What changed in this filing

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Item 1. Financial Statements

2017-08-14 compared with 2017-05-01 · 405 added, 284 removed, 879 unchanged (44% of the section changed)

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300,000,000 shares authorized;

88,764,357 shares issued and outstanding

89,237,683 and 88,764,357 shares issued and outstanding, respectively

stock to be issued (125,000 shares)

paid in capital

other comprehensive income

other comprehensive (loss) income

stockholders ’

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

Condensed Consolidated Statements of Income and Comprehensive Income

the three months ended

and marketing

and administrative

and amortization

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

For the three months ended

For the six months ended

June 30, 2017

June 30, 2016

Cost of sales

Operating expenses

from operations

(income) expenses

Remeasurement

loss (gain) on translation of foreign subsidiary

on change in fair value of derivative liability

on sale of assets

of debt discount

of debt issuance cost

other expenses (income)

income before income taxes

income after tax

income per share –

average common shares outstanding

Comprehensive

currency translation adjustment

Comprehensive

Selling and marketing

General and administrative

Depreciation and amortization

Total operating expenses

(Loss) income from operations

Other (income) expenses

Interest income

Interest expense

Remeasurement (gain) loss on translation of foreign subsidiary

Loss (gain) on change in fair value of derivative liability

Loss on sale of assets

Amortization of debt discount

Amortization of debt issuance cost

Total other expenses

Net (loss) income before income taxes

Income tax (benefit) expense

Net (loss) income after tax

Net (loss) income per share –

Weighted average common shares outstanding

Comprehensive (loss) income:

Net (loss) income

Foreign currency translation adjustment

Comprehensive (loss) income

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

Condensed Consolidated Statements of Cash Flows

the three months ended

Flows from Operating Activities

to reconcile net income to net cash provided by operating activities:

and amortization

of debt issuance cost

on sale of assets

based compensation expense

in the fair value of derivative liability

Remeasurement

loss (gain) on translation of foreign subsidiary

currency transaction loss

cash implied interest

of debt discount

in operating assets and liabilities:

payable and accrued liabilities

cash provided by operating activities

Flows from Investing Activities

for acquisition of fixed assets

from sale of assets

cash (used in) provided by investing activities

Flows from Financing Activities

of notes payable

of earn out liability

cash used in financing activities

of exchange rate on cash and cash equivalents

(decrease) increase in cash and cash equivalents

and Cash Equivalents, beginning of period

and Cash Equivalents, end of period

Disclosure of Cash Flow Information:

paid during the period for:

Disclosure of Non-cash Investing and Financing Activities:

of goodwill related to acquisition of Factor Nutrition to intellectual property

For the six months ended

June 30, 2017

June 30, 2016

Cash Flows from Operating Activities

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

Amortization of debt issuance cost

Stock issued for services

Stock based compensation expense

Change in the fair value of derivative liability

Remeasurement gain on translation of foreign subsidiary

Foreign currency transaction loss

Non cash implied interest

Loss on sale of fixed assets

Amortization of debt discount

Changes in operating assets and liabilities:

Accounts receivable

Prepaid expense

Accounts payable and accrued liabilities

Deferred revenue

Net cash provided by operating activities

Cash Flows from Investing Activities

Payments for acquisition of fixed assets

Proceeds from sale of assets

Payment of development fee

Payment of earn out liability

Restricted cash

Net cash used in investing activities

Cash Flows from Financing Activities

Repayment of notes payable

Net cash used in financing activities

Effect of exchange rate on cash and cash equivalents

Net decrease in cash and cash equivalents

Cash and Cash Equivalents, beginning of period

Cash and Cash Equivalents, end of period

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:

Supplemental Disclosure of Non-cash Investing and Financing Activities:

Reallocation of goodwill related to acquisition of Factor Nutrition to intellectual property

Reallocation of goodwill related to acquisition of Breakthrough Products, Inc.

to intellectual property

Reallocation of non-compete agreement related to acquisition of Breakthrough Products, Inc.

Adjusting the value of shares issued to goodwill related to acquisition of Breakthrough Products, Inc.

Reallocation of blogger database and intellectual property related to acquisition of Nomadchoice Pty Ltd.

To customer database

Common stock to be issued now issued

Common stock issued for the acquisition of assets of Per-fekt

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

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Summary of Significant Accounting Policies

accompanying condensed consolidated financial statements as of March 31, 2017 and December 31, 2016 and for the three months ended

March 31, 2017 and 2016 are unaudited.

These unaudited condensed consolidated financial statements have been prepared in accordance

with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and

are presented in accordance with the requirements of Rule S-X of the Securities and Exchange Commission (the “SEC”)

accompanying condensed consolidated financial statements as of June 30, 2017 and December 31, 2016 and for the three and six months

ended June 30, 2017 and 2016 are unaudited.

These unaudited condensed consolidated financial statements have been prepared in

accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information

and are presented in accordance with the requirements of Rule S-X of the Securities and Exchange Commission (the “SEC”)

and with the instructions to Form 10-Q.

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normal recurring accruals) considered necessary for a fair presentation have been included.

Operating results for the three months

ended March 31, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31,

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial

statements as of and for the year ended December 31, 2016 and footnotes thereto included in the Company’s Annual Report

on Form 10-K filed with the SEC on March 24, 2017.

Operating results for the three and

six months ended June 30, 2017 are not necessarily indicative of the results that may be expected for the fiscal year ending December

The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated

financial statements as of and for the year ended December 31, 2016 and footnotes thereto included in the Company’s Annual

Report on Form 10-K filed with the SEC on March 24, 2017.

of Presentation

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The Company minimizes this risk by placing its cash deposits with major financial institutions.

At March 31, 2017, the uninsured

At June 30, 2017, the uninsured

balance amounted to $577,157.

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All of our intangible assets are subject to amortization except

intellectual property of $1,450,000 acquired as part of Asset Purchase Agreement entered into with Factor Nutrition LLC on January

intellectual property of $1,450,000 acquired as part of an Asset Purchase Agreement entered into with Factor Nutrition Labs LLC

on January 22, 2015 and $10,000 acquired as part of an Asset Purchase Agreement entered into with Perfekt Beauty Holdings LLC

and CDG Holdings, LLC on June 21, 2017.

Intangible assets are amortized on a straight line basis over the useful lives.

As of March 31, 2017, our qualitative

analysis of intangible assets with indefinite lives did not indicate any impairment.

June 30, 2017, our qualitative analysis of intangible assets with indefinite lives did not indicate any impairment.

assets include equipment and intangible assets other than those with indefinite lives.

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a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value.

March 31, 2017, our qualitative analysis of long-lived assets did not indicate any impairment.

June 30, 2017, our qualitative analysis of long-lived assets did not indicate any impairment.

asset purchase is accounted for under the purchase method of accounting.

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over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill.

As of March 31, 2017, our

As of June 30, 2017, our

qualitative analysis of goodwill did not indicate any impairment.

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in the period in which such determination is made.

Synergy CHC Inc.

is a wholly-owned foreign

subsidiary, is subject to income taxes in the jurisdictions in which it operates.

Significant judgment is required in

determining the provision for income tax.

There are many transactions and calculations undertaken during the ordinary course of

business for which the ultimate tax determination is uncertain.

The company recognizes liabilities for anticipated tax audit issues

based on the Company’s current understanding of the tax law.

Where the final tax outcome of these matters is different from

the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination

is a wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates.

judgment is required in determining the provision for income tax.

There are many transactions and calculations undertaken during

the ordinary course of business for which the ultimate tax determination is uncertain.

The company recognizes liabilities for

anticipated tax audit issues based on the Company’s current understanding of the tax law.

Where the final tax outcome of

these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in

the period in which such determination is made.

Earnings (Loss) Per Common Share

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method), unless their effect on net loss per share is anti-dilutive.

As of March 31, 2017, options to purchase 6,300,000 shares of common stock and warrants to purchase 1,000,000 shares of common

As of June 30, 2017, options to purchase 6,300,000 shares of common stock and warrants to purchase 1,000,000 shares of common

stock were outstanding.

following is a reconciliation of the number of shares used in the calculation of basic earnings per share and diluted earnings

per share for the three months ended March 31, 2017, and 2016:

income after tax

Weighted average

common shares outstanding

stock to be issued

shares from the assumed exercise of dilutive stock options

shares from the assumed exercise of dilutive stock warrants

potential common shares

per share for the three and six months ended June 30, 2017, and 2016:

For the three months ended

For the six months ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

Net income after tax

Weighted average common shares outstanding

Common stock to be issued

Incremental shares from the assumed exercise of dilutive stock options

Incremental shares from the assumed exercise of dilutive stock warrants

Dilutive potential common shares

Net earnings per share:

following securities were not included in the computation of diluted net earnings per share as their effect would have been antidilutive:

to purchase common stock

For the three months ended

For the six months ended

June 30, 2017

June 30, 2016

June 30, 2017

June 30, 2016

Options to purchase common stock

Warrants to purchase common stock

Company’s unaudited condensed consolidated financial statements are prepared using U.S.

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The Company had

an accumulated deficit at March 31, 2017 of $6,807,346.

The Company had a working capital deficit of $2,375,052 as of March 31,

an accumulated deficit at June 30, 2017 of $6,857,529.

The Company had a working capital deficit of $2,324,708 as of June 30,

Due to acquisitions during 2015 of revenue-producing products, the Company believes it has established an ongoing source

of revenue that is sufficient to cover its operating costs and has income from operations of $3,158,631.

of revenue that is sufficient to cover its operating costs and has income from operations of $3,066,333 during the six months

ended June 30, 2017.

Management’s

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to the fair value measurement.

of March 31, 2017, the Company has determined that there were no assets or liabilities measured at fair value.

of June 30, 2017, the Company has determined that there were no assets or liabilities measured at fair value.

consists of raw materials, components and finished goods.

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Any additional

costs relating to assembly or special pack-outs of the Company's products are charged to cost of sales.

costs relating to assembly or special pack-outs of the Company’s products are charged to cost of sales.

display costs

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were various updates recently issued, most of which represented technical corrections to the accounting literature or application

to specific industries and are not expected to a have a material impact on the Company’s consolidated financial statements.

to specific industries and are not expected to a have a material impact on the Company’s unaudited condensed consolidated

financial statements.

consists of finished goods, components and raw materials.

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its cash deposits with major financial institutions.

At March 31, 2017 and December 31, 2016, the uninsured balances amounted

to $1,255,907 and $2,038,985, respectively.

of March 31, 2017, three customers accounted for 96% of the Company’s accounts receivable.

At June 30, 2017 and December 31, 2016, the uninsured balances amounted to

$577,157 and $2,038,985, respectively.

of June 30, 2017, five customers accounted for 89% of the Company’s accounts receivable.

As of December 31, 2016, three

customers accounted for 91% of the Company’s accounts receivable.

the three months ended March 31, 2017, three customers accounted for approximately 39% of the Company’s net revenue.

the year ended December 31, 2016, three customers accounted for approximately 34% of the Company’s net revenues.

Substantially

all of the Company’s business is with companies in the United States.

the three months ended March 31, 2017 and the year ended December 31, 2016, our products were made by the following suppliers:

the six months ended June 30, 2017, three customers accounted for approximately 35% of the Company’s net revenue.

three months ended June 30, 2017, three customers accounted for approximately 32% of the Company’s net revenue.

six months ended June 30, 2016, four customers accounted for approximately 25% of the Company’s net revenue.

For the three

months ended June 30, 2016, three customers accounted for approximately 25% of the Company’s net revenue.

ended December 31, 2016, three customers accounted for approximately 34% of the Company’s net revenues.

Substantially all

of the Company’s business is with companies in the United States.

the three and six months ended June 30, 2017 and the year ended December 31, 2016, our products were made by the following suppliers:

Innovations - Pittsburgh, PA

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Fixed Assets and Intangible Assets

of March 31, 2017 and December 31, 2016, fixed assets and intangible assets consisted of the following:

of June 30, 2017 and December 31, 2016, fixed assets and intangible assets consisted of the following:

and equipment

accumulated depreciation

expense for the three months ended March 31, 2017 and 2016 was $25,065 and $2,227, respectively.

During the three months ended

March 31, 2017, we sold fixed assets with an aggregate carrying value of $9,076 for $6,199 which resulted in loss on sale of fixed

assets of $2,877.

expense for the three months ended June 30, 2017 and 2016 was $25,246 and $8,467, respectively.

Depreciation expense for the six

months ended June 30, 2017 and 2016 was $50,311 and $10,694, respectively.

During the six months ended June 30, 2017, we sold

fixed assets with an aggregate carrying value of $9,076 for $6,199 which resulted in loss on sale of fixed assets of $2,877.

intellectual property

assets subject to amortization

accumulated amortization

expense for the three months ended March 31, 2017 and 2016 was $267,253 and $276,410, respectively.

These intangible assets were

acquired through an Asset Purchase Agreement and Stock Purchase Agreements entered into during 2015.

expense for the three months ended June 30, 2017 and 2016 was $331,866 and $285,906, respectively.

Amortization expense for the

six months ended June 30, 2017 and 2016 was $599,119 and $562,316, respectively.

These intangible assets were acquired through

an Asset Purchase Agreement and Stock Purchase Agreements.

Related Party Transactions

Company accrued and paid consulting fees of $41,250 per month, accounting fees of $12,500 per month and rent of $1,500 per month

to a company owned by Mr.

Company accrued and paid consulting fees of $41,250 per month through April 2017 and $57,917 per month through June 2017, accounting

fees of $12,500 per month and rent of $1,500 per month to a company owned by Mr.

Jack Ross, Chief Executive Officer of the Company.

The Company expensed $165,750 during the three months

ended March 31, 2017.

As of March 31, 2017, the total outstanding balance was $90,291 for consulting fees and reimbursements.

The Company expensed $199,084 during the three months ended June 30, 2017 and $364,834 during the six months ended June 30, 2017.

The Company also paid out a bonus of $525,000 during the three and six months ended June 30, 2017.

As of June 30, 2017, the total

outstanding balance was $0.

January 22, 2015, the Company entered into a Loan Agreement with Knight Therapeutics (Barbados) Inc.

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related party, for the purchase of the Focus Factor assets.

At March 31, 2017, the Company owed Knight $2,204,096 on this loan,

At June 30, 2017, the Company owed Knight $1,655,708 on this loan,

net of debt issuance cost (see Note 10).

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Neuragen Corp., for the purchase of Knight Therapeutics, Inc.’s assets.

At March 31, 2017, the Company owed Knight $612,500

At June 30, 2017, the Company owed Knight $600,000

in relation to this agreement (see Note 10).

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Hand MD, LLC is a 50% owner in Hand MD Corp.

The Company expensed $30,000 through payroll for the three months ended March 31,

As of March 31, 2017, the total outstanding balance was $0.

The Company expensed $30,000 through payroll for the three months ended June 30,

2017 and $60,000 for the six months ended June 30, 2017.

As of June 30, 2017, the total outstanding balance was $0.

November 12, 2015, the Company entered into a Loan Agreement with Knight Therapeutics (Barbados) Inc., a related party, for the

purchase of NomadChoice Pty Limited and Breakthrough Products, Inc.

At March 31, 2017, the Company owed Knight $2,677,703 on this

At June 30, 2017, the Company owed Knight $1,675,564 on this

loan, net of debt issuance cost (see Note 10).

Company expensed royalty of $136,636 during the three months ended March 31, 2017.

At March 31, 2017 NomadChoice Pty Ltd., a subsidiary

of the Company, owed Knight Therapeutics $53,934 in connection with a royalty distribution agreement.

Company expensed royalty of $27,414 during the three months ended March 31, 2017.

At March 31, 2017 Sneaky Vaunt Corp., a subsidiary

of the Company, owed Knight Therapeutics $27,414 in connection with a royalty distribution agreement.

Company expensed commissions of $35,622 during the three months ended March 31, 2017.

At March 31, 2017 Sneaky Vaunt Corp., a

subsidiary of the Company, owed Founded Ventures, owned by a shareholder in the Company, $35,622 in connection with a commission

Company expensed royalty of $98,627 during the three months ended June 30, 2017 and $235,263 during the six months ended June

At June 30, 2017 NomadChoice Pty Ltd., a subsidiary of the Company, owed Knight Therapeutics $156,986 in connection

with a royalty distribution agreement.

Company expensed royalty of $74,804 during the three months ended June 30, 2017 and $102,218 during the six months ended June

At June 30, 2017 Sneaky Vaunt Corp., a subsidiary of the Company, owed Knight Therapeutics $103,742 in connection with

a royalty distribution agreement.

Company expensed commissions of $97,200 during the three months ended June 30, 2017 and $132,821 during the six months ended June

The Company also paid a development fee for the brand, Sneaky Vaunt, in the amount of $761,935 during the six months

ended June 30, 2017.

At June 30, 2017 Sneaky Vaunt Corp., a subsidiary of the Company, owed Founded Ventures, owned by a shareholder

in the Company, $21,167 in connection with a commission agreement.

Company paid $31,250 and $62,500 during the three and six months ended June 30, 2017 to Hand MD, Corp, related to a royalty agreement.

At June 30, 2017, the Company owed Hand MD Corp.

$275,044 in minimum future royalties.

Accounts Payable and Accrued Liabilities

of March 31, 2017 and December 31, 2016, accounts payable and accrued liabilities consisted of the following:

of June 30, 2017 and December 31, 2016, accounts payable and accrued liabilities consisted of the following:

Manufacturers

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Notes Payable

Company’s loans payable at March 31, 2017 and December 31, 2016 are as follows:

Company’s loans payable at June 30, 2017 and December 31, 2016 are as follows:

debt issuance cost

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The Company recognized amortization

of deferred financing costs of $13,957 during the three months ended March 31, 2017, respectively.

Unamortized debt issuance cost

as of March 31, 2017 amounted to $45,904.

Company recognized and paid interest expense of $103,740 during the three months ended March 31, 2017, respectively.

Accrued interest

expense was $0 as of March 31, 2017.

Loan payable balance was $2,250,000 as of March 31, 2017.

of deferred financing costs of $14,112 and $28,070 during the three and six months ended June 30, 2017, respectively.

debt issuance cost as of June 30, 2017 amounted to $31,792.

Company recognized and paid interest expense of $83,914 and $187,654 during the three and six months ended June 30, 2017, respectively.

Accrued interest expense was $0 as of June 30, 2017.

Loan payable balance was $1,687,500 as of June 30, 2017.

January 22, 2015 Loan:

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The Company recognized amortization

of deferred financing costs of $1,293 during the three months ended March 31, 2017.

Unamortized debt issuance cost as of March

31, 2017 amounted to $1,307.

The Company recorded present value of future payments of $288,889 and $290,947 as of March 31, 2017

and December 31, 2016, respectively.

The Company recorded imputed interest expense of $10,442 for the three months ended March

the three months ended March 31, 2017, the Company made payments of $31,250 in connection with this Security Agreement.

of deferred financing costs of $1,307 and $2,600 during the three and six months ended June 30, 2017, respectively.

debt issuance cost as of June 30, 2017 amounted to $0.

The Company recorded present value of future payments of $286,754 and $290,947

as of June 30, 2017 and December 31, 2016, respectively.

The Company recorded imputed interest expense of $10,365 and $20,807

for the three and six months ended June 30, 2017, respectively.

the three and six months ended June 30, 2017, the Company made payments of $12,500 and $25,000, respectively, in connection with

this Security Agreement.

November 12, 2015 Loan:

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The Company recognized amortization

of deferred financing costs of $28,791 during the three months ended March 31, 2017.

Unamortized debt issuance cost as of March

31, 2017 amounted to $72,297.

Company recognized interest expense of $120,430 during the three months ended March 31, 2017.

During the three months ended March

31, 2017, the Company paid interest of $128,906.

Accrued interest was $22,603 as of March 31, 2017.

Loan balance at March 31,

2017 was $2,750,000.

of deferred financing costs of $29,111 and $57,902 during the three and six months ended June 30, 2017, respectively.

debt issuance cost as of June 30, 2017 amounted to $43,186.

Company recognized interest expense of $81,758 and $202,189 during the three and six months ended June 30, 2017, respectively.

During the three and six months ended June 30, 2017, the Company paid interest of $90,234 and $219,141, respectively.

interest was $14,127 as of June 30, 2017.

Loan balance at June 30, 2017 was $1,718,750.

Stockholders’

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stock with $0.00001 par value.

of March 31, 2017 and December 31, 2016, there were 88,764,357 shares of the Company’s common stock issued and outstanding.

During the six months ended June 30, 2017,

the Company issued 473,326 shares of its common stock valued at $0.51 per share in accordance with an asset purchase agreement

entered into with Perfekt Beauty Holdings, LLC and CDG Holdings, LLC, in exchange for assets and liabilities related to the Per-fekt

of June 30, 2017 and December 31, 2016, there were 89,237,683 and 88,764,357 shares of the Company’s common stock issued

and outstanding, respectively.

Commitments & Contingencies

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Rent expense under this lease for the period from acquisition until March 31, 2017 was $8,923 per month less a $3,010

per month sublease through March 2017.

December 2015, a subsidiary entered into a non-cancellable operating lease for office space through November 2016.

was extended until April 2017.

Rental payments under this lease are $5,900 Australian dollars per month, which is approximately

following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining

non-cancelable lease terms in excess of one year as of March 31, 2017:

Year ending December

per month sublease through March 2017 and expired.

In December 2015, a subsidiary entered into

a non-cancellable operating lease for office space through November 2016.

This lease was extended until April 2017 and

December 8, 2014, a subsidiary entered into a non-cancellable 36 month phone lease with an estimated cost of $894 a month.

following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining

non-cancelable lease terms in excess of one year as of March 31, 2017:

Year ending December

remaining nine months

non-cancelable lease terms in excess of one year as of June 30, 2017:

ending December 31:

remaining six months

Stock Options

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following table summarizes the options outstanding, option exercisability and the related prices for the shares of the Company’s

common stock issued to employees and consultants under the Plan at March 31, 2017:

stock option activity for the three months ended March 31, 2017 is as follows:

common stock issued to employees and consultants under the Plan at June 30, 2017:

stock option activity for the six months ended June 30, 2017 is as follows:

Exercise Price

Outstanding at December 31, 2016

Expired or canceled

Outstanding at March 31, 2017

compensation expense related to vested options was $339,136 during the three months ended March 31, 2017 which is a component

of general and administrative expense in the statement of income.

The Company determined the value of share-based compensation

for options vesting during the period using the Black-Scholes fair value option-pricing model with the following weighted average

estimated fair value of Company’s common stock of $0.40-0.74, risk-free interest rate of 0.90-2.23%, volatility

of 135-160%, expected lives of 3-10 years, and dividend yield of 0%.

Stock options outstanding as of March 31, 2017, as disclosed

in the above table, have an intrinsic value of $928,500.

of March 31, 2017, unrecognized compensation costs related to non–vested stock–based compensation arrangements were

$1,216,279, and is expected to be recognized over a weighted average period of 1.25 years.

at December 31, 2016

at June 30, 2017

compensation expense related to vested options was $341,544 and $680,679 during the three and six months ended June 30, 2017,

respectively, which is a component of general and administrative expense in the statement of income.

The Company determined the

value of share-based compensation for options vesting during the period using the Black-Scholes fair value option-pricing model

with the following weighted average assumptions:

estimated fair value of Company’s common stock of $0.40-0.74, risk-free

interest rate of 0.90-2.23%, volatility of 135-160%, expected lives of 3-10 years, and dividend yield of 0%.

Stock options outstanding

as of June 30, 2017, as disclosed in the above table, have an intrinsic value of $660,000.

of June 30, 2017, unrecognized compensation costs related to non–vested stock–based compensation arrangements were

$858,030, and is expected to be recognized over a weighted average period of 1 year.

Stock Warrants

following table summarizes the warrants outstanding, warrant exercisability and the related prices for the shares of the Company’s

common stock at March 31, 2017:

warrant activity for the three months ended March 31, 2017 is as follows:

Outstanding at December 31, 2016

Expired or canceled

Outstanding at March 31, 2017

outstanding as of March 31, 2017, as disclosed in the above table, have an intrinsic value of $0.

common stock at June 30, 2017:

warrant activity for the six months ended June 30, 2017 is as follows:

at December 31, 2016

at June 30, 2017

outstanding as of June 30, 2017, as disclosed in the above table, have an intrinsic value of $0.

identification and selection is consistent with the management structure used by the Company’s chief operating decision

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rather, the chief operating decision maker reviews operating results on an aggregate basis.

sales attributed to customers in the United States and foreign countries for the three months ended March 31, 2017 and 2016 were

United States

Foreign countries

Company’s net sales by product group for the three months ended March 31, 2017 and 2016 were as follows:

sales attributed to customers in the United States and foreign countries for the three months ended June 30, 2017 and 2016 were

Company’s net sales by product group for the three months ended June 30, 2017 and 2016 were as follows:

Nutraceuticals

Over the Counter (OTC)

Consumer Goods

the Counter (OTC)

Cosmeceuticals

Net sales for any other product group of similar products are less than 10% of consolidated net sales.

assets (net) attributable to operations in the United States and foreign countries as of March 31, 2017 and December 31, 2016

were as follows:

United States

Foreign countries

Income tax expense was $291,467 for the three

months ended March 31, 2017, respectively, compared to $183,905 for the same period in 2016.

The current provision is attributable

to Australian operations and the current tax rate in effect in that country.

The Company also has operations in Canada that

started at the beginning of 2016 and is currently evaluating its tax position as it pertains to the 2017 year end.

sales attributed to customers in the United States and foreign countries for the six months ended June 30, 2017 and 2016 were

Company’s net sales by product group for the six months ended June 30, 2017 and 2016 were as follows:

Nutraceuticals

the Counter (OTC)

Cosmeceuticals

Net sales for any other product group of similar products are less than 10% of consolidated net sales.

assets (net) attributable to operations in the United States and foreign countries as of June 30, 2017 and December 31, 2016 were

tax (benefit) expense was $(167,756) and $123,711 for the three and six months ended June 30, 2017, respectively, compared to

$211,180 and $395,085, respectively, for the same periods in 2016.

The current provision is attributable to Australian operations

and the current tax rate in effect in that country.

The Company also has operations in Canada that started at the beginning of

2016 and is currently evaluating its tax position as it pertains to the 2017 year end.

total deferred tax asset is calculated by multiplying a domestic (US) 34% marginal tax rate by the cumulative net operating loss

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would be limited as to the amount that could be utilized each year, based on the Code.

Asset Purchase

June 21, 2017, the Company entered into and simultaneously closed on an Asset Purchase Agreement with Perfekt Beauty Holdings

LLC and CDG Holdings, LLC, which owns 92.3% of the issued and outstanding equity interests of Perfekt Beauty.

Perfekt Beauty is

engaged in the business of developing and selling skincare and cosmetics products under the brand Per-fekt.

Company has accounted for this transaction under the acquisition method of accounting.

Under the acquisition method of accounting,

the total acquisition consideration price is allocated to the assets acquired and liabilities assumed based on their estimated

The Company has allocated the purchase price to the assets acquired and liabilities assumed as follows:

Consideration

paid in 473,326 shares of common stock

additional consideration, the Company will pay quarterly royalties equal to 5% of net sales for 10 years following the closing

The purchase price is subject to adjustment as provided in the Purchase Agreement, based on the final amounts of accounts

payable, accounts receivable and new and unsold inventory.

Subsequent Events

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into the unaudited condensed consolidated financial statements.

Company paid $761,935 as consulting fees to a related party (officer) for services rendered in April 2017.

April 2017, the Company paid $378,125 in principal and accrued interest on the second loan (November 12, 2015) to Knight Therapeutics.

During July 2017, the Company paid $365,234

in principal and accrued interest on the second loan (November 12, 2015) to Knight Therapeutics (Barbados) Inc.

During August 2017, the Company secured a

loan of $10,000,000 and an ongoing credit facility for additional tranches for an aggregate of up to $20,000,000 from Knight

to support product acquisitions and general working capital purposes.

The loan bears interest at 10.5% per annum and matures on

August 9, 2020.

The Company paid Knight $200,000 as origination fees, $100,000 as work fee and $100,000 for other expenses

to related to the loan and credit facility.

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

following discussion and analysis of the results of operations and financial condition of Synergy for the three months ended

March 31, 2017 and 2016, should be read in conjunction with the unaudited condensed consolidated financial statements of

Synergy, and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this

Our discussion includes forward-looking statements based upon current expectations that involve risks and

uncertainties, such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could

differ materially from those anticipated in these forward-looking statements as a result of a number of factors, including

those set forth under the caption, "Cautionary Notice Regarding Forward-Looking Statements"

"Business"

section in our Form 10-K filed on March 24, 2017.

We use words such as

“anticipate,”

following discussion and analysis of the results of operations and financial condition of Synergy for the three and six months

ended June 30, 2017 and 2016, should be read in conjunction with the unaudited condensed consolidated financial statements of

Synergy, and the notes to those unaudited condensed consolidated financial statements that are included elsewhere in this Form

Our discussion includes forward-looking statements based upon current expectations that involve risks and uncertainties,

such as our plans, objectives, expectations and intentions.

Actual results and the timing of events could differ materially from

those anticipated in these forward-looking statements as a result of a number of factors, including those set forth under the

caption, “Cautionary Notice Regarding Forward-Looking Statements”

and the “Business”

section in our Form

10-K filed on March 24, 2017.

We use words such as “anticipate,”

“estimate,”

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“could,”

and similar expressions to identify forward-looking

and similar expressions to identify forward-looking statements.

Company is in the business of marketing and distributing consumer branded products through various distribution channels primarily

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GAAP”), provides useful information to investors.

March 31, 2017

June 30, 2017

loss after tax

on foreign currency translation and transaction

June 30, 2017

Net income after taxes

Interest income

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Stock-based compensation

Loss on foreign

currency translation and transaction

Loss on foreign currency translation and transaction

Adjusted EBITDA

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to similarly titled measures reported by other companies.

of Operations for the Three months Ended March 31, 2017 and 2016

the three months ended March 31, 2017, we had revenue of $10,788,319 from sales of our products, as compared to revenue of $8,267,851

of Operations for the Three months Ended June 30, 2017 and 2016

the three months ended June 30, 2017, we had revenue of $9,318,918 from sales of our products, as compared to revenue of $8,274,575

for the same period in 2016.

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Nutraceuticals

Over the Counter (OTC)

Consumer Goods

the Counter (OTC)

Cosmeceuticals

the three months ended March 31, 2017, our cost of revenue was $2,502,530.

Our cost of revenue for the three months ended March

the three months ended June 30, 2017, our cost of revenue was $2,462,424.

Our cost of revenue for the three months ended June

30, 2016, was $2,182,292.

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Nutraceuticals

Over the Counter (OTC)

Consumer Goods

the Counter (OTC)

Cosmeceuticals

profit was $8,285,789, or 77% for the three months ended March 31, 2017, as compared to gross profit of $6,231,174, or 75% for

profit was $6,856,494, or 74% for the three months ended June 30, 2017, as compared to gross profit of $6,092,283, or 74% for

the same period in 2016, an increase of $764,211, or 13%.

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and Marketing Expenses

the three months ended March 31, 2017, our selling and marketing expenses were $2,897,197 as compared to $1,447,676 for the same

the three months ended June 30, 2017, our selling and marketing expenses were $4,223,712 as compared to $2,189,179 for the same

period in 2016, which is primarily due to marketing our various products in multiple media channels including print, television

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and Administrative Expenses

the three months ended March 31, 2017, our general and administrative expenses were $1,937,643.

For the three months ended March

the three months ended June 30, 2017, our general and administrative expenses were $2,367,969.

For the three months ended June

30, 2016, our general and administrative expenses were $1,679,378.

The increase is primarily due to increased personnel and operations

as our company grew.

as our company has grown.

and Amortization Expenses

the three months ended March 31, 2017, our depreciation and amortization expenses were $292,318 as compared to $278,637 for the

the three months ended June 30, 2017, our depreciation and amortization expenses were $357,111 as compared to $294,373 for the

same period in 2016.

Income and Expenses

the three months ended March 31, 2017 and 2016 we had other (income) and expense items of the following:

March 31, 2017

March 31, 2016

Interest income

Interest expense

Remeasurement loss (gain) on translation

of foreign subsidiary

Gain on change in fair value of derivative

Loss on sale of assets

Amortization of debt discount

Amortization of debt issuance cost

Total other expense (income)

the three months ended March 31, 2017, we had interest expense of $247,364 as compared to $431,264 for the same period in 2016.

the three months ended June 30, 2017 and 2016 we had other (income) and expense items of the following:

June 30, 2017

June 30, 2016

Remeasurement

loss (gain) on translation of foreign subsidiary

on change in fair value of derivative liability

on sale of assets

of debt discount

of debt issuance cost

other expense

the three months ended June 30, 2017, we had interest expense of $187,077 as compared to $401,958 for the same period in 2016.

The decrease was due to the payoffs and pay downs of the loans.

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We issued warrants with a reset provision

in 2015 which led to the calculation of warrant derivative liability and hence we recorded a loss on change in fair value of derivative

liability of $663,423.

In 2016 we cancelled those warrants and issued shares.

For the three months ended June 30, 2017, our net loss was $50,181 as compared to a net loss of $12,590 for

the same period in 2016.

of Operations for the Six months Ended June 30, 2017 and 2016

the six months ended June 30, 2017, we had revenue of $20,107,237 from sales of our products, as compared to revenue of $16,542,326

for the same period in 2016.

The increase is due to a new company launch and a major customer expanding our store count and product

line, and is comprised of the following categories:

Nutraceuticals

the Counter (OTC)

Cosmeceuticals

the six months ended June 30, 2017, our cost of revenue was $4,964,954.

Our cost of revenue for the six months ended June 30,

2016, was $4,218,869.

The increase is due to a new company launch and a major customer expanding our store count and product line

and is comprised of the following categories:

Nutraceuticals

the Counter (OTC)

Cosmeceuticals

profit was $15,142,283, or 75% for the six months ended June 30, 2017, as compared to gross profit of $12,323,457, or 74% for

the same period in 2016, an increase of $2,818,826, or 23%.

The increase in gross profit margin is directly related to increase

in sales and better negotiated deals with manufacturers, utilizing volume purchasing to avail lower prices and purchasing finished

goods instead of buying components.

and Marketing Expenses

the six months ended June 30, 2017, our selling and marketing expenses were $7,120,909 as compared to $3,636,855 for the same

period in 2016, which is primarily due to marketing our various products in multiple media channels including print, television

and online and the launch of our new product line.

and Administrative Expenses

the six months ended June 30, 2017, our general and administrative expenses were $4,305,612.

For the six months ended June 30,

2016, our general and administrative expenses were $3,548,183.

The increase is primarily due to increased personnel and operations

as our company has grown.

and Amortization Expenses

the six months ended June 30, 2017, our depreciation and amortization expenses were $649,429 as compared to $573,010 for the same

period in 2016.

Income and Expenses

the six months ended June 30, 2017 and 2016 we had other (income) and expense items of the following:

June 30, 2017

June 30, 2016

Remeasurement

gain on translation of foreign subsidiary

on change in fair value of derivative liability

on sale of assets

of debt discount

of debt issuance cost

other expense

the six months ended June 30, 2017, we had interest expense of $434,441 as compared to $833,222 for the same period in 2016.

decrease was due to the payoffs and pay downs of the loans.

We also issued warrants along with the loans and paid debt issuance

cost in 2015 which led to the amortization of debt discount and debt issuance costs.

We issued warrants with a reset provision

in 2015 which led to the calculation of warrant derivative liability and hence we recorded a gain on change in fair value of derivative

1 unchanged sentence

In 2016 we cancelled those warrants and issued shares.

the three months ended March 31, 2017, our net income was $2,558,654 as compared to a net income of $2,810,476 for the same period

the six months ended June 30, 2017, our net income was $2,508,473 as compared to a net income of $2,797,886 for the same period

and Capital Resources

of March 31, 2017, we had $1,714,988 cash on hand and a $2,375,052 working capital deficit.

In addition, we also had restricted

cash of $138,188 which is held for credit card collateral.

of June 30, 2017, we had $894,229 cash on hand and a $2,324,708 working capital deficit.

In addition, we also had restricted cash

of $138,380 which is held for credit card collateral.

Company’s unaudited condensed consolidated financial statements are prepared using U.S.

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The Company had

an accumulated deficit at March 31, 2017 of $6,807,346.

The Company had a working capital deficit of $2,375,052 as of March 31,

an accumulated deficit at June 30, 2017 of $6,857,529.

The Company had a working capital deficit of $2,324,708 as of June 30,

Due to acquisitions during 2015 of revenue-producing products, the Company believes it has established an ongoing source

of revenue that is sufficient to cover its operating costs and has income from operations of $3,158,631.

of revenue that is sufficient to cover its operating costs and has income from operations of $3,066,333 for the six months ended

June 30, 2017.

Management’s

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unable to continue as a going concern.

months ended March 31, 2017 and 2016

months ended June 30, 2017 and 2016

Cash Provided by Operating Activities

cash provided by operating activities for the three months ended March 31, 2017 was $1,676,330, compared to $3,425,171 for the

same period in 2016.

This decrease in net cash provided by operating activities for the three months ended March 31, 2017 was

primarily attributable to an increase in accounts receivable and a decrease in accounts payable.

$1,676,330 consists of our net income of $2,558,654 increased by:

Amortization of debt

issuance cost

Net cash provided by operating

activities for the six months ended June 31, 2017 was $3,301,371, compared to $3,720,005 for the same period in 2016.

decrease in net cash provided by operating activities for the six months ended June 30, 2017 was primarily attributable to a

net decrease in net income (after adjusting non-cash items) of $631,362 offset by a net increase in operating assets and liabilities

The $3,301,371 consists of our net

income of $2,508,473 increased by:

Amortization of debt issuance cost

Depreciation and amortization

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Non cash implied interest

Remeasurement loss on translation

of foreign subsidiary

Remeasurement gain on translation of foreign subsidiary

Foreign currency transaction loss

Increase in accounts receivable

Decrease in accounts receivable

Decrease in inventory

Decrease in prepaid expenses

Increase in prepaid expenses

Decrease in deferred revenue

Decrease in accounts payable and

accrued expenses

Decrease in accounts payable and accrued expenses

Cash Used in Investing Activities

cash used in investing activities for the three months ended March 31, 2017 was $85,583, compared to net cash provided of $386,021

cash used in investing activities for the six months ended June 30, 2017 was $870,650, compared to net cash used of $2,392,903

for the same period in 2016.

The increase in cash used in investing activities during 2017 is attributable to the increase in

restricted cash.

Payments for acquisition

of fixed assets

Proceeds from sale of assets

Increase in restricted cash

The decrease in cash used in investing activities during 2017 is attributable to the payout of an

earn out liability in 2016.

for acquisition of fixed assets

from sale of assets

of development fee

in restricted cash

Cash Used in Financing Activities

cash used in financing activities for the three months ended March 31, 2017 was $2,387,500, compared to net cash used of $3,689,000

cash used in financing activities for the six months ended June 30, 2017 was $4,025,000, compared to net cash used of $1,962,500

for the same period in 2016.

This is attributable to the repayment of notes.

Repayment of notes payable

$ (2,387,500 )

of notes payable

2017 Initiatives

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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