Cosmos Health Inc.: Form 10-K for the period ended Dec 31, 2024

The Company

Cosmos Health Inc. was incorporated in 2009 in Nevada and is a diversified, vertically integrated global healthcare group, owner of proprietary pharmaceutical and nutraceutical brands, generics, manufacturer and distributor of healthcare products, engaged in research & development of innovative medicines and repurposing drugs as well as operator of a telehealth platform.

As a global company we are harnessing our expertise and stepping up innovation to continue the momentum behind the discovery, delivery, and expanded development of modern pharmaceutical and nutraceutical products.

Our Markets

We operate in the healthcare sector and particularly in the Pharmaceutical and Nutraceutical businesses. We cover vertically several process phases within the abovementioned sectors, such as research & development, manufacturing, marketing, sales and distribution of products and services. More specifically, we operate in generic medicines, nutraceuticals, biocides, medical devices, novel oncology drugs, drug repurposing and telehealth services.

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 we consider 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.

According to a study published by Towards Healthcare, the global generic drugs market was valued at $424.98 billion in 2024 and is projected to reach $874.63 billion by 2033, representing a Compound Annual Growth Rate (CAGR) of 8.35% throughout the forecasted period. The rise in patent expiration, increasing demand for cost-effective and efficient medicines and less complex approval process for generics drive the market growth.

The global nutraceuticals market size is calculated at USD 591.15 billion in 2024, grew to USD 636.31 billion in Q1 2025, and is projected to reach around USD 1,234 billion by 2034. The market is expanding at a CAGR of 7.64% between 2025 and 2034. This indicates a growing interest in products that promote wellness and help prevent illness. This shift towards focusing on preventive health is driving an increase in market demand.

According to the Towards Healthcare study, the global obesity & weight management market size is calculated at USD 163.13 billion in 2024 and is expected to be worth USD 362.1 billion by 2034, expanding at a CAGR of 8.3% from 2024 to 2034, driven by the increasing prevalence of obesity and its associated health risks, including diabetes, hypertension, and orthopedic conditions.

According to Future Market Insights, the global hospital disinfectant products and services market size is expected to reach $75.6 billion in value by 2033. This reflects a compound annual growth rate (CAGR) of 7.7% during the forecast period, with the EU and UK market playing a significant role.

According to Fortune Business Insights, the global oncology drugs market size was valued at USD 201.75 billion in 2023 and is projected to grow from USD 220.80 billion in 2024 to USD 518.25 billion by 2032, exhibiting a CAGR of 11.3% during the forecast period (2024-2032).

The global drug repurposing market size is anticipated to reach USD 30.1 billion by 2028, up from USD 24.5 billion in 2021, reflecting a CAGR of 2.9% over the 2022-2028 period. Drug repurposing, often referred to as re-profiling, is the process of identifying new therapeutic applications for approved and marketed drugs that have already been through safety and efficacy testing and has emerged as a key strategy by the vast majority of pharmaceutical and biopharmaceutical companies to fuel significant business expansion. Notably, between 2007 and 2009, 30-40% of all biologics approved in the U.S. were either repurposed or repositioned drugs.

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Growth Strategy

Our main strategy initiative is focused on continuing our progress in becoming a global healthcare company through the development of a lean, efficient and vertically integrated operating model, as well as, to expand our portfolio of our own branded nutraceutical and pharmaceutical products, grow our customer base and achieve our growth stabilization in this new market and gain an adequate size in the global pharmaceutical 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 the enhancement of our manufacturing capacities and building a multinational network or wholesalers, distributors, and pharmacies and simultaneously continuing to expand the portfolio of innovative 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.

In 2024, we continued to execute on the core elements of our “Growth Strategy”, which remains as follows:

• High Marking Segments: delivering on our growth areas and high-margin segments, we continued to show strong performance of our key proprietary brands such as Sky Premium Life® (“SPL”), Mediterranation® and C-Sept® / C-Scrub® with launches into new fast growing geographical regions.
• Generic Pharmaceuticals: focusing on our generic medicines’ capital with a view on a global commercial reach, focused portfolio and pipeline footprint, we continued to optimize our generics business and build a strong pipeline that will allow us to leverage our assets, know-how and sales network.
• Manufacturing of Pharmaceuticals: directing our manufacturing business by optimizing our production facilities and establishing a global footprint in the pharmaceutical fields of contract manufacturing organization (CMO) and contract development and manufacturing organization (CDMO).
• Global Networks, leveraging our extensive global network to access new markets and business segments, amplifying our reach and impact. We aim to expand and consort our sales distribution networks of our proprietary brands through strategic agreements in new regions and territories, such as the UAE and other GCC countries, Eastern Europe etc., while strengthening our market share in core markets.
• Corporate Reorganization: through vertical integration and efficiency, a corporate reorganization is underway to streamline costs and enhance asset and resource utilization through the integration of business units. A key component of this plan is to achieve operational efficiencies and economies of scale through organic growth and a cost optimization initiative aimed at significantly reducing recurring operating expenses and while maintaining the Company's growth outlook.
• Innovation: stepping up innovation through taken steps to deliver innovative products pipeline, by accelerating our R&D efforts on IP-driven products such as the CCX0722 obesity and weight management pill, CCDL24 an innovative treatment for gastrointestinal disorders, CNS, Prostate, Ovarian and Colorectal cancer treatments. Finally, our recently acquired AI-driven drug repurposing platform “Cloudscreen®”, aims to address major health challenges in various treatment areas.

We have made several strategic acquisitions of companies, products and technologies to complement our internal growth and expertise. These acquisitions have strengthened our core product technology infrastructure by providing additional manufacturing, marketing, and research and development capabilities, including the ability to manufacture our products, other product components and services.

Product Portfolio

Our product portfolio includes generics and over-the-counter (“OTC”) pharmaceutical products, innovative medicines, as well as nutraceuticals and biocides. This structure enables strong alignment and integration between manufacturing, operations, commercial regions, research & development and our global marketing and portfolio function, optimizing our product lifecycle across therapeutic areas and physical wellbeing.

Generic Medicines:

Generic medicines are the chemical and therapeutic equivalents of originator medicines and are typically more affordable in comparison to the originator’s products. Generic medicines are required to meet similar governmental requirements as their brand-name equivalents, such as those relating to current Good Manufacturing Practices (“GMP”), manufacturing processes and health authorities’ inspections, and must receive regulatory approval prior to their sale in any given country. Generic medicines may be manufactured and marketed if relevant patents on their brand-name equivalents (and any additional government-mandated market exclusivity periods) have expired.

We develop, manufacture and sell generic medicines in a variety of dosage forms, including tablets, capsules, liquids, ointments and creams.

Our portfolio of generic medicines includes: 1) ASTO-CHOL (Pravastatin); 2) Diorium (Omeprazole); 3) HEART-FREE (Clopidogrel); 4) the LIPICHOL (Atorvastatin); 5) Miltus (Donepezil); 6) Newzypra (Olanzapine); 7) the PNEUMO-KAST (Montelukast); 8) Sahar (Pioglitazone); 9) VIVALCID (Leucovorin); and 10) the Diabit-is (Sitagliptin). The table below presents all the generics, the medication uses purpose and the active ingredient of each product:

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Nutraceuticals

Nutraceuticals is referring to a broad range of products derived from food sources that provide health benefits in addition to their basic nutritional value. While nutraceuticals are not classified as drugs, they are often used for their therapeutic effects in a manner similar to pharmaceuticals.

Our proprietary nutraceutical brands are Sky Premium Life® (“SPL”) and Mediterranation®. Our portfolio currently includes around 165 SKUs and more specifically product codes such as Vitamins and Minerals, Amino Acids, Botanical and other Herbal extracts used for health prevention and care needs.

Our products are classified into two main categories, “Products per Benefit” and “Products per Nutrient” as follows:

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Biocides

Our proprietary portfolio of branded biocides and antiseptic soaps comprises of our brands C-Sept® and C-Scrub®. The biocide C-Sept Pro 2% has a broad-spectrum antimicrobial formulation that combines 76% Isopropyl Alcohol and 2% chlorhexidine digluconate as active substances. On the other hand, our antiseptic soap, C-Scrub Wash 4% CHG, contains chlorhexidine digluconate as its active antiseptic substance, which is approved by the World Health Organization for human use. The broad antimicrobial spectrum of C-Scrub Wash 4% CHG encompasses Gram-positive and Gram-negative microbes, fungi, and viruses, and its efficacy has been demonstrated in numerous published clinical studies. C-Scrub Wash 4% CHG significantly reduces bacterial load on the skin with long lasting.

Other Pharmaceutical Products:

Our portfolio of other pharmaceutical products includes brands such as:

• Melatonin Spray®;
• Otikon™; and
• Bio-bebe®.

Melatonin Spray®, is recommended for addressing insomnia and jet lag, offering a peaceful sleep. It is manufactured using nanonemulsification technology and primarily contains melatonin, a lipophilic molecule. To increase the absorption of such molecules, nanoemulsification is one of the most effective methods. The absorption of the ingredient increases proportionally with the reduction of the micelle diameter. The diameter of a nanoemulsion micelle ranges between 50 and 300nm.

Otikon™ ear drops, is a class II medical device in the form of ear drops for spray application and contains natural ingredients used to relieve ear pain, remove excess ear wax (cerumen) and improve hearing. The efficacy and safety of Otikon™ ear drops, or naturopathic drops, has been studied in children with ear pain associated with otitis media. Among other ingredients, it contains olive oil, mullein olive oil extract (Verbascum Thapsus), marigold oil extract (Calendula officinalis), St. John’s wort oil extract (Hypericum perforatum) and lavender oil (Lavandula officinalis).

Bio-bebe® is an organic infant care and nutrition brand. All product lines are made exclusively of 100% organic, high-quality ingredients, and are produced with minimal environmental impact. The range includes a variety of baby foods such as organic powder milk, pear, carrot and banana purée, pasta with minced meat, whole grain rice cereals, whole grain cereal porridges and organic rice creams with vanilla milk. Additional brand extensions include baby cosmetics, liquid dish soaps and detergents.

In line with our growth strategy, we are constantly evaluating and optimizing our products portfolio, including through the sale of certain product rights in our operating or entering areas.

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Below is an analysis per category of our inventory as of December 31, 2024:

Business Offerings

Manufacturing

By being licensed under European Good Manufacturing Practices (GMP) and certified by the European Medicines Agency (EMA), we are competent to produce our own pharmaceutical products as well as ramping up revenue generation from manufacturing to third parties. Our facilities can accommodate a wide range of pharmaceuticals products in the form of tablets, capsules, syrups, nasal sprays, creams, gels, ointments and a broad range of other products such as nutraceuticals, cosmetics, biocides, and medical devices.

Full Line Wholesaler

As a full line pharmaceutical wholesaler, we distribute a comprehensive range of pharmaceutical products, including prescription medications, over-the-counter (OTC) drugs, medical devices, food supplements, nutraceuticals, cosmetics and other healthcare products, to various businesses within the healthcare sector such as retail pharmacies, hospitals, private clinics and other wholesale pharmaceutical distributors.

We utilize the latest technology in pharmaceutical storage and retrieval systems to ensure the quality and accuracy of its distribution. Our facility utilizes robotic technologies such as ROWA™ and SSI SCHAEFER A-Frame to automate our processes in the inventory management, procurement, order execution and tracking. 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.

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We provide telehealth services through ZipDoctor, which is a direct-to-consumer subscription-based telemedicine platform that provides its customers affordable, unlimited, 24/7 access to board certified physicians and licensed mental and behavioural health counsellors and therapists. ZipDoctor’s online telemedicine platform is available to customers across the United States and offers English and Spanish coverage with virtual visits taking place either by telephone or through a secured video chat platform.

Drug Repurposing

Cloudscreen® (Cloudscreen) is a multimodal platform for drug repositioning and repurposing. It integrates both 1D and 3D data types into its AI algorithm, which thoroughly analyzes the druggable proteome and variome, offering accurate predictions for repurposing of existing drugs toward new indications. The platform is accompanied by in vitro validation for both toxicity and effectiveness.

Finding new therapeutic applications for previously researched drugs can offer patients quicker access to novel treatments. Such a strategy not only benefits developers by reducing time and costs but also retains the original IP protection. Especially for high-cost conditions like cancer, exploring anti-cancer potentials in a vast array of off-patent drugs, which have already established their safety profiles, is a powerful tactic preferred by most leading pharmaceutical enterprises.

We have built on promising preclinical discoveries, predictive insights, and simulations generated by Cosmos Health's AI-powered Cloudscreen® drug repurposing platform. Recent in vitro studies have validated the therapeutic potential of a repurposed marketed drug for both indications, with inventors establishing a novel mechanism of action unique to each of the following disease. For instance:

• Multiple sclerosis (MS) is a chronic autoimmune disorder that affects the central nervous system, leading to a broad spectrum of symptoms and potentially significant disability. According to the Atlas of MS, the global prevalence of MS has increased from 2.3 million individuals in 2013 to 2.9 million in 2023.
• Gliomas are a diverse group of primary brain and spinal cord tumors originating from glial cells. In oncology, gliomas account for approximately 30% of all central nervous system tumors and about 80% of all malignant brain tumors.
• Hematologic malignancies encompass a diverse group of cancers affecting the blood, bone marrow, and lymphatic system, including leukemia, lymphoma, and multiple myeloma. These diseases account for a significant portion of cancer diagnoses worldwide, with varying incidence rates across different regions.

Our patent application for multiple sclerosis was filed under application number N2039644, while the application pertaining to glioma was submitted under number N2039647. Additionally, a third application, focusing on hematologic malignancies including multiple myeloma was filed under number N2039645. All three applications were officially filed on February 10, 2025.

These advancements build on promising preclinical discoveries, predictive insights, and simulations generated by Cosmos Health's AI-powered Cloudscreen drug repurposing platform. Recent in vitro studies have validated the therapeutic potential of a repurposed marketed drug for both indications, with inventors establishing a novel mechanism of action unique to each cancer type.

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Research & Development

Our R&D activities are focused on novel medicines development activities that are World Intellectual Property Organization (“WIPO”) patented. Specifically, they includes preclinical assessment (including toxicology, pharmacokinetics, pharmacodynamics and pharmacology studies), clinical development (including pharmacology and the design, execution and analysis of global safety and efficacy trials), as well as regulatory strategy to deliver registration of our pipeline products. We develop novel innovative medicines in our core therapeutic and disease focus areas, such as CNS cancer, prostate, ovarian and colorectal cancer, and finally obesity and weight management.

In line with our growth strategy and our focus on internal growth that leverages our R&D capabilities, we have entered, and expect to pursue, in-licensing, acquisition, collaboration, funding and other partnership opportunities to supplement and expand our existing pipeline.

Obesity & Weight Management (CCX0722)

By employing novel amino acid-based cross-linkers, a series of water-absorbent polymeric networks, known as superabsorbent hydrogels (SAHs), our obesity product, CCX0722, has emerged as promising candidates for weight management and obesity. Spatial fillers are hydrophilic biopolymer grids capable of absorbing and retaining large amounts of water or biological fluids. CCX0722 is expected to reduce food intake by increasing satiety and reducing appetite. The product is being optimized in terms of its physicochemical properties and its effects on gut microflora through a series of in vitro studies and simulations

We are currently finalizing the scale-up production phase of CCX0722, paving the way for human clinical trials and targeting a market launch in the first or second quarter of 2026. Building on the successful completion of pilot production and previous development milestones, the Company is now actively engaging with contract research organizations (CROs) to complete the technical dossier, and clinical trials are set to be completed between the end of 2025 and the beginning of 2026. This strategic progress marks a critical step in positioning CCX0722 for regulatory submission and potential classification as a class III medical device.

CNS Cancer

We have acquired all rights arising from the patent filed with the WIPO under reference code PCT/EP2023/071865, related to CNS cancer treatment. The patent filing describes the repurposing of an existing drug to act on the Mucosa-associated lymphoid tissue lymphoma translocation protein 1 (MALT1), a key target in various diseases. This innovation proposes the use of the repurposed drug in addressing certain central nervous system (CNS) cancers, hematological cancers, allergic inflammation, and autoimmune diseases. Existing preclinical data are promising for the further development of these findings.

Prostate, Ovarian and Colorectal Cancers

The Company has secured buy-out rights and exclusive licensing for two patented anticancer drugs targeting, among others, prostate, ovarian, and colorectal cancers.

Both of these innovative anticancer therapies, developed through cutting-edge oncology research, are protected by international patents and set to commence Clinical Phase I trials. The first therapy is safeguarded by WIPO patent WO 2017/001439A1 and the second by WIPO patent WO 2018/011414 A1, with a focus on major markets such as the USA, EU, Canada, Japan, China, and Australia.

The innovation on the first novel drug development task provides novel hybrid esters of steroidal lactams and alkylating agents (LSEs, steroids that contain lactam group -NHC=O- into steroid ring/s conjugated with alkylating agents). The compounds are esters of steroidal lactams with derivatives of bis(2-chloroethyl) aminophenoxypropanoic acid. These compounds exhibit: 1. higher antitumor activity, 2. lower acute toxicity in comparison with non-lactam steroid alkylating esters and conventional alkylators.

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Through the important cytotoxic anticancer activity against several human cancer cell lines and tumor systems in vitro and in vivo and their well-tolerated toxicity, these new molecules seems to hold a quite unique multi-targeting profile of biological and pharmacological effects on tumor cells, fairly different of the conventional and currently used anticancer drugs.

With regard to the status of the studies, they have been conducted for the lead molecules: in silico studies, in vitro and in vivo evaluation, in 38 human cancer cell lines and in 14 human cancer xenograft models, optimized drug synthesis, acute toxicity evaluation in mice, primary pharmacokinetic (PK) study in mice.

On the other hand, novel pharmacologically active 1,2,4-triazolo-[3,4-b]-1,3,4-thiadiazole derivatives (TADs) were prepared and tested in vitro and in vivo for multi-targeted anticancer activity. TADs demonstrated: (1) High cytostatic and cytotoxic activity against human cancer cell lines, in vitro. (2) High antitumor effects against human tumor xenografts in vivo. (3) Well tolerated systemic toxicity and relatively low acute toxicities, in vivo. (3) High effectiveness against cancer cells resistant to chemotherapeutics as, platinum complexes (cisplatin, carboplatin, oxaliplatin), doxorubicin, irinotecan, paclitaxel). (4) High activity against colon and pancreatic cancer cells that bear K-RAS and/or TP53 mutations. (5) High effectiveness against hormone refractory prostate cancer. (6) High effectiveness against hormone-therapy resistant breast cancer. (7) They induce strong inhibition of phosphorylation and activity of Topoisomerase IIa. (8) They induce strong inhibition of PI3K-AKT-mTOR signal transduction cellular pathway. (9) High activity against tumors that bear KRAS, BRAF, MEK1, PIK3CA mutations. (10) Very high effectiveness against cancer tumors that present defective mismatch repair system (dMMR) with high microsatellite instability (MSI-H). (11) They significantly enhance microsatellite instability in MSI-H cancer cells, as well as in MSI stable (MSS) cancer cells. (12) They trigger the expression of PDL-1 on cancer cells, inducing a dose dependent increment of 80-100% in 2-4 days after treatment. In silico computational and primary in vitro and in vivo studies confirm that TADs act as multi-targeted agents with a novel panel of pharmacological activity.

Studies have been conducted for the lead molecules: In Silico studies, in Vitro and in vivo evaluation (in 28 human cancer cell lines and in 10 human cancer xenograft models), Optimized drug synthesis, Acute toxicity evaluation in mice.

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. No customer accounted for 10% or more of our total consolidated revenues during the years ended December 31, 2024 and 2023.

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 on 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 of 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. Our geographical market sales distribution of our total consolidated revenues during the years ended December 31, 2024 and 2023 are as follows:

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.

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Our competitors include other pharmaceutical companies, and 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.

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 our 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.

A main part of our business relates to 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 Greek government regulation that applies to our business requires the granting to our operating subsidiaries 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.

On July 22, 2015, the National Medicines Agency in Greece approved the license of wholesale sale of pharmaceutical products under the name SkyPharm SA with set validity at five years and an expiration date of July 22, 2020. Subsequently, on June 15, 2020, SkyPharm legally and timely submitted the application for renewal of the wholesale license of pharmaceutical products to the National Medicines Agency. The National Medicines Agency did not respond, therefore the Company asked for an immediate decision on the renewal. Two months after the filing of the no. 3459 / 15.01.2021 letter and almost nine months after the no. 627615.06.2020 company application for the renewal, 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 (Greek National Medicines Organization) to SkyPharm states that after an inspection of EOF at the premises of Doc Pharma, we did not have a wholesale license in violation of article 106 par. 1b and par. 1c of the ministerial decision D.YG3a / GP.32221 / 29-4-2019. The National Medicines Agency imposed a fine of €15,000 ($16,225) on SkyPharm for the above case, which was included in “General and administrative” expense on the accompany statement of operations and comprehensive loss for the 12-month period ended December 31, 2023.

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 subsidiary, Cana SA, is a holder of Good Manufacturing Practices license (GMP), which means that it is certified for fulfilling the minimum standards that a medicines manufacturer must meet in the production processes.

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.

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Research and Development

The Company entered into a Research & Development agreement with Doc Pharma S.A. on May 17, 2021. Under this agreement, 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®. More specifically, Doc Pharma is responsible for the product development and the Company has added 165 of such products codes in its portfolio as of December 31, 2024. The licenses purchased by Doc Pharma SA are capitalized and included in “Goodwill and intangible assets, net” of the Company’s Consolidated Balance Sheets as of December 31, 2024. Thus, no relevant R&D expense had been charged to the Company’s Consolidated Statements of Operations and Comprehensive Loss, concerning this agreement.

On June 25, 2022, the Company signed a research and development (“R&D”) agreement with a third party (CloudPharm PC), through which the Company assigned to the third party the development of new products and services in the field of health, focusing on the human intestinal microbiome. The project includes two phases. Phase 1 has a 20-month duration and its cost amounts to EUR 758,000 ($838,450) and phase 2, has a 22-month duration and a cost of EUR 820,000 ($907,084). The amount will be due and payable upon completion of the corresponding phases. The Company records the corresponding R&D expense based on the project’s progress, which is invoiced by the third party in the relevant period. For the 12-month periods ended December 31, 2024 and 2023, the Company incurred $0 and $164,859 of such costs respectively included in “Research and Development costs” in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

On January 23, 2024, the Company completed the acquisition of Cloudscreen, a cutting-edge Artificial Intelligence (AI) powered platform. The acquisition is pursuant to a purchase agreement announced on October 11, 2023. Cloudscreen is a multimodal platform specialized in drug repurposing, a process that involves uncovering new target proteins or indications for existing drugs for use in treating different diseases. The total purchase price amounted to $637,080 incorporating both cash and stock consideration. The platform is included in “Goodwill and intangible assets, net” in the Company’s Consolidated Balance Sheets.

On December 3, 2024, the Company entered into a Research Study Agreement with the National Hellenic Research Foundation (“NHRF” or the “Contractor”) for an in vitro study supporting modifications to an existing invention. This study is conducted under a prior agreement between the Company, NHRF, and CloudPharm PC, originally signed on June 15, 2022. Under the agreement, while conducting the study, NHRF will ensure scientific rigor, provide periodic updates, and maintain confidentiality. Cosmos Health will supply the necessary documentation and support to the research. Ownership of the research protocol is shared among CloudPharm PC, NHRF and Cosmos Health, while NHRF retains control over its methodologies. NHRF is prohibited from publishing findings without Cosmos Health’s approval or using the study for any other purpose. The total contract value is €60,000 plus VAT, payable in three installments. For the 12-month period ended December 31, 2024, the Company incurred €15,000 ($15,743) in costs related to this agreement, which were recorded under “Research and Development costs” in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

On December 6, 2024, the Company signed an Independent Contractor Agreement with a third-party contractor (the “Contractor”). The Contractor will provide oncology research and development services exclusively to the Company. The contract lasts three years (December 5, 2024 – December 5, 2027) and may be extended by mutual agreement. The Company may terminate the contract immediately for specific causes, including felony conviction, fraud, or loss of medical license. Either party may terminate the contract with a 30-day written notice. Certain compensation obligations will remain effective after termination. The monthly consideration to be paid to the Contractor is based on the commencement of the Clinical Trials (as defined in the agreement) and New Drugs Applications (as defined in the agreement) and additional cash and stock consideration is payable based on certain milestones. None of the milestones were met as of December 31, 2024, and thus the Company has incurred no expenses as of the end of the period.

On December 31, 2024, the Company signed an agreement with a related party, DocPharma SA (the “Licensor”), through which the Company obtained a royalty-bearing, exclusive worldwide license to actively commercialize the patents owned by the Licensor, through research and preclinical and clinical trials for the useful life of the patents, or for 20 years, whichever is longer. The patents, filed in 2016 and 2017 respectively, cover innovative treatments for cancer. The terms of the agreement include an initial payment of EUR 500,000 due by the end of 2024, followed by fixed annual payments of EUR 350,000 during the five-year Start-Up Term from 2025 to 2030. After the Start-Up Term, the Company will pay an 1.5% royalty on annual net sales of licensed products covered by an issued patent. Moreover, the Company retains an optional buy-out right for a total amount of EUR 7,500,000, which can be exercised with a 60 day-notice and a 60-day close period. The Company also has the right to sublicense the patents. For the 12-month period ended December 31, 2024, the Company incurred EUR 500,000 ($517,550) in royalties concerning this agreement, which were included in “Research and Development costs” in the Company’s Consolidated Statements of Operations and Comprehensive Loss.

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Distribution & Trade Agreements

On July 1, 2021, the Company’s subsidiary, SkyPharm SA, entered into an exclusive distribution agreement with a company based in Germany (“Distributor A”), whereas SkyPharm appointed 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 and Germany. Distributor A places purchase orders with SkyPharm at the company’s address and a purchase order is necessary to initiate any shipment.

On July 7, 2021, SkyPharm SA signed a trade agreement with a company specializing in e-commerce mall advice and operation (“Distributor B”). Based on the agreement, SkyPharm sells 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 provides platform operation services to SkyPharm. The services provided by Distributor B 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 and promotion of pharmaceutical products (“Distributor C”). Based on the agreement, Distributor C is appointed as the exclusive representative for the promotion and 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.

On September 22, 2022, the Company entered into a distribution agreement with a third party in order to become the distributor of Monkeypox Virus Real-Time PCR Detection Kits. Cosmos has exclusive distribution rights for Greece and Cyprus, with the opportunity to distribute the test kits across Europe on a non-exclusive basis.

On June 27, 2024, the Company signed an exclusive distribution agreement (the “Agreement”) with Pharmalink for its Sky Premium Life products in the UAE. As part of the Agreement, Pharmalink will be responsible for all key functions, including sales and marketing, regulatory affairs, logistics, supply, and distribution of Sky Premium Life® products in the UAE. Cosmos Health has secured its first purchase order from Pharmalink for 130,000 units and anticipates receiving orders of more than 500,000 units in the first year and in excess of 3,000,000 units over the next five years.

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 above 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 failed to meet certain performance milestones. The Company was 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.

The Distribution and Equity Acquisition Agreement was to remain in effect indefinitely unless Marathon fails to provide Market Competitive (as defined) product pricing and Marathon has not become profitable within five years of the agreement. On March 20, 2023, the Company sent a termination notice to Marathon, which became effective on April 19, 2023 as a result of Marathon’s failure to satisfy these conditions. The Company had accounted for its obligation to issue a variable number of the Company’s Common Shares as Share-settled debt obligation in accordance with ASC Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), which was measured at fair value or the settlement amount of $1,554,590 (CAD $2 million). Due to termination of the Distribution and Equity Acquisition Agreement, the Company recorded a gain on extinguishment of debt of $1,554,590 due to the write-off of the share settled debt obligation, for the 12-month period ended December 31, 2023.

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Employees & Human Capital

As of December 31, 2024, we had 149 full-time employees in total, of which 15 engaged in sales department, seven in procurement department, five in marketing department, 38 in warehouse services, 26 in logistics/transportation works, six in quality assurance, 12 in finance & accounting department, six in management, four in cleaning, nine in administration, 12 in call center, six in the R&D department and three in IT department. Our global workforce is comprised of the following ethnicities: 99% Caucasian and 1% Asian. Of those employees, 38% are female. 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.

Our human capital resources objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees. The principal purposes of our equity incentive plans are to attract, retain and motivate selected employees, consultants and directors through the granting of stock-based compensation awards and cash-based performance bonus awards.

Attracting and retaining top talent is an integral part to our success. We intentionally build a workforce of people with viewpoints and backgrounds as diverse as the customers we serve around Europe. As a responsibility to our team and in an evolving effort, we engage employees with meaningful careers and development opportunities to grow and succeed.

Available Information

Our internet address is https://www.cosmoshealthinc.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, proxy statements on Schedule 14D, 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 (http://www.sec.gov), under our Nasdaq ticker “COSM”.

The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company, however we describe below some of the risks we believe are material to our business. You should carefully consider the following risks in evaluating us and our business. You should also refer to the other information set forth in this report, including the information set forth in “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as in our consolidated financial statements and the related notes. Our business prospects, financial condition or results of operations could be adversely affected by any of the following risks.

Regulatory and Litigation Risks

Laws and regulations regarding our business may prohibit or restrict our ability to sell our products in some markets or require us to make changes to our business model in some markets. Our products, business practices and manufacturing activities are subject to extensive government regulations and could be subject to additional laws and regulations.

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Taxation and transfer pricing could adversely affect our results of operations and financial condition

We are subject to foreign tax and intercompany pricing laws, including those relating to the flow of funds between our U.S. parent company and our foreign subsidiaries. These pricing laws are designed to ensure that appropriate levels of income and expense are reported by our U.S. and foreign entities, and that they are taxed appropriately. Regulators in the United States and in foreign markets closely monitor our corporate structures, intercompany transactions, and how we effectuate intercompany fund transfers. Our effective tax rate could increase, and our results of operations and financial condition could be materially adversely affected if regulators challenge our corporate structures, transfer pricing methodologies or intercompany transfers. We are eligible to receive foreign tax credits in the United States for certain foreign taxes actually paid abroad. In the event any audits or assessments are concluded adversely to us, we may not be able to offset the consolidated effect of foreign income tax assessments through the use of U.S. foreign tax credits. Because the laws and regulations governing U.S. foreign tax credits are complex and subject to periodic legislative amendment, we may not be able to take advantage of any foreign tax credits in the future. In addition, changes in the amount of our total and foreign source taxable income may also limit our ability to take advantage of foreign tax credits in the future. The various customs, exchange control and transfer pricing laws are continually changing, and are subject to the interpretation of governmental agencies. We collect and remit value-added taxes and sales taxes in jurisdictions and states in which we have determined that nexus exists. Despite our efforts to be aware of and to comply with such laws and changes to the interpretations thereof, we may not be able to continue to operate in compliance with such laws. We may need to adjust our operating procedures in response to these interpretational changes, and such changes could have a material adverse effect on our results of operations and financial condition.

Changes in consumer behavior

Consumer behavior in recent years shows an increasing trend in the health-medicines sector, especially during the period of health crisis. It is observed that shopping habits and consumer behavior in general have changed since the coronavirus pandemic. The coronavirus pandemic and the responses thereto around the world could adversely impact our business and operating results. Consumers have turned to basic necessities and digital channels and e-commerce while physical networks are underperforming.

Management of further developments

In recent years, the Company has been steadily increasing its turnover, while expanding its range of products and its own branded nutraceutical products, has acquired the latest technology drug storage systems to ensure quality and accuracy (zero error rates) in their distribution. The further increase of the Company’s operations may lead, among other things, to increased capital needs, new investments in equipment and information systems, and requirements for capacity building. Failure to raise new capital will have a significant impact on the non-implementation of the required investments necessary to increase sales. Under these conditions, the growth of the Company’s activity, its financial results and its financial situation will be negatively affected.

Currency exchange rate fluctuations could adversely affect our results of operation and financial condition

In 2024, we recognized 100% percent of our net sales in markets outside the United States, the majority of which were recognized in each market’s respective local currency. We purchase inventory from companies in foreign markets, some of them in U.S. dollars. In preparing our financial statements, we translate net sales and expenses in foreign countries from their local currencies into U.S. dollars using average annual exchange rates. Because our sales are in foreign countries, exchange rate fluctuations may have a significant effect on net sales and earnings. Our reported earnings have been significantly affected by fluctuations in currency exchange rates, with net sales and earnings generally increasing with a weaker U.S. dollar and decreasing with a strengthening U.S. dollar.

Geopolitical issues, conflicts and other global events could adversely affect our results of operations and financial condition

Because our business is conducted outside of the United States, it is subject to global political issues and conflicts such as the current war in the Ukraine. Such political issues and conflicts could have a material adverse effect on our results of operations and financial condition if they escalate in areas in which we do business. In addition, changes in and adverse actions by governments in foreign markets in which we do business could have a material adverse effect on our results of operations and financial condition.

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Climate change and related legislation or regulations may adversely impact our business, including potential financial, operational and physical impacts.

The nature of our business has not required any material capital expenditures to comply with federal, state or local provisions enacted or adopted regulating the discharge of materials into the environment. No material capital expenditures to meet such provisions are anticipated. Such regulatory provisions did not have a material effect upon our results of operations or competitive position during the year ended December 31, 2024.

Cybersecurity risks and the failure to maintain the integrity of data could expose us to data loss, litigation and liability, which could adversely affect our results of operations and financial condition.

We collect and retain large volumes of data from employees and independent consultants, including credit card numbers and other personally identifiable information, for business purposes, including transactional and promotional purposes. Our various information technology systems enter, process, summarize and report such data. The integrity and protection of this data are critical to our business. We are subject to significant security and privacy regulations, as well as requirements imposed by the credit card industry. Similarly, a failure to adhere to the payment card industry’s data security standards could cause us to incur penalties from payment card associations, termination of our ability to accept credit or debit card payments, litigation and adverse publicity, any of which could have a material adverse effect on our business and financial condition. Maintaining compliance with these evolving regulations and requirements could be difficult and may increase costs. In addition, a penetrated or compromised data system or the intentional, inadvertent, or negligent release or disclosure of data could result in theft, loss or fraudulent or unlawful use of company, employee, consultant or guest data which could adversely affect our reputation, disrupt our operations, or result in remedial and other costs, fines or lawsuits, which could have a material adverse effect on our results of operations and financial condition. Although we take measures to protect the security, integrity and confidentiality of our data systems, we experience cyber-attacks of varying degrees and types on a regular basis. Our infrastructure may be vulnerable to these attacks, and in some cases, it could take time to discover them. Breaches of our data systems, or those of our vendors, whether from circumvention of security systems, denial-of-service attacks or other cyber-attacks, hacking, “phishing” attacks, computer viruses, ransomware or malware, employee or insider error, malfeasance, social engineering, vendor software supply chain compromises, physical breaches or other actions, could result in material interruptions or malfunctions in our or such vendors’ websites, applications, data processing, or disruption of other business operations. For various reasons or circumstances, our employees may work remotely from time to time. Additionally, outside parties may attempt to fraudulently induce employees, users, or customers to disclose sensitive information to gain access to our data or our users’ or customers’ data. Any such breach or unauthorized access could result in the unauthorized disclosure, misuse or loss of sensitive information and lead to significant legal and financial exposure, regulatory inquiries or investigations, loss of confidence by our sales force, disruption of our operations and damage to our reputation. These risks are heightened as we work with third-party partners and as our sales force uses social media, as the partners and social media platforms could be vulnerable to the same types of breaches.

We may be required to expend significant capital and other resources to protect against and remedy any potential or existing security breaches and their consequences. A cyber-attack could also lead to litigation, fines, other remedial action, heightened regulatory scrutiny and diminished customer confidence. In addition, our remediation efforts may not be successful, and we may not have adequate insurance to cover these losses. The unavailability of the information systems or the failure of these systems to perform as anticipated for any reason could disrupt our business and could have a material adverse effect on our business, results of operations, cash flows and financial condition. Moreover, cyber-attacks against the Ukrainian government and other countries in the region have been reported in connection with the recent conflicts between Russia and Ukraine. To the extent such attacks have collateral effects on global critical infrastructure, financial institutions or us, such developments could adversely affect our business, operating results and financial condition. At this time, it is difficult to assess the likelihood of such threat and any potential impact at this time.

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Inflation and rising interest rates in the EU

In December 2024, the EU annual inflation was at 2.4%, significantly lower, compared with 2023, when the annual inflation reached the highest level ever measured at 3.4%. The annual average change in the harmonized index of consumer prices (HICP) in the EU during the period 2015-2024 was 2.52%. The high inflation has adversely affected our business due to the higher costs of purchasing raw materials, the higher transportation costs and the significantly increased operating costs. Moreover, the significant rise in the interest rates during 2023 may also adversely affect our business since all of our loan facilities carry floating interest rates and this may cause increased financing outflows. In 2024 we noticed a slight decrease in the floating rates mostly affected by the interest rate cuts imposed by the Federal Reserve, however they are on average still significantly higher compared to all recent periods prior to 2023.

Inflation Reduction Act of 2022 in the U.S.

The U.S. Inflation Reduction Act of 2022 (the “IRA”), includes several provisions that may impact our business to varying degrees, including provisions that reduce the out-of-pocket spending cap for Medicare Part D beneficiaries from $7,050 to $2,000 starting in 2025, thereby effectively eliminating the coverage gap; impose new manufacturer financial liability on certain drugs under Medicare Part D, allow the U.S. government to negotiate Medicare Part B and Part D price caps for certain high-cost drugs and biologics without generic or biosimilar competition; require companies to pay rebates to Medicare for certain drug prices that increase faster than inflation; and delay until January 1, 2032 the implementation of the U.S. Department of Health and Human Services (HHS) rebate rule that would have limited the fees that pharmacy benefit managers can charge. Further, under the IRA, orphan drugs are exempted from the Medicare drug price negotiation program, but only if they have one rare disease designation and for which the only approved indication is for that disease or condition. If a product receives multiple rare disease designations or has multiple approved indications, it may not qualify for the orphan drug exemption. Although we do not have current sales in the United States, the effects of the IRA on any future business of ours and the healthcare industry in general is not yet known.

Development, regulatory approval & marketing of products

The discovery and development of drugs, vaccines and biological products are time consuming, costly and unpredictable. The outcome is inherently uncertain and involves a high degree of risk due to the following factors, among others:

• The process from early discovery to design and adequate implementation of clinical trials to regulatory approval can take many years and have high costs.
• We may have difficulties recruiting and enrolling patients for clinical trials on a consistent basis.
• Product candidates can and do fail at any stage of the process, including as the result of unfavorable pre-clinical and clinical trial results, or unfavorable new pre-clinical or clinical data and further analyses of existing pre-clinical or clinical data, including results that may not support further clinical development of the product candidate or indication.
• We may need to amend our clinical trial protocols or conduct additional clinical trials under certain circumstances, for example, to further assess appropriate dosage or collect additional safety data.
• We may not be able to meet anticipated pre-clinical or clinical endpoints, commencement and/or completion dates for our pre-clinical or clinical trials, regulatory submission dates, regulatory approval dates and/or launch dates.
• We may not be able to successfully address all the comments received from regulatory authorities such as the FDA and the EMA, or be able to obtain approval for new products and indications from regulators.

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Regulatory approvals of our products depend on myriad factors, including regulatory determinations as to the product’s safety and efficacy. In the context of public health emergencies like the COVID-19 pandemic, regulators evaluate various factors and criteria to potentially allow for marketing authorization on an emergency or conditional basis.

Additionally, clinical trial and other product data are subject to differing interpretations and assessments by regulatory authorities. As a result of regulatory interpretations and assessments or other developments that may occur during the review process, or even after a product is authorized or approved for marketing, a product’s commercial potential could be adversely affected by potential emerging concerns or regulatory decisions regarding or impacting the scope of indicated patient populations, labeling or marketing, manufacturing processes, safety issues and/or other matters, including decisions relating to emerging developments regarding potential product impurities. Finally, certain of our products have received and may in the future receive approvals under accelerated approval pathways where continued approval may be contingent upon confirmatory studies demonstrating the anticipated clinical benefit and/or safety profile.

The Company’s cybersecurity principles, goals and targets are defined in a policy approved by the Board of Directors (the “Policy”). This Policy is anchored in a risk-based approach based on industry standards to balance the level of cybersecurity against the risks faced by the Company. Material risks are managed by both internal resources and third-party contractors, with cybersecurity risk monitoring integrated into our overall risk management program. The Company believes that effective information security management is necessary for the secured sharing and protection of information within the Company’s cyberspace.

The Policy applies to all directors, officers, employees and contractors of the Company and any parent, holding companies and subsidiaries regardless of their contract terms, who use the Company’s technological devices.

The Board of Directors is responsible for leading the Company to minimize the risk of unauthorized and malicious use, disclosure, potential theft, alteration or damaging effects on the Company’s operations while concurrently enabling the sharing of information in cyberspace. The Board of Directors is committed to ensuring that risks to the confidentiality, integrity or availability of Company-owned information assets are managed appropriately by implementing an information security risk management approach.

The Audit Committee oversees the Policy and its implementation of the Company’s oversight, programs, procedures, and policies related to cybersecurity, cybersecurity risks, information security, and data privacy. Team leads from various departments of the Company have been identified under the Policy to report to the Company’s CFO overseeing the cybersecurity strategy as defined in the Policy.

The management team includes members with IT backgrounds and relevant experience to guide our cybersecurity efforts. Management ensures that employees are provided with adequate resources and training to fully understand cybersecurity guidelines and expectations. In the event of a Policy breach, members of the management team may be asked by the IT Department to assist with security investigations. If any member of management is unaware of the best course of action in dealing with an IT-related matter, the manager shall immediately contact the Company’s third-party IT representative. Upon discovering a potential violation of the Policy or a cybersecurity breach, the member of management must document the incident and request the individual surrender possession of any devices that may have suffered a security breach.

Additionally, the Company’s management reports to the Audit Committee on the Company’s and its subsidiaries’ strategies, risks, metrics and operations relating to cybersecurity and information security matters, including significant cybersecurity and information security-related projects and initiatives and related progress, the integration and alignment of such strategy with the Company’s overall business and strategy, and trends that may affect such strategy or operations.

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In 2024, we did not identify any cybersecurity threats that have materially affected or are reasonably likely to materially affect our business strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we have not experienced an undetected cybersecurity incident.

The Company rents and owns the below corporate offices and facilities:

• U.S. corporate office is located at 141 W. Jackson Blvd, Suite 4236, Chicago, Illinois 60604. The first rent lease commenced in 2015 and has been amended several times throughout the years. The last amendment to that lease was on March 20, 2023 through July 31, 2025. The monthly rate is currently $831 per month.
• Our Greece office and that of SkyPharm SA are located at 5 Agiou Georgiou Street, 55438, Pilea, Thessaloniki, Greece. The Company has signed a new lease for a three-year period which commenced on October 1, 2024 at the rate of €2,202 ($2,383) per month for this office.
• The offices of Decahedron are located at Unit 14 Spice Green Centre, Flex Meadow, Harlow, CM19 5TR, Essex, U.K. The commencement of the lease was on September 25, 2020 at the rate of ₤3,500 ($4,473) per month.
• The corporate offices of CANA SA are located at Konstantinoupoleos 19, 14122, Irakleio, Athens, Greece. The Company has a signed lease which is annually renewed. The monthly rate for this office amounts to €4,244 ($4,592). Additionally, CANA SA wholly owns a 54,000 sq. ft production facility located in Irekleio, Athens, Greece, which is s licensed under European Good Manufacturing Practices (GMP) and certified by the European Medicines Agency (EMA) for the manufacture of pharmaceuticals, food supplements, cosmetics, biocides, and medical devices.
• The offices of Cosmofarm are located at Gonata Stylianou 15, Peristeri, Attiki, Greece 12133. The Company purchased the building for a total sum of $1,054,872 in cash, on April 24, 2023.

Each of the above facilities is adequate for the Company’s current needs.

We are not aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our voting securities are adverse to us or have a material interest adverse to us.

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 Health 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.

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Overview

Summary

We are diversified, vertically integrated global healthcare group, owner of proprietary pharmaceutical and nutraceutical brands, generics, manufacturer and distributor of healthcare products, engaged in research & development of innovative medicines and repurposing drugs as well as operator of a telehealth platform. 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.

Revenue sources

Full Line Wholesaler

As a full line pharmaceutical wholesaler, we distribute a comprehensive range of pharmaceutical products, including prescription medications, over-the-counter (OTC) drugs, medical devices, food supplements, nutraceuticals, cosmetics and other healthcare products, to various businesses within the healthcare sector such as retail pharmacies, hospitals, private clinics and other wholesale pharmaceutical distributors.

Branded Pharmaceuticals & Generics

We are engaged in the production, promotion, distribution and sale of licensed branded generics and OTC products throughout Europe by our subsidiaries in Greece and UK. Our capital efficient business model is based on infrastructure, efficiency and scale. We believe that there is a significant growth on opportunities through product additions and geographic expansion.

Healthcare Distribution

We conduct direct distribution and sales of pharmaceuticals, medical devices, branded generics and OTC products. Our automated and GDP licensed distribution facilities ensure all medications reach their destination daily on an efficient and secure way. Our network exceeds over 1,500 pharmacies in Greece. We have created an upgraded and high-end distribution center in Greece due to our Robotic systems and integrated automations (“ROWA” robotics).

Nutraceutical

We have created and developed our own proprietary branded nutraceutical products, named “Sky Premium Life®” which was launched in 2018 and “Mediterranation®” which was launched in 2022. Utilizing unique formulations, and specialized extraction processes which follow strict pharmaceutical standards, our proprietary lines of nutraceuticals aim for excellence. We have a full portfolio of fast-moving and specialty formulas with more than 160 product codes including vitamins, minerals and other herbal extracts. Our nutraceutical products are manufactured exclusively by Doc Pharma. Our nutraceutical products have penetrated several markets within 2022 and 2023 through digital channels such as Amazon and Tmall. We focus on nutraceutical products because we foresee it as a market with high growth opportunities due to its large market size and margin contribution as the demand for nutraceutical products is increasing globally.

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General 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. Our business depends on the timely supply of materials, services and related products to meet the demands of our customers, which depends in part on the timely delivery of materials and services from suppliers and contract manufacturers. Significant or sudden increases in demand for our products, as well as worldwide demand for the raw materials and services we require to manufacture and sell our products, may result in a shortage of such materials or may cause shipment delays due to transportation interruptions or capacity constraints. Such shortages or delays could adversely impact our suppliers’ ability to meet our demand requirements. Difficulties in obtaining sufficient and timely supply of materials or services can have an adverse impact on our manufacturing operations and our ability to meet customer demand.

We may also experience significant interruptions of our manufacturing operations, delays in our ability to deliver products, increased costs or customer order cancellations as a result of:

• the failure or inability to accurately forecast demand and obtain sufficient quantities of quality raw materials on a cost-effective basis;
• volatility in the availability and cost of materials or services, including rising prices due to inflation;
• difficulties or delays in obtaining required import or export approvals;
• shipment delays due to transportation interruptions or capacity constraints, such as reduced availability of air or ground transport or port closures;
• information technology or infrastructure failures, including those of a third-party supplier or service provider; and
• natural disasters or other events beyond our control (such as earthquakes, utility interruptions, tsunamis, hurricanes, typhoons, floods, storms or extreme weather conditions, fires, regional economic downturns, regional or global health epidemics, geopolitical turmoil, increased trade restrictions between the U.S. and China and other countries, social unrest, political instability, terrorism, or acts of war) in locations where we or our customers or suppliers have manufacturing or other operations.

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

Results of Operations

Year ended December 31, 2024 versus December 31, 2023

For the year ended December 31, 2024, the Company had a net loss of $16,183,018 on revenue of $54,426,402, versus a net loss of $18,542,654 on revenue of $53,376,874, for the year ended December 31, 2023.

Revenue

For the 12-month period ended December 31, 2024, the Company’s total revenue increased by 1.97%, reaching $54,426,402, compared to $53,376,874 for the prior year period ended December 31, 2023. This growth was primarily driven by the following factors:

• Wholesale Revenue Growth: The revenue increase was largely attributable to our subsidiary Cosmofarm SA, which experienced higher sales following the acquisition of several customer bases. Additionally, there was a moderate increase in demand for the period, further contributing to revenue expansion.
• Pharmaceutical Manufacturing Expansion: Our pharmaceutical manufacturing segment experienced a significant revenue increase, primarily due to the inclusion of CANA, our manufacturing subsidiary, for the full 12-month period in 2024. In contrast, during 2023, CANA contributed to the Group’s results only for six months following its acquisition on June 30, 2023. For further details, refer to the Segment Reporting section.

The combination of these factors contributed to the overall revenue growth for the period.

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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, 2024, our cost of goods sold (“COGS”) was $50,115,079, representing a 2.22% increase compared to $49,027,305 for the prior fiscal year ended December 31, 2023.

The increase in COGS was proportionate to revenue growth and was primarily influenced by a shift in revenue mix, with a larger portion of total revenue derived from our wholesale segment. Historically, our wholesale operations generate lower gross margins compared to other revenue streams, contributing to the overall increase in COGS as a percentage of revenue.

Gross Profit

For the year ended December 31, 2024, our gross profit was $4,311,323, representing a decrease of $38,246, or 0.88%, compared to $4,349,569 for the prior fiscal year ended December 31, 2023.

The change in gross profit was primarily attributable to the differing year-over-year growth rates of revenue and cost of goods sold (COGS). While revenue increased compared to the prior-year period, COGS grew at a comparatively higher rate, resulting in a contraction of gross profit.

Operating Expenses

For the year ended December 31, 2024, total operating expenses were $19,856,153, compared to $26,180,786 for the prior fiscal year ended December 31, 2023, representing a decrease of $6,324,633, or 24.16%. The decrease in operating expenses was primarily attributable to the following factors:

• Lower provisions for expected credit losses and allowances for doubtful accounts, which amounted to $4,691,767 in 2024 compared to $11,850,788 in 2023.
• A significant reduction in sales and marketing expenses, particularly related to our branded nutraceuticals, which declined by 70.53% year-over-year.

Despite the overall decline in operating expenses, certain cost categories increased:

• Salaries and wages increased by $1,138,527 (25%) compared to 2023, primarily due to the full-year inclusion of our subsidiary CANA in 2024 (compared to the six months period in 2023, following its acquisition on June 30, 2023) and the hiring of additional full-time employees across our Greek subsidiaries.
• Research and development (R&D) costs increased by $368,434 (223.48%), mainly due to the annual royalty fee charged by our related-party manufacturing company, Doc Pharma SA, pursuant to a royalty agreement signed on December 31, 2024.
• Depreciation and amortization expense increased by $634,861 (103.33%), primarily driven by the amortization of 19 generic licenses acquired from Doc Pharma SA on December 29, 2023, with a total purchase value of €3,200,000 ($3,539,840).
• Impairment of intangible assets: during the year ended December 31, 2024, the Company recognized total impairment charges of $291,980 relating to intangible assets that were deemed no longer recoverable. Specifically, the Company recorded impairment losses associated with certain branded pharmaceutical products that had been acquired from Doc Pharma SA pursuant to the agreement executed on June 28, 2023. These products were initially intended to be launched and commercialized in various markets; however, following a reassessment of the Company’s commercialization strategy, management concluded that it no longer intends to proceed with their market introduction in the foreseeable future. As such, the carrying value of these assets was fully impaired. In addition, the Company fully wrote off the remaining carrying value of the telehealth platform developed and owned by its wholly owned subsidiary, Zip Doctor Inc., due to the discontinuation of the platform’s operation and the absence of future plans for its reactivation or redevelopment. No impairment charges were recorded during the year ended December 31, 2023.

As a result of these expense changes, our net operating loss for the year ended December 31, 2024 was $15,544,830, representing an improvement of $6,286,387 (28.8%) compared to a net operating loss of $21,831,217 for the year ended December 31, 2023.

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Other Income (expense), net

For the year ended December 31, 2024, the Company reported other income of $86,737, compared to other expense of $65,867 for the year ended December 31, 2023. This represents a net favorable variance of $152,604, or 231.69% year-over-year improvement.

The increase was primarily attributable to the reversal of a previously recorded adjustment related to the cumulative impact of discounted sales to Medihelm SA, the exclusive distributor of the Company’s proprietary line of nutraceutical products. During 2023, the Company had adopted a conservative accounting approach to reflect the low collectability risk associated with historical sales to Medihelm and had therefore recognized a corresponding expense.

In 2024, however, due to the significant allowance already recorded in 2023 and the limited level of new sales activity with Medihelm during the current year, management determined that this adjustment was no longer required. As such, the Company reversed the previously recorded charge, resulting in an increase to other income.

For additional details, refer to Note 2 – Summary of Significant Accounting Policies, under the “Revenue Recognition” section of the accompanying consolidated financial statements.

Interest Income & Expenses

For the year ended December 31, 2024, interest expense totalled $1,012,314, representing an increase of $145,838, or 16.83%, compared to $866,476 for the prior year ended December 31, 2023. The increase was primarily driven by new debt facilities totalling $828,080, entered into by our subsidiary Cosmofarm SA.

Interest income for the year ended December 31, 2024, was $406,449, reflecting a decrease of $256,410, or 38.68%, compared to $662,859 for the year ended December 31, 2023. This decline was primarily due to the receipt of loan repayments during 2024, which reduced outstanding loan receivable balances and, consequently, interest earned on them and the absence of interest income from treasury bills, which contributed approximately $55,000 to interest income in 2023 but were not in place during 2024.

Gain on extinguishment of debt

For the year ended December 31, 2024, we did not recognize any gains on debt extinguishment.

For the year ended December 31, 2023, we recorded a gain on extinguishment of debt of $1,910,967, which was primarily attributable to an $1,605,499 gain from the termination of our agreement with Marathon Global Inc., which resulted in the write-off of the share-settled debt obligation outstanding as of December 31, 2022 and a $305,468 gain from the forgiveness of debt related to the Synthesis Structured debt facility of our subsidiary SkyPharm SA.

Bargain purchase gain

On June 30, 2023, the Company completed the acquisition of CANA. As a result of the acquisition, we recognized a bargain purchase gain of $1,440,249, which arose because the fair value of CANA’s net assets at the acquisition date exceeded the total fair value of the consideration transferred.

The bargain purchase gain was recognized as other income in the Consolidated Statements of Operations for the year ended December 31, 2023. Management determined that the gain resulted primarily from negotiated purchase terms and the specific financial condition of the seller at the time of the transaction.

As no similar transactions occurred during the year ended December 31, 2024, no such gains were recognized in the current period.

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Unrealized Foreign Currency Losses & Deemed Dividends

For the year ended December 31, 2024, the Company recorded a net comprehensive loss of $24,093,129, compared to a net comprehensive loss of $25,071,043 for the year ended December 31, 2023. This change in net comprehensive loss was primarily due to the unrealized foreign currency translation loss and a change in deemed dividends, as detailed below:

• The unrealized foreign currency translation loss for the year ended December 31, 2024 amounted to $1,715,087, compared to an unrealized foreign currency translation gain of $712,791 for the same period in 2023. The significant fluctuation in foreign exchange results was largely driven by changes in the exchange rates of the Euro and British Pound against the US Dollar, primarily affecting intercompany loans and balances between the Company and its Greek and UK subsidiaries. These currency fluctuations have had a material impact on the translation of intercompany balances. For the detailed foreign exchange rates used to translate these balances, please refer to “Note 2 – Summary of Significant Accounting Policies” under the section “Foreign Currency Translation and Other Comprehensive Loss”.
• The deemed dividend for the year ended December 31, 2024 amounted to $6,195,024, relating to the Warrant Inducement Letter dated September 26, 2024. In contrast, the deemed dividends recorded for the year ended December 31, 2023, were $7,241,180, primarily associated with the Warrant Exchange Agreement the Company entered on December 29, 2023. For further details on the deemed dividends, please refer to “Note 7 - Warrant Anti-Dilution Adjustment and Deemed Dividend”.

The significant fluctuation in the unrealized foreign currency results was the primary factor influencing the difference in comprehensive loss between the two years. For a comprehensive understanding of the key accounting policies and assumptions underlying these changes, readers are encouraged to review the relevant Notes to the Financial Statements, as indicated above.

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 period December 31, 2024, the Company had revenue of $54,426,402, net loss of $16,183,018 and net cash used in operations of $7,717,034. Additionally, as of December 31, 2024, the Company had negative working capital of $296,193, an accumulated deficit of $114,022,275, and stockholders’ equity of $24,532,929. 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 12 months from the date of this filing.

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The Company’s revenues are not able to sustain its operations, and concerns exist regarding the Company’s ability to meet its obligations as they become due. The Company is subject to a number of risks to those of smaller commercial companies, including dependence on key individuals and products, the difficulties inherent in the development of a commercial market, the need to obtain additional capital, competition from larger companies, and other pharmaceutical and health care companies.

Management evaluated the above conditions which raise substantial doubt about the Company’s ability to continue as a going concern to determine if it can meet its obligations for the subsequent 12 months from the date of this filing. Management considered its ability to access future capital, curtail expenses if needed, expand product lines, and acquire new products.

Management’s plans include expansion of brand name products to the market, expanding the current product portfolio, and evaluating acquisition targets to expand distribution. The exclusive distribution agreement signed for its Sky Premium Life products in the United Arab Emirates (“UAE”) and the significant orders already received, are expected to substantially strengthen its operating cash flow. Furthermore, the Company intends to vertically integrate the supply chain distribution network. On top of that, the Company plans to access the capital markets further in order to raise additional funds through equity offerings. More specifically, commencing from August 2025, the Company will be eligible to utilize an S-3 registration statement, (12 months following the date that the Company had regained compliance with Listing Rule 5250(c)(1) (the “Filing Rule”)), to be in a position to raise equity capital more efficiently in conjunction with utilizing potential equity proceeds by its outstanding warrants. Management’s plans also include postponing certain debt repayments, through achieving favorable amendments to its debt facilities and in parallel intends to make substantial efforts to receive additional debt financing. Moreover, the Company’s management is considering of postponing certain repayments of suppliers and creditors. 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.

Considering the above, management is of the view that substantial doubt exists for the Company’s ability to continue as a going concern. 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.

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Liquidity and Capital Resources

As of December 31, 2024, the Company had negative working capital of $296,193, compared to a positive working capital of $12,285,310 as of December 31, 2023. The decrease in working capital is primarily attributable to the significant cash used in operating activities during the year ended December 31, 2024. In addition, the reduction in working capital was influenced by the significant allowances for doubtful accounts recorded for the 12-month period ended December 31, 2024. The cash used in operating activities, as detailed in the liquidity section, led to a reduction in the Company’s available current assets, while the increase in allowances for doubtful accounts reflects the Company’s prudent assessment of its receivables. The Company continues to closely manage its working capital to ensure adequate liquidity for operations and strategic investments. Going forward, management is focused on improving collections and reducing allowances for doubtful accounts, which are expected to have a positive impact on working capital and overall liquidity in the coming periods.

Cash Flow from Operating Activities

As of December 31, 2024, the Company had net cash of $315,105, compared to net cash of $3,833,195 as of December 31, 2023. The decrease in net cash is primarily due to the operating cash outflows during the period, reflecting the Company's ongoing investment in key operational activities. For the year ended December 31, 2024, the Company used net cash of $7,717,034 in operating activities, compared to net cash used of $15,635,999 for the year ended December 31, 2023. The negative cash used in operating activities is primarily attributable to the Group's operating losses, which were driven by the Parent entity and all subsidiaries. The impact of working capital items was marginal in relation to the negative cash flow results. The operating losses were primarily a result of substantial investments made in several key areas, including the hiring of highly skilled employees, increased spending on research and development, and marketing costs related to the promotion of the Company’s own branded products. Additionally, depreciation and amortization expenses increased significantly, driven by the acquisition of manufacturing facilities, corporate offices, and pharmaceutical and nutraceutical licenses. The Company anticipates that these significant operating investments should yield positive results soon, contributing to future operating profits and positive operating cash flows. Management expects that, as these investments mature, the Company will achieve improved financial performance and enhance its ability to generate positive cash flows from operations in the near term. The Company’s liquidity position, as of December 31, 2024, remains under careful review by management, and the Company is focused on improving cash flows by realizing the expected benefits of its operational investments. The Company will continue to monitor its liquidity position and take necessary actions to ensure it can meet its financial obligations and maintain sufficient liquidity to support its strategic objectives.

Cash Flow from Investing Activities

For the year ended December 31, 2024, the Company used $798,269 in net cash for investing activities, compared to $13,760,357 in the prior year. The higher outflow in 2023 was primarily driven by the purchase of fixed assets, including the acquisition of facilities for the Company’s subsidiary Cosmofarm SA, the acquisition of nutraceutical and pharmaceutical licenses, and the acquisition of a building in Canada, along with the cash paid for the acquisition of the Company’s subsidiary Cana, on June 30, 2023.

In contrast, during the year ended December 31, 2023, the Company limited its investing outflows by spending approximately $1.2 million on the acquisition of several nutraceutical licenses through its subsidiary SkyPharm SA and certain machinery for its manufacturing subsidiary, CANA. These outflows were partially offset by the $468,974 in proceeds from its outstanding loans receivable. The Company’s investment strategy continues to focus on expanding its business through organic growth and selective acquisitions of companies and licenses.

Cash Flow from Financing Activities

For the year ended December 31, 2024, the Company generated $5,046,684 in net cash from financing activities, compared to $12,694,007 for the year ended December 31, 2023. The decrease in financing inflows was due to the significantly higher financing activities in 2023, which included $9,362,937 from the offering completed in July 2023, the receipt of the outstanding subscription receivable from the December 2022 offering, and $3,533,741 in net proceeds from the exercise of warrants during December 2023.

In 2024, the Company repaid $1,092,121 of its outstanding Notes Payable but received $865,600 from new debt facilities signed during the year. Additionally, the Company had $816,318 in net proceeds from its Lines of Credit. Furthermore, the Company raised additional equity funds through two Prospectus Supplements to its Registration Statement on Form S-3, resulting in gross proceeds of $649,039. In September 2024, the Company entered into a Warrant Inducement with an investor, issuing 9,748,252 new warrants and reducing the exercise price of 4,874,126 warrant shares from $1.45 to $0.8701. This transaction resulted in gross cash proceeds of $4,240,977.

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Liquidity Outlook

The Company’s financing activities in 2024 have enabled it to access additional funds through debt and equity financing, which will support its ongoing investments and operational growth. The Company continues to manage its liquidity position carefully and is committed to maintaining sufficient resources to support its strategic objectives, including expanding its operations through both organic growth and selective acquisitions.

Management is confident that the Company’s current liquidity position, along with its ongoing financing and investment strategies, will enable it to meet its financial obligations and continue its growth trajectory in the coming periods.

Debt Obligations

November 16, 2015 Debt Agreement

On November 16, 2015, the Company entered into a Loan Agreement with Panagiotis Drakopoulos, the Company’s 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 bore an interest rate of 6% per annum and was due and payable in full on November 15, 2016. As of December 31, 2022, the Company had an outstanding principal balance of €8,000 ($8,558) and accrued interest of €6,797 ($7,271). During the year ended December 31, 2023, the Company repaid the entire outstanding balance of €8,000. Therefore, as of December 31, 2023, the outstanding principal balance was $0. Mr. Drakopoulos is not considered a related party since he is no longer employed by the Company and currently holds no equity position in the Company.

June 23, 2020 Debt Agreement

On June 23, 2020, the Company’s subsidiary, Cosmofarm, entered into an agreement with the National Bank of Greece S.A. (the “Bank”) to borrow a maximum of €500,000 ($611,500). The note has a maturity date of 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 received in three equal monthly installments. The note is interest bearing from the date of receipt and is payable every three months at an interest rate of 3.06% plus 3-month Euribor (2.92% as of December 31, 2024). The outstanding balance was €88,235 ($91,232) and €205,882 ($227,747) as of December 31, 2024 and 2023, respectively, of which $91,232 and $97,606 was classified as “Notes payable – long-term portion” respectively, on the accompanying consolidated balance sheets. During the year ended December 31, 2024, the Company repaid €117,647 ($121,776) of the principal balance.

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% plus 0.6% plus 6-month Euribor when Euribor is positive (2.68% as of December 31, 2024). The principal is to be repaid in 18 quarterly installments of €27,778 ($30,333). During the year ended December 31, 2023, the Company repaid €111,111 ($122,911) of the principal and as of December 31, 2023, the Company had accrued interest of €11,191 ($12,379) related to this note and a principal balance of €222,222 ($245,822), of which $122,911 is classified as “Notes payable – long term portion” on the accompanying consolidated balance sheets. During the year ended December 31, 2024, the Company repaid €111,111 ($115,011) of the principal and as of December 31, 2024, the Company has accrued interest of €7,570 ($7,836) related to this note and a principal balance of €111,111 ($115,011), all of which is classified as “Notes payable” on the accompanying consolidated balance sheets.

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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 “Convertible Promissory Note”). The Convertible Promissory Note bears an interest rate of 8% per annum. The outstanding balance as of December 31, 2022, was $100,000. On February 7, 2023, the Company fully repaid the outstanding balance and interest of the Convertible Promissory Note.

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 (2.92% as of December 31, 2023). Pursuant to the terms of the agreement, there is a nine-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 18 quarterly installments of €27,778 commencing three months from the end of the grace period During the year ended December 31, 2023, the Company repaid €105,747 ($109,459) of the principal. As of December 31, 2023, the Company had accrued interest of €10,905 ($12,063), principal of €316,900 ($350,555), of which $227,065 is classified as “Notes payable – long term portion” on the accompanying consolidated balance sheets. During the year ended December 31, 2024, the Company repaid €109,926 ($113,784) of the principal. As of December 31, 2024, the Company had accrued interest of €15,778 ($16,332), principal of €206,343 ($213,585), of which $94,612 is classified as “Notes payable – long term portion” on the accompanying consolidated balance sheets.

June 9, 2022 Debt Agreement

On June 9, 2022, the Company entered into an agreement with a third-party lender in the principal amount of €320,000 ($335,008). The note matures on June 16, 2027 and bears an annual interest rate of 3.89% plus an additional rate of 0.60%, plus the 3-month Euribor (2.92% as of December 31, 2024). Pursuant to the agreement, there is a 12-month grace period for principal repayment during which interest is accrued. The principal is to be repaid in 17 equal quarterly installments of €18,824. During the year ended December 31, 2024, the Company repaid €80,000 ($82,808) of the principal. As of December 31, 2024 and 2023 the Company has accrued interest of €8,352 ($8,645)and €11,043 ($12,215), respectively, and an outstanding balance of €180,000 ($186,318) of which $103,510 and $204,322, respectively, are classified as “Notes payable – long term portion” on the accompanying consolidated balance sheets.

August 29, 2022 Promissory Note

On August 29, 2022, the Company entered into a promissory note for the principal amount of $166,667. The Company received $150,000 in cash and recorded $16,667 as an original issue discount upon issuance. The promissory note matured on the earlier of (a) December 27, 2022, or (b) the date the Company completes a debt or equity financing of at least $1,000,000. The debt carried an annual interest rate of 12% which was due upon maturity. As of December 31, 2022, the Company had repaid the principal balance in full and had a balance of $5,041 in accrued interest related to this note. The Company repaid the outstanding interest during the year ended December 31, 2023 and thus the balance of both principal and interest as of December 31, 2023 was $0.

July 14, 2023 Debt Agreement

On July 14, 2023, the Company entered into an agreement with a third-party lender in the principal amount of €1,000,000 ($1,123,700). The note matures on July 31, 2028, and bears an annual interest rate of 2.46% plus the 3-month Euribor (2.92% as of December 31, 2024). Pursuant to the agreement, there is a nine-month grace period for interest and principal repayment. The principal is to be repaid in 18 equal quarterly installments of €55,556 commencing on May 2, 2024. During the year ended December 31, 2024, the Company repaid €162,950 ($168,670) of the principal. As of December 31, 2024 and 2023, the Company has accrued interest of €16,735 ($17,322) and €19,820 ($21,925), respectively, and an outstanding balance of €814,750 ($843,348) and $€977,00 ($1,081,532), of which $618,616 and $897,864, respectively, are classified as “Notes payable – long term portion” on the accompanying consolidated balance sheets.

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Cloudscreen

On January 23, 2024, the Company completed the acquisition of Cloudscreen, a cutting-edge Artificial Intelligence (AI) powered platform. The acquisition is pursuant to the purchase agreement announced on October 11, 2023. Cloudscreen is a multimodal platform specialized in drug repurposing, a process that involves uncovering new target proteins or indications for existing drugs for use in treating different diseases. The total purchase price amounted to $637,080 and consisted of 280,000 shares of common stock with a fair value of $319,200 and an amount of $317,880 to be settled in cash during 2024 based on the Promissory Note signed on October 10, 2023. As of December 31, 2024, and December 31, 2023, the Company had an outstanding balance of $279,348 and $317,880 all of which is classified as “Notes payable” on the accompanying consolidated balance sheets.

July 29, 2024 Debt Agreement

On July 29, 2024 the Company entered into an agreement with a third-party lender in the principal amount of €400,000 ($432,760). The note matures on July 31, 2029 and bears an annual interest rate of 2.58% plus the 3-month Euribor (2.92% as of December 31, 2024). Pursuant to the agreement, there is a six-month grace period for principal and interest repayment. The principal is to be repaid in 18 equal quarterly installments of €22,222 commencing on April 30, 2025. During the 12 months ended December 31, 2024, the Company repaid no principal and accrued interest of €5,957 ($6,445). As of December 31, 2024, and December 31, 2023, the Company had an outstanding balance of €400,000 ($414,040) and €0 ($0), of which $345,033 is classified as “Notes payable - long term portion” on the accompanying consolidated balance sheets.

December 20, 2024 Debt Agreement

On December 20, 2024 the Company entered into an agreement with a third-party lender in the principal amount of €400,000 ($414,040). The note matures on December 20, 2027, and bears an annual interest rate of 6% (including the 3-month Euribor of 2.92% as of December 31, 2024). Pursuant to the agreement, there is a six-month grace period for principal repayment. The principal is to be repaid in 6 equal semiannual installments of €66,667 commencing on June 20, 2025. During the 12 months ended December 2024, the Company repaid no principal and had not accrued any interest. As of December 31, 2024, and December 31, 2023, the Company an outstanding balance of €400,000 ($414,040) and €0 ($0), of which $276,027 is classified as “Notes payable - long term portion” on the accompanying consolidated balance sheets.

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 ($2,316,000), (the “EURO Loan”) and USD $4,000,000 (the “USD Loan”). Interest on both the EURO Loan and USD Loan commenced on October 1, 2018, at 6% per annum plus one-month Euribor (3.869% as of December 31, 2023), and 6% plus one-month LIBOR (5.47% as of date of December 31, 2023), respectively.

On December 30, 2020, the Company transferred the EURO Loan to a new third-party lender. The terms remained the same except interest accrues at 5.5% per annum plus one-month Euribor 3.869% as of December 31, 2023. The principal was scheduled to be repaid in a total of five quarterly installments beginning October 31, 2021 of €50,000 ($54,600) each with a final repayment of €1,800,000 ($1,965,600) payable on October 31, 2022.

On March 3, 2022, the Company entered into a modification agreement to extend the maturity date to January 10, 2023, and payments under the USD Loan. During June 2022, the Company agreed with the Lender to postpone the repayment of an installment of $500,000 due on June 30, 2022 (based on the modification agreement signed on March 3, 2022) until January 2023. During September 2022, the Company entered into an agreement with the Lender to postpone the repayment of the outstanding balance on the USD Loan of $3,950,000, plus unpaid accrued interest until January 2023. The Company capitalized fees paid upon modification of €200,000 ($221,060) that are being amortized over the life of the loan. The Company incurred non-cash interest expense of $216,182 during the year ended December 31, 2022, concerning the above capitalized fees.

During the year ended December 31, 2022, the Company repaid €175,000 ($191,100) of the EURO Loan and $2,593,363 of the USD Loan such that as of December 31, 2022, the Company had principal balances of €1,775,000 ($1,898,895) and $1,406,637 under the agreements, respectively. As of December 31, 2022, the Company had accrued $309,365 in interest expense related to these agreements.

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On December 21, 2022, the USD Loan was assigned to GIB Fund Solutions ICAV (the “Fund”). On January 31, 2023, the Company paid $1,100,000 to the Fund under a full and final settlement agreement for the USD Loan, recording a gain on extinguishment of debt of $306,637 relating to the waiver of the unpaid balance. Additionally, the Company repaid €50,000 ($50,310) of the EURO Loan during the year ended December 31, 2023. As of December 31, 2023, the Company had an outstanding principal balance of €1,725,000 ($1,908,195), of which $1,327,440 is classified as “Notes payable – long term portion” on the consolidated balance sheets. As of December 31, 2023, the Company had accrued $161,274 in interest expense related to these agreements.

On December 22, 2022 SkyPharm signed an agreement for the extension of the payments and an increase in interest rate due under the EURO loan, that was extended to be repaid with a balloon payment now due on October 31, 2025. This extension was agreed upon in writing on December 22, 2022, with a retroactive modification date to October 31, 2022 (the original maturity date).

As of December 31, 2023, the Company had an outstanding principal balance of €1,725,000 ($1,908,195), of which $1,327,440 is classified as “Notes payable - long term portion” on the consolidated balance sheets. As of December 31, 2023, the Company had accrued $161,274 in interest expense related to these agreements.

The Company repaid €375,000 ($388,163) of the EURO Loan during the 12 months ended December 31, 2024. As of December 31, 2024, the Company had an outstanding principal balance of €1,350,000 ($1,397,385), all of which $1,086,638 is classified as “Notes payable” on the consolidated balance sheets. For the 12 months ended December 31, 2024, the Company had accrued $155,822, in interest expense related to these agreements.

COVID-19 Government Loans

May 12, 2020 Loan

On May 12, 2020, the Company’s subsidiary, SkyPharm, was granted loan from the Greek government and, on May 22, 2020, received the amount of €300,000 ($366,900). The loan would be repaid in 40 equal monthly installments beginning on July 29, 2022. As a condition to the loan, the Company was required to retain the same number of employees until October 31, 2020. As of December 31, 2023, the principal balance was €121,875 ($134,818). During the year ended December 31, 2024, the Company repaid €18,750 ($19,408) of the principal balance. The outstanding balance is €103,125 ($106,745) as of December 31, 2024.

June 24, 2020 Debt Agreement

On June 24, 2020, the Company’s subsidiary, Decahedron, received a loan £50,000 ($68,310) from the UK government. The loan has a ten-year maturity and bears interest at a rate of 2.5% per annum beginning 12 months after the initial disbursement, which was on July 10, 2020. The Company may prepay this loan without penalty at any time. As of December 31, 2023, the principal balance was £40,858 ($52,066). As of December 31, 2024, the principal balance was £38,144 ($47,761).

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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 the 12-month period ended December 31, 2023, the Company had an outstanding principal balance under these loans of $13,257 in loans payable to Grigorios Siokas. As of December 31, 2024, the Company had an outstanding principal balance of $8,594 related to this payable. During the 12-month period ended December 31, 2024, the Company received $46,232 and repaid $49,842 of such loans.

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

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, 2024 and 2023, the Company had a principal balance of €10,200 ($10,558) and €10,200 ($11,283), respectively.

The above balances are adjusted for the foreign currency rate as of the balance sheet date. For the years ended December 31, 2024 and 2023, the Company recorded a foreign currency translation gain of $725 and a loss of $371, respectively.

Significant Equipment

We do not intend to purchase any significant equipment for the next 12 months aside from a few pieces of IT equipment. Nevertheless, we will replace essential equipment for operations if it is required within the year.

Employees

In order to achieve our strategic objectives, we have, and will remain, focused on hiring and retaining a highly skilled management team that has extensive experience and specific skill sets relating to the sales, selection, development and commercialization of pharmaceutical products. We intend to continue our efforts to build and expand this team as we grow our business. We have plans to increase the number of our employees by adding more salespeople during the next 12 months.

Off Balance Sheet Arrangements

As of December 31, 2024, there were no off-balance sheet arrangements.

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Critical Accounting Policies and Estimates

In December 2001, the SEC requested that all registrants list their most “critical accounting polices” in the Management’s Discussion and Analysis. The SEC indicated that a “critical accounting policy” is one which is both important to the portrayal of a company’s financial condition and results, and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.

Foreign Currency. Assets and liabilities of all foreign operations are translated at year-end rates of exchange, and the statements of operations are translated at the average rates of exchange for the year. Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholders’ equity until the entity is sold or substantially liquidated. Gains or losses from foreign currency transactions (transactions denominated in a currency other than the entity’s local currency) are included in net (loss) earnings.

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

The Company is liable for income taxes in Greece and the United Kingdom. The corporate income tax rate is 22% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 25% in the 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 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 Health 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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Accounts Receivable and Allowance for Credit Losses

The Company follows ASC Topic 326, Financial Instruments – Credit Losses (“ASC 326”) to estimate the allowance for doubtful accounts. The Company is required to estimate credit losses on accounts receivable balances held at amortized cost. ASC 326 introduces a new methodology for measuring credit losses, replacing the previous incurred loss model with an expected credit loss model. The Company measures credit losses on accounts receivable using an expected credit loss model, which considers historical experience, current conditions, and reasonable and supportable forecasts. Credit losses are measured as the difference between the present value of contractual cash flows expected to be collected and the present value of expected cash flows discounted at the financial instrument’s original effective interest rate. The Company reviews individually each trade receivable for collectability and performs on-going credit evaluations of its customers and adjusts credit limits based upon payment history and the customer’s current credit worthiness, as determined by the review of their current credit information; and determines the allowance for doubtful accounts based on historical write-off experience, customer specific facts and general economic conditions that may affect a client’s ability to pay. Bad debt expense is included in general and administrative expenses, if any.

Inventory

Our merchandise inventories are made up of finished goods, manufacturing products, raw materials and other products and are valued at the lower of cost or market using the weighted-average cost method. However, the net realizable value (“NRV”) will always be higher than our inventory’s cost, once most of our inventory is fast moving and the vast majority of our products is pharmaceuticals, which have standard selling prices that could not result to the NRV being higher than the average cost. Moreover, our efficient inventory management which has led to minimum obsolete and slow-moving inventory also indicates that the NRV is higher than its average cost. Thus, an NRV assessment would have no material, if any, to our inventory’s cost. Average cost includes the direct purchase price, net of vendor allowances and cash discounts, of merchandise inventory. We record valuation reserves on an annual basis for merchandise damage and defective returns, merchandise items with slow-moving or obsolescence exposure and merchandise that has a carrying value that exceeds market value. These reserves are estimates of a reduction in value to reflect inventory valuation at the lower of cost or market. The reserve for merchandise returns is based upon the determination of the historical net realizable value of products sold from our returned goods inventory or returned to vendors for credit. Our reserve for merchandise returns includes amounts for returned product on-hand as well as for new merchandise on-hand that we estimate will ultimately become returned goods inventory after being sold based on historical return rates.

Below is an analysis per category of our inventories as of December 31, 2024 and 2023:

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Recently Issued Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board (“FASB”) issued final guidance which requires disaggregated disclosures of certain categories of expenses that are included in expense line items on the face of the income statement. The disclosure is required on an annual and interim basis. The guidance also requires the total amount of selling expenses to be disclosed and, on an annual basis, the definition of selling expenses. The new disclosure requirements are effective for annual reporting periods beginning after December 15, 2026. Entities are permitted to adopt these disclosure requirements earlier than the mandated dates if they choose to do so. This new guidance will result in increased disclosures in the notes to our financial statements.

In December 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures. This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting: Improvements to Reportable Segment Disclosures. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company has completed its evaluation of this guidance and has implemented the standard. A respective disclosure has been included in Note 19 (Segment Reporting) to the consolidated financial statements.

Management does not believe that any recently issued, but not effective, accounting standards, if currently adopted, would have a material effect on the Company’s consolidated financial statements.

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act) that are designed to ensure that information required to be disclosed in the Company’s Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Principal Executive Officer/Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were ineffective due to material weaknesses stated in Management’s Report on Internal Control over Financial Reporting set forth below.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Exchange Act. This rule defines internal control over financial reporting as a process designed by, or under the supervision of, the Company’s Chief Executive Officer and Chief Financial Officer, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

• Pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions;
• Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of the Company; and
• Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

With the participation of the Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the effectiveness of our internal control over financial reporting. Based on this evaluation, our management has concluded that our internal control over financial reporting was ineffective as of December 31, 2024, as the result of the below weaknesses.

AS 2201 and the SEC define the term “material weakness” as “a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis.” We had the following material weaknesses at December 31, 2024 set forth below:

• The Company has a lack of proper segregation of duties.
• The Company’s internal control structure lacks multiple levels of review and oversight and does not have appropriate IT General Controls (ITGCs) for the applications used in the Financial Reporting process, caused by lack of design of relevant controls and overall IT risk management.

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Remediation of Deficiencies and Material Weaknesses

We are in the process of remediating all material weaknesses present in our internal controls.

- The Company has a lack of proper segregation of duties.

We are in the process of updating the organizational chart in order to reallocate roles among personnel and emphasize sharing the responsibilities of key business processes by distributing the discrete functions of these processes to multiple people and departments. Specifically, we have delegated the following processes to different personnel; authorization, custody, recordkeeping, and reconciliation. For example, a manager authorizing discount sales is not responsible for maintaining accounts receivable records or handling cash receipts. In addition, we have set access rights at the data and our software based on the job responsibilities and level of the personnel, therefore unauthorized users are not able to change any data on the system or process to bank transactions.

- The Company’s internal control structure lacks multiple levels of review and oversight and does not have appropriate IT General Controls (ITGCs) for the applications used in the Financial Reporting process, caused by lack of design of relevant controls and overall IT risk management.

Enhancements to Internal Controls and Financial Reporting Systems

The Company is actively refining its internal control framework by implementing multiple levels of review tailored to job responsibilities and personnel hierarchy. Key enhancements include:

• Bank Reconciliation Oversight: Management conducts timely reviews to ensure bank reconciliations are prepared accurately and on schedule. Discrepancies between the general ledger and bank statements are promptly identified and addressed.
• Review and Authorization of Financial Information: The Chief Financial Officer (CFO) reviews management accounting information and authorizes material transactions and adjustments, ensuring compliance with financial policies and procedures.
• Payroll Process Controls: Payroll is processed by an external service provider, subsequently reviewed by the accountant, and formally approved by the CFO before payment authorization.
• Financial Reporting System Assessment: The Company is evaluating the implementation of a new financial reporting application across all subsidiaries. This system is expected to enhance financial data processing, reporting accuracy, and integration of key financial controls, thereby strengthening IT General Controls (ITGCs) within a unified and more reliable platform.

These initiatives reflect the Company’s ongoing commitment to improving financial reporting processes, internal controls, and operational efficiency in alignment with best practices and regulatory requirements.

Limitations on the Effectiveness of Internal Controls

Our management, including our Chief Executive Officer and our Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting are or will be capable of preventing or detecting all errors or all fraud. Any control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements, due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns may occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risk.

This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit us to provide only management’s report in this annual report.

Changes in Internal Control Over Financial Reporting

During the most recently completed fiscal year, there has been no change in our internal control over financial reporting that has materially affected or is reasonably likely to materially affect, our internal control over financial reporting.