Cosmos Health Inc.: Form 10-Q for the period ended Jun 30, 2025

Available Information

The following discussion should be read in conjunction with our interim Condensed Consolidated Financial Statements and the related notes and other financial information appearing elsewhere in this report as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Form 10-K for the year ended December 31, 2024 (“Form 10-K”) and this Quarterly Report on Form 10-Q for the quarter ended June 30, 2025.

Forward-Looking Statements

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

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

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

Overview

Summary

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.

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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.

Regulations and Licenses

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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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, pandemics, 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.

Distribution and Trade Agreements

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 two years and in excess of 3,000,000 units over the next five years. Up to August 14, 2025 we have received orders for approximately 170,000 units.

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Acquisitions and Co-Ventures

ZipDoctor

On September 28, 2022, the Company entered into a non-binding letter of intent (“LOI”) agreement to wholly acquire ZipDoctor Inc., a company that possesses a direct-to-consumer subscription-based telemedicine platform, that expects to provide its customers affordable, unlimited, 24/7 access to board certified physicians and licensed mental and behavioral health counselors and therapists. The current parent company of the acquiree will continue to manage all its aspects of the day-to-day operations, including product development, marketing, and operational support.

On March 17, 2023, the Company entered into a definitive agreement to acquire ZipDoctor Inc. for a total sum of $150,000. The transaction closed on April 3, 2023.

CANA

On May 31, 2023, the Company entered into a Stock Purchase Agreement with the owners of one hundred (100%) percent of the equity (the “Shares”) of Cana Laboratories Holdings (Cyprus) Limited (“Cana”), which wholly owned an operating subsidiary, Pharmaceutical Laboratories Cana S.A. (“Cana SA”). The purchase price for the shares for the two sellers is €800,000 and 46,377 shares of Cosmos restricted common stock at an issuance price of $17.25 per share or $800,000. Moreover, on February 28, 2023, the Company signed a Secured Promissory Note with Cana, whereby Cana borrowed the sum of €4,100,000 ($4,457,520), included in the total cash consideration provided for the acquisition. The acquisition was successfully completed on June 30, 2023.

Cana SA is a Greek pharmaceutical company that manufactures, sells, distributes, and markets original branded products researched and developed by leading global pharmaceutical and healthcare companies. Cana stands out as it brings significant synergies and vertical integration. With a long-standing history spanning almost a century, Cana has earned the trust of industry giants like AstraZeneca, Merck, Unilever, and Procter & Gamble. Cana's Good Manufacturing Practice (GMP) license enables us to manufacture pharmaceuticals, including medicines, within the EU, which creates attractive opportunities for high-margin contract manufacturing agreements with major multinational clients.

Bikas

On June 15, 2023, Cosmos Health Inc. entered into an Assignment and Assumption Agreement (the “Agreement”) with Ioannis Bikas O.E., a Greek Company (“Bikas”). Bikas is owner of a pharmaceutical distribution network in Greece and agreed to sell the Company their distribution network and customer base. The purchase price of the network was €100,000 ($109,330) of cash, and €300,000 ($316,081) of the Company’s stock. The Company issued 99,710 shares of common stock related to the acquisition of the customer base, based on the fair value of the stock on the acquisition date. The Company accounted for the acquisition as an asset acquisition in accordance with ASC 805 and recorded $425,411 as an intangible asset related to the customer base acquired.

This acquisition positively impacted on our revenue (an increase of more than $10 million annually) and enhanced the Company's gross margins due to economies of scale. Additionally, synergies with Cosmofarm's state-of-the-art facility, which employs robotic technologies for procurement, inventory management, and order execution, provide an elevated level of service to pharmacies, leading to increased orders. We are pleased to announce that we have now successfully integrated Bikas within the Cosmofarm platform.

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. The Company accounted for the acquisition as an asset acquisition in accordance with Accounting Standards Codification (“ASC”) Topic 805, Business Combinations, (“ASC 805”) and recorded $637,080 as another asset related to the technology platform acquired. The total amount was reclassified to “Goodwill and intangible assets, net” in January 2024 with the closing of the agreement (refer to Notes 2 & 5).

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Results of Operations

Three and Six Months Ended June 30, 2025 and 2024

Revenue and net loss

For the three months ended June 30, 2025, the Company reported revenue of $14,745,702 and a net loss of $2,828,068, compared to revenue of $13,206,717 and a net loss of $2,590,711 for the corresponding period in 2024.

For the six months ended June 30, 2025, the Company reported revenue of $28,458,230 and a net loss of $3,646,165, compared to revenue of $27,191,190 and a net loss of $4,457,401 for the corresponding period in 2024.

Revenue for the three months ended June 30, 2025, increased by approximately 11.7% compared to the same period in 2024, primarily due to higher revenue from SkyPharm S.A. (“SkyPharm”) and Cana S.A. (“Cana”), our wholly owned subsidiaries. SkyPharm, which markets our proprietary nutraceutical line under the Sky Premium Life (“SPL”) brand, achieved higher sales in the United Arab Emirates, Cyprus, and Greece. Cana, our manufacturing subsidiary acquired on June 30, 2023, entered into new contract manufacturing agreements and expanded existing agreements, resulting in a significant increase in revenue for the period. For the six months ended June 30, 2025, revenue increased by approximately 2.4% compared to the same period in 2024. This increase was primarily attributable to the same factors that contributed to the revenue growth for the three‑month period.

Net loss for the three months ended June 30, 2025, increased by 9.2% (or $237,357) compared to the same period in 2024. The increase was primarily driven by non‑cash interest expense and the change in fair value of convertible notes related to the new convertible notes issued during the second quarter of 2025 (see Note 11 to the unaudited condensed consolidated financial statements included in this Form 10‑Q). For the six months ended June 30, 2025, net loss decreased by 18.2% compared to the same period in 2024, primarily as a result of a significantly higher gross profit of 51.7% for the period.

Cost of Goods Sold

For the three months ended June 30, 2025, and 2024, the Company reported cost of goods sold (“COGS”) of $13,581,888 and $12,439,469, respectively, representing an increase of $1,142,419, or approximately 9.2%. For the six months ended June 30, 2025, and 2024, COGS was $25,244,617 and $25,690,316, respectively, representing a decrease of $445,699, or approximately 1.7%.

The increase in COGS for the three‑month period was consistent with the revenue increase of 11.7%. However, due to a shift in the Company’s revenue mix toward higher‑margin product lines, particularly nutraceuticals and contract manufacturing, which generally carry lower direct costs relative to the wholesale revenue stream, the increase in COGS was proportionally lower than the increase in revenue. For the six‑month period, COGS decreased despite the slight increase in revenue, further supporting the trend of a shift toward higher‑margin revenue streams.

Our future revenue growth is expected to continue to be affected by various factors such as industry growth trends, including drug utilization, the introduction of new innovative brand therapies, the likely increase in the number of branded pharmaceutical products that will be available over the next few years’ price increases and price deflation, general economic conditions, including the effects of the current conflict in the Ukraine, the coronavirus in the United Kingdom and the member states of European Union, competition within the industry, customer consolidation, changes in pharmaceutical manufacturer pricing and distribution policies and practices, increased downward pressure on government and other third party reimbursement rates to our customers, and changes in government rules and regulations.

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Gross Profit

For the three months ended June 30, 2025, the Company reported gross profit of $1,163,814, an increase of 51.7% compared to the same period in 2024. For the six months ended June 30, 2025, gross profit was $3,213,613, an increase of 52.7% compared to the corresponding period in 2024.

The significant improvement in gross profit for both periods was primarily attributable to a favourable shift in the Company’s revenue mix, with a greater proportion of sales derived from higher‑margin product lines, particularly within the nutraceuticals segment and from contract manufacturing revenue generated by the Company’s subsidiary, Cana.

Operating Expenses

For the three‑month period ended June 30, 2025, total operating expenses were $3,809,133 compared to $3,269,274 for the corresponding period in 2024, an increase of $539,859, or approximately 16.5%. For the six‑month period ended June 30, 2025, total operating expenses were $6,692,077 compared to $6,439,008 for the same period in 2024, an increase of $253,069, or approximately 3.9%. The increase in operating expenses for both periods was primarily driven by higher salaries and wages, largely attributable to the addition of management and scientific personnel at our subsidiary, Cana.

• Salaries and Wages: Personnel expenses increased by 28.4% ($413,581) for the three‑month period ended June 30, 2025, and by 7.2% ($195,421) for the six‑month period ended June 30, 2025, compared to the same periods in 2024. These increases were primarily driven by the addition of management and scientific personnel at our subsidiary, Cana, as discussed above.
• Sales and Marketing Expenses: Sales and marketing expenses declined significantly, particularly those associated with the Company’s branded nutraceutical portfolio. These expenses decreased by 80.4% for the three‑month periods ended June 30, 2025 and 2024, and by 82.5% for the equivalent six‑month periods. The reduction was consistent with management’s strategic decision to temporarily scale back investment in brand promotion and advertising during the periods under review.
• Depreciation and Amortization: Depreciation and amortization expenses remained relatively stable, with increases of $40,788 for the three‑month period and $41,440 for the six‑month period, compared to the respective periods in 2024.
• General and Administrative Expenses: General and administrative expenses for the three‑month period ended June 30, 2025, increased modestly to $1,490,485, up $99,960, or 7.2%, from $1,390,525 in the prior‑year quarter. For the six‑month period, these expenses increased by $160,524, or 5.7%. The increase was primarily attributable to higher professional service fees.
• Research and Development Costs: The Company incurred research and development costs of $74,637 for the three‑month period ended June 30, 2025, and $90,266 for the six‑month period. No such costs were incurred during the corresponding periods in 2024, as the related agreements were either not in place or at an early stage that did not generate expenses.

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Other Income (Expense)

For the three‑month period ended June 30, 2025, other income (expense), net was an expense of $42,190, representing an increase of $12,885 compared to an expense of $29,305 in the corresponding period of 2024. For the six‑month period ended June 30, 2025, other income (expense), net was an expense of $110,327, compared to income of $162,519 in the corresponding six‑month period of 2024, reflecting a decrease of $272,846. The variance in the six-month period is primarily attributable to the recognition of non-recurring charges and prior-period adjustments during the current period, which were not present in the comparative quarter. These one-off items had a material impact on the classification of other income and expense, thereby reversing the net favorable position recorded in the prior year.

Interest Income & Expenses

Interest expense for the three months ended June 30, 2025 increased by $46,368 or 13.6%, to $388,814 compared to $342,446 in the prior‑year quarter. For the six‑month period ended June 30, 2025, interest expense increased by $64,803 or 12.7%, to $575,921 from $511,118 in 2024. The increase is primarily attributable to the financing arrangement entered into by our subsidiary, Cosmofarm, with Attica Bank, as well as the issuance of new convertible notes by the Parent company during the second quarter of 2025.

Interest income for the three‑month period showed a slight increase of $3,757 or 3.7%, from $102,030 in 2024 to $105,787 in 2025, whereas for the six‑month period it decreased by $10,682 or 5.1%, from $207,795 in 2024 to $197,113 in 2025. Interest income remained relatively consistent, as the Company did not enter into any new loan receivable agreements, and the repayments made during the period were not significant enough to materially impact the amount of interest income recognized.

Foreign currency translation adjustment, net

For the three-month period ended June 30, 2025, the Company recognized foreign currency translation adjustment net income of $1,562,470, compared to a translation loss of $176,591 in the same period of 2024, representing a favourable variance of approximately $1,739,061. For the six-month period, translation adjustment net income rose to $2,593,738, versus a loss of $775,867 in the prior-year period, a favourable swing of approximately $3,369,605.

This improvement primarily reflects pronounced appreciation of both the euro and the British pound against the U.S. dollar during the reporting periods, which positively impacted the translation of our euro‑denominated and GBP‑denominated subsidiaries when consolidated into USD.

In particular, the average EUR/USD exchange rate strengthened to approximately 1.18 USD per EUR by June 30, 2025 from roughly 1.13 USD per EUR one year earlier, which enhanced the U.S. dollar value of results reported by our euro‑area operations. Similarly, the GBP/USD rate averaged around 1.3722 USD per GBP as of June 2025, up from approximately 1.27 USD per GBP in mid‑2024, resulting in a significant favourable translation impact for our GBP‑denominated subsidiary (Decahedron Ltd).

Liquidity and Capital Resources

As of June 30, 2025 compared with December 31, 2024

As of June 30, 2025, the Company had negative working capital of $604,249, compared to negative working capital of $296,193 as of December 31, 2024. Although the Company’s current assets increased by approximately $5.1 million, this increase was largely offset by a significant rise in current liabilities. The increase in current liabilities was primarily driven by the issuance of new convertible notes by the parent entity during the second quarter of 2025 (approximately $1.6 million), an increase in lines of credit and notes payable totaling $1.8 million, and an increase in third‑party and related‑party accounts payable of approximately $1 million.

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Cash Flow from Operating Activities

As of June 30, 2025, the Company reported net cash of $655,503, compared to $315,105 as of December 31, 2024, reflecting an increase of $340,398. For the six‑month period ended June 30, 2025, the Company used net cash of $1,396,236 in operating activities, compared to $4,622,989 used in the same period of the prior year.

The negative operating cash flow for the current period was primarily attributable to consolidated operating losses, mainly incurred at the Parent Company level, partially offset by non‑cash items such as stock‑based compensation expense of approximately $1.2 million and depreciation and amortization of approximately $0.7 million. Changes in working capital during the period had a mixed impact, with increases in accounts payable and accrued expenses (both third‑party and related‑party) contributing positively but offset by higher prepaid expenses and related‑party assets as well as increases in inventory.

The significant reduction in operating cash outflows compared to the prior period was mainly due to the lower net loss recognized in 2025 and the absence of substantial operating investments that occurred during the first half of 2024, particularly related‑party prepayments for inventory and product purchases.

Cash Flow from Investing Activities

For the six‑month period ended June 30, 2025, the Company generated net cash of $64,751 from investing activities, compared to $242,404 in the same period of the prior year. The investing cash inflows in the current period were primarily driven by proceeds from loan receivables of approximately $0.2 million, partially offset by capital expenditures and limited spending on intangible assets totalling approximately $0.1 million.

The decrease in net cash provided by investing activities compared to the prior period is mainly attributable to lower loan repayments received during 2025, as well as the absence of proceeds from sales of intangible assets that occurred in the comparative period. The Company’s investing cash flows during the current period were minimal and primarily related to routine asset purchases and scheduled loan collections.

Cash Flow from Financing Activities

For the six‑month period ended June 30, 2025, the Company generated $2,165,227 in net cash from financing activities, compared to $746,610 during the same period in 2024. The increase was primarily driven by proceeds from convertible notes issued by the Parent Company during the current period, which represented the most significant source of financing inflows. Additionally, both the Parent Company and its wholly owned subsidiary, Cosmofarm SA, entered into new debt facilities, collectively providing substantial proceeds that contributed to strengthening liquidity.

The Company also utilized its lines of credit, generating approximately $14.1 million in proceeds, which were offset by repayments of $13.8 million during the period. Debt repayments on notes payable and related party obligations totaled $746,679 for the six‑month period ended June 30, 2025, consistent with prior‑year levels. No equity financing transactions occurred in the current period, compared to gross proceeds of approximately $0.6 million from equity raises completed in early 2024. Overall, financing inflows during the first half of 2025 provided the primary source of liquidity to offset operating cash outflows and support the Company’s ongoing working capital needs.

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We anticipate using cash in our bank account as of June 30, 2025, cash generated from debt or equity financing, from investing activities or from management loans to the extent that funds are available to do so to conduct our business in the upcoming year. Management is not obliged to provide these or any other funds. If we fail to meet these requirements, we may lose the qualification for quotation and our securities would no longer trade on Nasdaq Capital Market. Further, as a consequence we would fail to satisfy our reporting obligations with the Securities and Exchange Commission (“SEC”), and investors would then own stock in a company that does not provide the disclosure available in quarterly and annual reports filed with the SEC and investors may have increased difficulty in selling their stock as we will be non-reporting.

Going Concern

The Company’s unaudited consolidated financial statements have been prepared in accordance 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 six‑month period ended June 30, 2025, the Company generated revenue of $28,458,320, incurred a net loss of $3,646,165, and used $1,396,236 of net cash in operating activities. As of June 30, 2025, the Company had cash and cash equivalents of $655,503, compared to $315,105 as of December 31, 2024, reflecting an increase of $340,398. The Company also had negative working capital of $604,249, an accumulated deficit of $117,668,440, and stockholders’ equity of $26,231,633.

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. While the Company’s revenues have grown, they remain insufficient to fund operating expenses and meet debt obligations as they become due. Furthermore, the Company remains dependent on external financing sources to sustain operations and fund growth initiatives.

Management has evaluated these factors and its ability to meet obligations due within the next 12 months. Its plans include expanding the portfolio of brand‑name and private‑label products, launching new distribution channels, and increasing sales from recently secured agreements, such as the exclusive distribution of Sky Premium Life products in the United Arab Emirates (“UAE”). Significant purchase orders have already been received under this agreement and are expected to contribute to operating cash inflows in the near term. Moreover, the Company is planning to expand the customer base of its subsidiary, Cosmofarm S.A., which is expected to substantially increase its wholesale revenue stream. In addition, the Company’s manufacturing subsidiary, CANA S.A., which is already demonstrating improved revenue and gross profit, is planning to strengthen its existing contract manufacturing agreements and secure new ones.

From a financing perspective, during the six‑month period ended June 30, 2025, the Company raised capital through the issuance of convertible notes by the Parent Company and by entering into new debt facilities at both the Parent Company and subsidiaries level. Management intends to continue accessing capital markets to raise additional funds through equity offerings. Beginning in August 2025, the Company expects to become eligible to utilize an S‑3 registration statement (12 months after regaining compliance with Nasdaq Listing Rule 5250(c)(1)) to access equity capital more efficiently. In addition, the Company is pursuing amendments to certain debt facilities to defer principal repayments and exploring additional debt financing opportunities to enhance liquidity. Finally, on August 5, 2025, the Company entered into a Securities Purchase Agreement for the issuance of up to $300 million of senior secured convertible promissory notes, with an initial $8 million closing completed on August 6, 2025. The availability of these proceeds, primarily intended for digital asset acquisition and working capital, significantly improves the Company’s liquidity and alleviates substantial doubt regarding our ability to continue as a going concern for at least the next 12 months.

Management is also considering postponing certain payments to suppliers and other creditors if required. Although these actions are intended to address the going concern uncertainty, there can be no assurance that the Company will be successful in executing its plans or obtaining the necessary funding.

As a result, substantial doubt remains regarding the Company’s ability to continue as a going concern for a period of 12 months from the date of this filing. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty, including potential effects on the recoverability or classification of assets or the amounts and classification of liabilities.

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Strategic Plan

Our strategic plan, which strikes a balance between growth and sustainability, emphasizes synergies, vertical integration, operational efficiencies, R&D, brand expansion, and the global growth of our distribution network and facilities.

We intend to continue to pursue active ongoing acquisitions. In fact, many of our acquisitions entail exploring opportunities, with discounted assets through business combinations or joint ventures, all to enhance our distribution network. We will expand our R&D division which is a platform and incubator to develop new patented pharmaceuticals and proprietary innovative nutraceutical products. To foster organic growth, we will enhance our business development and marketing efforts, pursue global expansion via prominent retailers, pharmacies and e-commerce platforms, and recapture lost markets such as the infant and baby care categories. In addition, we will invest in the expansion of our production capacity and global network of facilities to boost sales of our brands, engage in contract manufacturing with large multinational pharmaceutical companies, produce pharma grade ethanol for hospitals, and expand into new large markets capitalizing on our comparative advantages. Last but not least, we aim to strategically invest in key personnel, from seasoned export managers to highly skilled scientists, to ensure we have the necessary expertise at our fingertips.

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 and during the six-month period ended June 30, 2025, 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.

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While the Company intends to pursue these milestones, there may be circumstances where for valid business reasons or due to factors beyond the control of the Company, a reallocation of efforts may be necessary or advisable.

The Company intends to spend the funds available to strengthen working capital, inventories, intangible assets, acquisitions, research and development, sales and marketing expenses. Due to the uncertain nature of the industry in which the Company operates, projects may be frequently reviewed and reassessed. Accordingly, while it is currently intended by management that the available funds will be expended as set forth above, actual expenditures may in fact differ from these amounts and allocations.

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).

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.

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.

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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.

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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.

Off Balance Sheet Arrangements

As of June 30, 2025, there were no off-balance sheet arrangements.

Critical Accounting Policies

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

Revenue Recognition: The Company adopted Topic 606 Revenue from Contracts with Customers on January 1, 2018. As a result, it has changed its accounting policy for revenue recognition as detailed in Note 2.

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

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

The Company is liable for income taxes in Greece and the United Kingdom. The corporate income tax rate is 22% in Greece (tax losses are carried forward for five years effective January 1, 2013) and 25% in United Kingdom. Losses may also be subject to limitation under certain rules regarding change of ownership.

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

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We recognize the impact of an uncertain tax position in our financial statements if, in management’s judgment, the position is not more-likely-than-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 as incurred, respectively.

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

The Company has net operating loss carry-forwards in our parent, Cosmos 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.

Accounts Receivable and Allowance for Credit Losses

The Company follows ASC 310 to estimate the allowance for doubtful accounts. Pursuant to FASB ASC paragraph 310-10-35-9, losses from uncollectible receivables shall be accrued when both of the following conditions are met: (a) information available before the financial statements are issued or are available to be issued (as discussed in Section 855-10-25) indicates that it is probable that an asset has been impaired at the date of the financial statements, and (b) the amount of the loss can be reasonably estimated. Those conditions may be considered in relation to individual receivables or in relation to groups of similar types of receivables. If the conditions are met, accrual shall be made even though the receivables that are uncollectible may not be identifiable. 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 Reserves

Our merchandise inventories are made up of finished goods and are valued at the lower of cost or market using the weighted-average cost method. 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.

Convertible Promissory Note

As permitted under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 825, *Financial Instruments (“*ASC 825”), the Company elects to account for its convertible promissory note, which meets the required criteria, at fair value at inception and at each subsequent reporting date. Subsequent changes in fair value are recorded as a component of non-operating loss in the consolidated statements of operations. This election is made on an instrument-by-instrument basis as permitted under ASC 825. The portion of total changes in fair value of the convertible promissory note attributable to changes in instrument-specific credit risk are determined through specific measurement of periodic changes in the discount rate assumption exclusive of base market changes and are presented as a component of comprehensive income in the accompanying Consolidated Statements of Operations and Comprehensive Income (Loss). As a result of electing the fair value option, direct costs and fees related to the convertible promissory note are expensed as incurred.

The Company estimates the fair value of the convertible promissory note using a Monte Carlo simulation model, which uses as inputs the fair value of our common stock and estimates for the equity volatility and volume volatility of our common stock, the time to expiration of the convertible promissory note, the risk-free interest rate for a period that approximates the time to expiration, and probability of default. Therefore, we estimate our expected future volatility based on the actual volatility of our common stock and historical volatility of our common stock utilizing a lookback period consistent with the time to expiration. The time to expiration is based on the contractual maturity date, giving consideration to the voluntary, mandatory and potential accelerated redemption scenarios. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of measurement for time periods approximately equal to the time to expiration. Probability of default is estimated using Bloomberg's Default Risk function which uses our financial information to calculate a default risk specific to the Company

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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 and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Evaluation of Disclosure Controls and Procedures

The Company’s management, with the participation of the Company’s Principal Executive Officer and Principal Financial Officer, has evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, the Principal Executive Officer and the Principal Financial Officer have concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were ineffective due to material weaknesses stated 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.

We are in the process of remediating all material weaknesses present in our internal controls and we plan to have completed the remediation by December 31, 2025.

- 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.

- 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.

We are in the process of developing multiple levels of review based on job responsibilities and level of personnel. For example, management reviews whether the bank reconciliations are being prepared on a timely basis by the preparer and whether there are discrepancies between the general ledger and the bank statements. Another example is the review of management accounting information by the CFO and his authorization for material transactions and adjustments. Furthermore, we are in the process of assessing a new financial reporting application that will be used by all the companies of the Group and would be able to support, process financially relevant information, provide financially relevant reporting and house financially relevant interfaces and application controls in order for us to more efficiently establish IT General Controls to a single and more reliable application.

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Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting that have materially affected or are reasonably likely to materially affect, our internal control over financial reporting.

Our Audit Committee is in the process of evaluating our existing controls and procedures, while communicating with the Management on quarterly basis.

Audit Committee

We have a separately designated standing audit committee, which is appointed by the Board of Directors of Cosmos Health Inc. On April 28, 2022, Dr. Anastasios Aslidis was elected to serve on the Board of Directors and was appointed as a chair of the Audit Committee. Our three independent directors, Anastasios Aslidis, John Hoidas and Demetrios Demetriades serve on the Audit Committee. The primary function of the committee is to assist the Board of Directors in overseeing (1) the financial reporting and accounting processes of the Company, and (2) the financial statements audits of the Company. The Committee also prepares a written report to be included in the annual proxy statement of the Company pursuant to the applicable rules and regulations of the “SEC”. In furtherance of these purposes, the Committee shall maintain direct communication among the Company’s independent auditors and the Board of Directors. The independent auditors and any other registered public accounting firm engaged in preparing or issuing an audit report or performing other audit review or attest services for the Company shall report directly to the Committee and are ultimately accountable to the Committee and the Board of Directors.

In discharging its oversight role, the Committee is authorized to investigate any matter brought to its attention with full access to all books, records, facilities and personnel of the Company. The Committee shall have the sole authority to retain at the Company’s expense outside legal, accounting or other advisors to advise the Committee and to receive appropriate funding, as determined by the Committee, from the Company for the payment of the compensation of such advisors and for the payment of ordinary administrative expenses of the Committee that are necessary to carry out its duties. The Committee may request any officer or employee of the Company or the Company’s outside counsel or independent auditors to attend a meeting of the Committee or to meet with any member of, or advisors to, the Committee. The Committee may also meet with the Company’s investment bankers or financial analysts who follow the Company.

The Committee shall meet no less frequently than four times per year, with additional meetings as circumstances warrant. The Committee shall also meet periodically with management, the internal auditors, if any, and the independent auditors in separate executive sessions. The Committee shall record the minutes of all such meetings and shall submit the minutes of its meetings to, or discuss the matters deliberated at each meeting with, the Board of Directors. The Company’s chief financial or accounting officer shall function as the management liaison officer to the Committee.

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The Company is not required to provide the information called for in this item due to its status as a Smaller Reporting Company. You should refer to the other information set forth in this report, including the information set forth in “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 these risks.