What changed in this filing

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Item 1. Financial Statements

2018-11-13 compared with 2018-08-14 · 338 added, 367 removed, 966 unchanged (42% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

June 30, 2018

September 30, 2018

December 31, 2017

6 unchanged sentences

Total Current Assets

Fixes assets, net

Fixed assets, net

Intangible assets, net

24 unchanged sentences

For the three months ended

For the six months ended

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

For the nine months ended

September 30, 2018

September 30, 2017

September 30, 2018

September 30, 2017

Cost of sales

4 unchanged sentences

Total operating expenses

(Loss) income from operations

Income from operations

Other (income) expenses

5 unchanged sentences

Total other expenses

Net (loss) income before income taxes

Net income (loss) before income taxes

Income tax (benefit) expense

Net (loss) income after tax

Net (loss) income per share –

Net income (loss) after tax

Net income (loss) per share –

Weighted average common shares outstanding

Comprehensive (loss) income:

Net (loss) income

Net income (loss)

Foreign currency translation adjustment

Comprehensive (loss) income

Comprehensive income (loss)

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

Condensed Consolidated Statements of Cash Flows

For the six months ended

June 30, 2018

June 30, 2017

For the nine months ended

September 30, 2018

September 30, 2017

Cash Flows from Operating Activities

5 unchanged sentences

Remeasurement loss (gain) on translation of foreign subsidiary

Foreign currency transaction loss

Foreign currency transaction (gain) loss

Non cash implied interest

15 unchanged sentences

Repayment of notes payable

Net cash used in financing activities

Proceeds from notes payable

Payment of debt issuance costs

Net cash (used in) provided by financing activities

Effect of exchange rate on cash, cash equivalents and restricted cash

Net decrease in cash, cash equivalents and restricted cash

Net (decrease) increase in cash, cash equivalents and restricted cash

Cash, Cash Equivalents and restricted cash, beginning of period

17 unchanged sentences

is the sole owner of six subsidiaries:

Neuragen Corp., Breakthrough Products, Inc., NomadChoice Pty Ltd., Synergy CHC Inc.,

Sneaky Vaunt Corp.

Neuragen Corp., Breakthrough Products, Inc., NomadChoice Pty Ltd., Synergy CHC Inc., Sneaky

and The Queen Pegasus Corp.

1 unchanged sentence

Summary of Significant Accounting Policies

accompanying condensed consolidated financial statements as of June 30, 2018 and December 31, 2017 and for the three and six months

ended June 30, 2018 and 2017 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.

Accordingly, they do not include all the information and footnotes required by generally

accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of

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

Operating results for the three and

six months ended June 30, 2018 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, 2017 and footnotes thereto included in the Company’s Annual

Report on Form 10-K filed with the SEC on April 2, 2018.

accompanying condensed consolidated financial statements as of September 30, 2018 and December 31, 2017 and for the three and

nine months ended September 30, 2018 and 2017 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.

Accordingly, they do not include all the information and footnotes

required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments

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

Operating results for

the three and nine months ended September 30, 2018 are not necessarily indicative of the results that may be expected for the

fiscal year ending December 31, 2018.

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, 2017 and footnotes thereto included

in the Company’s Annual Report on Form 10-K filed with the SEC on April 2, 2018.

of Presentation

12 unchanged sentences

highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.

As of September

30, 2018, the Company had no cash equivalents.

2 unchanged sentences

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

At June 30, 2018, the uninsured

balance amounted to $369,095.

At September 30, 2018, the

uninsured balance amounted to $1,040,864.

following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the statement of financial

position that sum to the total of the same such amounts shown in the statement of cash flows.

September 30, 2018

December 31, 2017

September 30, 2017

Cash and cash equivalents

Restricted cash

Total cash, cash equivalents, and restricted cash shown in the statement of cash flows

included in restricted cash represent amounts held for credit card collateral.

Capitalization

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

As of June 30, 2018, our qualitative analysis of intangible

As of September 30, 2018, our qualitative analysis of intangible

assets with indefinite lives did not indicate any impairment.

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

June 30, 2018, our qualitative analysis of long-lived assets did not indicate any impairment.

September 30, 2018, our qualitative analysis of long-lived assets did not indicate any impairment.

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

2 unchanged sentences

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

As of June 30, 2018, our

qualitative analysis of goodwill did not indicate any impairment.

As of September 30, 2018,

our qualitative analysis of goodwill did not indicate any impairment.

of ASU 2014-09, Revenue from Contracts with Customers

12 unchanged sentences

Overall, the adoption of ASC 606 did not have a material impact on the Company’s

condensed consolidated balance sheet, statement of operations and comprehensive income and statement of cash flows for the six

months ended June 30, 2018.

ASC 606 also requires additional disclosures about the nature, amount, timing and uncertainty of revenue

and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized

from costs incurred to fulfill a contract.

As described below, the analysis of contracts under ASC 606 supports the recognition

of revenue at a point in time, resulting in revenue recognition timing that is materially consistent with the Company’s

condensed consolidated balance sheet, statement of operations and comprehensive income and statement of cash flows for the nine

months ended September 30, 2018.

ASC 606 also requires additional disclosures about the nature, amount, timing and uncertainty

of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets

recognized from costs incurred to fulfill a contract.

As described below, the analysis of contracts under ASC 606 supports the

recognition of revenue at a point in time, resulting in revenue recognition timing that is materially consistent with the Company’s

historical practice of recognizing product revenue when title and risk of loss pass to the customer.

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that are short term in nature are expensed as incurred.

The Company does not have any contract costs capitalized as of June 30,

The Company does not have any contract costs capitalized as of September

Liabilities - Deferred Revenue

54 unchanged sentences

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

As of June 30, 2018 and 2017, options to purchase 8,666,667 and 6,300,000 shares of common stock, respectively, were outstanding.

As of both June 30, 2018 and 2017, warrants to purchase 1,000,000 shares of common stock were outstanding.

As of September 30, 2018, and 2017, options to purchase 7,166,667 and 6,300,000 shares of common stock, respectively, were outstanding.

As of both September 30, 2018 and 2017, 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 and six months ended June 30, 2018, and 2017:

For the three months ended

For the six months ended

June 30, 2018

June 30, 2017

June 30, 2018

June 30, 2017

Net income after tax

per share for the three and nine months ended September 30, 2018, and 2017:

the three months ended

the nine months ended

Net income (loss) 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

Incremental shares from the assumed exercise of dilutive stock

Incremental shares from the assumed exercise

of dilutive stock warrants

Dilutive potential common shares

Net earnings per share:

Net earnings (loss) per share:

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

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to the fair value measurement.

of June 30, 2018, the Company has determined that there were no assets or liabilities measured at fair value.

of September 30, 2018, the Company has determined that there were no assets or liabilities measured at fair value.

consists of raw materials, components and finished goods.

182 unchanged sentences

The period ended

June 30, 2017 has been reclassified to reflect this change.

September 30, 2017 has been reclassified to reflect this change.

August 2016, the FASB issued AS 2016-15, Classification of Certain Cash Receipts and Cash Payments, which clarifies how certain

48 unchanged sentences

carrying value of inventory consisted of the following:

June 30, 2018

September 30, 2018

December 31, 2017

6 unchanged sentences

receivable, net of allowances for sales returns and doubtful accounts, consisted of the following:

June 30, 2018

September 30, 2018

December 31, 2017

1 unchanged sentence

Less allowances

Total accounts receivable, net

Total accounts receivable,

Prepaid Expenses

expenses consisted of the following:

June 30, 2018

September 30, 2018

December 31, 2017

12 unchanged sentences

its cash deposits with major financial institutions.

At June 30, 2018 and December 31, 2017, the uninsured balances amounted to

$369,095 and $1,557,373, respectively.

of June 30, 2018, four customers accounted for 89% of the Company’s accounts receivable.

At September 30, 2018 and December 31, 2017, the uninsured balances amounted

to $1,040,864 and $1,557,373, respectively.

of September 30, 2018, four customers accounted for 78% of the Company’s accounts receivable.

As of December 31, 2017, three

customers accounted for 88% of the Company’s accounts receivable.

the six months ended June 30, 2018, three customers accounted for approximately 44% of the Company’s net revenue.

three months ended June 30, 2018, three customers accounted for approximately 47% of the Company’s net revenue.

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

For the three

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

For the year ended

December 31, 2017, two customers accounted for approximately 42% 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, 2018 and the year ended December 31, 2017, our products were made by the following suppliers:

the nine months ended September 30, 2018, three customers accounted for approximately 50% of the Company’s net revenue.

For the three months ended September 30, 2018, two customers accounted for approximately 58% of the Company’s net revenue.

For the nine months ended September 30, 2017, two customers accounted for approximately 34% of the Company’s net revenue.

For the three months ended September 30, 2017, two customers accounted for approximately 50% of the Company’s net revenue.

For the year ended December 31, 2017, two customers accounted for approximately 42% of the Company’s net revenues.

Substantially

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

the three and nine months ended September 30, 2018 and the year ended December 31, 2017, our products were made by the following

Innovations - Pittsburgh, PA

Nutrition, Inc.

Flat Tummy Tea

Caraway Tea Company,

LLC - Highland, NY

C-Care, LLC - Linthicum

Capstone Nutrition

Tea Company, LLC - Highland, NY

LLC - Linthicum Heights, MD

Nutrition - Ogden, UT

HealthSpecialty

- Santa Fe Springs, CA

Dongguan Jingrui –

The Queen Pegasus

Skin Actives –

Ningbo Beautiful Daily

Cosmetics –

Jingrui –

Queen Pegasus

Actives –

Beautiful Daily Cosmetics –

Zhejiang, China

2 unchanged sentences

Fixed Assets and Intangible Assets

of June 30, 2018, and December 31, 2017, fixed assets and intangible assets consisted of the following:

June 30, 2018

of September 30, 2018, and December 31, 2017, fixed assets and intangible assets consisted of the following:

September 30, 2018

December 31, 2017

2 unchanged sentences

Fixed assets, net

expense for the three months ended June 30, 2018 and 2017 was $39,754 and $25,246, respectively.

Depreciation expense for the

six months ended June 30, 2018 and 2017 was $76,162 and $50,311, respectively.

June 30, 2018

expense for the three months ended September 30, 2018 and 2017 was $38,299 and $27,134, respectively.

Depreciation expense for

the nine months ended September 30, 2018 and 2017 was $114,461 and $77,445, respectively.

September 30, 2018

December 31, 2017

5 unchanged sentences

Intangible assets, net

expense for the three months ended June 30, 2018 and 2017 was $416,197 and $331,866, respectively.

Amortization expense for the

six months ended June 30, 2018 and 2017 was $831,275 and $599,119, respectively.

These intangible assets were acquired through

an Asset Purchase Agreement and Stock Purchase Agreements.

During the current period we purchased intangible assets related to

Cocowhite for $50,000.

expense for the three months ended September 30, 2018 and 2017 was $417,280 and $369,722, respectively.

Amortization expense for

the nine months ended September 30, 2018 and 2017 was $1,248,555 and $968,841, 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 $57,917 for four months to a company owned by Mr.

Company accrued and paid consulting fees of $57,917 for seven months to a company owned by Mr.

Jack Ross, Chief Executive Officer

of the Company.

The Company expensed $171,917 during the three months ended June 30, 2018 and $229,833 during the six months ended

June 30, 2018.

As of June 30, 2018, the total outstanding balance was $0 for consulting fees and reimbursements.

The Company expensed $173,750 during the three months ended September 30, 2018 and $403,583 during the nine months

ended September 30, 2018.

As of September 30, 2018, the total outstanding balance was $0 for consulting fees and reimbursements.

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

1 unchanged sentence

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

At June 30, 2018, the Company owed Knight $0 on this loan, net of

debt issuance cost (see Note 10).

At September 30, 2018, the Company owed Knight $0 on this loan, net

of debt issuance cost (see Note 10).

June 26, 2015, the Company entered into a Security Agreement with Knight Therapeutics, Inc., through its wholly owned subsidiary

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

At June 30, 2018, the Company owed Knight $277,381

At September 30, 2018, the Company owed Knight $274,814

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 June 30,

2018 and $60,000 for the six months ended June 30, 2018.

As of June 30, 2018, the total outstanding balance was $0.

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

30, 2018 and $90,000 for the nine months ended September 30, 2018.

As of September 30, 2018, the total outstanding balance was

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 June 30, 2018, the Company owed Knight $0 on this loan,

net of debt issuance cost (see Note 10).

Company expensed royalty of $132,987 during the three months ended June 30, 2018 and $280,009 during the six months ended June

At June 30, 2018 NomadChoice Pty Ltd., a subsidiary of the Company, owed Knight Therapeutics $268,986 in connection

At September 30, 2018, the Company owed Knight $0 on this

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

August 9, 2017, the Company entered into a Loan Agreement with Knight Therapeutics (Barbados) Inc., a related party, for a working

capital loan.

At September 30, 2018, the Company owed Knight $8,053,411 on this loan, net of debt issuance cost (see Note 10).

December 23, 2016, we entered into an agreement with Knight Therapeutics for the distribution rights of FOCUSFactor in Canada.

In conjunction with this agreement, we are required to pay Knight a distribution fee equal to 30% of gross sales for sales achieved

through a direct sales channel and 5% of gross sales for sales achieved through retail sales.

The minimum due to Knight under

this agreement is $100,000 Canadian dollars.

As of September 30, 2018, the total outstanding balance was $100,000 Canadian dollars.

Company expensed royalty of $62,306 during the three months ended September 30, 2018 and $342,315 during the nine months ended

September 30, 2018.

At September 30, 2018 NomadChoice Pty Ltd., a subsidiary of the Company, owed Knight Therapeutics $50,310

in connection with a royalty distribution agreement.

Company expensed royalty of $4,663 during the three months ended September 30, 2018 and $14,279 during the nine months ended September

At September 30, 2018 Sneaky Vaunt Corp., a subsidiary of the Company, owed Knight Therapeutics $3,948 in connection

with a royalty distribution agreement.

Company expensed royalty of $3,954 during the three months ended June 30, 2018 and $9,616 during the six months ended June 30,

At June 30, 2018 Sneaky Vaunt Corp., a subsidiary of the Company, owed Knight Therapeutics $8,954 in connection with a royalty

distribution agreement.

Company expensed commissions of $14,078 during the three months ended June 30, 2018 and $27,631 during the six months ended June

At June 30, 2018, Sneaky Vaunt Corp., a subsidiary of the Company, owed Founded Ventures, owned by a shareholder in

the Company, $9,059 in connection with a commission agreement.

Company expensed royalty of $347 during the three months ended June 30, 2018 and $1,911 during the six months ended June 30, 2018.

At June 30, 2018 The Queen Pegasus, a subsidiary of the Company, owed Knight Therapeutics $678 in connection with a royalty distribution

Company expensed commissions of $2,905 during the three months ended June 30, 2018 and $5,890 during the six months ended June

At June 30, 2018, The Queen Pegasus, a subsidiary of the Company, owed Founded Ventures $1,439 in connection with a

commission agreement.

Company paid $62,500 and $125,000 during the three and six months ended June 30, 2018 to Hand MD, Corp, related to a royalty agreement.

At June 30, 2018, the Company owed Hand MD Corp.

Company expensed commissions of $10,898 during the three months ended September 30, 2018 and $38,529 during the nine months ended

September 30, 2018.

At September 30, 2018, Sneaky Vaunt Corp., a subsidiary of the Company, owed Founded Ventures, owned by a

shareholder in the Company, $5,734 in connection with a commission agreement.

Company expensed royalty of $386 during the three months ended September 30, 2018 and $2,297 during the nine months ended September

At September 30, 2018 The Queen Pegasus, a subsidiary of the Company, owed Knight Therapeutics $129 in connection with

a royalty distribution agreement.

Company expensed commissions of $1,228 during the three months ended September 30, 2018 and $7,118 during the nine months ended

September 30, 2018.

At September 30, 2018, The Queen Pegasus, a subsidiary of the Company, owed Founded Ventures $649 in connection

with a commission agreement.

Company paid $62,500 and $187,500 during the three and nine months ended September 30, 2018 to Hand MD, Corp, related to a royalty

At September 30, 2018, the Company owed Hand MD Corp.

$61,663 in minimum future royalties.

Accounts Payable and Accrued Liabilities

of June 30, 2018 and December 31, 2017, accounts payable and accrued liabilities consisted of the following:

June 30, 2018

of September 30, 2018, and December 31, 2017, accounts payable and accrued liabilities consisted of the following:

September 30, 2018

December 31, 2017

6 unchanged sentences

Notes Payable

Company’s loans payable at June 30, 2018 and December 31, 2017 are as follows:

June 30, 2018

Company’s loans payable at September 30, 2018 and December 31, 2017 are as follows:

September 30, 2018

December 31, 2017

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The Company recognized and

paid interest expense of $0 and $4,611, respectively during the three and six months ended June 30, 2018.

Accrued interest expense

was $0 as of June 30, 2018.

paid interest expense of $0 and $4,611, respectively during the three and nine months ended September 30, 2018.

Accrued interest

expense was $0 as of September 30, 2018.

to certain restrictions, the Company may prepay the outstanding principal of the Loan (in whole but not in part) at any time if

32 unchanged sentences

The Company recognized amortization

of deferred financing costs of $0 and $3,257 during the three and six months ended June 30, 2018, respectively.

Unamortized debt

issuance cost as of June 30, 2018 amounted to $0.

of deferred financing costs of $0 and $3,257 during the three and nine months ended September 30, 2018, respectively.

debt issuance cost as of September 30, 2018 amounted to $0.

June 26, 2015 Security Agreement:

11 unchanged sentences

The Company recognized amortization

of deferred financing costs of $0 during the three and six months ended June 30, 2018.

Unamortized debt issuance cost as of June

30, 2018 amounted to $0.

The Company recorded present value of future payments of $277,381 and $282,240 as of June 30, 2018 and

December 31, 2017, respectively.

The Company recorded imputed interest expense of $10,026 and $20,141 for the three and six months

ended June 30, 2018, respectively.

the three and six months ended June 30, 2018, the Company made payments of $12,500 and $25,000, respectively, in connection with

this Security Agreement.

of deferred financing costs of $0 during the three and nine months ended September 30, 2018.

Unamortized debt issuance cost as

of September 30, 2018 amounted to $0.

The Company recorded present value of future payments of $274,814 and $282,240 as of September

30, 2018 and December 31, 2017, respectively.

The Company recorded imputed interest expense of $9,933 and $30,074 for the three

and nine months ended September 30, 2018, respectively.

the three and nine months ended September 30, 2018, the Company made payments of $12,500 and $37,500, respectively, in connection

with this Security Agreement.

November 12, 2015 Loan:

26 unchanged sentences

for the TTM EBITDA of $5 million during the period ending March 31, 2018.

On May 14, 2018, we entered into Loan Amendment Agreement

and reduced the TTM EBITA from a minimum of $5 million to $2 million for each twelve months period ending on the last day of each

fiscal quarter until September 30, 2018 and we shall maintain a minimum EBITDA of $5 million for the twelve month period ending

on the last day of each Fiscal Quarter thereafter, provided that the minimum EBITDA amount shall be increased by an amount equal

to 50% of any Additional Tranche advanced to Borrower hereunder.

An additional default interest rate of 5% (from 10.5% to

15.5%) applies from April 1, 2018 up to later of i) September 30, 2018;

or ii) when Event of Default is cured.

Interest Rate will be reduced to 13% if Synergy amends its employment agreement for each and every employee earning $250,000 or

more annually through a reduction of individual salary by at least $60,000 in exchange for bonus of no more than $75,000 payable

upon Synergy achieving an EBITDA of $13.887 million for calendar year 2018.

During the period ending June 30, 2018 the interest

rate was reduced to 13% due to reducing payroll expenses.

Also, Synergy will maintain Focus Factor Net Sales as measured on a

year-end basis of at least USD $15 million for each fiscal year starting with December 31, 2017.

Default Interest rate of 5% (from 10.5% to 15.5%) applies

in accordance to our current agreement and will be in effect starting April 1, 2018 and will be in effect until the $5 million

TTM EDITDA covenant is achieved.

During the period ending June 30, 2018 the interest rate was reduced to 13% due to reducing payroll

Also, Synergy will maintain Focus Factor Net Sales as measured on a year-end basis of at least USD $15 million for each

fiscal year starting with December 31, 2017.

Company also recorded deferred financing costs of $452,869 with respect to the above loan.

The Company recognized amortization

of deferred financing costs of $37,739 and $78,735 during the three and six months ended June 30, 2018, respectively.

debt issuance cost as of June 30, 2018 amounted to $314,492.

Company recognized and paid interest expense of $286,361 and $528,444 during the three and six months ended June 30, 2018, respectively.

Accrued interest was $0 as of June 30, 2018.

The loan balance at June 30, 2018 was $8,500,000.

of deferred financing costs of $93,090 and $168,568 during the three and nine months ended September 30, 2018, respectively.

debt issuance cost as of September 30, 2018 amounted to $221,403.

Company recognized and paid interest expense of $273,000 and $801,444 during the three and nine months ended September 30, 2018,

respectively.

Accrued interest was $0 as of September 30, 2018.

The loan balance at September 30, 2018 was $8,000,000.

Stockholders’

1 unchanged sentence

stock with $0.00001 par value.

of both June 30, 2018 and December 31, 2017, there were 89,862,683 shares of the Company’s common stock issued and outstanding.

of both September 30, 2018 and December 31, 2017, there were 89,862,683 shares of the Company’s common stock issued and

Commitments & Contingencies

3 unchanged sentences

Company and Mr.

Kadanoff entered into an employment agreement on October 10, 2017 with an initial term of 3 years.

for his service as Chief Financial Officer, Mr.

Kadanoff will receive an annual base salary of $450,000.

He received a signing

bonus consisting of:

(i) 100,000 shares of the Company’s common stock, and (ii) a cash payment equal to the value of 100,000

shares of the Company’s common stock based on a price of $0.55 per share.

He received an annual bonus for calendar year

2017 of $37,500.

Beginning with calendar year 2018, Mr.

Kadanoff will be eligible for an annual target bonus of up to half his

The target bonus will be determined at the discretion of our Board or compensation committee based upon the achievement

of financial and other performance-related goals and may be paid in cash or shares of the Company’s common stock.

connection with his employment, Mr.

Kadanoff purchased 400,000 shares of our common stock from the Company for a price of $0.55

per share during the year ended December 31, 2017.

The Company granted Mr.

Kadanoff an option to purchase 1,500,000 shares of

the Company’s common stock at an exercise price of $0.55 (the “Initial Option”).

The Initial Option vests in

three (3) equal annual installments on the first three anniversaries of Mr.

Kadanoff’s Start Date with the Company, provided

Kadanoff remains employed by the Company on each such date.

The Initial Option expires on the tenth anniversary of the

Subject to the approval by the Board, during each calendar year of Mr.

Kadanoff’s employment with the Company

beginning with 2018, the Company will grant to him an option to purchase 500,000 shares of the Company’s common stock (such

options collectively the “Additional Options”).

The exercise price of each Additional Option will be the Fair Market

Value of the common stock on the date each such Additional Option is granted.

Each Additional Option will expire on the tenth

anniversary of the date of grant of such Additional Option.

The Additional Options will vest in three (3) equal annual installments

on the first three anniversaries of the date of grant of such Additional Option, provided that Mr.

Kadanoff remains employed by

the Company on each such date.

Upon the occurrence of a Change in Control, the vesting of stock options granted to Mr.

will be accelerated subject to his continued service to the Company as of such date and provided further that Mr.

Kadanoff’s

stock options will be treated no less favorably than those of any other senior executive or Chairman of the Company.

Company and Mr.

McCullough entered into an employment agreement on October 17, 2017 (the “Employment Agreement”) with

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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 June 30, 2018:

non-cancelable lease terms in excess of one year as of September 30, 2018:

Year ending December 31:

remaining six months

remaining three months

Stock Options

3 unchanged sentences

October 16, 2017, the Company granted 1,500,000 options with an exercise price of $0.55 per share to an employee of the Company.

During August 2018, 1,500,000 unvested options were cancelled due to termination of employee.

October 18, 2017, the Company granted 200,000 options with an exercise price of $0.70 per share to an employee of the Company.

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 June 30, 2018:

stock option activity for the six months ended June 30, 2018 is as follows:

common stock issued to employees and consultants under the Plan at September 30, 2018:

stock option activity for the nine months ended September 30, 2018 is as follows:

Exercise Price

1 unchanged sentence

Expired or canceled

Outstanding at June 30, 2018

compensation expense related to vested options was $119,769 and $239,386 during the three and six months ended June 30, 2018,

Outstanding at September 30, 2018

compensation expense related to vested options was ($90,396) and $148,990 during the three and nine months ended September 30,

2018, 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:

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

1 unchanged sentence

Stock options outstanding

as of June 30, 2018, as disclosed in the above table, have an intrinsic value of $300,000.

As of June 30, 2018, unamortized stock-based

compensation costs related to options was $950,997, and will be recognized over a period of 2.25 years.

as of September 30, 2018, as disclosed in the above table, have an intrinsic value of $30,000.

As of September 30, 2018, unamortized

stock-based compensation costs related to options was $353,065, and will be recognized over a period of 2 years.

Stock Warrants

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

common stock at June 30, 2018:

Warrants Outstanding

Warrants Exercisable

warrant activity for the six months ended June 30, 2018 is as follows:

common stock at September 30, 2018:

warrant activity for the nine months ended September 30, 2018 is as follows:

Exercise Price

Outstanding at December 31, 2017

Expired or canceled

Outstanding at June 30, 2018

outstanding as of June 30, 2018, as disclosed in the above table, have an intrinsic value of $0.

Outstanding at September 30, 2018

outstanding as of September 30, 2018, 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

5 unchanged sentences

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 June 30, 2018 and 2017 were

June 30, 2018

June 30, 2017

sales attributed to customers in the United States and foreign countries for the three months ended September 30, 2018 and 2017

were as follows:

September 30, 2018

September 30, 2017

United States

1 unchanged sentence

countries primarily consist of Australia and Canada.

Company’s net sales by product group for the three months ended June 30, 2018 and 2017 were as follows:

June 30, 2018

June 30, 2017

Company’s net sales by product group for the three months ended September 30, 2018 and 2017 were as follows:

September 30, 2018

September 30, 2017

Nutraceuticals

3 unchanged sentences

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

Company’s net sales by major sales channel for the three months ended June 30, 2018 and 2017 were as follows:

June 30, 2018

June 30, 2017

sales attributed to customers in the United States and foreign countries for the six months ended June 30, 2018 and 2017 were

June 30, 2018

June 30, 2017

Company’s net sales by major sales channel for the three months ended September 30, 2018 and 2017 were as follows:

September 30, 2018

September 30, 2017

sales attributed to customers in the United States and foreign countries for the nine months ended September 30, 2018 and 2017

were as follows:

September 30, 2018

September 30, 2017

United States

Foreign countries

Company’s net sales by product group for the six months ended June 30, 2018 and 2017 were as follows:

June 30, 2018

June 30, 2017

Company’s net sales by product group for the nine months ended September 30, 2018 and 2017 were as follows:

September 30, 2018

September 30, 2017

Nutraceuticals

3 unchanged sentences

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

Company’s net sales by major sales channel for the six months ended June 30, 2018 and 2017 were as follows:

June 30, 2018

June 30, 2017

assets (net) attributable to operations in the United States and foreign countries as of June 30, 2018 and December 31, 2017 were

June 30, 2018

Company’s net sales by major sales channel for the nine months ended September 30, 2018 and 2017 were as follows:

September 30, 2018

September 30, 2017

assets (net) attributable to operations in the United States and foreign countries as of September 30, 2018 and December 31, 2017

were as follows:

September 30, 2018

December 31, 2017

1 unchanged sentence

Foreign countries

tax (benefit) expense was $222,389 and $383,002 for the three and six months ended June 30, 2018, respectively, compared to $167,756

and ($123,711), respectively, for the same periods in 2017.

tax (benefit) expense was ($126,190) and $256,812 for the three and nine months ended September 30, 2018, respectively, compared

to $97,713 and $221,424, respectively, for the same periods in 2017.

The current provision is attributable to Australian operations

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But is reviewing the TCJA’s potential ramifications, as

the Company acts to bring tax compliance up to day.

The total deferred tax asset is calculated

by multiplying a domestic (US) 25% marginal effective tax rate (estimated state rate of 4%) by the cumulative

net operating loss carryforwards (“NOL”).

The Company estimates currently it has NOLs, which expire through

Management has determined based on all the available information that a 100% valuation reserve is required.

purposes, the Company has not completed

its evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382/383,

change of ownership rules.

If the Company has had a change in ownership, the NOL’s would be limited or eliminated,

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

The Company has not filed its State &

Local Income/Franchise tax returns in States it is required to file for the last few years, so such returns and liability remain

the Company acts to bring tax compliance up to date.

total deferred tax asset is calculated by multiplying a domestic (US) 21% marginal tax rate by the cumulative net operating loss

carryforwards (“NOL”).

The domestic marginal tax rate does not include any state & local marginal tax rate attributable

to the Company.

The Company currently has estimated NOLs, which expire through 2035.

Management has determined based on all the

available information that a 100% valuation reserve is required.

purposes, the Company has not completed its evaluation of NOL utilization limitations under Internal Revenue Code, as amended

(the “Code”) Section 382/383, change of ownership rules.

If the Company has had a change in ownership, the NOL’s

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

NOL’s attributable

to Breakthrough Products, Inc., which are the majority of the Company’s domestic NOL’s are Separate Return Limitation

Year (SRLY) NOL’s.

Such losses may generally not be available for use (limited or eliminated).

Company has not filed its State & Local Income/Franchise tax returns in States it is required to file for the last few years,

so such returns and liability remain open.

Such liability, if any, has not yet been quantified by the Company, as of the reporting

The Company is currently assessing the requirements to file these returns in states to determine any potential liability,

which the Company feels is immaterial.

which the Company believes is immaterial.

Subsequent Events

2 unchanged sentences

into the unaudited condensed consolidated financial statements.

to June 30, 2018, the Company made an additional $500,000 payment on $10,000,000 loan.

to September 30, 2018, the Company made an additional $500,000 payment on $10,000,000 loan.

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 and six months

ended June 30, 2018 and 2017, 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

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

ended September 30, 2018 and 2017, 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,

39 unchanged sentences

For the three

June 30, 2018

Net loss after tax

September 30, 2018

Net income after tax

Interest income

2 unchanged sentences

One-time expenses

Loss on foreign currency translation and transaction

Loss on foreign currency translation and

Adjusted EBITDA

June 30, 2018

September 30, 2018

Net loss after taxes

3 unchanged sentences

One-time expenses

Loss on foreign currency translation and transaction

Loss on foreign currency translation and

Adjusted EBITDA

10 unchanged sentences

to similarly titled measures reported by other companies.

of Operations for the Three months Ended June 30, 2018 and 2017

the three months ended June 30, 2018, we had revenue of $9,728,712 from sales of our products, as compared to revenue of $9,318,918

of Operations for the Three months Ended September 30, 2018 and 2017

the three months ended September 30, 2018, we had revenue of $9,190,377 from sales of our products, as compared to revenue of

$9,175,673 for the same period in 2017.

We had an increase in Nutraceuticals in 2018 as compared to 2017 due to new customers.

We had a decrease

in Over the Counter in 2018 as compared to 2017 as 2017 was high due to a sell in to a new customer.

We had a decrease in Consumer

Goods in 2018 as compared to 2017 as 2017 was the launch of a new product.

We had an increase in Cosmeceuticals in 2018 as compared

to 2017 due to new customers and new products.

The revenue is comprised of the following categories:

June 30, 2018

June 30, 2017

We had a decrease in Over the Counter in 2018 as compared to 2017 as 2017 was high due to a sell in to a new customer.

a decrease in Consumer Goods in 2018 as compared to 2017 as 2017 was the launch of a new product.

We had a decrease in Cosmeceuticals

in 2018 as compared to 2017 due to a promotion in 2017 that did not reoccur in 2018.

The revenue is comprised of the following

September 30, 2018

September 30, 2017

Nutraceuticals

2 unchanged sentences

Cosmeceuticals

the three months ended June 30, 2018, our cost of revenue was $2,744,760.

Our cost of revenue for the three months ended June

30, 2017, was $2,462,424.

We had an increase in Nutraceuticals in 2018 as compared to 2017 due to higher sales and a different

mix of products being sold.

We had an increase in Over the Counter in 2018 as compared to 2017 due to a different mix of product

the three months ended September 30, 2018, our cost of revenue was $2,945,389.

Our cost of revenue for the three months ended

September 30, 2017, was $2,657,623.

We had an increase in Nutraceuticals in 2018 as compared to 2017 due to higher sales and a

different mix of products being sold.

We had an increase in Over the Counter in 2018 as compared to 2017 due to a different mix

of product being sold.

We had a decrease in Consumer Goods in 2018 as compared to 2017 due to a decrease in revenue.

We had an increase in

Cosmeceuticals in 2018 as compared to 2017 due to an increase in revenue.

The cost of revenue is comprised of the following categories:

June 30, 2018

June 30, 2017

increase in Cosmeceuticals in 2018 as compared to 2017 due to promotions being run.

The cost of revenue is comprised of the following

September 30, 2018

September 30, 2017

Nutraceuticals

2 unchanged sentences

Cosmeceuticals

profit was $6,983,952, or 72% for the three months ended June 30, 2018, as compared to gross profit of $6,856,494, or 74% for

the same period in 2017, an increase of $127,458, or 1.9%.

profit was $6,244,988, or 68% for the three months ended September 30, 2018, as compared to gross profit of $6,518,050, or 71%

for the same period in 2017, a decrease of $273,062, or 4%.

The decrease in gross profit margin is directly related to increase

1 unchanged sentence

and Marketing Expenses

the three months ended June 30, 2018, our selling and marketing expenses were $5,148,656 as compared to $4,223,712 for the same

period in 2017, which is primarily due to increased personnel in our advertising and marketing departments.

the three months ended September 30, 2018, our selling and marketing expenses were $3,960,131 as compared to $3,685,313 for the

same period in 2017, which is primarily due to increased personnel in our advertising and marketing departments.

and Administrative Expenses

the three months ended June 30, 2018, our general and administrative expenses were $1,475,289.

For the three months ended June

30, 2017, our general and administrative expenses were $2,367,969.

The decrease is primarily due to better management of operating

the three months ended September 30, 2018, our general and administrative expenses were $1,189,681.

For the three months ended

September 30, 2017, our general and administrative expenses were $1,990,743.

The decrease is primarily due to better management

of operating costs.

and Amortization Expenses

the three months ended June 30, 2018, our depreciation and amortization expenses were $455,951 as compared to $357,111 for the

same period in 2017.

the three months ended September 30, 2018, our depreciation and amortization expenses were $455,579 as compared to $396,857 for

the same period in 2017.

The increase is due to more assets owned in 2018.

Income and Expenses

the three months ended June 30, 2018 and 2017 we had other (income) and expense items of the following:

June 30, 2018

June 30, 2017

the three months ended September 30, 2018 and 2017 we had other (income) and expense items of the following:

September 30, 2018

September 30, 2017

Interest income

3 unchanged sentences

Total other expense

the three months ended June 30, 2018, we had interest expense of $305,687 as compared to $187,077 for the same period in 2017.

the three months ended September 30, 2018, we had interest expense of $288,479 as compared to $272,318 for the same period in

The increase was due to increase in the interest rate of Loan 3 from 10% to 13% offset by repayment of Loan 1 and Loan 2.

the three months ended June 30, 2018, our net loss was $783,393 as compared to a net loss of $50,181 for the same period in 2017.

of Operations for the Six months Ended June 30, 2018 and 2017

the six months ended June 30, 2018, we had revenue of $19,429,573 from sales of our products, as compared to revenue of $20,107,237

the three months ended September 30, 2018, our net income was $345,590 as compared to a net income of $127,486 for the same period

of Operations for the Nine months Ended September 30, 2018 and 2017

the nine months ended September 30, 2018, we had revenue of $28,619,950 from sales of our products, as compared to revenue of

$29,282,910 for the same period in 2017.

We had an increase in Nutraceuticals in 2018 as compared to 2017 due to new customers.

We had a decrease

in Over the Counter in 2018 as compared to 2017 as 2017 was high due to a sell in to new customers.

We had a decrease in Consumer

Goods in 2018 as compared to 2017 as 2017 was the launch of a new product.

We had an increase in Cosmeceuticals in 2018 as compared

to 2017 due to new customers and new products.

The decrease is comprised of the

following categories:

June 30, 2018

June 30, 2017

We had a decrease in Over the Counter in 2018 as compared to 2017 as 2017 was high due to a sell in to new customers.

decrease in Consumer Goods in 2018 as compared to 2017 as 2017 was the launch of a new product.

We had an increase in Cosmeceuticals

in 2018 as compared to 2017 due to new customers and new products.

The decrease is comprised of the following categories:

September 30, 2018

September 30, 2017

Nutraceuticals

2 unchanged sentences

Cosmeceuticals

For the six months ended

June 30, 2018, our cost of revenue was $5,554,668.

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

We had an increase in Nutraceuticals in 2018 as compared to 2017 due to higher sales and a different mix of products being sold.

We had a decrease in Over the Counter in 2018 as compared to 2017 due to a different mix of product being sold.

We had a decrease

in Consumer Goods in 2018 as compared to 2017 due to a decrease in revenue.

We had an increase in Cosmeceuticals in 2018 as compared

to 2017 due to an increase in revenue.

the nine months ended September 30, 2018, our cost of revenue was $8,500,057.

Our cost of revenue for the nine months ended September

30, 2017, was $7,622,577.

We had an increase in Nutraceuticals in 2018 as compared to 2017 due to higher sales and a different

mix of products being sold.

We had an increase in Over the Counter in 2018 as compared to 2017 due to a different mix of product

We had a decrease in Consumer Goods in 2018 as compared to 2017 due to a decrease in revenue.

We had an increase in

Cosmeceuticals in 2018 as compared to 2017 due to an increase in revenue.

The cost of revenue is comprised of the following categories:

June 30, 2018

June 30, 2017

September 30, 2018

September 30, 2017

Nutraceuticals

2 unchanged sentences

Cosmeceuticals

profit was $13,874,905, or 71% for the six months ended June 30, 2018, as compared to gross profit of $15,142,283, or 75% for

the same period in 2017, a decrease of $1,267,378, or 8.4%.

profit was $20,119,893, or 70% for the nine months ended September 30, 2018, as compared to gross profit of $21,660,333, or 74%

for the same period in 2017, a decrease of $1,540,440, or 7%.

The decrease in gross profit margin is directly related to a different

1 unchanged sentence

and Marketing Expenses

the six months ended June 30, 2018, our selling and marketing expenses were $9,401,359 as compared to $7,120,909 for the same

period in 2017, which is primarily due to increased personnel in our advertising and marketing departments.

the nine months ended September 30, 2018, our selling and marketing expenses were $13,361,490 as compared to $10,806,422 for the

same period in 2017, which is primarily due to increased personnel in our advertising and marketing departments.

and Administrative Expenses

the six months ended June 30, 2018, our general and administrative expenses were $3,236,145.

For the six months ended June 30,

the nine months ended September 30, 2018, our general and administrative expenses were $4,425,826.

For the nine months ended September

30, 2017, our general and administrative expenses were $6,296,355.

1 unchanged sentence

and Amortization Expenses

the six months ended June 30, 2018, our depreciation and amortization expenses were $907,437 as compared to $649,429 for the same

period in 2017.

the nine months ended September 30, 2018, our depreciation and amortization expenses were $1,363,016 as compared to $1,046,286

for the same period in 2017.

The increase is due to more assets owned in 2018.

Income and Expenses

the six months ended June 30, 2018 and 2017 we had other (income) and expense items of the following:

June 30, 2018

June 30, 2017

the nine months ended September 30, 2018 and 2017 we had other (income) and expense items of the following:

September 30, 2018

September 30, 2017

Interest income

4 unchanged sentences

Total other expense

the six months ended June 30, 2018, we had interest expense of $575,863 as compared to $434,441 for the same period in 2017.

increase was due to increase in the interest rate of Loan 3 from 10% to 13% offset by repayment of Loan 1 and Loan 2.

the nine months ended September 30, 2018, we had interest expense of $864,342 as compared to $706,759 for the same period in 2017.

The increase was due to increase in the interest rate of Loan 3 from 10% to 13% offset by repayment of Loan 1 and Loan 2.

(Loss) Income

the six months ended June 30, 2018, our net loss was $838,886 as compared to a net income of $2,508,473 for the same period in

the nine months ended September 30, 2018, our net loss was $493,296 as compared to a net income of $2,635,959 for the same period

and Capital Resources

of June 30, 2018, we had $865,812 cash on hand and a $2,557,687 working capital surplus.

In addition, we also had restricted cash

of $138,023 which is held for credit card collateral.

months ended June 30, 2018 and 2017

of September 30, 2018, we had $1,605,381 cash on hand and a $2,822,351 working capital surplus.

In addition, we also had restricted

cash of $137,096 which is held for credit card collateral.

months ended September 30, 2018 and 2017

Cash Provided by Operating Activities

cash provided by operating activities for the six months ended June 30, 2018 was $712,546, compared to $3,301,371 for the same

period in 2017.

This decrease in net cash provided by operating activities for the six months ended June 30, 2018 was primarily

attributable to net loss during the period, an increase in inventory, a decrease in accounts payable and a decrease in accounts

$712,546 consists of our net loss of $838,886 increased by:

cash provided by operating activities for the nine months ended September 30, 2018 was $2,043,765, compared to $969,227 for the

same period in 2017.

This increase in net cash provided by operating activities for the nine months ended September 30, 2018 was

primarily attributable to a decrease in accounts receivable.

$2,043,765 consists of our net loss of $493,296 adjusted by:

Amortization of debt issuance cost

3 unchanged sentences

Remeasurement loss on translation of foreign subsidiary

Foreign currency transaction loss

Foreign currency transaction gain

Decrease in accounts receivable

4 unchanged sentences

Cash Used in Investing Activities

cash used in investing activities for the six months ended June 30, 2018 was $194,300, compared to net cash used of $832,270 for

the same period in 2017.

The decrease in cash used in investing activities during 2018 is attributable to the payout of a development

cash used in investing activities for the nine months ended September 30, 2018 was $194,300, compared to net cash used of $1,860,116

for the same period in 2017.

The decrease in cash used in investing activities during 2018 is attributable to the payout of a

development fee in 2017.

Payments for acquisition of fixed assets

1 unchanged sentence

Purchase of intangible assets

Cash Used in Financing Activities

cash used in financing activities for the six months ended June 30, 2018 was $1,712,500, compared to net cash used of $4,025,000

Cash (Used in) Provided by Financing Activities

cash used in financing activities for the nine months ended September 30, 2018 was $2,287,500, compared to net cash provided of

$3,884,631 for the same period in 2017.

This is attributable to the repayment of notes.

This is attributable to proceeds from a new loan in 2017 and the repayment of notes in

Repayment of notes payable

28 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