What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-14 compared with 2020-05-19 · 680 added, 567 removed, 810 unchanged (61% of the section changed)

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

March 31, 2020

June 30, 2020

December 31, 2019

10 unchanged sentences

LIABILITIES AND STOCKHOLDERS’

EQUITY (DEFICIT)

Current Liabilities

10 unchanged sentences

Stockholders’

Equity (Deficit)

Common stock, $0.01 par value;

100,000,000 shares authorized, 54,142,940 and 53,627,344 shares issued, 53,627,344 and 52,888,449 outstanding as of March 31, 2020 and December 31, 2019, respectively

100,000,000 shares authorized, 71,063,440 and 53,404,045

shares issued, 70,548,248 and 52,888,845 outstanding as of June 30, 2020 and December 31, 2019, respectively

Additional paid-in capital

10 unchanged sentences

CONSOLIDATED STATEMENTS OF OPERATIONS

Three Months Ended March 31,

Three Months Ended June 30

Six Months Ended June 30,

Product revenues, net

15 unchanged sentences

Income taxes (Benefit)

Net loss attributable to noncontrolling interests

Net loss attributable to Conversion Labs, Inc.

Net Income (Loss)

Net (loss) income attributable to noncontrolling interests

Net Income (loss) attributable to Conversion Labs, Inc.

Basic loss per share attributable to Conversion Labs, Inc.

from continuing operation

Basic income per share attributable to Conversion Labs, Inc.

from discontinued operation

Diluted loss per share attributable to Conversion Labs, Inc.

from continuing operation

Diluted income per share attributable to Conversion Labs, Inc.

from discontinued operation

Weighted Average number of common shares outstanding

1 unchanged sentence

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’

Conversion Labs,

Noncontrolling

5 unchanged sentences

Distribution to non-controlling interest

Deemed distribution from down-round provision in common stock shares yet to be issued

Deemed distribution from down-round provision in common stock shares

yet to be issued

Deemed distribution from warrant price adjustments

1 unchanged sentence

(20,238,551 )

$ (3,537,114 )

Stock issued for services

Stock compensation

Cashless exercise of warrants

Purchase of common stock

Shares issued for share liability

Distribution to non-controlling interest

Deemed distribution from down-round provision in common stock shares

yet to be issued

Balance June 30, 2020

(23,705,170 )

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

Conversion Labs,

Noncontrolling

6 unchanged sentences

$ (12,804,418 )

Agreement to issue shares for non-controlling interest in Conversion

Stock compensation

Balance June 30, 2019

(14,941,929 )

$ (1,429,083 )

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

CONSOLIDATED STATEMENTS OF CASH FLOWS

Three Months Ended

March 31, 2020

March 31, 2019

CASH FLOWS FROM OPERATING ACTIVITIES

1 unchanged sentence

$ (5,980,791 )

Adjustments to reconcile net (loss) income to net cash provided by (used) in operating activities

$ (1,696,554 )

Adjustments to reconcile net (loss) income to net

cash provided by (used) in operating activities

Amortization of debt discount

3 unchanged sentences

Operating Lease Payments

Liability to issue shares for services

Stock issued for services

Stock compensation expense

Liability to issue shares for services

Changes in Assets and Liabilities

Trade accounts receivable

Accounts receivable

Product deposit

3 unchanged sentences

Accounts payable and accrued expenses

Net cash provided by operating activities

Net cash (used in) provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Cash paid for capitalized software costs

Payment to seller for contingent consideration

Net cash (used in) provided by investing activities

Contingent consideration on business combination paid

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Distributions to non-controlling interest

Proceeds from loan payable

Repayment of notes payable

Shares issued for cash

Cash receipts from investors for unissued shares

Debt issuance costs

Distributions to non-controlling interest

Proceeds from notes payable

Repayment of notes payable

Net cash provided by (used in) financing activities

Net increase (decrease) in cash

Net increase in cash

Cash at beginning of the period

2 unchanged sentences

Cash paid during the period for interest

Agreement to issue shares for non-controlling interest in Conversion

Cashless exercise of warrants

Deemed distribution from warrant price adjustments

Stock issues for capitalized costs

Deemed distribution from down-round provision

Stock yet to be issued for capitalized costs

Deemed distribution from down-round provision on unissued shares

Shares issued for share liability

$ (1,726,000 )

Debt issuance costs for liability to issue shares

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

TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

THE THREE MONTHS ENDED MARCH 31, 2020

NATURE OF THE ORGANIZATION AND BUSINESS

Labs, Inc., was formed in the State of Delaware on May 24, 1994, under its prior name, Immudyne, Inc.

The Company changed its

name to Conversion Labs, Inc.

Labs, Inc., was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc.

We changed our name to Conversion

on June 22, 2018.

Further, in connection with changing its name, the Company changed its trading

symbol to CVLB.

On April 1, 2016, with respect to a limited liability company operating agreement with joint venture partners

for its skincare products under the legal name Immudyne PR LLC (“Immudyne PR”), such original operating agreement

of Immudyne PR was amended and restated and the Company increased its ownership and voting interest in Immudyne PR to 78.2%.

with the name change of the parent company to Conversion Labs, Inc.

completed in 2018, Immudyne PR was renamed to Conversion Labs

PR LLC (now known as “Conversion Labs PR”).

On April 25, 2019, the operating agreement of Conversion Labs PR was amended

and restated in its entirety to increase the Company’s ownership and voting interest in Conversion Labs PR to 100%.

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC, a provider of a SaaS-based PDF

conversion service with SEO and SEM expertise.

June 2019, a joint venture with GoGoMeds.com was formed through the Company’s majority-owned subsidiary CVLB Rx, allowing

it to market branded and generic prescription drugs that are then sold and shipped (via GoGoMeds) online directly to consumers

Further, in connection with changing its name, the Company changed its trading symbol to CVLB.

April 1, 2016, our majority-owned subsidiary, Immudyne PR LLC (“Immudyne PR”), which was initially formed for the

purpose of a joint venture with the original owners of one of our skincare products, amended and restated its operating agreement

whereby we increased our ownership and voting interest in Immudyne PR to 78.2%.

Concurrent with the name change of the parent

company to Conversion Labs, Inc.

completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known as “Conversion

Labs PR”).

On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated in its entirety after

acquiring the remaining minority interest in the Conversion Labs PR, which is now a wholly-owned subsidiary of the Company.

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC, a software as a service (SaaS)

application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli Software’s growth business

model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

early 2019, the Company also launched a service-based business under the name Conversion Labs Media LLC, which was to be used

to run e-commerce marketing campaigns for other online businesses.

However, this business was discontinued in 2019 in order to

focus on its core business as well the expansion of our telehealth opportunities.

In June 2019, a strategic

joint venture with GoGoMeds.com (GoGoMeds) was formed in order to help facilitate the launch of our telemedicine

GoGoMeds is a nationwide pharmacy licensed to dispense prescription medications directly to consumers

in all 50 states and the District of Columbia.

Company is a direct response healthcare company that provides a convenient, cost-effective and smarter way for consumers to access

high quality Over The Counter (OTC) products and prescription medications.

The Company believes that the traditional model

of visiting a doctor’s office, receiving a physical prescription, visiting a neighborhood pharmacy, and returning to see

a doctor for follow up care or prescription refills is inefficient, costly to patients, and discourages many patients from seeking

much needed medical care.

Direct-to-consumer telemedicine companies, like the Company, offer patients immediate and virtual treatment

from licensed physicians, and the home delivery of prescription medications bundled with over-the counter wellness products.

Company is a direct to consumer response healthcare company that provides a convenient, cost-effective and smarter way

for consumers to access high quality Over The Counter (OTC) products and prescription medications.

healthcare system

is undergoing a paradigm shift largely due to new technologies and the emergence of direct-to-consumer healthcare.

the traditional model of visiting a doctor’s office, receiving a physical prescription, visiting a neighborhood pharmacy,

and returning to see a doctor for follow up care or prescription refills is inefficient, costly to patients, and discourages many

patients from seeking much needed medical care.

Direct-to-consumer telemedicine companies, like our Company, offer patients immediate

and virtual treatment from licensed physicians, and the home delivery of prescription medications, devices and diagnostics bundled

with over-the counter wellness products.

have built a platform that allows us to efficiently launch telehealth and wellness product lines wherever we determine there is

a market need.

Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers,

and engineers focused on building enduring brands.

otherwise indicated, the “Company”

refers to Conversion Labs, Inc.

(formerly known as Immudyne, Inc.) and its majority-owned

subsidiaries LegalSimpli Software, LLC, a Puerto Rico limited liability company (“LegalSimpli”), Conversion Labs PR,

LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company (“Conversion

Labs PR”), Conversion Labs Media, LLC (“CVLB Media”), a Puerto Rico limited liability company, Conversion Labs

Rx, LLC (“CVLB Rx”), a Puerto Rico limited liability company, and Conversion Labs Asia Limited, a Hong Kong company

(“Conversion Labs Asia”).

refers Conversion Labs, Inc.

(formerly known as Immudyne, Inc.), our wholly subsidiary

Conversion Labs PR, LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company

(“Conversion Labs PR”) and our majority-owned subsidiary LegalSimpli Software, LLC, a Puerto Rico limited liability

company (“LegalSimpli”).

Unless otherwise specified, all dollar amounts are expressed in United States dollars.

4 unchanged sentences

additional shares of common stock.

accompanying financial statements has been prepared on the basis that the Company will continue as a going concern, which assumes

accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes

the realization of assets and the satisfaction of liabilities in the normal course of business.

As of March 31, 2020, the Company

As of June 30, 2020, the Company

has an accumulated deficit approximating $23.7 million and has experienced significant losses from continuing operations.

Based on the Company’s cash balance as of March 31, 2020 of $358,000, and projected cash needs for growth for 2020,

management estimates that it will need to increase sales revenue and/or raise additional capital to cover operating and capital

requirements for the next year.

Management will need to raise the additional needed funds through increased sales volume, issuing

additional shares of common stock or other equity securities, or obtaining debt financing.

Although management has been successful

to date in raising necessary funding, there can be no assurance that sales revenue will substantially increase or that any required

future financing can be successfully completed on a timely basis, or on terms acceptable to the Company.

on the Company’s cash balance as of June 30, 2020, and projected cash needs, management estimates that it will need an additional

$4.0 million through the next 12 months, either from increasing sales revenue and/or raising additional capital via the

sale of common stock or other equity securities, or obtaining debt financing.

Although management has been successful to date

in raising necessary funding, there can be no assurance that sales revenue will substantially increase or that any required future

financing can be successfully completed on a timely basis, or on terms acceptable to the Company.

Based on these circumstances,

27 unchanged sentences

Company records revenue under the adoption of ASC 606 by analyzing exchanges with its customers using a five-step analysis:

Identify the contract

Identify performance obligations

Determine the transaction price

Allocate the transaction price

Recognize revenue

performance obligations

the transaction price

the Company’s product-based contracts with customers, the Company has determined that there is one performance obligation

20 unchanged sentences

Customer discounts, returns and rebates on product revenues during the three

months ended March 31, 2020 and 2019 approximated $477,000 and $552,000, respectively.

Company began testing trial offers with the Shapiro MD products in late 2018.

The Company was unable to adequately implement a

process to report any trial-based sales and the related impact on inventory.

Given the relatively new trail period being offered,

the Company has not been able to estimate the historical effect to determine how this will change the recording of revenue or

expected reserve for return rates.

Company offers a suite of software to customers as a monthly subscription based service.

This suite of software allows the user

or subscriber to convert almost any type of document to other editable document type formats for easy editing.

For these subscription-based

contracts with customers, the Company offers a 14-day trial period which is billed at $1.95 for an initial period, a monthly subscription,

or a yearly subscription to the Company’s software.

The Company has estimated that there is one product and performance

obligation that is delivered over time, as the Company allows the subscriber to access the service for the time period purchased.

The Company allows the customer to cancel at any point during the billing cycle, in which case the customers subscription will

not be renewed for the following month or year depending on the original subscription.

The Company records the sales over the

customers subscription period for monthly and yearly subscribers or at the end of the initial 14 day service period for customers

who purchased the initial subscription.

The Company offers a discount for the purchase of the monthly and yearly subscriptions,

which must be paid at the initiation of the contract term, so that the Contract price is fixed at the contract initiation.

and monthly subscriptions for the subscription are recorded net of the Company’s known discount rates.

As of March 31, 2020

and December 31, 2019, the Company has accrued contract liabilities of approximately $303,000 and $110,000, respectively, which

represent obligations on in-process monthly or yearly contracts with customers and yet to be recognized initial 14-day trial periods.

the three months ended March 31, 2020 and 2019, the Company had the following disaggregated revenue:

Months Ended March 31,

months ended June 30, 2020 and 2019 approximated $857,000 and $161,000, respectively.

Customer discounts, returns and

rebates on product revenues during the six months ended June 30, 2020 and 2019 approximated $1,334,000 and $713,000, respectively.

Company, through its majority-owned subsidiary LegalSimpli, offers a suite of software to customers as a monthly subscription

based service.

This suite of software allows the user or subscriber to convert almost any type of document to other editable document

type formats for easy editing.

For these subscription-based contracts with customers, the Company offers a 14-day trial period

which is billed at $1.95 for an initial period, a monthly subscription, or a yearly subscription to the Company’s software.

The Company has estimated that there is one product and performance obligation that is delivered over time, as the Company allows

the subscriber to access the service for the time period purchased.

The Company allows the customer to cancel at any point during

the billing cycle, in which case the customers subscription will not be renewed for the following month or year depending on the

original subscription.

The Company records the sales over the customers subscription period for monthly and yearly subscribers

or at the end of the initial 14 day service period for customers who purchased the initial subscription.

The Company offers a

discount for the purchase of the monthly and yearly subscriptions, which must be paid at the initiation of the contract term,

so that the Contract price is fixed at the contract initiation.

Yearly and monthly subscriptions for the subscription are recorded

net of the Company’s known discount rates.

As of June 30, 2020 and December 31, 2019, the Company has accrued contract liabilities

of approximately $304,000 and $110,000, respectively, which represent obligations on in-process monthly or yearly contracts with

customers and yet to be recognized initial 14-day trial periods.

the six months ended June 30, 2020 and 2019, the Company had the following disaggregated revenue :

Six Months Ended June 30,

Product revenues by Brand for Conversion Labs PR:

12 unchanged sentences

of accounts receivable previously written off are recorded as income when received.

As of March 31, 2020 and 2019, the Company

As of June 30, 2020 and 2019, the Company

had determined that an allowance for doubtful accounts reserve was not necessary.

As of March 31, 2020 and 2019, the reserve for

sales returns and allowances was approximately $152,000 and $82,000, respectively.

of March 31, 2020 and December 31, 2019, inventory consisted primarily of finished cosmetic products.

Inventory is maintained

at the Company’s third-party warehouse locations, which is owned by a related party, in Pennsylvania and at Amazon fulfillment

As of June 30, 2020 and December 31, 2019, the

reserve for sales returns and allowances was approximately $351,000 and $82,000, respectively.

of June 30, 2020 and December 31, 2019, inventory consisted primarily of finished cosmetic products.

Inventory is maintained at

the Company’s third-party warehouse location, which is owned by a related party, in Pennsylvania and at Amazon fulfillment

is valued at the lower of cost or net realizable value with cost determined on a first-in, first-out (“FIFO”) basis.

1 unchanged sentence

net realizable, if lower.

As of March 31, 2020 and December 31, 2019, the Company recorded an inventory reserve in the amount

of $39,320 and $12,500, respectively.

The increase in our inventory reserve mainly is attributable to the lack of marketability

for our Scarology product line.

As of March 31, 2020 and December 31, 2019, the Company’s inventory consisted of the following:

As of June 30, 2020 and December 31, 2019, the Company recorded an inventory reserve in the amount of

$34,657 and $12,500, respectively.

The increase in our inventory reserve mainly is attributable to the lack of marketability for

our INR Wellness product line.

As of June 30, 2020 and December 31, 2019, the Company’s inventory consisted of the following:

Raw materials and packaging components

1 unchanged sentence

Total net inventory

to our cash situation and the Company’s credit, many of our vendors require deposits when a purchase order is placed for

goods or fulfillment services.

These deposits typically ranging from 10% to 33% of the total purchased amount.

Our vendors issue

a credit memo when sending their final invoice, reducing the amount the Company owes for the deposit amount previously paid to

The Company capitalizes these product deposits until the inventory is received at the Company’s fulfillment

As of March 31, 2020 and December 31, 2019, the Company has $60,832 and $150,000, respectively, of product deposits with

multiple vendors for the purchase of raw materials or finished for products we sell online.

As of March 31, 2020 and December

31, 2019, the vast majority of these product deposits are with one vendor that manufacturers the Company’s finished goods

inventory for its Shapiro hair care product line.

of our vendors require deposits when a purchase order is placed for goods or fulfillment services.

These deposits typically ranging

from 10% to 33% of the total purchased amount.

Our vendors issue a credit memo when sending their final invoice, reducing the

amount the Company owes for the deposit amount previously paid to the vendors.

The Company capitalizes these product deposits

until the inventory is received at the Company’s fulfillment centers.

As of June 30, 2020 and December 31, 2019, the Company

has approximately $281,000 and $150,000, respectively, of product deposits with multiple vendors for the purchase of raw materials

or finished for products we sell online.

As of June 30, 2020 and December 31, 2019, the vast majority of these product deposits

are with one vendor that manufacturers the Company’s finished goods inventory for its Shapiro hair care product line.

Software Costs

2 unchanged sentences

The Company does not sell internally

developed software.

Certain development costs not meeting the criteria for capitalization, in accordance with Accounting Standards

Codification (“ASC”) ASC 350-40 Internal-Use Software , are expensed as incurred.

As of March 31, 2020 and 2019,

the Company capitalized $108,400 and $0 related to internally developed software costs which is included in development.

March 31, 2020, these costs include $40,000 in capitalized stock based compensation that was given to a third-party service provider.

During the three months ending March 31, 2020 and 2019, the Company amortized $2,551 and $0 of capitalized software costs, respectively.

developed software other than through the use of subscription service.

Certain development costs not meeting the criteria for

capitalization, in accordance with Accounting Standards Codification (“ASC”) ASC 350-40 Internal-Use Software ,

are expensed as incurred.

As of June 30, 2020 and 2019, the Company capitalized $317,160 and $0 related to internally developed

software costs which is included in development.

As of June 30, 2020, these costs include $40,000 in capitalized stock based compensation

that was given to a third-party service provider.

During the three months ending June 30, 2020 and 2019, the Company amortized

$11,585 and $0 of capitalized software costs, respectively.

assets are comprised of customer relationship asset and purchased licenses with estimated useful lives of three years and indefinite

14 unchanged sentences

to Issue Common Stock

to issue common stock represents liabilities of the Company for failing to issue shares of common stock timely to various consultants

and or third-party investors in conjunction with various consulting, service, warrant or stock purchase agreements.

31, 2020, the Company has a liability to issue 7,265,760 shares of common stock.

These yet to be issued shares of common stock

are valued based on the fair market value of the common stock price on the date of agreement or the purchase price specified in

the stock purchase agreement.

Liability to issue common

stock represents liabilities of the Company for failing to issue shares of common stock timely to various consultants and or third-party

investors in conjunction with various consulting, service, warrant or stock purchase agreements.

As of June 30, 2020, the Company

has a liability to issue 2,627,635 shares of common stock for $541,972 in fair value.

During the six months ended June

30, 3020, the Company received $1,639,000 in cash from investors which was recorded as a liability to issue shares until such

time as the shares were issued.

The yet to be issued shares of common stock are valued based on the fair market value of

the common stock price on the date of agreement or the purchase price specified in the stock purchase agreement.

Company files corporate federal and state tax returns.

39 unchanged sentences

are excluded from dilutive earnings per share when the effects would be antidilutive.

stock equivalents comprising shares underlying 33,978,181 options and warrants for the three months ended March 31, 2020 have

not been included in the loss per share calculations as the effects are anti-dilutive.

Common stock equivalents comprising shares

underlying 28,996,224 options and warrants for the three months ended March 31, 2019, respectively, have not been included in

the income per share calculations as the effects are anti-dilutive.

stock equivalents comprising shares underlying 17,498,953 options and warrants for the three and six months ended June

30, 2020 have not been included in the loss per share calculations as the effects are anti-dilutive.

Value of Financial Instruments

9 unchanged sentences

if any of our current manufacturers cease to perform adequately.

As of March 31, 2020 and December 31, 2019, we utilized two (2)

As of June 30, 2020 and December 31, 2019, we utilized two (2)

suppliers for fulfillment services, two (2) suppliers for manufacturing finished goods, one (1) supplier for packaging and bottles

and one (1) supplier for labeling.

For the three months ended March 31, 2020 and the year ended December 31, 2019, we purchased

For the three and six months ended June 30, 2020 and the year ended December 31, 2019, we purchased

100% of our finished goods from two (2) manufacturers.

40 unchanged sentences

INTANGIBLE ASSETS

of March 31, 2020, the Company has the following amounts related to intangible assets:

of June 30, 2020, the Company has the following amounts related to intangible assets:

Gross Carrying Amount

5 unchanged sentences

of December 31, 2019 the Company has the following amounts related to intangible assets:

Carrying Amount

Gross Carrying Amount

Accumulated Amortization

3 unchanged sentences

Purchased licenses

The aggregate amortization expense of the Company’s intangible

assets for the three months ended March 31, 2020 and 2019 was approximately $83,903 and $83,903, respectively.

Estimated amortization

expense for 2020 and 2021 is approximately $336,000 and $140,000, respectively.

aggregate amortization expense of the Company’s intangible assets for the three months ended June 30, 2020 and 2019 was

approximately $83,903 and $83,903, respectively.

The aggregate amortization expense of the Company’s intangible assets for

the six months ended June 30, 2020 and 2019 was approximately $167,806 and $167,806, respectively.

Estimated amortization expense

for 2020 and 2021 is approximately $336,000 and $140,000, respectively.

NOTES PAYABLE

3 unchanged sentences

Pursuant to the terms of the Purchase Agreement,

the Company issued and sold to the Investors senior secured convertible notes in the aggregate original principal amount of $550,000,

and warrants to purchase up to 2,391,305 shares of the Company’s common stock.

The Notes will matured in May 2019.

shall pay, interest on the outstanding principal amount of the Notes compounded annually at the annual rate of twelve percent

(12%), subject to adjustments.

The Notes may be converted into the Company’s common stock, at the option of the holder,

at any time following issuance, unless the conversion or share issuance under the conversion would cause the holder to beneficially

own in excess of 4.99% of the Company’s common stock.

The conversion price for the principal and interest, if any, in connection

with voluntary conversion by the Holder shall be $0.23 per share of Common Stock, subject to adjustment as defined in the note.

The borrowers have converted $344,642 of these notes including $9,922 of interest as of December 31, 2019 and 2018.

note matured in May of 2019, the Company had yet to pay $187,308 to one investor as of December 31, 2019.

As of March 31, 2020,

the Company signed an agreement to cure the default and pay the outstanding amount of the note.

August 15, 2019, the Company entered into securities purchase agreements with three accredited investors.

Pursuant to the terms

of the Purchase Agreements, the Company issued and sold to the investors convertible promissory notes for the aggregate original

principal amount of $1,291,500, and warrants to purchase up to 4,679,348 shares of the Company’s common stock.

mature on August 15, 2020 and accrue interest at a rate of twelve percent (12%) per annum, subject to adjustments

as discussed in the notes.

These notes may be converted into shares of the Company’s common stock, at the discretion of

the holder, at any time following issuance, unless the conversion or share issuance under the conversion would cause the holder

to beneficially own shares in excess of 4.99% of the Company’s common stock.

The conversion price for the principal and

interest, if any, in connection with voluntary conversion by the investors shall be $0.23 per share of common stock, subject to

adjustment as defined in the notes.

In conjunction with the convertible notes, the Company issued warrants to purchase up to 4,612,500

shares of common stock with an exercise price of $0.28 per share.

The fair value of these warrants was determined to be $569,147

based on using the Black-Scholes pricing model.

These warrants were evaluated by management and deemed to be equity-linked awards

subject to ASC 810, Derivatives and Hedging.

These notes contained an original issue discount of 20% or $215,250 which

is the difference between the note face amount of $1,291,500 and the cash proceeds received from the investors.

As part of this

financing, the Company paid debt issuance costs $284,070 which are placed as a contra-debt account and amortized over the life

the Company issued and sold to them senior secured convertible notes in the aggregate original principal amount of $550,000 (collectively,

the “Alpha and Brio Notes”), and warrants to purchase up to 2,391,305 shares of the Company’s common stock (collectively

the “Alpha and Brio Warrants”).

The Alpha and Brio Notes matured on May 2019.

Interest on the outstanding principal

amount of the Alpha and Brio Notes compounded annually at the annual rate of twelve percent (12%), subject to adjustments.

Alpha and Brio Notes are convertible into the Company’s common stock, at the option of the holder, at any time following

issuance, unless the conversion or share issuance under the conversion would cause the holder to beneficially own in excess of

4.99% of the Company’s common stock.

The conversion price for the principal and interest, if any, in connection with voluntary

conversion by the Holder shall be $0.23 per share of Common Stock, subject to adjustment as defined in the Alpha and Brio Notes.

Alpha and Brio have converted $344,642 of these notes including $9,922 of interest as of December 31, 2019 and 2018.

June 30, 2020, these notes have been paid off.

August 15, 2019, the Company entered into securities purchase agreements (the “August Purchase Agreements”) with three

accredited investors, including Alpha and Brio.

Pursuant to the terms of the August Purchase Agreements, the Company issued and

sold to the investors convertible promissory notes for the aggregate original principal amount of $1,291,500 (collectively the

“August 2019 Notes”), and warrants to purchase up to 4,679,348 shares of the Company’s common stock

(the “August 2019 Warrants”).

The August 2019 Notes mature on August 15, 2020 and accrue interest at a rate of twelve

percent (12%) per annum, subject to adjustments as defined therein.

The August 2019 Notes may be converted into shares of the

Company’s common stock, at the discretion of the holder, at any time following issuance, unless the conversion or share

issuance under the conversion would cause the holder to beneficially own shares in excess of 4.99% of the Company’s common

The conversion price for the principal and interest, if any, in connection with voluntary conversion by the investors shall

be $0.23 per share of common stock, subject to adjustment as defined therein.

In conjunction with the August 2019 Notes, the Company

issued the August 2019 Warrants with an exercise price of $0.28 per share.

The fair value of August 2019 Warrants was determined

to be $569,147 based on using the Black-Scholes pricing model.

The August 2019 Warrants were evaluated by management and deemed

to be equity-linked awards subject to ASC 810, Derivatives and Hedging.

The August 2019 Notes contained an original issue

discount of 20% or $215,250 which is the difference between the note face amount of $1,291,500 and the cash proceeds received

from the investors.

As part of this financing, the Company paid debt issuance costs $284,070 which are placed as a contra-debt

account and amortized over the life of the loan.

February 25, 2020, the Company entered into a Note Repayment and Warrant Amendment Agreement with Alpha and Brio, whereby the

Company agreed to repay the outstanding balance of the Convertible Promissory Note issued in favor of Alpha and Brio on August

15, 2019 in the amount of $1,291,000, including principal and interest.

As a result of this transaction, the Company accelerated

debt discounts for warrants, issuance costs and original issue discount of $500,145, which was recognized through interest expense

on the accompanying consolidated statement of operations.

As of March 31, 2020 and December 31, 2019, the gross balance payable

for these notes was $0 and $1,291,000, respectively.

As of March 31, 2020 and December 31, 2019, the Company has cumulatively

amortized $568,322 and $404,393 of the debt discounts costs including debt issuance costs, original issue discount, and discount

for warrants issued in connection with the debt transaction, all of which is included in interest expense on the accompanying

consolidated statement of operations.

As of March 31, 2020 and December 31, 2019, the net balance payable for these notes was

$0 and $627,426, respectively.

February 18, 2020, the Company entered into two agreements for the purchase and sale of future revenue with C6 Capital, LLC (“C6”).

Pursuant to the terms of the Purchase Agreement, the Company issued and sold to C6 two loan agreements in the aggregate original

principal amount of $1,020,000.

These loans contain an original purchase discount of 18%, or $270,000, in total, or $135,000 per

C6 paid $375,000 per loan agreement for a total of $750,000.

The Company paid debt issuance costs to C6 of $7,500 per

agreement, or $15,000 in total, which was placed as a contra-debt account and will be amortized over the life of the loan.

loan agreements require the Company to pay all future receipts of the Company without recourse until such time as the purchased

amount has been repaid.

The loan agreements require the company to make a daily average payment of $8,094 during the term of the

As of March 31, 2020, the Company has made $161,904 in principal payments under these loan agreements.

31, 2020, the gross balance payable for these loan agreements was $858,000, and the balance of the loan net of discounts was $600,424.

For the three months ended March, 31, 2020, the Company has amortized $27,329 of debt discount through interest expense on the

accompanying statement of operations.

interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $793,039 and $170,194 for the three

months ended March 31, 2020 and 2019, respectively.

Company agreed to repay the outstanding balance of Alpha and Brio’s August 2019 Notes in the amount of $1,291,000, including

principal and interest.

As a result of this transaction, the Company accelerated debt discounts for warrants, issuance costs and

original issue discount of $500,145, which was recognized through interest expense on the accompanying consolidated statement

of operations.

As of June 30, 2020 and December 31, 2019, the gross balance payable for these notes was $0 and $1,291,000, respectively.

As of June 30, 2020 and December 31, 2019, the Company has cumulatively amortized $568,322 and $404,393 of the debt discounts

costs including debt issuance costs, original issue discount, and discount for warrants issued in connection with the debt transaction,

all of which is included in interest expense on the accompanying consolidated statement of operations.

As of June 30, 2020 and

December 31, 2019, the net balance payable for these notes was $0 and $627,426, respectively.

February 18, 2020, the Company entered into two purchase agreements (the “C6 Purchase Agreements”) for the purchase

and sale of future revenue with C6 Capital, LLC (“C6”).

Pursuant to the terms of the C6 Purchase Agreements, the Company

issued and sold to C6 two loan agreements in the aggregate original principal amount of $1,020,000.

These loans contain

an original purchase discount of 18%, or $270,000, in total, or $135,000 per agreement.

C6 paid $375,000 per loan agreement for

a total of $750,000.

The Company paid debt issuance costs to C6 of $7,500 per agreement, or $15,000 in total, which was placed

as a contra-debt account and will be amortized over the life of the loan.

The loan agreements require the Company to pay all future

receipts of the Company without recourse until such time as the purchased amount has been repaid.

The loan agreements require

the Company to make a daily average payment of $8,094 during the term of such agreements.

As of June 30, 2020, the Company has

made $161,904 in principal payments under these loan agreements.

As of June 30, 2020, the gross balance payable for these loan

agreements was $858,000, and the balance of the loan net of discounts was $600,424.

For the three months ended March 31, 2020,

the Company has amortized $27,329 of debt discount through interest expense on the accompanying statement of operations.

May 21, 2020 through May 27, 2020 the Company, issued convertible promissory notes (the “May 2020 Notes”) to six (6)

accredited investors (each a “May 2020 Investor”, and collectively, the “May 2020 Investors”).

The aggregate principal amount of the May 2020 Notes is $1,000,000 for which the Company received gross proceeds of $1,000,000.

The May 2020 Notes are due and payable six months from the date of issuance.

The May 2020 Notes entitle each holder to 12% interest

upon Maturity.

The May 2020 Notes may be converted into shares of the Company’s common stock at any time following the date

of issuance at a conversion price of $0.50 per share, subject to adjustment.

an inducement to enter into the transaction, the Company issued an aggregate of 665,000 shares of the Company’s restricted

common stock to the May 2020 Investors.

In the event of a default the outstanding balance of the May 2020 Notes shall increase

to 130% and shall become immediately due and payable upon notice to the Company.

interest expense on notes payable, inclusive of amortization of debt discounts, amounted to $1,021,914 and $300,000 for the six

months ended June 30, 2020 and 2019, respectively.

Total interest expense on notes payable, inclusive of amortization of debt

discounts, amounted to $228,875 and $129,826 for the three months ended June 30, 2020 and 2019, respectively.

In June 2020, the Company

and its subsidiaries received loans in the aggregate amount of approximately $242,000 (the “PPP Loan”) under the new

Paycheck Protection Program legislation administered by the U.S.

Small Business Administration.

These loans bear interest at one

percent per annum (1.0%) and mature five years from the date of the first disbursement.

The proceeds of the PPP Loan must be used

for payroll costs, lease payments on agreements before February 15, 2020 and utility payments under agreements before February

At least 60% of the proceeds must be used for payroll costs and certain other expenses and no more than 40% may be used

on non-payroll expenses.

Proceeds from the PPP Loan used by the Company for the approved expense categories may be fully forgiven

by the Small Business Administration if the Company satisfies applicable employee headcount and compensation requirements.

Company currently believes that a majority of the PPP Loan proceeds will qualify for debt forgiveness;

however, there can be no

assurance that the Company will qualify for forgiveness from the Small Business Administration until it occurs.

STOCKHOLDERS’

During the month of February

2020 , the Company entered into a stock purchase agreement with a third-party investor

for the purchase of 4,000,000 shares of common stock at $0.16 per share for $640,000 in cash consideration.

As of March 31, 2020,

these shares of common stock had not yet been issued and thus the Company has included the fair value of these shares

on the accompanying balance sheet in the liability to issue common stock accrual.

During the month of March

2020, the entered into a stock purchase agreement with a third-party investor for the purchase of 1,250,000 shares of common stock

at $0.16 per share for $200,000 in cash consideration.

As of March 31, 2020, these shares of common stock had not yet been

issued and thus the Company has included the fair value of these shares on the accompanying balance sheet in the liability

to issue common stock accrual.

the month of March 2020, Alpha and Brio exercised their warrants in a cashless exercise for an aggregate of 1,836,155 common

stock warrants to obtain 739,291 shares of common stock.

the month of February 2020, the Company entered into a stock purchase agreement with a third-party investor for the purchase of

4,000,000 shares of common stock at $0.16 per share for $640,000 in cash consideration.

the month of March 2020, the entered into a stock purchase agreement with a third-party investor for the purchase of 1,250,000

shares of common stock at $0.16 per share for $200,000 in cash consideration.

the month of March 2020, Alpha and Brio exercised their warrants in a cashless exercise for an aggregate of 1,836,155 common stock

warrants to obtain 739,291 shares of common stock.

As of June 30,

2020, the Company received $540,972 in cash from investors which is recorded as a liability to issue shares until

such time as the shares are issued.

Noncontrolling

the three months ended March 31, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $315,872 and

the three months ended June 30, 2020 and 2019, the net loss attributed to the non-controlling interest amounted to $68,131

and $144,887, respectively.

During the three months ended June 30, 2020 and 2019, the Company paid distributions to

non-controlling shareholders of $85,223 and $0, respectively.

For the six months ended June 30, 2020 and 2019, the

net loss attributed to the non-controlling interest amounted to $246,947 and $214,742, respectively.

six months ended June 30, 2020 and 2019, the Company paid distributions to non-controlling shareholders of $121,223 and

$34,298, respectively.

During the three months ended March 31, 2020 and 2019, the Company paid distributions to non-controlling

shareholders of $36,000 and $34,298, respectively.

April 25, 2019, the Company entered into an membership purchase agreement with entities owned by the Company’s Chief Executive

officer and Chief Technology Officer, Conversion Labs PR, and purchased the remaining 21.8% interest of Conversion Labs PR from

the Company’s Chief Executive officer and Chief Technology Officer.

As such, the Company now wholly-owns 100% of Conversion

In order to consummate this transaction, the Company agreed to issue 5 million shares of common stock based on the issuance

price of $0.18 per share, equal to $900,000 to the Company’s Chief Executive Officer and Chief Technology Officer.

were not issued until August 6, 2019, and, as such, the Company has recorded a liability on the Company’s balance sheet

as of June 30, 2019.

The difference between the value of the stock issued and net book value of the transfer to accumulated deficit

was recognized in non-controlling interest for a charge of $412,377.

Service-Based

12 unchanged sentences

a result of amendment, the Company cancelled 1,850,000 service based options with an exercise price of $0.30.

following is a summary of outstanding service-based options activity for the three months ended March 31, 2020:

the six months ended June 30, 2020 the Company issued 2.4 million stock options to three employees, two advisory board members,

and one vendor of the Company.

These stock options have a contractual term of 10 years and vest in 1/3 increments over a two to

three year period.

following is a summary of outstanding service-based options activity for the three months ended June 30, 2020:

Options Outstanding Number of Shares

4 unchanged sentences

$ 0.20 - 0.40

Balance at March 31, 2020

Balance at June 30, 2020

$ 0.16 - 1.50

1 unchanged sentence

$ 0.20 - 0.40

Exercisable at March 31, 2020

Exercisable at June 30, 2020

$ 0.20 - 0.40

13 unchanged sentences

a result of amendment, the Company cancelled 1,850,000 service based options with an exercise price of $0.30.

following is a summary of outstanding performance-based options activity for the three months ended March 31, 2020:

following is a summary of outstanding performance-based options activity for the three months ended June 30, 2020:

Options Outstanding Number of Shares

4 unchanged sentences

$ 0.25 - 0.40

Balance at March 31, 2020

$ 0.25 - 0.40

Balance at June 30, 2020

$ 0.25 –

Exercisable December 31, 2019

$ 0.25 - 0.40

Exercisable at March 31, 2020

Exercisable at June 30, 2020

$ 0.25 - 0.40

following is a summary of outstanding and exercisable warrants activity during the three months ended March 31, 2020:

following is a summary of outstanding and exercisable warrants activity during the three months ended June 30, 2020:

Warrants Outstanding Number of Shares

7 unchanged sentences

Warrants Expired

Balance at March 31, 2020

Balance at June 30, 2020

$ 0.13 - 0.50

1 unchanged sentence

$ 0.20 - 0.50

Exercisable March 31, 2020

Exercisable June 30, 2020

$ 0.13 - 0.50

Capital Anstalt (“Alpha”) Warrants

February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement whereby the Company agreed

to (i) repay the outstanding balance of the Convertible Promissory Note issued in favor of Alpha on May 29, 2018 in the amount

of $224,145, including principal and interest and (ii) amend the exercise price of the warrant issued to Alpha in connection with

the 2018 Alpha Note on May 29, 2018.

The 2018 Alpha Warrant originally provides for the purchase of up to 1,956,522 shares of

the Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the

February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement (the “2018 Alpha

Amendment”) whereby the Company agreed to (i) repay the outstanding balance of the convertible promissory note issued in

favor of Alpha on May 29, 2018 in the amount of $224,145, including principal and interest (the “2018 Alpha Note”)

and (ii) amend the exercise price of the warrant (the “2018 Alpha Warrant”) issued to Alpha in connection with the

2018 Alpha Note on May 29, 2018.

The 2018 Alpha Warrant originally provided for the purchase of up to 1,956,522 shares of the

Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the 2018

Alpha Amendment.

2 unchanged sentences

issuable under the Alpha 2018 Warrant from 1,956,522 to 4,057,972 shares.

February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement whereby the Company agreed

to (i) repay the outstanding balance of the Convertible Promissory Note issued in favor of Alpha on August 15, 2019 in the amount

of $520,000, including principal and interest and (ii) amend the exercise price of the warrant issued to Alpha in connection with

the 2019 Alpha Note on August 15, 2019.

The Alpha 2019 Warrant originally provided for the purchase of up to 1,826,087 shares

of the Company’s common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of

the 2019 Alpha Amendment.

Pursuant to the 2019 Alpha Amendment, Alpha has agreed to the reduction of the exercise price of $0.28

Therefore, effective upon the date of the 2019 Alpha Amendment, the exercise price of the 2019 Alpha Warrant is reduced

to $0.23, subject to further adjustment.

However, for purposes of calculating additional shares to be issued to Alpha pursuant

to the terms of the 2019 Alpha Warrant, the deemed exercise price will be $0.135, as if the exercise price were actually reduced

to $0.135 and thereafter increased to $0.23.

As a result of the above described reduction of the exercise price and the application

of certain provisions of the 2019 Alpha Warrant, the amount of shares that may be purchased upon exercise of the 2019 Alpha Warrant

after giving effect to the foregoing is increased to 3,787,439 shares of the Company’s common stock.

a result of the above transactions, the Company has recorded a deemed distribution to Alpha for the price adjustments of the Alpha

warrants of $915,479 which is recorded in the statement of changes in stockholder’s equity as an increase in additional

paid in capital and a reduction of accumulated deficit.

During the month of March 2020, Alpha exercised a portion of their warrants

in a cashless exercise, whereby Alpha exercised 1,336,155 common stock warrants to obtain 451,159 share of common stock.

February 25, 2020, the Company and Alpha entered into a Note Repayment and Warrant Amendment Agreement (the “2019 Alpha

Amendment”) whereby the Company agreed to (i) repay the outstanding balance of the convertible promissory note issued in

favor of Alpha on August 15, 2019 in the amount of $520,000, including principal and interest (the “August 2019 Alpha Note”)

and (ii) amend the exercise price of the August 2019 Warrant issued to Alpha in connection with the 2019 Alpha Note on August

The August 2019 Warrant issued to Alpha originally provided for the purchase of up to 1,826,087 shares of the Company’s

common stock at an exercise price of $0.28 per share, none of which have been issued as of the date of the 2019 Alpha Amendment.

Pursuant to the 2019 Alpha Amendment, Alpha has agreed to the reduction of the exercise price of $0.28 to $0.23.

Therefore, effective

upon the date of the 2019 Alpha Amendment, the exercise price of the 2019 Alpha Warrant was reduced to $0.23, subject to further

However, for purposes of calculating additional shares to be issued to Alpha pursuant to the terms of the 2019 Alpha

Warrant, the deemed exercise price will be $0.135, as if the exercise price were actually reduced to $0.135 and thereafter increased

As a result of the above described reduction of the exercise price and the application of certain provisions of the

2019 Alpha Warrant, the amount of shares that may be purchased upon exercise of the 2019 Alpha Warrant after giving effect to

the foregoing is increased to 3,787,439 shares of the Company’s common stock.

a result of the above transactions, the Company has recorded a deemed distribution to Alpha for the price adjustments of the August

2019 Warrant issued to Alpha of $915,479 which is recorded in the statement of changes in stockholder’s equity as an increase

in additional paid in capital and a reduction of accumulated deficit.

During the month of March 2020, Alpha exercised a portion

of their warrants in a cashless exercise, whereby Alpha exercised 1,336,155 common stock warrants to obtain 451,159 share of common

May 7, 2020, the Company agreed to further amend August 2019 Warrant issued to Alpha on August 15, 2019, as amended on February

25, 2020 (the “Second Alpha Warrant Amendment”).

Specifically, pursuant to anti-dilution provisions contained therein,

the Company agreed to amend the August 2019 Warrant issued to Alpha in order to increase the amount of shares able to be purchased

thereunder by an additional 1,657,005 shares of the Company’s common stock or an aggregate of up to 5,444,444 shares (the

“Alpha Warrant Shares”).

On the same day, Alpha exercised, on a cashless basis, all of the August 2019 Warrants issued

to Alpha, as amended, resulting in the issuance of 1,957,331 shares of the Company’s common stock to Alpha.

Upon Alpha’s

cashless exercise, the August 2019 Warrants issued to Alpha are no longer in force or effect and no additional issuances will

be due or owing.

Master Fund (“Brio”) Warrants

26 unchanged sentences

in a cashless exercise, whereby Alpha exercised 500,000 common stock warrants to obtain 287,736 shares of common stock.

May 7, 2020, the Company agreed to further amend those certain warrants issued to Brio on August 15, 2019, as amended on February

Specifically, pursuant to anti-dilution provisions therein, the Company agreed to amend the 2019 Brio Warrant in order

to increase the amount of shares able to be purchased thereunder by an additional 517,814 shares of the Company’s common

stock or an aggregate of up to 1,701,389.

On the same day, Brio exercised on a cashless basis the Brio Warrants in full resulting

in the issuance of 611,666 shares of the Company’s common stock to Brio.

Upon Brio’s cashless exercise, the 2019 Brio

Warrants are no longer in force or effect and no additional issuances will be due or owing.

total stock-based compensation expense related to Service-Based Stock Options, Performance-Based Stock Options and Warrants issued

for service amounted to $95,900 and $834,191 for the three months ended March 31, 2020 and 2019, respectively.

for service amounted to approximately $439,000 and $191,000 for the three months ended June 30, 2020 and 2019, respectively.

total stock-based compensation expense related to Service-Based Stock Options, Performance-Based Stock Options and Warrants issued

for service amounted to $535,000 and $373,000 for the six months ended June 30, 2020 and 2019, respectively.

Such amounts are

44 unchanged sentences

of this agreement.

As of March 31, 2020 and December 31, 2019, the $0 and $0, respectively was included in accounts payable and

As of June 30, 2020 and December 31, 2019, the $0 and $0, respectively was included in accounts payable and

accrued expenses in regard to this agreement.

2018, the Company entered into a license agreement (the “Agreement”) with M.ALPHABET, LLC (“Alphabet”),

pursuant to which Alphabet agreed to license its PURPUREX business which consists of methods and compositions developed by Licensor

2018, the Company entered into a license agreement (the “Alphabet Agreement”) with M.ALPHABET, LLC (“Alphabet”),

pursuant to which Alphabet agreed to license its PURPUREX business which consists of methods and compositions developed by Alphabet

for the treatment of purpura, bruising, post-procedural bruising and traumatic bruising (the “Product Line”).

to the license granted under the Agreement, Conversion Labs PR obtains an exclusive license to incorporate (i) any intellectual

to the license granted under the Alphabet Agreement, Conversion Labs PR obtains an exclusive license to incorporate (i) any intellectual

property rights related to the Product Line and (ii) all designs, drawings, formulas, chemical compositions and specifications

6 unchanged sentences

the 120-day anniversary of the Agreement and an additional $50,000 on the 360-day anniversary of the Agreement.

execution of the Agreement, Alphabet was granted a 10-year option to purchase 100,000 shares of the Company’s common

execution of the Alphabet Agreement, Alphabet was granted a 10-year option to purchase 100,000 shares of the Company’s common

stock at an exercise price of $0.50.

8 unchanged sentences

the normal course of business operations, the Company may become involved in various legal matters.

As of March 31, 2020, the

Company’s management does not believe that there are any potential legal matters that could have an adverse effect on the

Company’s financial position.

As of June 30, 2020, the Company’s

management does not believe that there are any potential legal matters that could have an adverse effect on the Company’s

financial position.

RELATED PARTY TRANSACTONS

5 unchanged sentences

Schreiber, for rent on Conversion Labs PR’s

Puerto Rico office space amounted to $15,000 and $12,000 for the three months ended March 31, 2020 and 2019, respectively.

Puerto Rico office space amounted to $15,000 and $12,000 for the three months ended June 30, 2020 and 2019, respectively.

Labs PR utilizes BV Global Fulfillment, owned by a related person of the Company’s current Chief Executive Officer to warehouse

1 unchanged sentence

The Company pays a monthly fee of $13,000

to $16,000 for fulfillment services and reimburses BV Global Fulfillment for their direct costs associated with shipping

the Company’s products.

As of March 31, 2020 and December 31, 2019, the Company owed BV Global Fulfillment $49,501 and $53,026,

respectively, which are included in accounts payable and accrued liabilities on the accompany consolidated balance sheets.

to $16,000 for fulfillment services and reimburses BV Global Fulfillment for their direct costs associated with shipping the Company’s

As of June 30, 2020 and December 31, 2019, the Company owed BV Global Fulfillment $161,823 and $53,026, respectively,

which are included in accounts payable and accrued liabilities on the accompany consolidated balance sheets.

SUBSEQUENT EVENTS

Company has evaluated subsequent events through the date these financial statements were issued and has identified the following:

May 7, 2020, the Company agreed to further amend those certain warrants issued to Alpha on August 15, 2019, as amended on February

25, 2020 (the “2019 Alpha Warrant”).

Specifically, pursuant to anti-dilution provisions contained therein, the Company

agreed to amend the 2019 Alpha Warrant in order to increase the amount of shares able to be purchased thereunder by an additional

1,657,005 shares of the Company’s common stock or an aggregate of up to 5,444,444 shares (the “Alpha Warrant Shares”).

On the same day, Alpha exercised on a cashless basis the Alpha Warrants in full resulting in the issuance of 1,957,331 shares

of the Company’s common stock to Alpha.

Upon Alpha’s cashless exercise, the 2019 Alpha Warrants are no longer in force

or effect and no additional issuances will be due or owing.

May 7, 2020, the Company agreed to further amend those certain warrants issued to Brio on August 15, 2019, as amended on February

Specifically, pursuant to anti-dilution provisions therein, the Company agreed to amend the 2019 Brio Warrant in order

to increase the amount of shares able to be purchased thereunder by an additional 517,814 shares of the Company’s common

stock or an aggregate of up to 1,701,389.

On the same day, Brio exercised on a cashless basis the Brio Warrants in full resulting

in the issuance of 611,666 shares of the Company’s common stock to Brio.

Upon Brio’s cashless exercise, the 2019

Brio Warrants are no longer in force or effect and no additional issuances will be due or owing.

On July 27, 2020, the

Company issued a secured convertible promissory Note in the principal amount of up to $1,500,000, to an accredited investor.

Company received $600,000 in aggregate gross proceeds.

Any additional advances under this note would require the approval of the

lender in its sole discretion.

This note accrues interest at a rate of one and one-quarter percent (1.25%) per month and matures

on January 24, 2021.

Upon the closing of a Qualified Financing prior to repayment of this note, upon the written election by the

investor, the outstanding principal and all accrued but unpaid interest thereon shall convert into fully paid and nonassessable

shares of the preferred stock, par value $0.001 per share, of the Company issued and sold by the Company at the closing of a Qualified

Upon such written election by the lender, this note shall convert into the number of shares of preferred stock (including

fractional shares) equal to the quotient of (i) the outstanding principal and accrued but unpaid interest on this note, divided

by (ii) the price per share paid by the cash purchasers of the preferred stock sold in such Qualified Financing.

Financing ”

means a transaction or series of transactions with the principal purpose of raising capital pursuant to which

the Company issues and sells shares of preferred stock for aggregate gross proceeds of at least $2,500,000 (excluding all proceeds

from the incurrence of indebtedness, including this note, that is converted into such preferred stock, or otherwise cancelled

in consideration for the issuance of such preferred stock).

As collateral security for the Company’s obligations under this

note, the Company pledged, assigned and transferred to the investor a first priority security interest in and collateral assignment

of the Company’s right, title and interest in and to all of the Company’s tangible and intangible property.

contains customary events of default (each an “Event of Default”).

If an Event of Default occurs, all outstanding

obligations owing under this note will become immediately due and payable at the investor’s election.

During August 2020,

the Company offered an inducement to all warrant holders of our $0.40 warrants for a total 2,634,228 common stock warrants outstanding

by offering a $0.05 discount on the exercise price of these warrants if they immediately exercised.

The adjusted exercise price

of these warrants would become $0.35.

To date, a vast majority of our warrant holders have exercised this discount, but the Company

is still in the process of completing the inducement.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

61 unchanged sentences

economic and business conditions;

interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as the recent

outbreak of COVID-19, or the novel coronavirus);

interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as COVID-19);

ability to continue as a going concern;

16 unchanged sentences

results of our future activities will not differ materially from our assumptions.

used in this Quarterly Report on Form 10-Q and unless otherwise indicated, the terms “Company,”

As used in this Quarterly

Report on Form 10-Q and unless otherwise indicated, the terms “Company,”

“we,”

2 unchanged sentences

refer to Conversion Labs, Inc.

(formerly known as Immudyne, Inc.), our wholly subsidiary

Conversion Labs PR, LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company

(“Conversion Labs PR”) and our majority-owned subsidiaries LegalSimpli Software, LLC, a Puerto Rico limited liability

company (“LegalSimpli”), Conversion Labs PR, LLC (formerly Immudyne PR LLC, now “Conversion Labs PR”),

a Puerto Rico limited liability company (“Conversion Labs PR”), Conversion Labs Media, LLC (“CVLB Media”),

a Puerto Rico limited liability company, Conversion Labs Rx, LLC (“CVLB Rx”), a Puerto Rico limited liability company,

and Conversion Labs Asia Limited, a Hong Kong company (“Conversion Labs Asia”).

Unless otherwise specified, all dollar

amounts are expressed in United States dollars.

(formerly known as Immudyne, Inc.), our wholly owned subsidiary Conversion Labs PR, LLC

(formerly Immudyne PR LLC, now “Conversion Labs PR”), a Puerto Rico limited liability company (“Conversion Labs

PR”) and our majority-owned subsidiaries LegalSimpli Software, LLC, a Puerto Rico limited liability company (“LegalSimpli”).

Unless otherwise specified, all dollar amounts are expressed in United States dollars.

Labs, Inc., was formed in the State of Delaware on May 24, 1994, under our prior name, Immudyne, Inc.

2 unchanged sentences

Further, in connection with changing its name, the Company changed its trading symbol to CVLB.

April 1, 2016, with respect to a limited liability company operating agreement with joint venture partners for one of our skincare

products under the legal name Immudyne PR LLC (“Immudyne PR”), such original operating agreement of Immudyne PR was

amended and restated and we increased our ownership and voting interest in Immudyne PR to 78.2%.

Concurrent with the name change

of the parent company to Conversion Labs, Inc.

completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known

as “Conversion Labs PR”).

On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated

in its entirety after acquiring the minority interest in the Conversion Labs PR, which is now a wholly-owned subsidiary of the

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC, a software as a service (SaaS)

application for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli Software’s growth business

model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

April 1, 2016, our majority-owned subsidiary, Immudyne PR LLC (“Immudyne PR”), which was initially formed for the

purpose of a joint venture with the original owners of one of our skincare products, amended and restated its operating agreement

whereby we increased our ownership and voting interest in Immudyne PR to 78.2%.

Concurrent with the name change of the parent

company to Conversion Labs, Inc.

completed in 2018, Immudyne PR was renamed to Conversion Labs PR LLC (now known as “Conversion

Labs PR”).

On April 25, 2019, the operating agreement of Conversion Labs PR was amended and restated in its entirety after

acquiring the remaining minority interest in the Conversion Labs PR, which is now a wholly-owned subsidiary of the Company.

June 2018, Conversion Labs closed the strategic acquisition of 51% of LegalSimpli Software, LLC (“LegalSimpli”), a

software as a service (SaaS) for converting, editing, signing and sharing PDF documents.

In addition to LegalSimpli’s

growth business model, this acquisition added deep search engine optimization and search engine marketing expertise to the Company.

early 2019, we also launched a service-based business under the name Conversion Labs Media LLC, which was to be used to run e-commerce

2 unchanged sentences

business as well the expansion of our telehealth opportunities.

June 2019, a joint venture with GoGoMeds.com was formed through our majority-owned subsidiary, Conversion Labs Rx, LLC, allowing

us to market branded and generic prescription drugs that are then sold and shipped (via GoGoMeds) online directly to consumers

in all 50 states and the District of Columbia.

June 2019, a joint venture with GoGoMeds.com was formed allowing us to market branded and generic prescription drugs that are

then sold and shipped (via GoGoMeds) online directly to consumers in all 50 states and the District of Columbia.

Company is a direct response healthcare company that provides a convenient, cost-effective and smarter way for consumers to access

9 unchanged sentences

wellness products.

believe that many people can relate to the hassle and inconvenience of seeking medical care.

According to a November 2018 Merritt

Hawkins Survey, the average wait time to see a doctor is now 29 days, and in major cities such as Boston, the average wait is

now 109 days.

With the U.S.

projected to be short 121,300 doctors by 2030, wait times are likely to grow worse.

Timely and convenient

access to healthcare and prescription medications is a critical factor in improving quality of care and patient outcomes.

that, because of this importance and the growing demand from patients, telemedicine platforms like ours can fundamentally change

the market for healthcare in the U.S.

Our mission is to build a portfolio of direct to consumer wellness brands that encompass

on-demand medical treatment, online pharmacy and over-the-counter products.

We want our brands to be top-of-mind for consumers

and sought after for their proprietary characteristics and endorsements by thought leading physicians and influencers.

not the first company in telemedicine, we are an early mover that has made investments in technology and people that we

believe will pay long-term dividends.

According to a 2018 Euromonitor estimate, the market for direct to consumer healthcare products

is estimated at $700 billion in global annual sales.

Alliance Bernstein estimates that the disruptable market for online pharmacy

is in the $300 billion dollar range, and they estimate that up to 70% of this market will move from traditional pharmacies

to online pharmacies over the next ten years.

The opportunities are immense, and we believe that we are well positioned to capitalize

on these large scale economic shifts in healthcare.

believe that product innovation and excellence are the heart of our business.

As is exemplified with our first brand, Shapiro

MD, we have built a full line of proprietary OTC products for male and female hair loss, FDA

approved OTC minoxidil, an FDA-cleared medical device, and now a personalized telemedicine offering that gives consumers access

to virtual medical treatment and a full line of oral and topical prescription medications for hair loss.

Our men’s telemedicine

brand, Rex MD, currently offers treatment for erectile dysfunction, and we will soon offer treatments for longevity, strength

and endurance, hair loss, skin care and other products we identify that can improve the lives of patients and customers.

built a platform that allows us to efficiently launch telehealth and wellness product lines wherever we determine there is a market

Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers, and engineers

focused on building enduring brands.

have built a platform that allows us to efficiently launch telehealth and wellness product lines wherever we determine there is

a market need.

Our platform is supported by a driven team of digital marketing and branding experts, data analysts, designers,

and engineers focused on building enduring brands.

in 2019, we have made significant investments in our telemedicine technology platform which is the backbone of our physician network,

pharmacy provider, CRM software, and third-party advertising platforms.

pharmacy provider, CRM system, and third-party advertising platforms.

This platform facilitates patient consultations, virtual

prescriptions, fulfillment, and follow-up consultations.

Direct-To-Consumer

actively seek to acquire, license and develop products and brands with large untapped e-commerce potential and proven business

Our products are marketed and sold directly to consumers through advertisements on Facebook, Google, Amazon, and other

social media and e-commerce platforms.

We intend to continue to grow revenue and profitability of our four commercial stage consumer

and telehealth brands.

We also expect that PDFSimpli, our PDF conversion software product, will continue to grow and achieve profitability

in the short term.

We continue to actively seek new brands to buy or license to expand our product offerings and add to our growth.

understand that life is more than just survival and that health and wellness should also encompass the way our body feels, looks,

and performs.

Our brands aim to bring this holistic understanding to the consumer, with messaging that is clear, scientific, and

The product offerings behind each brand are thoughtfully considered and tested to ensure they answer consumer needs,

preferences, and feedback.

Our brands aim for customer satisfaction at every step of the process, from learning, ordering, fulfillment,

and reordering.

Our current brand portfolio is comprised of brands respectively targeting four market segments:

hair loss, immune

health, men’s health, and disaster preparedness.

in 2017, Shapiro MD is a brand for hair loss in both men and women.

Shapiro MD’s product offerings include both over-the-counter

and prescription products and/or ingredients that have been rigorously studied for their effects in treating hair loss.

beginning with a proprietary patented hair loss product line of shampoo, conditioner, and leave-in-foamer, Shapiro MD’s

product portfolio has grown to now include U.S.

Food and Drug Administration (“FDA”) approved medications such as

minoxidil and finasteride, and an over-the-counter supplement for hair loss.

In March of 2020, the Company received FDA 510(k)

clearance for the Shapiro MD Laser Hair Restoration Device.

loss is a deeply personal problem that affects people psychologically in addition to its physical effects, this is why we are

committed to the continued expansion of Shapiro MD to be one of the leading online destinations for clinically studied and proven

solutions for both male and female hair loss.

We are currently exploring proprietary compounded prescription products for product

portfolio expansion.

February 21, 2020, ConsumersAdvocate.org ranked Shapiro MD as the third best hair loss treatment provider in the United States,

ahead of other household brands such as Bosley, Keeps and Rogaine.

We believe that the combination of Shapiro MD’s patented

over-the-counter product line with prescription medications and our soon to be FDA-cleared laser hat, will lead to a big increase

in brand awareness, customer satisfaction, retention rates and overall profitability.

iNR Wellness MD

in 2018, iNR Wellness MD is a supplement for immune and gut support.

The iNR Wellness product line is a daily nutritional supplement

that contains yeast, oat, and mushroom beta glucans.

Our spokesperson for our iNR Wellness MD brand is Dr.

Joseph DiTrolio, a

member of the Board of Directors of the Company and an opinion-leading physician, professor of surgery, innovator, and public

in 2019, Rex MD is a men’s health brand currently offering personalized treatment plans from licensed physicians

in 50 states for erectile dysfunction.

After consultation with a physician, if appropriate, we dispense and ship prescription

medication directly to patients.

We are initially focused on generic Viagra and Cialis but intend to expand our product offering

to include treatment for cold sores, mental health, and many other common medical conditions faced by men.

Our vision for Rex

MD is to become a leading telemedicine destination for men.

Preparedness:

launched in the first quarter of 2020, is a telemedicine brand intended to offer prescription medications and over-the-counter

emergency preparation supplies for disaster situations such as flu epidemics, bacterial outbreaks, bioterrorism and water supply

failure, among others.

Our research indicates that vital supplies and prescription medications may be rapidly depleted during

high-demand situations caused by disasters, and we believe that pre-prescribing certain medications and supplies can serve to

reduce strain during emergency situations.

the launch of this brand, we also intend to target the travel preparedness market with prescription medications that can address

common illnesses seen in overseas travel such as traveler’s diarrhea- the most common travel-related illness.

strong potential for earned media exists for SOSRx, and are in the process of identifying influencers and opinion leaders in emergency

preparation and public health that will serve to drive brand awareness and brand equity upon launch.

Telehealth Brands

telehealth brands have been built with one singular focus in mind:

to become the leading provider of quality healthcare in a virtual

To this end, we work with our physicians, our advisors, and our patients to ensure that we can provide the ultimate quality

We believe the long-term success of our telehealth business will be driven primarily by the outstanding care we provide

in our services and product offerings.

Our current brand portfolio is comprised of telehealth brands respectively targeting three

market segments:

hair loss, men’s health, and emergency medications.

Owned Subsidiary:

is a PDF conversion software product, which was acquired through the purchase of 51% of the membership interests of LegalSimpli

Software, LLC, a Puerto Rico limited liability company, which operates a marketing-driven software solutions business.

enables users to convert, edit and sign PDF documents.

As of March 1, 2020, PDFSimpli was ranked in the top 5,750 websites globally,

in which it was also ranked in the top 1,200 for specific countries with more than 4.5 million registrants globally.

launch, PDFSimpli has converted or edited over 5 terabytes of documents for customers from the legal, financial, real-estate and

academic sectors.

a Puerto Rico limited liability company, which operates a marketing-driven software solutions business.

PDFSimpli enables users

to convert, edit and sign PDF documents.

As of March 1, 2020, PDFSimpli was ranked in the top 5,750 websites globally, in which

it was also ranked in the top 1,200 for specific countries with more than 4.5 million registrants globally.

Since its launch,

PDFSimpli has converted or edited over 5 terabytes of documents for customers from the legal, financial, real-estate and academic

PDFSimpli has over 39,000 active subscriptions as of March 1, 2020.

6 unchanged sentences

offices, and in line with guidance from public health officials, we have temporarily restricted access to our offices and implemented

a mandataory remote work policy during this period.

a mandatory remote work policy during this period.

Our offices will remain closed until we are able to safely and responsibly

8 unchanged sentences

ability to service our customers.

are also carefully monitoring shifting consumer behavior from physical healthcare offices to our online platform.

As of the date

of this Quarterly Report on Form 10-Q, we have observed continued strength in our e-commerce sales since the end of the quarter

ended March 31, 2020, due in part to changing consumer behavior during the COVID-19 pandemic and a multi-year high in e-commerce

marketing efficiency due to recent declines in advertising costs.

Telehealth businesses, such as ours, have benefitted from the

increased coverage and visibility of telehealth, partly due to quarantine measures and policies adopted widely across the country.

We believe the the increased awareness of telehealth is reflected in the rapid growth we are seeing across our telehealth brands,

particularly in Rex MD.

core brands, most notably Shapiro MD and Rex MD, have experienced rapid growth due to the COVID-19 pandemic and the silmultaneous

increase in e-commerce and telehealth.

Website traffic to Rex MD and Shapiro MD has increased 371% and 91% respectively from our

fourth quarter of 2019 to this first quarter of 2020.

Our subscription growth has also increased dramatically quarter over quarter.

Shapiro MD experienced a 96% increase in customers on subscriptions and Rex MD experienced a 1,380% increase in customers on subscriptions.

We believe that subscription growth is an indicator of better retention and the long term profitability of our customer base.

there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and the longer term impact of the virus on

consumer behavior, we believe our business is well positioned for continued growth and profitability later this year.

are also carefully monitoring shifting consumer behavior from brick and mortar retail and physical healthcare offices to

our online platform.

We have observed continued strength in our e-commerce sales since the end of the quarter ended June 30, 2020,

due in part to changing consumer behavior during the COVID-19 pandemic and widespread awareness and acceptance of telemedicine.

Telemedicine businesses, such as ours, have benefitted from increased coverage and visibility due

to quarantine measures and policies adopted widely across the country.

We believe the increased awareness of telehealth is reflected

in the rapid growth we are seeing across our telehealth brands.

of Operations

of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019

financial results for the three months ended March 31, 2020 are summarized as follows in comparison to the three months ended

March 31, 2019.

Months Ended March 31,

revenues, net

Software revenues,

revenues, net

of the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019

financial results for the three months ended June 30, 2020 are summarized as follows in comparison to the three months ended June

June 30, 2020

June 30, 2019

Product revenues, net

Software revenues, net

Service revenues, net

Total revenues, net

Cost of product revenue

of software revenue

cost of revenue

Total operating expenses

from operations

Other expenses

from operations before provision for income taxes

Cost of software revenue

Total cost of revenue

Selling & marketing expenses

General and administrative expenses

Operating expenses

Customer service expenses

Development costs

Total expenses

Loss from operations

$ (3,218,372 )

loss attributable to non-controlling interests

loss attributable to Conversion Labs, Inc.

Other income (expenses)

Income from continuing operations

before provision for income taxes

$ (3,447,247 )

for the three months ended March 31, 2020 were approximately $4.3 million, an increase of 59.5% compared to approximately

$2.7 million for the three months ended March 31, 2019.

Our increase in revenues was primarily attributable to both

the increase in software revenues which accounts for approximately 33% of revenues and which increased as a result of successful

online marketing efforts and Rex MD.

Cost of product revenues

consists primarily of product material costs and fulfillment costs directly attributable to the production of our products.

of software revenue consist primarily of credit card processing fees and information technology fees related to our online platform.

Total cost of revenue increased by approximately 147.0% to approximately $1.8 million for the three months ended

March 31, 2020 compared to approximately $700,000 for the three months ended March 31, 2019.

Net income (loss) attributable to

noncontrolling interests

Net income (loss) attributable to Conversion Labs, Inc.

$ (3,379,116 )

for the three months ended June 30, 2020 were approximately $9.1 million, an increase of 236.9% compared to approximately $2.3

million for the three months ended June 30, 2019.

The increase in revenues was attributable to both the increase in product revenue

of 241.0% and an increase in software revenue of 212.4%.

Product revenue accounts for 87% of total revenue and has increased in

the three months ended June 30, 2020 due to an increase in online sales demands.

Management attributes a portion of this increased

demand to the nationwide lockdown resulting from COVID-19 precautions and the resulting increase in consumers’

Software revenue accounts for 13% of total revenue and has steadily increased quarter over quarter due to a combination

of higher demand, market awareness, and continued marketing campaigns.

of product revenues consists primarily of product material costs and fulfillment costs directly attributable to the production

of our products.

Cost of software revenue consist primarily of credit card processing fees and information technology fees related

to our online platform.

Total cost of revenue increased by approximately 234.3.% to approximately $2.2 million for the three months

ended June 30, 2020 compared to approximately $655,000 for the three months ended June 30, 2019.

The increase in cost of revenues

was due to increased revenues and related increase in merchant and other processing fees incurred to generate revenues from our

products segment and increased margins on revenues of LegalSimpli software subscriptions.

Gross profit increased

by approximately 28.1% to approximately $2.5 million for the three months ended March 31, 2020 compared to approximately

$2.0 million for the three months ended March 31, 2019.

This is a result of increased sales.

was due to increased revenues and related increase in merchant and other processing fees incurred due to the higher sales volumes

in both our product and software sales.

profit increased by approximately 237.7% to approximately $6.9 million for the three months ended June 30, 2020 compared to approximately

$2.0 million for the three months ended June 30, 2019.

This is a result of the increased sales.

Gross profit as a percentage of

revenues remained consistent at 76% for the three months ended June 30, 2020 and for the three months ended June 30, 2019.

Three Months Ended June 30,

Selling & marketing expenses

General and administrative expenses

Operating expenses

Customer service expenses

Development costs

Total operating expenses

expenses for the three months ended June 30, 2020 were approximately $10.1 million, as compared to approximately $2.9 million

for the three months ended June 30, 2019.

This represents an increase of 251.8%, or $7.2 million.

The increase is primarily attributable

and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the three months ended June

30, 2020, the Company had an increase of approximately $5.1 million in selling and marketing costs resulting from additional

sales and marketing initiatives to drive further growth throughout all of 2020.

and administrative expenses:

This mainly consists of payroll expenses for executive management, stock-based compensation,

amortization expense and legal and professional fees.

During the three months ended June 30, 2020, the Company has had an

increase of approximately $950,000 in general and administrative expenses, primarily related to stock-based compensations

and infrastructure to support the increase in sales volume.

operating expenses:

This mainly consists of rent, insurance, royalty expense, bank charges and IT services for our online

During the three months ended June 30, 2020, the Company had an increase of approximately $100,000, primarily related

to increases in sales volume driving up bank charges, IT services, and offices supplies offset by decreases in rent and royalty

service expenses:

This consists of payroll and benefit expenses related to the Company’s customer service department

located in Puerto Rico.

During the three months ended June 30, 2020, the Company had a decrease of approximately $51,000,

primarily related to decreases in headcount in the Company’s customer service department.

This mainly relates to third-party technology services for developing and maintaining our online platforms.

the three months ended June 30, 2020, the Company had an increase of approximately $41,000, primarily resulting from technology

platform improvements for LegalSimpli and amortization expenses at Conversion Labs PR.

Three Months Ended June

Interest expense

expense for the three months ended June 30, 2020 increased by $99,000 compared to the three months ended June 30,2019.

in other expense is primarily attributable to an increase in the amortization of debt discount.

of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

financial results for the six months ended June 30, 2020 are summarized as follows in comparison to the six months ended June

June 30, 2020

June 30, 2019

Product revenues, net

Software revenues, net

Service revenues, net

Total revenues, net

Cost of product revenue

Cost of software revenue

Total cost of revenue

Selling & marketing expenses

General and administrative expenses

Operating expenses

Customer service expenses

Development costs

Total expenses

Loss from operations

$ (4,958,877 )

$ (1,396,534 )

Other income (expenses)

Income from continuing operations

before provision for income taxes

$ (5,980,791 )

$ (1,696,554 )

Net income (loss) attributable to

noncontrolling interests

Net income (loss) attributable to Conversion Labs, Inc.

$ (5,773,844 )

$ (1,481,852 )

for the six months ended June 30, 2020 were approximately $13.4 million, an increase of 148.2% compared to approximately $5.4

million for the six months ended June 30, 2019.

The increase in revenues was attributable to both the increase in product revenue

of 128.9% and an increase in software revenue of 284.6%.

Product revenue accounts for 81% of total revenue and has increased in

the six months ended June 30, 2020 due to an increase in online sales demands.

Management attributes a portion of this increased

demand to the nationwide lockdown resulting from COVID-19 precautions and the resulting increase in consumers’

Software revenue accounts for 19% of total revenue and has steadily increased quarter over quarter due to a combination

of higher demand, market awareness, and continued marketing campaigns.

of product revenues consists primarily of product material costs and fulfillment costs directly attributable to product production.

Cost of software revenue consist primarily of credit card processing fees and information technology fees related to our online

Total cost of revenue increased by approximately 196.3% to approximately $3.9 million for the six months ended June

30, 2020 compared to approximately $1.3 million for the six months ended June 30,2019.

The increase in cost of revenues was due

to increased revenues and a related increase in merchant and other processing fees incurred due to the higher sales volumes in

both our product and software sales.

profit increased by approximately 132.4% to approximately $9.4 million for the six months ended June 30,2020 compared to approximately

$4.1 million for the six months ended June 30, 2019.

This is due to increased sales.

Gross profit as a percentage of revenues

decreased to approximately 59% for the three months ended March 31, 2020 from approximately 74% for the three months ended

March 31, 2019.

This is due to the shift in the composition of revenues between periods from primarily supplement products sold

at a lower margin.

The decrease is also due to the acquisition of LegalSimpli which, as a software product, cost of sales can

fluctuate due to volatility in merchant processing costs.

Three Months Ended March 31,

was 71% for the six months ended June 30, 2020 versus 75% for the six months ended June 30, 2019.

The decrease of 4% is attributed

to the higher cost of sales incurred during the second quarter of 2020 resulting from the use of different suppliers.

New suppliers

were used to supplement production for increased product demand.

Six Months Ended June 30,

Selling & marketing expenses

4 unchanged sentences

Total operating expenses

expenses for the three months ended March 31, 2020 were approximately $4.3 million, as compared to approximately $2.5 million

for the three months ended March 31, 2019.

expenses for the six months ended June 30, 2020 were approximately $14.4 million, as compared to approximately $5.5 million for

the six months ended June 30, 2019.

This represents an increase of 163.8%, or $8.9 million.

The increase is primarily attributable

and marketing expenses mainly consist of online marketing and advertising expenses.

During the three months ended March 31,

2020, the Company had an increase of approximately $1 million in selling and marketing expenses was a result of additional

marketing expenses to drive further revenue growth through all of 2020.

and administrative expenses mainly consist of payroll expenses for executive management, stock-based compensation, amortization

expense and legal and professional fees.

During the three months ended March 31, 2020, the Company has an increase of approximately

$700,000 in general and administrative expenses mainly related to increased infrastructure resulting from increased sales.

operating expenses consist of rent, insurance, bank charges, royalty expenses, IT services for our online products business

and office supplies.

During the three months ended March 31, 2020, the Company had a decrease of approximately $78,000 mainly

related to a decrease in the Company’s royalty expenses.

service expenses consist of payroll and benefit expenses related to the Company’s customer service department located

in Puerto Rico.

During the three months ended March 31, 2020, the Company had an increase of approximately $37,000 mainly

related to an increase in headcount for the Company’s customer service.

costs mainly relate to third-party technology services for developing and maintaining our online platform for LegalSimpli.

During the three months ended March 31, 2020, the Company had an increase of approximately $32,000 mainly as a result

of technology platform improvements for LegalSimpli and amortization expenses at CVLB PR.

Three Months Ended March 31,

and marketing expenses:

This mainly consists of online marketing and advertising expenses.

During the six months ended June

30,2020, the Company had an increase of approximately $7 million in selling and marketing costs.

This resulted from additional

sales and marketing initiatives to drive further growth throughout all of 2020.

and administrative expenses:

This mainly consists of payroll expenses for executive management, stock-based compensation,

amortization expense and legal and professional fees.

During the six months ended June 30, 2020, the Company has had an increase

of approximately $1.8 millions in general and administrative expenses mainly related to stock-based compensations and infrastructure

to support the increase in sales volume.

operating expenses:

This consists of rent, insurance, royalty expense, bank charges and IT services for our online products.

During the six months ended June 30, 2020, the Company had an increase of approximately $146,000, primarily related to increases

in sales volume driving up banking fees, IT services, and offices supplies, offset by decreases in rent and royalty expense.

service expenses:

This mainly consists of payroll and benefit expenses related to the Company’s customer service department

located in Puerto Rico.

During the six months ended June 30, 2020, the Company had a decrease of approximately $11,000, primarily

related to decreases in headcount in the Company’s customer service department effected in the second quarter.

This mainly relates to third-party technology services for developing and maintaining our online platforms.

the six months ended June 30, 2020, the Company had an increase of approximately $41,000, primarily resulting from technology

platform improvements for LegalSimpli and amortization expenses at Conversion Labs PR.

Six Months Ended June

Interest expense

expense for the three months ended March 31, 2020 increased by $623,000 compared to the three months ended March 31, 2019.

increase in other expense is primarily attributable to an increase in the amortization of debt discount.

March 31, 2020

expense for the six months ended June 30, 2020 increased by $721,894 compared to the six months ended June 30,2019.

in other expense is primarily attributable to increases in interest and amortization of debt discount.

June 30, 2020

December 31, 2019

4 unchanged sentences

$ (1,228,340 )

assets decreased by $1.3 million for the three months ended March 31, 2020.

This is primarily attributable to a decrease in cash

and cash equivalents of $750,00 due to payments of convertible notes and a decrease in inventory of $400,000.

Current liabilities

increased by $600,000, which was primarily attributable to an increase in accounts payable and accrued liabilities as a result

of the Company extending payables and credit terms with vendors during the three months ended March 31, 2020.

assets decreased by approximately $556,000 for the six months ended June 30,2020.

This is primarily attributable to a decrease

in cash and cash equivalents of $770,000 due to payments on convertible notes.

This was offset by an increase in accounts receivable

and other current assets of $214,000.

Current liabilities increased by $3.2 million which was primarily attributable to an increase

in accounts payable and accrued liabilities as a result of the Company extending payables and credit terms with vendors during

the six months ended June 30, 2020.

and Capital Resources

Three Months Ended

March 31, 2020

March 31, 2019

Six Months Ended

June 30, 2020

$ (5,980,791 )

$ (1,696,554 )

Net cash provided by operating activities

2 unchanged sentences

Net increase (decrease) in cash

inception, the Company has funded operations through the revenues of its products, issuance of common stock, through loans and

advances from officers and directors and the issuance of convertible notes from third-party investors.

cash provided by operating activities was approximately $661,355 for the three months ended March 31, 2020, as compared

with net cash used in operating activities of approximately $546,464 for the three months ended March 31, 2019.

cash used in investing activities for the three months ended March 31, 2020 was $468,400, as compared with net cash provided by

investing activities of $500,000 for the three months ended March 31, 2019.

Net cash used in investing activities was primarily

due to continued payments on the Company’s purchase of LegalSimpli of $400,000 and the cash paid for capitalized software

costs of $68,400.

Net cash used in financing

activities for the three months ended March 31, 2020 was $941,702, as compared with net cash provided by financing activities

of $15,702 for the three months ended March 31, 2019.

During the three months ended March 31, 2020, financing activities

consisted of proceeds from convertible notes payable $750,000, which were offset by the repayment of notes payable of $1,640,702

and payment for debt issuance costs of $15,000.

inception, the Company has funded operations through the revenues of its products, issuance of common stock, receipt of loans

and advances from officers and directors and the issuance of convertible notes to third-party investors.

cash provided by operating activities was approximately $1.1 million for the six months ended June 30, 2020, as compared

with net cash used in operating activities of approximately $640,000 for the six months ended June 30, 2019.

cash used in investing activities for the six months ended June 30, 2020 was approximately $677,000, as compared with net

cash provided by investing activities of $500,000 for the six months ended June 30, 2019.

Net cash used in investing activities

was primarily due to continued payments on the Company’s purchase of LegalSimpli of $400,000 and the cash paid for capitalized

software costs of approximately $277,000.

cash provided by financing activities for the six months ended June 30, 2020 was $1,003,969, as compared with net cash

used in financing activities of $55,168 for the six months ended June 30, 2019.

During the six months ended June

30, 2020, financing activities consisted of proceeds from convertible notes payable $1,750,000, and cash receipts for shares of

$1,889,000 which were offset by the repayment of notes payable of approximately $2,500,000, distributions of noncontrolling interests

of $121,223 and payment for debt issuance costs of $15,000.

and Capital Resources Outlook

6 unchanged sentences

the realization of assets and the satisfaction of liabilities in the normal course of business.

As of March 31, 2020, the Company

As of June 30, 2020, the Company

has an accumulated deficit approximating $23.7 million and has experienced significant losses from continuing operations.

on the Company’s cash balance as of March 31, 2020, and projected cash needs, management estimates that it will need to

increase sales revenue and/or raise additional capital to cover operating and capital requirements for the 2020 year.

will need to raise the additional needed funds through increased sales volume, issuing additional shares of common stock or other

equity securities, or obtaining debt financing.

Although management has been successful to date in raising necessary funding,

there can be no assurance that sales revenue will substantially increase or that any required future financing can be successfully

completed on a timely basis, or on terms acceptable to the Company.

Based on these circumstances, management has determined that

these conditions raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial

statements do not include any adjustments that might result from the outcome of this uncertainty.

on the Company’s cash balance as of June 30, 2020, and projected cash needs, management estimates that it will need an additional

$4.0 million through the next 12 months, either from increasing sales revenue and/or raising additional capital via the

sale of common stock or other equity securities, or obtaining debt financing.

Although management has been successful to date

in raising necessary funding, there can be no assurance that sales revenue will substantially increase or that any required future

financing can be successfully completed on a timely basis, or on terms acceptable to the Company.

Based on these circumstances,

management has determined that these conditions raise substantial doubt about the Company’s ability to continue as a going

The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Accounting Policies and Estimates

26 unchanged sentences

can be applied to the entire portfolio population.

Company began testing trial offers with the Shapiro MD products in late 2018.

The Company was unable to adequately implement a

process to report any trial-based sales and the related impact on inventory.

Given the relatively new trail period being offered,

the Company has not been able to estimate the historical effect to determine how this will change the recording of revenue.

Company offers a suite of software to customers as a monthly subscription-based service.

14 unchanged sentences

monthly subscriptions for the subscription are recorded net of the Company’s known discount.

As of the three ends March

As of the period ended June

30, 2020 and as the year ended December 31, 2019, the Company has accrued contract liabilities of approximately $303,000 and $110,000,

1 unchanged sentence

14-day trial periods.

discounts, returns and rebates on product revenues during the three months ended March 31, 2020 and three months ended March 31,

2019 approximated $314,000 and $328.000, respectively.

discounts, returns and rebates on product revenues during the six months ended June 30, 2020 and six months ended June 30,2019

approximated $1.3 million and $713,000, respectively.

Customer discounts and allowances on software revenues during the three

months ended March 31, 2020 and the three months ended March 31, 2019 approximated $163,000 and $26.500, respectively.

months ended June 30, 2020 and the three months ended June 30, 2019 approximated $163,000 and $26,500, respectively.

Software Costs

Company capitalizes certain payroll and third-party costs related to internally developed software and amortize these costs using

the straight-line method over the estimated useful life of the software, generally two years.

the straight-line method over the estimated useful life of the software, generally three years.

The Company does not sell internally

2 unchanged sentences

Software, are expensed as incurred.

As of March 31, 2020 and 2019, the Company capitalized $108,400 and $0 related to internally

As of June 30, 2020 and 2019, the Company capitalized $313,827 and $0 related to internally

developed software costs which is included in development.

As of March 31, 2020, these costs include $40,000 in capitalized stock

As of June 30,2020, these costs include $40,000 in capitalized stock

based compensation that was given to a third-party service provider.

During the three months ending March 31, 2020 and 2019, the

During the three months ending June 30, 2020 and 2019, the

Company amortized $8,251 and $0 of capitalized software costs.

5 unchanged sentences

Company files corporate federal and state tax returns.

Conversion Labs PR and LegalSimpli file tax returns in Puerto Rico,

both are limited liability companies and file separate tax returns with any tax liabilities or benefits passing through to its

Conversion Labs PR and LegalSimpli file tax returns in Puerto Rico, both

are limited liability companies and file separate tax returns with any tax liabilities or benefits passing through to its members.

Company records current and deferred taxes in accordance with Accounting Standards Codification (ASC) 740, “Accounting for

75 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements