What changed in this filing

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Item 1. Financial Statements

2019-08-13 compared with 2019-05-03 · 365 added, 319 removed, 835 unchanged (45% of the section changed)

1 unchanged sentence

Consolidated Balance Sheets

March 31, 2019

June 30, 2019

December 31, 2018

3 unchanged sentences

Accounts receivable, net

Prepaid expenses

Other current assets

Income taxes receivable

26 unchanged sentences

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

Condensed Consolidated Statements of Operations and Comprehensive Income

Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income

For the three months ended

March 31, 2019

March 31, 2018

For the six months ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Cost of sales

4 unchanged sentences

Total operating expenses

Income from operations

Income (loss) from operations

Other (income) expenses

1 unchanged sentence

Interest expense

Remeasurement (gain) loss on translation of foreign subsidiary

Remeasurement loss on translation of foreign subsidiary

Amortization of debt issuance cost

Total other expenses

Net income before income taxes

Income tax (benefit) expense

Net income (loss) before income taxes

Income tax expense

Net income (loss) after tax

2 unchanged sentences

Weighted average common shares outstanding

Comprehensive income:

Comprehensive income (loss):

Net income (loss)

Foreign currency translation adjustment

Comprehensive income

Comprehensive income (loss)

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

Condensed Consolidated Statement of Stockholders’

Accumulated Other

Comprehensive

Stockholders’

as of December 31, 2017

Additional Paid in

Accumulated Other Comprehensive

Total Stockholders’

Income (Loss)

Balance as of December 31, 2017

$ (8,866,432 )

Fair value of vested

stock options

Foreign currency translation

Fair value of vested stock options

Foreign currency translation gain

Balance as of March 31, 2018

$ (8,921,928 )

Accumulated Other

Comprehensive

Stockholders’

as of December 31, 2018

Fair value of vested stock options

Foreign currency translation gain

Balance as of June 30, 2018

$ (9,705,322 )

Fair value of vested

stock options

Foreign currency

translation loss

Common stock issued

for Per-fekt settlement

Additional Paid in

Accumulated Other Comprehensive

Total Stockholders’

Balance as of December 31, 2018

$ (15,027,122 )

Fair value of vested stock options

Foreign currency translation loss

Common stock issued for Per-fekt settlement

Balance as of March 31, 2019

$ (13,559,835 )

Fair value of vested stock options

Foreign currency translation loss

Balance as of June 30, 2019

$ (13,241,374 )

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

Condensed Consolidated Statements of Cash Flows

For the three months ended

March 31, 2019

March 31, 2018

For the six months ended

June 30, 2019

June 30, 2018

Cash Flows from Operating Activities

4 unchanged sentences

Stock based compensation expense

Remeasurement (gain) loss on translation of foreign subsidiary

Remeasurement loss on translation of foreign subsidiary

Foreign currency transaction loss

2 unchanged sentences

Accounts receivable

Prepaid expense

Other current assets

Accounts payable and accrued liabilities

4 unchanged sentences

Payment for acquisition of domain name

Purchase of intangible assets

Net cash used in investing activities

28 unchanged sentences

Summary of Significant Accounting Policies

accompanying condensed consolidated financial statements as of March 31, 2019 and December 31, 2018 and for the three months ended

March 31, 2019 and 2018 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, 2019 and December 31, 2018 and for the three and six months

ended June 30, 2019 and 2018 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, 2019 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, 2018 and footnotes thereto included in the Company’s Annual Report

on Form 10-K filed with the SEC on March 29, 2019.

Operating results for the three and

six months ended June 30, 2019 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, 2018 and footnotes thereto included in the Company’s Annual

Report on Form 10-K filed with the SEC on March 29, 2019.

of Presentation

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

At March 31, 2019, the uninsured

At June 30, 2019, the uninsured

balance amounted to $770,545.

1 unchanged sentence

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

March 31, 2019

June 30, 2019

December 31, 2018

March 31, 2018

June 30, 2018

Cash and cash equivalents

22 unchanged sentences

31, 2018, the Company fully impaired intangible assets related to Perfekt and Cocowhite and charged to operations impairment loss

As of March 31, 2019, our qualitative analysis of intangible assets with indefinite lives did not indicate any impairment.

As of June 30, 2019, 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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and charged to operations impairment loss of $864,067.

As of March 31, 2019, our qualitative analysis of long-lived assets did

As of June 30, 2019, our qualitative analysis of long-lived assets did

not indicate any impairment.

3 unchanged sentences

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

As of March 31, 2019, our

As of June 30, 2019, our

qualitative analysis of goodwill did not indicate any impairment.

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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 March 31,

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

Liabilities - Deferred Revenue

11 unchanged sentences

against the allowance for doubtful accounts.

As of both March 31, 2019 and December 31, 2018, allowance for doubtful accounts

As of both June 30, 2019 and December 31, 2018, allowance for doubtful accounts was

Company expenses marketing, promotions and advertising costs as incurred.

Such costs are included in selling expense in the accompanying

unaudited condensed consolidated statements of income.

unaudited condensed consolidated statements of operations.

and Development

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in the period in which such determination is made.

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

CHC Inc., 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.

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

As of March 31, 2019, and 2018, options to purchase 7,166,667 and 8,666,667 shares of common stock, respectively, were outstanding.

As of March 31, 2018, warrants to purchase 1,000,000 shares of common stock were outstanding.

As of June 30, 2019, and 2018, options to purchase 6,166,667 and 8,666,667 shares of common stock, respectively, were outstanding.

As of June 30, 2018, 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, 2019, and 2018:

per share for the three and six months ended June 30, 2019, and 2018:

For the three months ended

March 31, 2019

March 31, 2018

For the six months ended

June 30, 2019

June 30, 2018

June 30, 2019

June 30, 2018

Net income (loss) after tax

3 unchanged sentences

Dilutive potential common shares

Net earnings (loss) per share:

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:

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to the fair value measurement.

of March 31, 2019, the Company has determined that there were no assets or liabilities measured at fair value.

of June 30, 2019, the Company has determined that there were no assets or liabilities measured at fair value.

consists of raw materials, components and finished goods.

13 unchanged sentences

Company accounts for stock-based compensation issued to non-employees and consultants in accordance with the provisions of ASC

505-50, “Equity –

Based Payments to Non-Employees.”

515-50, “Compensation –

Stock Compensation.”

Measurement of share-based payment transactions with non-employees

32 unchanged sentences

were as follows:

March 31, 2019

June 30, 2019

December 31, 2018

3 unchanged sentences

USD exchange rate

March 31, 2019

March 31, 2018

June 30, 2019

June 30, 2018

Average Quarterly AUD:

47 unchanged sentences

Concern Evaluation

connection with preparing unaudited condensed consolidated financial statements for the three months ended March 31, 2019, management

evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about the Company’s

ability to continue as a going concern within one year from the date that the financial statements are issued.

connection with preparing unaudited condensed consolidated financial statements for the three and six months ended June 30, 2019,

management evaluated whether there were conditions and events, considered in the aggregate, that raised substantial doubt about

the Company’s ability to continue as a going concern within one year from the date that the financial statements are issued.

Company considered the following:

At March 31, 2019, the Company had an accumulated deficit

of $13,559,835.

At March 31, 2019, the Company had working capital deficit of $155,476.

At June 30, 2019, the Company had an accumulated deficit of $13,241,374.

At June 30, 2019, the Company had working capital deficit of $46,078.

Revenue decline in 2019 as compared to 2018 of $3,623,897.

5 unchanged sentences

In 2019, the Company repaid $1,025,000 of loans.

● The Company generated net income

of $1,467,286 for the three months ended March 31, 2019.

The Company generated net income of $318,462 for the three months ended June 30, 2019 and $1,785,748 for the six months ended

June 30, 2019.

In 2019, the Company generated $1,776,352 of cash from operating activities.

Working capital deficit of $155,476 at March 31, 2019, includes loans payables to related party of $1,971,873, royalty payable

to related party of $270,818 and deferred revenue of $84,373.

Working capital deficit of $46,078 at June 30, 2019, includes loans payables to related party of $1,979,876, royalty payable to

related party of $312,568 and deferred revenue of $37,051.

The Company has line of credit facility of $20 million available from its current lender for future mergers and acquisition.

3 unchanged sentences

in order to mitigate conditions or events that would raise substantial doubt about its ability to continue as a going concern:

Raise additional capital through line of credit and/or

loans financing for future mergers and acquisition.

Raise additional capital through line of credit and/or loans financing for future mergers and acquisition.

Implement additional restructuring and cost reductions.

Raise additional capital through a private placement.

of April 30 , 2019 and March 31, 2019, the Company had $1,041,947

and $688,836, respectively, in cash and cash equivalents.

of August 12, 2019 and June 30, 2019, the Company had $875,154 and $1,201,267, respectively, in cash and cash equivalents.

Accounting Pronouncements

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unaudited condensed consolidated financial statements.

The amendments in this Update provide an optional

transition practical expedient to not evaluate under Topic 842 existing or expired land easements that were not previously accounted

for as leases under Topic 840, Leases.

An entity that elects this practical expedient should evaluate new or modified land easements

under Topic 842 beginning at the date that the entity adopts Topic 842.

An entity that does not elect this practical expedient

should evaluate all existing or expired land easements in connection with the adoption of the new lease requirements in Topic

842 to assess whether they meet the definition of a lease.

The effective date and transition requirements for the amendments

are the same as the effective date and transition requirements in Update 2016-02.

The adoption of ASU 2018-01 did not have any

impact on the Company’s unaudited condensed consolidated financial statements.

September 2017, the FASB issued Accounting Standard Update (ASU) 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts

with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842).

The effective date for ASU 2017-13 is for fiscal years

beginning after December 15, 2018.

We have adopted ASC 606 as disclosed above.

The adoption of ASU 2017-13 did not have any impact

on the Company’s unaudited condensed consolidated financial statements.

Board is issuing this Update to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying

the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment

amendments in this Update provide guidance about which changes to the terms or conditions of a share-based payment award require

an entity to apply modification accounting in Topic 718.

The amendment is Effective for all entities for annual periods, and interim

periods within those annual periods, beginning after December 15, 2017.

Early adoption is permitted, including adoption in any

interim period, for (1) public business entities for reporting periods for which financial statements have not yet been issued

and (2) all other entities for reporting periods for which financial statements have not yet been made available for issuance.

Update is the final version of Proposed Accounting Standards Update 2016-360—Compensation—Stock Compensation (Topic

718)—Scope of Modification Accounting, which has been deleted.

Adoption of this new

standard did not have any impact on the Company’s unaudited condensed consolidated

financial statements.

January 2017, the FASB issued ASU 2017-04, Intangibles-Goodwill and Other (Topic 350), which simplifies the goodwill impairment

The effective date for ASU 2017-04 is for fiscal years beginning after December 15, 2019.

Early adoption is permitted for

interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

We are currently evaluating the

impact of adopting ASU 2017-04 on our unaudited condensed consolidated financial statements.

November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230), which requires that restricted cash and restricted

cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total cash

amounts shown on the statement of cash flows.

The effective date for ASU 2016-18 is for fiscal years beginning after December

15, 2017, and interim periods within those fiscal years.

Early adoption is permitted.

adopted ASU 2016-18 effective January 1, 2018.

The adoption of ASU 2016-18 had no impact on our retained earnings, and no impact

to our net income on an ongoing basis.

Adoption of the new standard requires that a statement of cash flows explain the change

during the period in the total of cash, cash equivalents and amounts generally described as restricted cash, or restricted cash

The amounts generally described as restricted cash and restricted cash equivalents should be included with cash and

cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statements of cash flows.

The amendments have been applied using a retrospective transition method to each period presented, as required.

The period ended

March 31, 2018 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

cash receipts and cash payments are presented and classified in the statement of cash flows.

The effective date for ASU 2016-15

is for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019.

Early adoption is permitted.

Adoption of this new standard did not have any impact on the

Company’s unaudited condensed consolidated financial statements.

February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) and subsequent amendments to the initial guidance:

ASU 2018-10, ASU 2018-11, ASU 2018-20 and ASU 2019-01 (collectively Topic 842) to increase transparency and comparability of lease

recognition and disclosure.

The update requires lessees to recognize lease contracts with a term greater than one year on the

balance sheet, while recognizing expenses on the income statement in a manner similar to current guidance.

For lessors, the update

makes targeted changes to the classification criteria and the lessor accounting model to align the guidance with the new lessee

model and revenue guidance.

ASU 2016-02, ASU 2017-13, ASU 2018-10, ASU 2018-11 and ASU 2018-20 are effective for annual reporting

periods beginning after December 15, 2018, and interim periods within those annual periods, with early adoption permitted.

of this new standard did not have any impact on the Company’s consolidated financial statements as the Company did

not have long-term lease.

ASU 2019-01 is effective for annual reporting periods beginning after December 15, 2019.

is currently assessing the potential impact of ASU 2019-01 on its consolidated financial statements.

amendments in this Update provide an optional transition practical expedient to not evaluate under Topic 842 existing or expired

land easements that were not previously accounted for as leases under Topic 840, Leases.

An entity that elects this practical

expedient should evaluate new or modified land easements under Topic 842 beginning at the date that the entity adopts Topic 842.

An entity that does not elect this practical expedient should evaluate all existing or expired land easements in connection with

the adoption of the new lease requirements in Topic 842 to assess whether they meet the definition of a lease.

The effective date

and transition requirements for the amendments are the same as the effective date and transition requirements in Update 2016-02.

The adoption of ASU 2018-01 did not have any impact on the Company’s unaudited condensed consolidated financial statements.

consists of finished goods, components and raw materials.

2 unchanged sentences

carrying value of inventory consisted of the following:

March 31, 2019

June 30, 2019

December 31, 2018

6 unchanged sentences

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

March 31, 2019

June 30, 2019

December 31, 2018

2 unchanged sentences

Total accounts receivable, net

Prepaid Expenses

expenses consisted of the following:

March 31, 2019

Other Current Assets

current assets consisted of the following:

June 30, 2019

December 31, 2018

5 unchanged sentences

Miscellaneous

Related Party Receivable

Concentration of Credit Risk

4 unchanged sentences

its cash deposits with major financial institutions.

At March 31, 2019 and December 31, 2018, the uninsured balances amounted

to $313,910 and $162,729, respectively.

of March 31, 2019, three customers accounted for 72% of the Company’s accounts receivable.

At June 30, 2019 and December 31, 2018, the uninsured balances amounted to

$770,545 and $162,729, respectively.

of June 30, 2019, 4 customers accounted for 67% of the Company’s accounts receivable.

As of December 31, 2018, three

customers accounted for 83% of the Company’s accounts receivable.

the three months ended March 31, 2019, two customers accounted for approximately 40% of the Company’s net revenue.

three months ended March 31, 2018, three customers accounted for approximately 41% of the Company’s net revenue.

year ended December 31, 2018, two customers accounted for approximately 41% of the Company’s net revenues.

Substantially

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

of March 31, 2019 and December 31, 2018, two vendors accounted for 78% and 77%, respectively, of the Company’s accounts

the three months ended March 31, 2019, two suppliers accounted for approximately 41% of the Company’s purchases.

three months ended March 31, 2018, three suppliers accounted for approximately 53% of the Company’s purchases.

Substantially

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

the six months ended June 30, 2019, two customers accounted for approximately 42% of the Company’s net revenue.

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

For the three

months ended June 30, 2019, two customers accounted for approximately 44% of the Company’s net revenue.

For the three months

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

For the year ended December

31, 2018, two customers accounted for approximately 41% of the Company’s net revenues.

Substantially all of the Company’s

business is with companies in the United States.

of June 30, 2019 and December 31, 2018, two vendors accounted for 72% and 77%, respectively, of the Company’s accounts payable.

the six months ended June 30, 2019, two suppliers accounted for approximately 36% of the Company’s purchases.

months ended June 30, 2018, three suppliers accounted for approximately 46% of the Company’s purchases.

For the three months

ended June 30, 2019, two suppliers accounted for approximately 27% of the Company’s purchases.

For the three months ended

June 30, 2018, two suppliers accounted for approximately 32% of the Company’s purchases.

Substantially all of the Company’s

business is with suppliers in the United States.

Fixed Assets and Intangible Assets

of March 31, 2019, and December 31, 2018, fixed assets and intangible assets consisted of the following:

March 31, 2019

of June 30, 2019, and December 31, 2018, fixed assets and intangible assets consisted of the following:

June 30, 2019

December 31, 2018

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Fixed assets, net

expense for the three months ended March 31, 2019 and 2018 was $38,060 and $36,408, respectively.

March 31, 2019

expense for the three months ended June 30, 2019 and 2018 was $34,263 and $39,754, respectively.

Depreciation expense for the

six months ended June 30, 2019 and 2018 was $72,323 and $76,162, respectively.

June 30, 2019

December 31, 2018

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Intangible assets, net

expense for the three months ended March 31, 2019 and 2018 was $268,215 and $415,078, respectively.

These intangible assets were

acquired through an Asset Purchase Agreement and Stock Purchase Agreements.

expense for the three months ended June 30, 2019 and 2018 was $269,333 and $416,197, respectively.

Amortization expense for the

six months ended June 30, 2019 and 2018 was $537,548 and $831,275, 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 per month and a one-time management fee of $65,411 to a company owned by Mr.

Jack Ross, Chief Executive Officer of the Company.

The Company expensed $238,961 during the three months ended March 31, 2019.

As of March 31, 2019, the total outstanding balance was $0 for consulting fees and reimbursements.

Company accrued and paid consulting fees of $57,917 per month and a management fee of $76,461 to a company owned by Mr.

Chief Executive Officer of the Company.

The Company expensed $185,000 during the three months ended June 30, 2019 and $423,961

during the six months ended June 30, 2019.

As of June 30, 2019, the total outstanding balance was $0 for consulting fees and reimbursements.

As of June 30, 2019, the Company has a receivable of $120,660 related to services the Company performed for a company owned by

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 March 31, 2019, the Company owed Knight $512,500

At June 30, 2019, the Company owed Knight $500,000

in relation to this agreement (see Note 10).

The Company recorded present value of future payments of $266,521 and $272,151 as

of June 30, 2019 and December 31, 2018, respectively.

August 18, 2015, the Company entered into a Consulting Agreement with Kara Harshbarger, the co-founder of Hand MD, LLC, pursuant

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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, 2019, the total outstanding balance was $0.

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

2019 and $60,000 for the six months ended June 30, 2019.

As of June 30, 2019, the total outstanding balance was $0.

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

capital loan.

At March 31, 2019, the Company owed Knight $6,859,107 on this loan, net of debt issuance cost (see Note 10).

At June 30, 2019, the Company owed Knight $6,393,702 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.

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this agreement is $100,000 Canadian dollars.

As of March 31, 2019, the total outstanding balance was $200,000 Canadian dollars.

In US Dollars, the total outstanding balance was $152,834 as of March 31, 2019.

As of June 30, 2019, the total outstanding balance was $200,000 Canadian dollars (approximately

$152,834 USD).

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

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minimum due to Knight under this agreement is $25,000 Canadian dollars.

As of March 31, 2019 the total outstanding balance was

$25,000 Canadian dollars.

In US Dollars, the total outstanding balance was $18,325.

Company expensed royalty of $88,864 during the three months ended March 31, 2019.

At March 31, 2019 NomadChoice Pty Ltd., a subsidiary

of the Company, owed Knight Therapeutics $88,864 in connection with a royalty distribution agreement.

Company expensed royalty of $1,085 during the three months ended March 31, 2019.

At March 31, 2019 the Company owed Knight Therapeutics

$1,085 in connection with a royalty distribution agreement for Sneaky Vaunt.

Company expensed commissions of $4,178 during the three months ended March 31, 2019.

At March 31, 2019, the Company, owed Founded

Ventures, owned by a shareholder in the Company, $4,178 in connection with a commission agreement for Sneaky Vaunt.

Company expensed commissions of $385 during the three months ended March 31, 2019.

At March 31, 2019, the Company owed Founded

Ventures $385 in connection with a commission agreement for The Queen Pegasus.

Company paid $2,794 during the three months ended March 31, 2019 to Hand MD, Corp, related to a royalty agreement.

2019, the Company owed Hand MD Corp.

As of June 30, 2019 the total outstanding balance was

$25,000 Canadian dollars (approximately $18,325 USD).

Company expensed royalty of $50,445 during the three months ended June 30, 2019 and $139,309 for the six months ended June 30,

At June 30, 2019 the Company, owed Knight Therapeutics $139,309 in connection with a royalty distribution agreement.

Company expensed royalty of $2,100 during the three months ended June 30, 2019 and $3,185 for the six months ended June 30, 2019.

At June 30, 2019 the Company owed Knight Therapeutics $2,100 in connection with a royalty distribution agreement for Sneaky Vaunt.

Company expensed commissions of $4,887 during the three months ended June 30, 2019 and $9,065 for the six months ended June 30,

At June 30, 2019, the Company, owed Founded Ventures, owned by a shareholder in the Company, $4,887 in connection with a

commission agreement for Sneaky Vaunt.

Company expensed commissions of $259 during the three months ended June 30, 2019 and $644 for the six months ended June 30, 2019.

At June 30, 2019, the Company owed Founded Ventures $259 in connection with a commission agreement for The Queen Pegasus.

Company paid $5,826 during the three months ended June 30, 2019 and $8,621 for the six months ended June 30, 2019 to Hand MD,

Corp, related to a royalty agreement.

At June 30, 2019, the Company owed Hand MD Corp.

$0 in minimum future royalties.

Accounts Payable and Accrued Liabilities

of March 31, 2019, and December 31, 2018, accounts payable and accrued liabilities consisted of the following:

March 31, 2019

of June 30, 2019, and December 31, 2018, accounts payable and accrued liabilities consisted of the following:

June 30, 2019

December 31, 2018

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Severance Accrual

Charitable Donation

Related Party Reimbursements

Notes Payable

Company’s loans payable at March 31, 2019 and December 31, 2018 are as follows:

March 31, 2019

Company’s loans payable at June 30, 2019 and December 31, 2018 are as follows:

June 30, 2019

December 31, 2018

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total payments of $1.2 million.

Company recorded present value of future payments of $269,387 and $272,151 as of March 31, 2019 and December 31, 2018, respectively.

The Company recorded imputed interest expense of $9,737 for the three months ended March 31, 2019.

the three months ended March 31, 2019, the Company made payments of $12,500 in connection with this Security Agreement.

Company recorded present value of future payments of $266,521 and $272,151 as of June 30, 2019 and December 31, 2018, respectively.

The Company recorded imputed interest expense of $9,633 for the three months ended June 30, 2019 and $19,370 for the six months

ended June 30, 2019.

the three and six months ended June 30, 2019, the Company made payments of $12,500 and $25,000, respectively, in connection with

this Security Agreement.

August 9, 2017 Loan:

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The Company recognized amortization

of deferred financing costs of $38,368 during the three months ended March 31, 2019.

Unamortized debt issuance cost as of March

31, 2019 amounted to $140,893.

Company recognized interest expense of $329,167 and paid $279,861 during the three months ended March 31, 2019.

Accrued interest

was $49,306 as of March 31, 2019.

The loan balance at March 31, 2019 was $7,000,000.

of deferred financing costs of $34,594 and $72,962 during the three and six months ended June 30, 2019, respectively.

debt issuance cost as of June 30, 2019 amounted to $106,298.

Company recognized interest expense of $263,069 and paid $263,069 during the three months ended June 30, 2019 and $592,236 and

paid $542,930 during the six months ended June 30, 2019.

Accrued interest was $49,306 as of June 30, 2019.

The loan balance at

June 30, 2019 was $6,500,000.

Stockholders’

1 unchanged sentence

stock with $0.00001 par value.

the three months ended March 31, 2019, the Company issued 26,391 shares of its common stock valued at $39,586 in full and final

settlement on the Per-fekt transaction.

of March 31, 2019 and December 31, 2018, there were 89,889,074 and 89,862,683, respectively, shares of the Company’s common

the six months ended June 30, 2019, the Company issued 26,391 shares of its common stock valued at $39,585 in full and final settlement

on the Per-fekt transaction.

of June 30, 2019 and December 31, 2018, there were 89,889,074 and 89,862,683, respectively, shares of the Company’s common

stock issued and outstanding.

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to a stock grant agreement between the Company and Mr.

the three months ended March 31, 2019 the Company received a 60 day Proposition 65 letter that one of its products did not have

California’s prop 65 label.

The Company is taking action to correct the oversight.

the six months ended June 30, 2019 the Company received a 60 day Proposition 65 letter that one of its products did not have California’s

prop 65 label.

The Company is in the process of finalizing the settlement of this case and should be notified on our about

August 15, 2019.

Stock Options

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 a stock option plan at March 31, 2019:

Options Outstanding

Options Exercisable

$ 0.25 - $0.70

stock option activity for the three months ended March 31, 2019 is as follows:

common stock issued to employees and consultants under a stock option plan at June 30, 2019:

stock option activity for the six months ended June 30, 2019 is as follows:

Weighted Average

Exercise Price

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Expired or canceled

Outstanding at March 31, 2019

compensation expense related to vested options was $45,533 during the three months ended March 31, 2019, which is a component

of general and administrative expense in the statement of operations.

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 $0.48-0.50, risk-free interest rate of 1.95-1.99%, volatility

of 116-117%, expected lives of 10 years, and dividend yield of 0%.

Stock options outstanding as of March 31, 2019, as disclosed

in the above table, have an intrinsic value of $0.

As of March 31, 2019, unamortized stock-based compensation costs related to

options was $244,966, and will be recognized over a period of 1.7 years.

Outstanding at June 30, 2019

compensation expense related to vested options was $38,679 and $84,212 during the three and six months ended June 30, 2019, respectively,

which is a component of general and administrative expense in the statement of operations.

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 $0.48-.050, risk-free interest

rate of 1.95-1.99%, volatility of 116-117%, expected lives of 10 years, and dividend yield of 0%.

Stock options outstanding as

of June 30, 2019, as disclosed in the above table, have an intrinsic value of $0.

As of June 30, 2019, unamortized stock-based

compensation costs related to options was $206,287, and will be recognized over a period of 1.33 years.

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, 2019 and 2018 were

March 31, 2019

March 31, 2018

sales attributed to customers in the United States and foreign countries for the three months ended June 30, 2019 and 2018 were

June 30, 2019

June 30, 2018

countries primarily consist of Australia and Canada.

Company’s net sales by product group for the three months ended June 30, 2019 and 2018 were as follows:

June 30, 2019

June 30, 2018

Nutraceuticals

Over the Counter (OTC)

Consumer Goods

Cosmeceuticals

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, 2019 and 2018 were as follows:

June 30, 2019

June 30, 2018

sales attributed to customers in the United States and foreign countries for the six months ended June 30, 2019 and 2018 were

June 30, 2019

June 30, 2018

United States

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countries primarily consist of Australia and Canada.

Company’s net sales by product group for the three months ended March 31, 2019 and 2018 were as follows:

March 31, 2019

March 31, 2018

Company’s net sales by product group for the six months ended June 30, 2019 and 2018 were as follows:

June 30, 2019

June 30, 2018

Nutraceuticals

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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 March 31, 2019 and 2018 were as follows:

March 31, 2019

March 31, 2018

assets (net) attributable to operations in the United States and foreign countries as of March 31, 2019 and December 31, 2018

were as follows:

March 31, 2019

Company’s net sales by major sales channel for the six months ended June 30, 2019 and 2018 were as follows:

June 30, 2019

June 30, 2018

assets (net) attributable to operations in the United States and foreign countries as of June 30, 2019 and December 31, 2018 were

June 30, 2019

December 31, 2018

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Foreign countries

tax (benefit) expense was $(5,908) for the three months ended March 31, 2019, compared to $160,613 for the same periods in 2018.

The current provision is attributable to Australian operations and the current tax rate in effect in that country.

tax expense was $40,456 and $34,548 for the three and six months ended June 30, 2019, respectively, compared to $222,389 and $383,002,

respectively for the same periods in 2018.

The current provision is attributable to Australian operations and the current tax

rate in effect in that country.

December 22, 2017, the Tax Cuts and Jobs Act (the TCJA), which significantly modified U.S.

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so such returns and liability remain open.

The Company has estimated and accrued for its sales tax liability at $238,209 and $180,222

as of March 31, 2019 and December 31, 2018, respectively.

Subsequent Events

evaluated all activities of the Company through the issuance date of the Company’s unaudited condensed consolidated financial

statements and concluded that no subsequent events have occurred that would require adjustments or disclosure

into the unaudited condensed consolidated financial statements.

statements and concluded that no subsequent events have occurred that would require adjustments or disclosure into the unaudited

condensed consolidated financial statements.

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, 2019 and 2018, 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 10-Q.

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 Note Regarding

Forward-Looking Statements”

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

ended June 30, 2019 and 2018, 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 Note Regarding Forward-Looking Statements”

and the “Business”

section in our Form 10-K filed on March 29, 2019.

such as “anticipate,”

section in our Form

10-K filed on March 29, 2019.

We use words such as “anticipate,”

“estimate,”

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For the three

March 31, 2019

June 30, 2019

Net income after tax

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Loss on foreign currency translation and transaction

One-time expense

Adjusted EBITDA

June 30, 2019

Net income after tax

Interest income

Interest expense

Stock-based compensation

Loss on foreign currency translation and transaction

One-time Expense

Adjusted EBITDA

and Adjusted EBITDA are considered non-GAAP financial measures.

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to similarly titled measures reported by other companies.

of Operations for the Three months Ended March 31, 2019 and 2018

the three months ended March 31, 2019, we had revenue of $9,468,955 from sales of our products, as compared to revenue of $9,700,861

of Operations for the Three Months Ended June 30, 2019 and 2018

the three months ended June 30, 2019, we had revenue of $6,336,721 from sales of our products, as compared to revenue of $9,728,712

for the same period in 2018.

We had an increase in Nutraceuticals in 2019 as compared to 2018 due to regular business.

a decrease in Over the Counter in 2019 as compared to 2018 due to an out of stock product.

We had a decrease in Consumer Goods

in 2019 as compared to 2018 due to a shift in business focus.

We had a decrease in Nutraceuticals in 2019 as compared to 2018 due to not overspending on marketing.

We had a decrease in Over the Counter in 2019 as compared to 2018 due to an out of stock product.

We had a decrease in Consumer

Goods in 2019 as compared to 2018 due to a shift in business focus.

We had a decrease in Cosmeceuticals in 2019 as compared to

due to regular business.

2018 due to a shift in business focus.

The revenue is comprised of the following categories:

March 31, 2019

March 31, 2018

June 30, 2019

June 30, 2018

Nutraceuticals

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Cosmeceuticals

the three months ended March 31, 2019, our cost of revenue was $2,540,450.

Our cost of revenue for the three months ended March

the three months ended June 30, 2019, our cost of revenue was $1,607,587.

Our cost of revenue for the three months ended June

30, 2018, was $2,744,760.

We had a decrease in Nutraceuticals in 2019 as compared to 2018 due to higher sales and a different

mix of products being sold.

We had an decrease in Over the Counter in 2019 as compared to 2018 due to an out of stock product.

We had a decrease in Consumer Goods in 2019 as compared to 2018 due to a decrease in revenue.

We had an increase in Cosmeceuticals

in 2019 as compared to 2018 due to a different mix of product being sold.

We had a decrease in Nutraceuticals in 2019 as compared to 2018 due to lower sales and a different mix

of products being sold.

We had a decrease in Over the Counter in 2019 as compared to 2018 due to an out of stock product.

a decrease in Consumer Goods in 2019 as compared to 2018 due to a decrease in revenue.

We had a decrease in Cosmeceuticals in

2019 as compared to 2018 due to a decrease in revenue.

The cost of revenue is comprised of the following categories:

March 31, 2019

March 31, 2018

June 30, 2019

June 30, 2018

Nutraceuticals

2 unchanged sentences

Cosmeceuticals

profit was $6,928,505, or 73% for the three months ended March 31, 2019, as compared to gross profit of $6,890,953, or 71% for

the same period in 2018, an increase of $37,552, or 1%.

The increase in gross profit margin is directly related to the mix of

products being sold.

profit was $4,729,434, or 75% for the three months ended June 30, 2019, as compared to gross profit of $6,983,952, or 72% for

the same period in 2018, a decrease of $2,254,818, or 32%.

The increase in gross profit margin is directly related to the mix

of products being sold.

and Marketing Expenses

the three months ended March 31, 2019, our selling and marketing expenses were $3,311,867 as compared to $4,252,703 for the same

period in 2018, which is primarily due to decreased personnel in our advertising and marketing departments.

the three months ended June 30, 2019, our selling and marketing expenses were $2,647,379 as compared to $5,148,656 for the same

period in 2018, which is primarily due to decreased personnel in our advertising and marketing departments and decreased advertising.

and Administrative Expenses

the three months ended March 31, 2019, our general and administrative expenses were $1,487,107.

For the three months ended March

the three months ended June 30, 2019, our general and administrative expenses were $1,072,705.

For the three months ended June

30, 2018, our general and administrative expenses were $1,475,289.

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and Amortization Expenses

the three months ended March 31, 2019, our depreciation and amortization expenses were $306,275 as compared to $451,486 for the

the three months ended June 30, 2019, our depreciation and amortization expenses were $303,596 as compared to $455,951 for the

same period in 2018.

1 unchanged sentence

Income and Expenses

the three months ended March 31, 2019 and 2018 we had other (income) and expense items of the following:

March 31, 2019

March 31, 2018

the three months ended June 30, 2019 and 2018 we had other (income) and expense items of the following:

June 30, 2019

June 30, 2018

Interest income

Interest expense

Remeasurement (gain) loss on translation of foreign subsidiary

Remeasurement loss on translation of foreign subsidiary

Amortization of debt issuance cost

Total other expense

the three months ended March 31, 2019, we had interest expense of $340,128 as compared to $270,176 for the same period in 2018.

The increase was due to increase in the interest rate of Loan 3 from 13% to 15.5%.

the three months ended June 30, 2019, we had interest expense of $284,285 as compared to $305,687 for the same period in 2018.

The decrease was due to the paying down of debt.

Income (Loss)

the three months ended March 31, 2019, our net income was $1,467,287 as compared to a net loss of $(55,493) for the same period

the three months ended June 30, 2019, our net income was $318,462 as compared to a net loss of $783,393 for the same period in

of Operations for the Six Months Ended June 30, 2019 and 2018

the six months ended June 30, 2019, we had revenue of $15,805,676 from sales of our products, as compared to revenue of $19,429,573

for the same period in 2018.

We had a decrease in Nutraceuticals in 2019 as compared to 2018 due to not overspending on marketing.

We had a decrease in Over the Counter in 2019 as compared to 2018 due to an out of stock product.

We had a decrease in Consumer

Goods in 2019 as compared to 2018 due to a shift in business focus.

We had a decrease in Cosmeceuticals in 2019 as compared to

2018 due to a shift in business focus.

The revenue is comprised of the following categories:

June 30, 2019

June 30, 2018

Nutraceuticals

Over the Counter (OTC)

Consumer Goods

Cosmeceuticals

the six months ended June 30, 2019, our cost of revenue was $4,148,037.

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

2018, was $5,554,668.

We had a decrease in Nutraceuticals in 2019 as compared to 2018 due to lower sales and a different mix of

products being sold.

We had a decrease in Over the Counter in 2019 as compared to 2018 due to an out of stock product.

a decrease in Consumer Goods in 2019 as compared to 2018 due to a decrease in revenue.

We had a decrease in Cosmeceuticals in

2019 as compared to 2018 due to decreased revenue.

The cost of revenue is comprised of the following categories:

June 30, 2019

June 30, 2018

Nutraceuticals

Over the Counter (OTC)

Consumer Goods

Cosmeceuticals

profit was $11,657,639, or 74% for the six months ended June 30, 2019, as compared to gross profit of $13,874,905, or 71% for

the same period in 2018, a decrease of $2,217,266, or 16%.

The increase in gross profit margin is directly related to the mix

of products being sold.

and Marketing Expenses

the six months ended June 30, 2019, our selling and marketing expenses were $5,959,245 as compared to $9,401,359 for the same

period in 2018, which is primarily due to decreased personnel in our advertising and marketing departments and decreased advertising.

and Administrative Expenses

the six months ended June 30, 2019, our general and administrative expenses were $2,559,813.

For the six months ended June 30,

2018, our general and administrative expenses were $3,236,145.

The decrease is primarily due to better management of operating

and Amortization Expenses

the six months ended June 30, 2019, our depreciation and amortization expenses were $609,871 as compared to $907,437 for the same

period in 2018.

The decrease is due to impairment of intangible assets in 2018.

Income and Expenses

the six months ended June 30, 2019 and 2018 we had other (income) and expense items of the following:

June 30, 2019

June 30, 2018

Interest income

Interest expense

Remeasurement loss on translation of foreign subsidiary

Amortization of debt issuance cost

Total other expense

the six months ended June 30, 2019, we had interest expense of $624,413 as compared to $575,863 for the same period in 2018.

increase was due to increase in the interest rate of Loan 3 from 13% to 15.5%.

Income (Loss)

the six months ended June 30, 2019, our net income was $1,785,748 as compared to a net loss of $838,886 for the same period in

and Capital Resources

of March 31, 2019, we had $688,836 cash on hand and a $155,476 working capital deficit.

of June 30, 2019, we had $1,064,301 cash on hand and a $46,078 working capital deficit.

In addition, we also had restricted cash

of $136,966 which is held for credit card collateral.

months ended March 31, 2019 and 2018

months ended June 30, 2019 and 2018

Cash Provided by Operating Activities

cash provided by operating activities for the three months ended March 31, 2019 was $813,711, compared to $944,647 for the same

cash provided by operating activities for the six months ended June 30, 2019 was $1,776,352, compared to $712,546 for the same

period in 2018.

This decrease in net cash provided by operating activities for the three months ended March 31, 2019 was primarily

This increase in net cash provided by operating activities for the six months ended June 30, 2019 was primarily

attributable to a decrease in accounts payable and accrued expenses.

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Non cash implied interest

Remeasurement gain on translation of foreign subsidiary

Remeasurement loss on translation of foreign subsidiary

Foreign currency transaction loss

1 unchanged sentence

Decrease in inventory

Decrease in prepaid expenses

Increase in deferred revenue

Decrease in other current assets

Decrease in deferred revenue

Decrease in accounts payable and accrued expenses

Cash Used in Investing Activities

cash used in investing activities for the three months ended March 31, 2019 was $0, compared to net cash used of $136,725 for

the same period in 2018.

The decrease in cash used in investing activities during 2019 is attributable to the purchase of assets

cash used in investing activities for the six months ended June 30, 2019 was $0, compared to net cash used of $194,300 for the

same period in 2018.

The decrease in cash used in investing activities during 2019 is attributable to the purchase of assets in

Cash Used in Financing Activities

cash used in financing activities for the three months ended March 31, 2019 was $512,500, compared to net cash used of $1,137,500

cash used in financing activities for the six months ended June 30, 2019 was $1,025,000, compared to net cash used of $1,712,500

for the same period in 2018.

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Repayment of notes payable

$ (1,025,000 )

2019 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