinsic value on December 16, 2020, and determined that the embedded derivative was valued at $456,570 which was recorded as a debt discount, and together with the original issue discount and transaction expenses of $43,000, in the aggregate of $499,570, is being amortized over the life of the loan. For the years ended December 31, 2021 and 2020, $494,973 and $4,597, respectively, of the debt discount has been amortized. As of December 31, 2021 and 2020, the fair value of the derivative liability was $5,822 and $460,728, respectively. The Company recorded a decrease in the derivative of $284,169 related to the conversions, which was recorded to additional paid-in capital. For the year ended December 31, 2021, the Company recorded a gain of $170,737 and for the year ended December 31, 2020 the Company recorded a loss of $4,158 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss).

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

January 7, 2021 Subscription Agreement

On January 7, 2021 (the “Issue Date”), the Company entered into a subscription agreement with an unaffiliated third party, whereby the Company issued for a purchase price of $100,000 in principal amount, a convertible promissory note. The note bears an interest rate of 8% per annum and matures on the earlier of (i) consummation of the Company listing its common shares on the NEO Stock Exchange or (ii) October 31, 2021.

Upon the consummation of a NEO listing, the total principal and accrued interest outstanding on the note will convert into shares of the Company’s common stock at a 25% discount to the prices of the common shares sold in the financing to be conducted in conjunction with the NEO listing. In the event that a NEO listing is not consummated on or before October 31, 2021, the note holder will have the option, in part or in full, to have the note repaid with interest, or convert the note into Company common stock at a 25% discount to the 30-day volume-weighted average price of the Common Shares on the most senior stock exchange in North American on which the common shares are trading prior to conversion. As of September 30, 2021, the Company had a principal balance of $100,000 and had accrued $5,736 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 the year ended December 31, 2021, $62,619 of the debt discount has been amortized. As of December 31, 2021, the fair value of the derivative liability was $39,843 and for the year ended December 31, 2021, the Company recorded a gain of $22,776 from the change in fair value of derivative liability as other income in the consolidated statements of operations and comprehensive income (loss).

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 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. 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. For year ended December 31, 2021, $60,063 of the debt discount has been amortized. As of December 31, 2021, the Company had accrued a principal balance of $525,000, had accrued $15,166 in interest expense, and had remaining debt discount of $258,937 which resulted in a net convertible note payable of $266,063.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

Securities Purchase Agreement

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 December 31, 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. The SPA automatically terminated on March 31, 2022.

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 years ended December 31, 2021 and 2020:

|  | Amount |
Balance on January 1, 2020 |  | $ | - |
Issuances to debt discount |  |  | 456,570 |
Change in fair value of derivative liabilities |  |  | 4,158 |
Balance on December 31, 2020 |  |  | 460,728 |
Issuances to debt discount |  |  | 62,619 |
Reduction of derivative related to conversions |  |  | (284,169 | )
Change in fair value of derivative liabilities |  |  | (193,513 | )
Balance on December 31, 2021 |  | $ | 45,665 |

The fair value of the derivative conversion features and warrant liabilities as of December 31, 2021 and 2020 were calculated using a Monte-Carlo option model valued with the following assumptions:

|  | December 31, |  |  | December 31, |
|  | 2021 |  |  | 2020 |
Dividend yield |  |  | 0 | % |  |  | 0 | %
Expected volatility |  | 106.8%-107.3 | % |  | 140.4%-142.5 | %
Risk free interest rate |  | 0.41%-0.44 | % |  | 0.11%-0.12 | %
Contractual terms (in years) |  | 0.50 - 0.52 |  |  | 1.00 - 1.04 |

NOTE 11 - DEBT

A summary of the Company’s third-party debt during the years ended December 31, 2021 and 2020 is presented below:

December 31, 2021 |  | Loan Facility |  |  | Trade Facility |  |  | Third Party |  |  | COVID Loans |  |  | Total |
Beginning balance |  | $ | 3,302,100 |  |  | $ | 6,446,000 |  |  | $ | 12,631,284 |  |  | $ | 435,210 |  |  | $ | 22,814,594 |
Proceeds |  |  | - |  |  |  | - |  |  |  | 565,900 |  |  |  | - |  |  |  | 565,900 |
Payments |  |  | (141,475 | ) |  |  | (57,835 | ) |  |  | (62,878 | ) |  |  | (3,233 | ) |  |  | (265,421 | )
Conversion of debt |  |  | (1,606,500 | ) |  |  | - |  |  |  | (3,010,000 | ) |  |  | - |  |  |  | (4,616,500 | )
Recapitalized upon debt modification |  |  | (86,670 | ) |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (86,670 | )
Debt forgiveness |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (169,770 | ) |  |  | (169,770 | )
Foreign currency translation |  |  | (167,671 | ) |  |  | (181,155 | ) |  |  | (46,329 | ) |  |  | (28,090 | ) |  |  | (423,245 | )
Subtotal |  |  | 1,299,784 |  |  |  | 6,207,010 |  |  |  | 10,077,977 |  |  |  | 234,117 |  |  |  | 17,818,888 |
Notes payable - long-term |  |  | - |  |  |  | (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 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

December 31, 2020 |  | Loan Facility |  |  | Bridge Loans |  |  | Trade Facility |  |  | Third Party |  |  | COVID Loans |  |  | Total |
Beginning balance |  | $ | 3,078,442 |  |  | $ | 191,287 |  |  | $ | 6,245,400 |  |  | $ | 2,514,595 |  |  | $ | - |  |  | $ | 12,029,724 |
Proceeds |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 16,121,500 |  |  |  | 435,210 |  |  |  | 16,556,710 |
Payments |  |  | - |  |  |  | (191,287 | ) |  |  | - |  |  |  | (5,006,115 | ) |  |  | - |  |  |  | (5,230,725 | )
Conversion of debt |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (807,795 | ) |  |  |  |  |  |  | (807,795 | )
Debt extinguishment |  |  | (12,066 | ) |  |  | - |  |  |  | - |  |  |  | (192,205 | ) |  |  | - |  |  |  | (204,271 | )
Foreign currency translation |  |  | 269,047 |  |  |  | - |  |  |  | 200,600 |  |  |  | 1,304 |  |  |  | - |  |  |  | 470,951 |
Subtotal |  |  | 3,302,100 |  |  |  | - |  |  |  | 6,446,000 |  |  |  | 12,631,284 |  |  |  | 435,210 |  |  |  | 22,814,594 |
Notes payable - long-term |  |  | (2,843,475 | ) |  |  | - |  |  |  | (2,384,850 | ) |  |  | (5,543,557 | ) |  |  | - |  |  |  | (10,771,882 | )
Notes payable - short-term |  | $ | 458,625 |  |  | $ | - |  |  | $ | 4,061,150 |  |  | $ | 7,087,727 |  |  | $ | 435,210 |  |  | $ | 12,042,712 |

Our outstanding debt as of December 31, 2021 is repayable as follows:
|  | December 31, 2021 |
2022 |  | $ | 5,549,174 |
2023 |  |  | 11,709,951 |
2024 |  |  | 264,255 |
2025 |  |  | 268,724 |
2026 and thereafter |  |  | 113,454 |
Total debt |  |  | 17,905,558 |
Less: fair value adjustments to assumed debt obligations |  |  | (86,670 | )
Less: notes payable - current portion |  |  | (5,462,504 | )
Notes payable - long term portion |  | $ | 12,356,384 |

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 SkyPharm 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 10th 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 $3,772,446 of principal and accrued interest was written off and the new debt was recorded at fair value as of June 30, 2020 in the amount of $3,033,990. For the year ended December 31, 2020, the Company recorded a gain on extinguishment of debt in the amount of $749,824, of which $12,066 related to the principal of the loans and the balance related to the accrued interest. As of December 31, 2020, the Company has accrued interest expense of $33,021 and the principal balance of the debt is $3,302,100, of which $2,843,475 is classified as Notes payable - long term portion on the consolidated balance sheet.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

On August 4, 2021, the Company entered into an exchange agreement 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 Nasdaq to settle $1,190,000 (€1,000,000) of debt. The Company issued these shares subsequent to December 31, 2021 (see Note 17)

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 loss upon extinguishment in the amount of $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 December 31, 2021, the Company has accrued interest expense of $4,414 and the principal balance of the debt is $1,299,784, which is classified as Notes payable on the consolidated balance sheet.

The debt is subject to acceleration in an Event of Default (as defined in the Notes). This agreement is secured by a personal guaranty of Grigorios Siokas, which is secured by a pledge of 1,000,000 shares of common stock of the Company owned by Mr. Siokas.

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 on the USD balance.

The USD $4,000,000 loan matured on August 31, 2021. On March 3rd 2022, the Company entered into an extension to the facility agreement (See Note 17). Based on the updated repayment terms, the facility’s final repayment date was extended to January 2023.

On December 30, 2020, the Company transferred the Euro €2,000,000 loan to a new third-party lender. The terms remained the same except interest will now accrue at 5.5% per annum plus Euribor. The principal is to be repaid in a total of five quarterly installments beginning October 31, 2021 of 50,000 Euro each with a final repayment of 1,800,000 Euro payable on the earlier of 24 months after December 30, 2020 or October 31, 2022.

As of December 31, 2020, the Company had principal balances of €2,000,000 ($2,446,000), of which $2,384,850 is classified as Notes payable - long term portion on the consolidated balance sheet, and $4,000,000 under the agreements and the Company had accrued $402 and $16,185 respectively, in interest expense related to these agreements. During the year ended December 31, 2021, the Company repaid $56,508 of the €2,000,000 balance such that as of December 31, 2021, the Company had principal balances of €1,950,000 ($2,207,010) and $4,000,000 under the agreements, of which $2,450,000 is classified as notes payable-long term on the consolidated balance sheet and the Company had accrued $10,466 and $104,220 respectively, in interest expense related to these agreements.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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. During the year ended December 31, 2020, the Company repaid €5,000 ($5,862) of this loan. As of December 31, 2020, the Company had an outstanding principal balance of €8,000 ($9,784) and accrued interest of €4,785 ($5,852). As of December 31, 2021, the Company had an outstanding principal balance of €8,000 ($9,054) and accrued interest of €6,318 ($7,151).

Conversion of Senior Promissory Notes

In the year ending December 31, 2019, the Company executed Senior Promissory Notes (the “Debt”) in an aggregate total of $2,500,000 to an unaffiliated third-party lender (the “Lender”). In the year ended December 31, 2020, the Company executed additional Senior Promissory Notes to an unaffiliated third-party lender in an aggregate principal total of $510,000. As of December 31, 2020, the Company had an aggregate principal balance of $3,010,000 on this Debt and the Company had accrued $527,604 in interest expense. On 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 December 31, 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.

February 25, 2020 Senior Promissory Note

On February 25, 2020, the Company executed a Senior Promissory Note (the “February Note”) in the principal amount of $1,000,000 payable to an unaffiliated third-party lender. The February Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The February Note matured on April 30, 2020.

The February Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the February Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the February Note. The Company was not in default at that time. The Company also repaid all accrued interest related to the February Note.

May 5, 2020 Senior Promissory Note

On May 5, 2020, the Company executed a Senior Promissory Note (the “May 5 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $1,000,000. The May 5 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 5 Note matured on December 31, 2020.

The May 5 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 5 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 5 Note. The Company also repaid the accrued interest related to this note.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

May 8, 2020 Senior Promissory Note

On May 8, 2020, the Company executed a Senior Promissory Note (the “May 8 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender who had previously loaned the Company $3,000,000. The May 8 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 8 Note matured on June 8, 2020.

The May 8 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the May 8 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. In July 2020, the Company used a portion of the proceeds from the July 3, 2020 senior promissory note to repay the principal of the May 8 Note. The Company also repaid the accrued interest related to this note.

May 18, 2020 and July 3, 2020 Senior Promissory Notes

May 18, 2020 Senior Promissory Note

On May 18, 2020, the Company executed a Senior Promissory Note (the “May 18 Note”) in the principal amount of $2,000,000 payable to an unaffiliated third-party lender. The May 18 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The May 18 Note matured on December 31, 2020. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023 (See Note 17).

The May 18 Note is subject to acceleration in an Event of Default. Grigorios Siokas, the Company’s CEO, personally

guaranteed repayment of the May 18 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection. As of December 31, 2021 and 2020, 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.

July 3, 2020 Senior Promissory Note

On July 3, 2020, the Company executed a Senior Promissory Note (the “July 3 Note”) in the principal amount of $5,000,000 payable to an unaffiliated third-party lender. The July 3 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The July 3 Note matures on June 30, 2022 unless in default. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023 (See Note 17).

The July 3 Note is subject to acceleration in an Event of Default (as defined). Grigorios Siokas, the Company’s CEO, personally guaranteed repayment of the July 3 Note. The guaranty is unconditional and irrevocable and constitutes a guaranty of performance and of payment when due, and not just of collection.

The Company used the proceeds from the July 3 Note to repay the principal outstanding on the May 5 Note ($2,000,000), the May 8 Note ($2,000,000), and the February Note ($1,000,000). As of December 31, 2021 and 2020, the Company had a principal balance of $5,000,000 on this note, which is classified as Notes payable - long term portion on the consolidated balance sheet.

As of December 31, 2021 and 2020, the Company had accrued an aggregate total of $210,574 and $148,685, respectively, in interest expense related to these loans.

August 4, 2020 Senior Promissory Note

On August 4, 2020, the Company executed a Senior Promissory Note (the “August 4 Note”) in the principal amount of $3,000,000 payable to an unaffiliated third-party lender. The August 4 Note bears interest at the rate of eighteen (18%) percent per annum, paid quarterly in arrears. The August 4 Note matured on December 31, 2020. On February 23, 2022, the Company entered into an allonge with the lender extending the maturity date to June 30, 2023 (See Note 17).

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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 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 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 $60,166 in accrued interest expense.

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 with the first payment due 9 months from the first deposit. As of December 31, 2020, the Company had no accrued interest and a principal balance of €500,000 ($611,500), of which $543,557 is classified as Notes payable - long term portion on the consolidated balance sheet. During the year ended December 31, 2021, the Company repaid €55,556 ($62,878) of the principal and as of December 31, 2021, the Company has accrued interest of $5,642 related to this note and a principal balance of €444,444 ($503,022), of which $377,270 is classified as Notes payable - long term portion on the consolidated balance 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 commencing three months from the end of the grace period. As of December 31, 2021, the Company has accrued interest of $3,100 and a principal balance of €500,000 ($565,900), of which $477,637 is classified as Notes payable - long term portion on the consolidated balance sheet.

COVID-19 Government Loans

On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted and on May 22, 2020 the Company received a €300,000 ($366,900) loan from the Greek government. The loan will be repaid in 40 equal monthly installments beginning on January 1, 2022 and bears an interest rate of 0.94% per annum. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020. 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 was $169,770.

On June 24, 2020, the Company received a loan £50,000 ($68,310) from the United Kingdom government. The loan has a six-year maturity and bears interest at a rate of 2.5% per annum beginning 12-months after the initial disbursement. The Company may prepay this loan without penalty at any time. The Company repaid £2,335 ($3,233) of principal during the year ended December 31, 2021, and the balance as of December 31, 2021 was £47,665 ($64,347).

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

Distribution and Equity Agreement

As discussed in Note 2 above, the Company entered into a Distribution and Equity Acquisition Agreement with Marathon. The Company was appointed the exclusive distributor of the Products (as defined) initially throughout Europe and on a non-exclusive basis wherever else lawfully permitted. As consideration for its services, Company received: (a) a 33 1/3% equity interest or 5 million shares in Marathon as partial consideration for the Company’s distribution services; and (b) received cash of CAD $2,000,000, subject to repayment in Common Shares of the Company if it fails to meet certain performance milestones. The Company is entitled to receive an additional CAD $2,750,000 upon the Company’s receipt of gross sales of CAD $6,500,000 and an additional CAD $2,750,000 upon receipt of gross sales of CAD $13,000,000.

As discussed in Note 2, the Company attributed no value to the shares received in Marathon pursuant to (a) above. In relation to the CAD $2 million cash received noted in (b) above, the Company accounted for its obligation to issue a variable number of the Company’s Common Shares as Share-settled debt obligation in accordance with ASC 480 measured at fair value or the settlement amount of $1,554,590 (CAD $2 million). If settlement were to occur on December 31, 2021, the Company would be required to issue 431,270 common shares to settle its debt obligation. The Company could be obligated to potentially issue an unlimited number of common shares to settle its Share-settled debt obligation. If such events were to occur, the Company would be required to increase its authorized share capital and since increasing the authorized share capital is within the control of the Company, as our CEO controls greater than 50% of the outstanding common stock of the Company, the original classification of equity-classified financial instruments issued by the Company were not affected.

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

NOTE 12 - LEASES

The Company has various lease agreements with terms up to 10 years, comprising leases of office space. Some leases include options to purchase, terminate or extend for one or more years. These options are included in the lease term when it is reasonably certain that the option will be exercised.

The assets and liabilities from operating and finance leases are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company’s secured incremental borrowing rates or implicit rates, when readily determinable. Short-term leases, which have an initial term of 12 months or less, are not recorded on the balance sheet.

The Company’s operating leases do not provide an implicit rate that can readily be determined. Therefore, we use a discount rate based on our incremental borrowing rate, which is determined using the interest rate of our long-term debt on the date of inception.

The Company’s weighted-average remaining lease term relating to its operating leases is 6.6 years, with a weighted-average discount rate of 6.74%.

The Company incurred lease expense for its operating leases of $260,664 and $188,400 which was included in “General and administrative expenses,” for the years ended December 31, 2021 and 2020, respectively.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s operating leases as of December 31, 2021.

Maturity of Lease Liability |  |  |
2022 |  | $ | 211,538 |
2023 |  |  | 182,316 |
2024 |  |  | 111,026 |
2025 |  |  | 111,026 |
2026 and thereafter |  |  | 418,723 |
Total undiscounted operating lease payments |  | $ | 1,034,629 |
Less: Imputed interest |  |  | (200,164 | )
Present value of operating lease liabilities |  | $ | 834,465 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

The Company’s weighted-average remaining lease term relating to its finance leases is 3.2 years, with a weighted-average discount rate of 6.74%.

The following table presents information about the amount, timing and uncertainty of cash flows arising from the Company’s finance leases as of December 31, 2021:

Maturity of Lease Liability |  |  |
2022 |  | $ | 85,231 |
2023 |  |  | 72,849 |
2024 |  |  | 55,765 |
2025 |  |  | 27,744 |
2026 and thereafter |  |  | 4,211 |
Total undiscounted finance lease payments |  | $ | 245,800 |
Less: Imputed interest |  |  | (24,321 | )
Present value of finance lease liabilities |  | $ | 221,479 |

The Company had financing cash flows used in finances leases of $92,105 and $85,804 for the years ended December 31, 2021 and 2020, respectively.

The Company incurred interest expense on its finance leases of $11,576 and $13,759 which was included in “Interest expense,” for the years ended December 31, 2021 and 2020, respectively. The Company incurred amortization expense on its finance leases of $97,270 and $123,533 which was included in “Depreciation and amortization expense,” for the years ended December 31, 2021 and 2020, respectively.

NOTE 13 - COMMITMENTS AND CONTINGENCIES

Legal Matters

From time to time, the Company may be involved in litigation relating to claims arising out of the Company’s operations in the normal course of business. As of December 31, 2021 and 2020, there were no pending or threatened lawsuits, other than the May Debt Exchange transaction disclosed in Note 8, that could reasonably be expected to have a material effect on the results of the Company’s operations.

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 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.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

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 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 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.

NOTE 14 - EARNINGS PER SHARE

Basic net income (loss) per share is computed by dividing net income (loss) attributable to the Company, decreased with respect to net income or increased with respect to net loss by dividends declared on preferred stock by using the weighted-average number of common shares outstanding. The dilutive effect of incremental common shares potentially issuable under outstanding options, warrants and restricted shares is included in diluted earnings per share in 2021 and 2020 utilizing the treasury stock method. The computations of basic and diluted per share data were as follows:

|  | 2021 |  |  | 2020 |
Numerator for Basic and Diluted Earnings Per Share: |  |  |  |  |  |
Net income (loss) |  | $ | (15,594,682 | ) |  | $ | 820,786 |
Denominator for Basic Earnings Per Share: |  |  |  |  |  |  |  |
Weighted Average Shares |  |  | 16,423,335 |  |  |  | 13,270,097 |
Potentially Dilutive Common Shares |  |  | - |  |  |  | 37,698 |
Adjusted Weighted Average Shares |  |  | 16,423,335 |  |  |  | 13,307,795 |
Basic and Diluted Net Income (Loss) per Share |  |  | (0.95 | ) |  |  | 0.06 |

The following table summarized the potential shares of common stock that were excluded from the computation of diluted net loss per share for the years ended December 31, 2021 and 2020 as such shares would have had an anti-dilutive effect:

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

|  | 2021 |  |  | 2020 |
Common Stock Warrants |  |  | 3,567,827 |  |  |  | - |
Common Stock Options |  |  | 37,000 |  |  |  | - |
Convertible Debt |  |  | 218,977 |  |  |  | - |
Total |  |  | 3,823,804 |  |  |  | - |

NOTE 15 - STOCK OPTIONS AND WARRANTS

As of December 31, 2021, there were 37,000 options outstanding and 37,000 options exercisable with expiration dates of January 2022.

A summary of the Company’s option activity during the years ended December 31, 2021 and 2020 is presented below:

|  |  |  |  |  |  |  | Weighted |  |  |  |
|  |  |  |  | Weighted |  |  | Average |  |  |  |
|  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  | Number of |  |  | Exercise |  |  | Contractual |  |  | Intrinsic |
Options |  | Shares |  |  | Price |  |  | Term |  |  | Value |
Balance Outstanding, January 1, 2020 |  |  | 74,000 |  |  | $ | 1.32 |  |  |  | 1.47 |  |  | $ | 64,800 |
Granted |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | (12,000 | ) |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance Outstanding, December 31, 2020 |  |  | 62,000 |  |  | $ | 1.19 |  |  |  | 0.60 |  |  | $ | 242,200 |
Granted |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Expired |  |  | (25,000 | ) |  |  | - |  |  |  | - |  |  |  | - |
Balance Outstanding, December 31, 2021 |  |  | 37,000 |  |  | $ | 1.32 |  |  |  | 0.01 |  |  | $ | 75,850 |
Exercisable, December 31, 2021 |  |  | 37,000 |  |  | $ | 1.32 |  |  |  | 0.01 |  |  | $ | 75,850 |

As of December 31, 2021, there were 3,698,238 warrants outstanding and 3,698,238 warrants exercisable with expiration dates from May 2023 through March 2024.

Warrant Anti-Dilution Adjustment and Deemed Dividend

The Company’s warrants outstanding contain certain anti-dilution adjustments if the Company issues shares of its common stock at a lower price per share than the applicable exercise price of the underlying warrant. If any such dilutive issuance occurs prior to the exercise of such warrant, the exercise price will be adjusted downward to a price equal to the common stock issuance, and the number of warrants that may be purchase upon exercise is increased proportionately so that the aggregate exercise price payable under the warrant shares shall be the same as the aggregate exercise price in effect immediately prior to such adjustment. On December 21, 2021, the Company issued its common stock upon conversion of its convertible debt at an issuance price of $2.02 per share. As a result, the Company issued additional warrants to the Company’s existing warrant holders to purchase 2,533,565 shares of common stock with an exercise price of $2.02 per share. The new warrants were issued with a weighted average contractual term of 2.04 years. The deemed dividend was recorded as an increase to accumulated deficit and additional paid-in capital and reduced net income available to common shareholders by the same amount. The Company valued (a) the fair value of the warrants immediately before the re-pricing in the amount of $1,915,077, (b) the fair value of the warrants immediately after the re-pricing in the amount of $9,548,110, and (c) recorded the difference as deemed dividend in the amount of $7,633,033. The warrants were valued using the Black-Scholes option pricing model using the following terms: a) fair value of common stock of $3.75, b) exercise prices of $5.00, $6.00 and $7.50 before re-pricing, c) exercise price of $2.02 after re-pricing, d) terms of 1.40 years, 1.97 years, 2.20 years and 2.26 years, e) dividend rate of 0%, and f) risk free interest rate of 0.41%.

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

A summary of the Company’s warrant activity for the years ending December 31, 2021 and 2020 is as follows:

|  |  |  |  |  |  |  | Weighted |  |  |  |
|  |  |  |  | Weighted |  |  | Average |  |  |  |
|  |  |  |  | Average |  |  | Remaining |  |  | Aggregate |
|  | Number of |  |  | Exercise |  |  | Contractual |  |  | Intrinsic |
Warrants |  | Shares |  |  | Price |  |  | Term |  |  | Value |
Balance Outstanding, January 1, 2020 |  |  | 1,164,673 |  |  | $ | 6.41 |  |  |  | 4.01 |  |  | $ | - |
Granted |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance Outstanding, December 31, 2020 |  |  | 1,164,673 |  |  | $ | 6.41 |  |  |  | 3.01 |  |  | $ | 5,360 |
Granted |  |  | 2,533,565 |  |  |  | 2.02 |  |  |  | 2.04 |  |  |  | - |
Forfeited |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Exercised |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Expired |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Balance Outstanding, December 31, 2021 |  |  | 3,698,238 |  |  | $ | 2.02 |  |  |  | 2.03 |  |  | $ | 4,992,621 |
Exercisable, December 31, 2021 |  |  | 3,698,238 |  |  | $ | 2.02 |  |  |  | 2.03 |  |  | $ | 4,992,621 |

NOTE 16 - DISAGGREGATION OF REVENUE

ASC 606-10-50-5 requires that entities disclose disaggregated revenue information in categories (such as type of good or service, geography, market, type of contract, etc.). ASC 606-10-55-89 explains that the extent to which an entity’s revenue is disaggregated depends on the facts and circumstances that pertain to the entity’s contracts with customers and that some entities may need to use more than one type of category to meet the objective for disaggregating revenue.

The Company disaggregates revenue by country to depict the nature and economic characteristics affecting revenue. The following table presents our revenue disaggregated by country for the years ended:

Country |  | 2021 |  |  | 2020 |
Croatia |  | $ | 18,441 |  |  | $ | 24,840 |
Cyprus |  |  | 112,640 |  |  |  | 36,987 |
Denmark |  |  | 53,710 |  |  |  | 537,098 |
France |  |  | - |  |  |  | 18,988 |
Germany |  |  | 13,370 |  |  |  | 1,314,381 |
Greece |  |  | 55,564,240 |  |  |  | 51,259,784 |
Ireland |  |  | - |  |  |  | 36,349 |
Italy |  |  | 15,446 |  |  |  | 75,183 |
Jordan |  |  | - |  |  |  | 29,635 |
Libya |  |  | - |  |  |  | 1,028 |
Netherlands |  |  | - |  |  |  | 188,890 |
Poland |  |  | - |  |  |  | 29,358 |
UK |  |  | 461,820 |  |  |  | 1,853,816 |
Total |  | $ | 56,239,667 |  |  | $ | 55,406,337 |

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COSMOS HOLDINGS, INC.

Notes to the Consolidated Financial Statements

December 31, 2021

NOTE 17 - SUBSEQUENT EVENTS

Extension of Maturity Dates on Existing Promissory Notes

On February 23, 2022, the Company entered into allonges to extend the maturity dates of existing Senior Promissory Notes to June 30, 2023 (See Note 11).

Security Purchase Agreement - Preferred Stock

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 $1,000.00 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 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.

Settlement of Debt

On February 28, 2022, the Company issued 238,000 shares of common stock upon the triggering event which was approval of the listing of the Company’s common stock to the Nasdaq to settle $1,190,000 (€1,000,000) of debt.

Extension to Debt Agreement

On March 3rd 2022, the Company’s wholly-owned subsidiary, SkyPharm SA, signed an extension to the facility agreement dated on May 12th 2017 relating to the USD $4,000,000 loan. Based on the updated repayment terms the facility’s final repayment date was extended to January 2023 (see Note 11).

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PART II - INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth all expenses to be paid by Cosmos Holdings Inc. (the “Registrant”) in connection with the sale of the common stock being registered. The security holders will not bear any portion of such expenses. All amounts shown are estimates except for the registration fee.

SEC registration fee |  |  | 4,559.00 |
Legal fees and expenses |  |  | 45,000.00 |
Accounting fees and expenses |  |  | 15,000.00 |
Printing expenses |  |  | 1,500.00 |
Other (including transfer agent and registrar fees) |  |  | 1,000.00 |
Total |  | $ | 67,059.00 |

Item 14. Indemnification of Directors and Officers

We have not entered into separate indemnification agreements with any of our directors or officers. The Nevada Revised Statutes provide us with the power to indemnify any of our directors and officers. The director or officer must have conducted himself/herself in good faith and reasonably believe that his/her conduct was in, or not opposed to, our best interests. In a criminal action, the director or officer must not have had reasonable cause to believe his/her conduct was unlawful.

Under applicable sections of the Nevada Revised Statutes, advances for expenses may be made by agreement if the director or officer affirms in writing that he/she believes he/she has met the standards and will personally repay the expenses if it is determined the officer or director did not meet the standards.

Our Bylaws include certain indemnification provisions under which we are required to indemnify any of our current or former directors or officers against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, actually and reasonably incurred by him or them including an amount paid to settle an action or satisfy a judgment inactive criminal or administrative action or proceeding to which he is or they are made a party by reason of his or her being or having been a director of the Company. In addition, our Articles of Incorporation provide that the no director or officer of the Company shall be personally liable to the Company or any of its stockholders for damages for breach of fiduciary duty as a director or officer involving any act or omission of any such director or officer; provided, however, that these provisions do not eliminate or limit the liability of a director or officer (i) for acts or omissions which involve intentional misconduct, fraud or knowing violation of the law, or (ii) the payment of dividends in violation of Section 78.300 of the Nevada Revised Statutes.

At present, there is no pending litigation or proceeding involving any of our directors or officers regarding which indemnification is sought, nor are we aware of any threatened litigation that may result in claims for indemnification.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted for our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event a claim for indemnification against such liabilities (other than payment by us for expenses incurred or paid by a director, officer or controlling person of ours in successful defense of any action, suit, or proceeding) is asserted by a director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction, the question of whether such indemnification by it is against public policy in the Securities Act and will be governed by the final adjudication of such issue.

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Item 15. Recent Sales of Unregistered Securities

The following information sets forth certain information with respect to all unregistered securities which we have sold during the last three years:

| 1. | On May 1, 2022 the Company issued 39,339 shares of common stock to convert $26,515 principal and accrued interest in accordance with a convertible promissory note issued to Platinum Point Capital LLC. Following the conversion, the outstanding balance of the above Note is $0.
| 2. | On February 28, 2022, we issued 6,000 shares of Series A Convertible Preferred Stock (“Series A Shares”), at a price of $1,000.00 per share, and warrants to purchase up to 2,000,000 shares of common stock, or the Warrants, for aggregate gross proceeds of approximately $6 million.
| 3. | On February 28, 2022, we issued 238,000 shares of common stock upon the conversion of $1,190,000 of notes payable. We recorded $973,420 as a capital contribution and an increase in equity related to the conversion of the $1,190,000 reduced by $216,580 recorded as a gain upon extinguishment of debt upon modification. The $216,580 gain upon extinguishment was determined using the fair value of the Company of $4.09 per share at the extinguishment commitment date.
| 4. | On December 8, 2021 we issued 125,000 shares of common stock to Grigorios Siokas, our Chief Executive Officer, upon the conversion of the remaining $750,000 balance of the $2,000,000 note originally issued to Mr. Grigorios Siokas.
| 5. | On September 17, 2021, we issued a convertible promissory note to a lender in the principal amount of $525,000 for a purchase price of $500,000. The note is convertible into shares of common stock at a conversion price equal to 70% of the average volume weighted average price of the common stock for the ten (10) trading days prior to the date of conversion, subject to a floor of $3.00.
| 6. | On August 4, 2021, pursuant to a debt exchange agreement, we issued 321,500 shares of common stock to a lender in exchange for the repayment of €1,350,000 principal amount of loans made to us.
| 7. | On July 19, 2021, pursuant to the terms of a debt exchange agreement, we issued 208,333 shares of common stock to Grigorios Siokas in exchange for the repayment of $1,250,000 of loans made by Mr. Siokas to us.
| 8. | On July 13, 2021, pursuant to a debt exchange agreement, we issued to Grigorios Siokas 166,667 shares of common stock in exchange for the repayment of $1,000,000 of loans by Mr. Siokas to us.
| 9. | On June 23, 2021, pursuant to a debt exchange agreement, we issued 500,000 shares of common stock to Grigorios Siokas, in exchange for $3,000,000 of existing loans by Mr. Siokas to the Company.
| 10. | On February 5, 2021, pursuant to a debt exchange agreement, we issued 781,819 shares of common stock in exchange for an aggregate of $3,010,000 principal amount of existing loans made by a lender to us.
| 11. | On October 29, 2020, pursuant to a debt exchange agreement, we issued 259,741 shares of common stock in exchange for an aggregate of $1,000,000 principal amount of an existing loan made by a lender to us.
| 12. | On June 24, 2019, pursuant to a debt exchange agreement, we issued 73,334 shares of common stock to Grigorios Siokas, in exchange for $550,000 of existing loans by Mr. Siokas to us.
| 13. | On May 28, 2019, pursuant to a debt exchange agreement, we issued 66,667 shares of common stock to Grigorios Siokas in exchange for $500,000 of existing loans by Mr. Siokas to the Company.
| 14. | On May 15, 2019, pursuant to a securities purchase agreement, we issued a senior convertible note in the principal amount of $1,500,000.

Unless otherwise set forth above, we believe each of these transactions was exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act (and Regulation D promulgated thereunder) as transactions by an issuer not involving any public offering.

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Item 16. Exhibits and Financial Statement Schedules

Exhibit No. |  | Document Description
2.1 |  | Share Exchange Agreement by and among Prime Estates and Developments Inc. and Amplerissimo dated September 27, 2013 (14)
3.1 |  | Amended and Restated Articles of Incorporation of the Registrant (1)
3.2 |  | Correction to Certificate of Designations of Rights and Preferences of Series A Convertible Preferred Stock dated February 24, 2022 (2)
3.3 |  | Amended and Restated Bylaws of the Registrant (1)
4.1 |  | Form of Securities Purchase Agreement dated November 15, 2017 by and among Cosmos Holdings Inc. and the Buyers listed (10)
4.2 |  | Form of Senior Convertible Note (10)
4.3 |  | Form of Warrant to Purchase Common Stock (10)
4.4 |  | Form of Leak-Out Agreement (10)
4.5 |  | Form of Registration Rights Agreement (10)
4.6 |  | Form of Amendment and Exchange Agreement (12)
4.7 |  | Form of Senior Convertible Note (12)
4.8 |  | Common Stock Purchase Warrant issued to Roth Capital Partners (11)
4.9 |  | Securities Purchase Agreement dated September 4, 2018, by and among Cosmos Holdings Inc. and the Buyers listed (15)
4.10 |  | Senior Convertible Note dated September 4, 2017 issued to Hudson Bay Master Fund (15)
4.11 |  | Senior Convertible Note dated September 4, 2018 issued to Alto Opportunity Master Fund, SPC-Segregated Master Portfolio B (15)
4.12 |  | Warrant dated September 4, 2018 issued to Hudson Bay Master Fund (15)
4.13 |  | Warrant dated September 4, 2018 issued to Alto Opportunity Master Fund, SPC-Segregated Master Portfolio B (15)
4.14 |  | Registration Rights Agreement dated September 4, 2018 (15)
4.15 |  | Leak-Out Agreement dated September 4, 2018 between Cosmos Holdings Inc. and Hudson Bay Master Fund (15)

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4.16 |  | Leak-Out Agreement dated September 4, 2018 between Cosmos Holdings Inc. and Alto Opportunity Master Fund, SPC-Segregated Master Portfolio B (15)
4.17 |  | Common Stock Purchase Warrant dated September 4, 2017 issued to Roth Capital Partners LLC (15)
4.18 |  | Form of Second Amendment and Exchange Agreement (20)
4.19 |  | Form of Senior Convertible Note (20)
4.20 |  | Stock Purchase Agreement dated as of February 18, 2019 between Alto Opportunity Master Fund SPC, Segregated Master Portfolio B and the Registrant (25)
5.1** |  | Opinion re legality
10.1 |  | Stock Purchase Agreement, dated November 4, 2015, by and between Grigorios Siokas and Dimitrios S. Goulielmos (3)
10.2 |  | Loan Facility Agreement, dated as of August 4, 2016, by and among SkyPharm S/A, Grigorios Siokas, as Guarantor and Synthesis Peer to Peer Income Fund. (4)
10.3 |  | Pledge Agreement, by and between Grigorios Siokas and Synthesis Peer-to Peer Income Fund (4)
10.4 |  | First Deed of Amendment relating to Loan Facility Agreement, dated as of August 4, 2016, by and among Sky Pharm S.A., as Borrower, Grigorios Siokas, as Guarantor and Synthesis Peer-to Peer Income Fund (5)
10.5 |  | Intellectual Property Sale Agreement, dated as of October 1, 2016, by and among the Company, Anastasios Tsekas and Olga Parthenea Georgatsou (6)
10.6 |  | Amended and Restating Loan Facility Agreement, dated as of March 23, 2017, by and among SkyPharm S.A., as Borrower, Grigorios Siokas, as Guarantor and Synthesis Peer-to Peer Income Fund, as Lender (7)
10.7 |  | Trade Finance Facility Offer Letter, dated as of April 10, 2017, by and between Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (8)
10.8 |  | Trade Finance Facility Agreement, dated as of April 10, 2017, by and between Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (8)
10.9 |  | Cross Guarantee and Indemnity Agreement, dated as of April 10, 2017, by and among Cosmos Holdings Inc., Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (8)
10.10 |  | Security Assignment of Receivables and other Contractual Rights, dated as of April 10, 2017, by and between Decahedron Ltd. and Synthesis Structured Commodity Trade Finance Limited. (8)
10.11 |  | Trade Finance Facility Agreement, dated May 12, 2017 by and between SkyPharm S.A and Synthesis Structured Commodity Finance Limited. (9)

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10.12 |  | Cross Guarantee and Indemnity Agreement dated May 12, 2017 by and between SkyPharm S.A., as Commodity Buyer, Cosmos Holdings Inc. as Guarantor and Synthesis Structured Commodity Trade Finance Limited (9)
10.13 |  | Security Assignment of Receivables and other Contractual Rights, dated May 12, 2017 by and between SkyPharm S.A and Synthesis Structured Commodity Trade Finance Limited (9)
10.14 |  | Distribution and Equity Acquisition Agreement Effective as of March 19, 2018 by and between Cosmos Holdings, Inc. and Marathon Global Inc. (13)
10.15 |  | First Amendment to Share Exchange Agreement dated May 24, 2018 (16)
10.16 |  | Stock Purchase Agreement dated as of June 23, 2018 by and among Cosmofarm Ltd., Deepdae Holdings Ltd. and Cosmos Holdings Inc. (17)
10.17 |  | Share Exchange Agreement dated as of June 26, 2018 with Marathon Global Inc. (18)
10.18 |  | Share Purchase Agreement dated September 30, 2018 by and between Cosmos Holdings Inc. and Abbydale Management Ltd. (52)
10.19 |  | Further Amendment dated October 17, 2018 to Supplemental Deed dated May 16, 2018 by and among SkyPharm S.A., Cosmos Holdings Inc. and Synthesis Structured Commodity Trade Finance Limited (21)
10.20 |  | Form of Third Amendment and Exchange Agreement (22)
10.21 |  | Form of Exchange Warrant (22)
10.22 |  | Form of Leak-Out Agreement (22)
10.23 |  | Amendment dated as of December 19, 2018 to Stock Purchase Agreement dated as of June 23, 2018 by and among Cosmofarm Ltd., Deepdae Holding Ltd. and Cosmos Holdings Inc. (23)
10.24 |  | Promissory Note dated December 19, 2018 from Cosmos Holdings Inc. to Deepdae Holding Ltd. (23)
10.25 |  | Stock Purchase Agreement dated as of February 5, 2019 (24)
10.26 |  | Stock Purchase Agreement dated as of February 18, 2019 (25)
10.27 |  | Amendment dated as of December 19, 2018 to Stock Purchase Agreement dated as of June 23, 2018 by and among Cosmofarm Ltd., Deepdae Holding Ltd. and Cosmos Holdings Inc. filed with Form 8-K on December 20, 2018 (23)
10.28 |  | Promissory Note dated December 19, 2018 from Cosmos Holdings Inc. to Deepdae Holding Ltd. filed with Form 8-K on December 20, 2018 (23)
10.29 |  | Form of Senior Promissory Note (26)
10.30 |  | Form of Guaranty Agreement (26)

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10.31 |  | Assumption Contract for the Design, Development and Production of Dietary Supplements dated March 10, 2017 by and between SkyPharm and Doc Pharma S.A. (27)
10.32 |  | Form of Securities Purchase Agreement by and Among Cosmos Holdings Inc and the Buyer (28)
10.33 |  | Form of Senior Convertible Note (28)
10.34 |  | Debt Exchange Agreement dated May 28, 2019 (29)
10.35 |  | Debt Exchange Agreement dated June 24,2019 (30)
10.36 |  | Form of Forbearance and Amendment Agreement (31)
10.37 |  | Form of Senior Promissory Note dated May 5, 2020 for $2,000,000 (32)
10.38 |  | Form of Senior Promissory Note dated May 8, 2020 for $2,000,000 (32)
10.39 |  | Form of Senior Promissory Note dated May 18, 2020 for $2,000,000 (33)
10.40 |  | Form of Senior Promissory Note dated July 3, 2020 for $5,000,000 (33)
10.41 |  | Agreement dated June 30, 2020 by and among Synthesis Peer-to-Peer Income Fund, Sky Pharm S.A. and Grigorios Siokas (33)
10.42 |  | Second Forbearance and Amended Agreement dated September 23, 2020 by and between Hudson Bay Master Fund Ltd. and the Registrant (34)
10.43 |  | Advisory Agreement dated October 8, 2020 by and between the Registrant and PGS Ventures B.V. (35)
10.44 |  | Advisory Agreement dated October 5, 2020 by and between Greg Siokas and PGS Ventures B.V. (36)
10.45 |  | Advisory Agreement dated October 5, 202 by and between the Registrant and PGS Ventures B.V (36)
10.46 |  | Senior Promissory Note dated August 4, 2020 for $3,000,000 (37)
10.47 |  | Employment Agreement dated January 1, 2019 by and between the Registrant and Georgios Terzis (37)
10.48 |  | Debt Exchange Agreement dated December 21, 2020 by and among the Registrant, Grigorios Siokas and an unaffiliated lender (39)

10.49 |  | Debt Exchange Agreement dated October 29, 2020 by and among the Registrant, Grigorios Siokas and an unaffiliated lender (40)
10.50 |  | Amended and Restated Debt Exchange Agreement dated as of February 5, 2021 (41)
10.51 |  | Consulting Agreement dated as of February 5, 2021 by and between the Registrant and an unaffiliated consultant (42)
10.52 |  | Addendum to Consulting Agreement dated as of February 5, 2021 by and between the Registrant and an unaffiliated consultant (42)
10.53 |  | Debt Exchange Agreement dated May 10, 2021 by and between the Registrant and Grigorios Siokas (43)
10.54 |  | Third Forbearance and Amendment Agreement dated June 18, 2021 by and between Hudson Bay Master Fund Ltd. and the Registrant (44)
10.55 |  | Debt Exchange Agreement dated June 23, 2021 by and between the Registrant and Grigorios Siokas (45)
10.56 |  | Debt Exchange Agreement dated July 13, 2021 by and between the Registrant and Grigorios Siokas (46)
10.57 |  | Convertible Promissory Note dated July 20, 2021 payable to Grigorios Siokas (47)

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10.58 |  | Debt Exchange Agreement dated August 4, 2021 by and between a senior institutional lender, the Registrant, SkyPharm S.A. and Grigorios Siokas (48)
10.59 |  | Capital Market Advisory Agreement dated as of July 1, 2021 and Exchange Listing LLC (49)
10.60 |  | Form of Securities Purchase Agreement dated as of September 17, 2021 (50)
10.61 |  | Form of Registration Rights Agreement dated as of September 17, 2021 (50)
10.62 |  | Form of Convertible Promissory Note (50)
10.63 |  | Form of Warrant to Purchase Common Stock (51)
10.64 |  | Form of Securities Purchase Agreement dated February 2022 (51)
10.65 |  | Form of Registration Rights Agreement (51)

14.1 |  | Code of Ethics (19)
16.1 |  | Letter from Malone Bailey LLP dated January 23, 2019 (35)
21 |  | List of Subsidiaries (53)
23.1* |  | Consent of Armanino LLP
23.2** |  | Consent of Carmel Millazo & Feil LLP (included in Exhibit 5.1)
24.1* |  | Power of attorney (included on the signature page)

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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*
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.*
107* |  | Calculation of SEC Filing Fee Table.

_________________

* | Filed herewith
** | To be filed by amendment
(1) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 12, 2021.
(2) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 1, 2022.
(3) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 9, 2015.
(4) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on August 16, 2016.
(5) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on September 16, 2016.
(6) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on October 5, 2016.
(7) | Incorporated by reference to the Current Report on Form 8-K/A filed by the Registrant on March 28, 2017.
(8) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on April 14, 2017.
(9) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on May 18, 2017.
(10) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on November 16, 2017.
(11) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on December 27, 2017.
(12) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on February 21, 2018.
(13) | Incorporated by reference to the Current Report on Form 8-K filed by the Registrant on March 19, 2018.
(14) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 3, 2013.
(15) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 5, 2018.
(16) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 31, 2018.
(17) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 26, 2018.
(18) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 19, 2018.
(19) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on April 17, 2018.
(20) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 27, 2018.

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(21) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 19, 2018.
(22) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 13, 2018.
(23) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 21, 2018.
(24) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 6, 2019.
(25) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on February 19, 2019.
(26) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 4, 2019.
(27) | Incorporated by reference to Registration Statement on Form S-1/A (No. 333-222061) filed by the Registrant on January 31, 2018.
(28) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 16, 2019.
(29) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on May 28, 2019.
(30) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2019.
(31) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 23, 2020.
(32) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 15, 2020.
(33) | Incorporated by reference to the filing of the Current Report on Form 10-Q filed by the Registrant on August 13, 2020.
(34) | Incorporated by reference to the filing of the Report on Form 8-K filed by the Registrant on September 24, 2020.
(35) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on October 21, 2020.
(36) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 13, 2020.
(37) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on November 16, 2020.
(38) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on November 17, 2020.

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(39) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on December 22, 2020.
(40) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 11, 2021.
(41) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 2, 2021.
(42) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on April 8, 2021.
(43) | Incorporated by reference to the filing of the Quarterly Report on Form 10-Q filed by the Registrant on May 17, 2021.
(44) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 21, 2021.
(45) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on June 25, 2021.
(46) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 14, 2021.
(47) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on July 27, 2021.
(48) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on August 10, 2021.
(49) | Incorporated by reference to the filing of the Current Report on Form 10-Q filed by the Registrant on August 16, 2021.
(50) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on September 21, 2021.
(51) | Incorporated by reference to the filing of the Current Report on Form 8-K filed by the Registrant on March 1, 2022.
(52) | Incorporated by reference to the filing of the Company’s Current Report on Form 8-K filed by the Registrant on October 4, 2018
(53) | Incorporated by reference to the filing of the Annual Report on Form 10-K filed by the Registrant on May 18, 2022.

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ITEM 17. UNDERTAKINGS

(a) The undersigned registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

(i) to include any prospectus required by Section 10(a)(3) of the Securities Act;

(ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent No more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” exhibit to the effective registration statement; and

(iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement;

provided, however, that paragraphs (i), (ii) and (iii) do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in reports filed with or furnished to the SEC by the registrant pursuant to Section 13 or Section 13 or Section 15(d) or the Exchange Act that are incorporated by reference in the registration statement, or is contained in a form of prospectus filed pursuant to Rule 424(b) that is part of the registration statement.

(2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

(4) That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b)(3) shall be deemed to be part of a registration statement relating to an offering and shall be deemed to be part of and included in the registration statement. Each prospectus filed pursuant to Rule 424(b)(3) or (b)(7), as part of a registration statement in reliance on Rule 430(b) relating to an offering pursuant to Rule 415(a)(1)(i), (vii) or (x) for the purpose of providing the information required by Section 10(a) of the Securities Act of 1933, shall be deemed to be part of and included in the registration statement as of the earlier of the date it is first used after effectiveness or the date of the first Contract of Sale of such securities in the Offering described in this prospectus. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first effective date, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

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(5) That, for the purpose of determining any liability under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

(i) Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424 (§ 230.424 of this chapter);

(ii) Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant;

(iii) The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and,

(iv) Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser.

(b) (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(6) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on May 25, 2022.

| COSMOS HOLDINGS INC. |
| By: | /s/ Grigorios Siokas |
|  | Grigorios Siokas Chief Executive Officer |

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Grigorios Siokas and Konstantinos Vassilopoulos,, as his or her true and lawful attorneys-in-fact and agent, with full power of substitution and resubstitution , for him or her and in his or her name, place and stead, in any and all capacities, to sign the Registration Statement on Form S-1 of Cosmos Holdings Inc. and any or all amendments (including post-effective amendments) thereto and any new registration statement with respect to the offering contemplated thereby filed pursuant to Rule 462(b) of the Securities Act of 1933, as amended, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises hereby ratifying and confirming all that said attorneys-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE |  | TITLE |  | DATE
/s/ Grigorios Siokas |  | Chairman and Chief Executive Officer (principal executive officer) |  | May 25, 2022
Grigorios Siokas |  |  |
/s/ Georgios Terzis |  | Chief Financial Officer (principal financial and accounting officer) |  | May 25, 2022
Georgios Terzis |  |  |
/s/ Demetrios G. Demetriades |  | Director |  | May 25, 2022
Demetrios G. Demetriades |  |  |
/s/ Dimitrios Goulielmos |  | Director |  | May 25, 2022
Dimitrios Goulielmos |  |  |
/s/ John J. Hoidas |  | Director |  | May 25, 2022
John J. Hoidas |  |  |
/s/ Dr. Anastasios Aslidis |  | Director |  | May 25, 2022
Dr. Anastasios Aslidis |  |  |

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