10-Q

U. S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Synergy CHC Corp.

Nevada	000-55098	99-0379440
(State or other jurisdiction	(Commission	(IRS Employer
of Incorporation)	File Number)	Identification Number)

865 Spring Street

Westbrook, Maine 04092

(Address of principal executive offices)

(615) 939-9004

(Issuer’s Telephone Number)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Sec.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule12b-2 of the Exchange Act.

Large accelerated filer [  ]	Accelerated filer [  ]	Non-accelerated filer [  ]	Smaller reporting company [X]
Emerging Growth Company [  ]

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No [X]

As of June 22, 2020, 89,889,074 shares of our common stock were issued and outstanding.

EXPLANATORY NOTE

As previously disclosed in the Current Report on Form 8-K filed by the Company with the SEC on May 12, 2020, the filing of the Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2020 was delayed due to circumstances related to the COVID-19 pandemic. The Company relied on the SEC’s order pursuant to Section 36 of the Securities Exchange Act of 1934 Modifying Exemptions from the Reporting and Proxy Delivery Requirements for Public Companies, as amended (Release No. 34-88465), dated March 25, 2020, to delay the filing of this Form 10-Q.

SYNERGY CHC CORP.

INDEX

Table of Contents

PART I	FINANCIAL INFORMATION
Item 1.	Condensed consolidated financial statements	3
	Condensed consolidated balance sheets as of March 31, 2020 (unaudited) and December 31, 2019	3
	Condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2020 and 2019 (unaudited)	4
	Condensed consolidated statement of changes in stockholders’ equity (deficit) for the three months ended March 31, 2020 and 2019 (unaudited)	5
	Condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019 (unaudited)	6
	Notes to unaudited condensed consolidated financial statements	7
Item 2.	Management’s discussion and analysis of financial condition and results of operations	25
Item 3.	Quantitative and qualitative disclosures about market risk	28
Item 4.	Controls and procedures	28
PART II	OTHER INFORMATION
Item 1.	Legal proceedings	29
Item 1A.	Risk factors	29
Item 2.	Unregistered sales of equity securities and use of proceeds	29
Item 3.	Defaults upon senior securities	29
Item 4.	Mine Safety Disclosures	29
Item 5.	Other information	25
Item 6.	Exhibits	25
Signatures		30

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Synergy CHC Corp.

Condensed Consolidated Balance Sheets

	March 31, 2020			December 31, 2019
	(Unaudited)
Assets
Current Assets:
Cash and cash equivalents	$	314,933		$	1,224,514
Restricted cash		100,000			100,000
Accounts receivable, net (including related party receivable of $470,984 and $277,432, respectively)		3,037,441			1,423,786
Prepaid expenses		191,153			186,143
Income taxes receivable		-			251,614
Inventory, net		1,714,096			1,861,038
Total Current Assets		5,357,623			5,047,095
Fixed assets, net		112,907			135,898
Intangible assets, net		6,671			7,636
Total Assets	$	5,477,201		$	5,190,629
Liabilities and Stockholders’ Deficit
Current Liabilities:
Accounts payable and accrued liabilities (including related party payable of $839,124 and $956,438, respectively)	$	4,134,020		$	4,674,064
Deferred revenue		17,137			7,887
Income taxes payable		164,338			-
Current portion of long-term debt, net of debt discount and debt issuance cost, related party		5,486,377			5,465,113
Total Current Liabilities		9,801,872			10,147,064
Long-term Liabilities:
Note payable, net of debt discount and debt issuance cost, related party		243,207			246,916
Total Long-term Liabilities		243,207			246,916
Total Liabilities		10,045,079			10,393,980
Commitments and contingencies
Stockholders’ Deficit:
Common stock, $0.00001 par value; 300,000,000 shares authorized; 89,889,074 shares issued and outstanding		899			899
Additional paid in capital		19,057,634			19,018,955
Accumulated other comprehensive income		345,855			11,364
Accumulated deficit		(23,972,266	)		(24,234,569	)
Total stockholders’ deficit		(4,567,878	)		(5,203,351	)
Total Liabilities and Stockholders’ Deficit	$	5,477,201		$	5,190,629

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

3

Synergy CHC Corp.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Income

	For the three months ended
	March 31, 2020			March 31, 2019
Revenue	$	6,117,286		$	9,468,955
Cost of sales (including related party purchases of $124,008 and $819,633, respectively)		1,497,779			2,540,450
Gross profit		4,619,507			6,928,505
Operating expenses
Selling and marketing		2,253,956			3,311,867
General and administrative		1,333,524			1,487,107
Depreciation and amortization		26,845			306,275
Total operating expenses		3,614,325			5,105,249
Income from operations		1,005,182			1,823,256
Other (income) expenses
Interest income		(66	)		(111	)
Interest expense		158,522			340,128
Remeasurement loss (gain) on translation of foreign subsidiary		278,126			(16,508	)
Amortization of debt issuance cost		20,757			38,368
Total other expenses		457,339			361,877
Net income before income taxes		547,843			1,461,379
Income tax expense (benefit)		285,540			(5,908	)
Net income after tax	$	262,303		$	1,467,287
Net income per share – basic	$	0.00		$	0.02
Net income per share – diluted	$	0.00		$	0.02
Weighted average common shares outstanding
Basic		89,889,074			89,865,319
Diluted		89,899,074			89,865,319
Comprehensive income:
Net income		262,303			1,467,287
Foreign currency translation adjustment		334,491			(70,940	)
Comprehensive income	$	596,794		$	1,396,347

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

4

Synergy CHC Corp.

Unaudited Condensed Consolidated Statement of Stockholders’ Equity (Deficit)

	Common stock				Additional Paid in		Accumulated Other Comprehensive			Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income			Deficit			Equity
Balance as of December 31, 2018		89,862,683	$	899	$	18,817,800	$	179,116		$	(15,027,122	)	$	3,970,693
Fair value of vested stock options						45,533								45,533
Foreign currency translation loss								(70,940	)		-			(70,940	)
Common stock issued for Per-fekt settlement		26,391		-		39,586								39,586
Net income											1,467,287			1,467,287
Balance as of March 31, 2019		89,889,074	$	899	$	18,902,919	$	108,176		$	(13,559,835	)	$	5,452,159

	Common stock				Additional Paid in		Accumulated Other Comprehensive		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Income		Deficit			Deficit
Balance as of December 31, 2019		89,889,074	$	899	$	19,018,955	$	11,364	$	(24,234,569	)	$	(5,203,351	)
Fair value of vested stock options						38,679							38,679
Foreign currency translation gain								334,491					334,491
Net income										262,303			262,303
Balance as of March 31, 2020		89,889,074	$	899	$	19,057,634	$	345,855	$	(23,972,266	)	$	(4,567,878	)

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

5

Synergy CHC Corp.

Unaudited Condensed Consolidated Statements of Cash Flows 

	For the three months ended
	March 31, 2020			March 31, 2019
Cash Flows from Operating Activities
Net income	$	262,303		$	1,467,287
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization		26,845			306,275
Amortization of debt issuance cost		20,756			38,368
Stock based compensation expense		38,679			85,119
Remeasurement loss (gain) on translation of foreign subsidiary		275,237			(16,508	)
Foreign currency transaction loss		114,608			98,357
Non cash implied interest		9,299			9,737
Reversal of allowance for doubtful accounts		(170,309	)		-
Gain on write-off of payables		(180,000	)		-
Changes in operating assets and liabilities:
Accounts receivable		(1,259,338	)		120,802
Accounts receivable, related party		(193,552	)		-
Inventory		146,942			1,810
Prepaid expense		4,534			405,766
Income taxes receivable		251,614			-
Income tax payable		164,338			-
Accounts payable and accrued liabilities		(635,464	)		(2,035,676	)
Accounts payable, related party		(187,804	)		296,710
Deferred revenue		9,250			34,664
Net cash (used in) provided by operating activities		(1,302,062	)		813,711
Cash Flows from Investing Activities		-			-
Cash Flows from Financing Activities
Advances from related party		70,490			-
Repayment of notes payable		(12,500	)		(512,500	)
Net cash provided by (used in) financing activities		57,990			(512,500	)
Effect of exchange rate on cash, cash equivalents and restricted cash		334,491			(70,940	)
Net (decrease) increase in cash, cash equivalents and restricted cash		(909,581	)		230,271
Cash, Cash Equivalents and restricted cash, beginning of period		1,324,514			595,916
Cash, Cash Equivalents and restricted cash, end of period	$	414,933		$	826,187
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest	$	145,434		$	289,598
Income taxes	$	-		$	38,919
Supplemental Disclosure of Non-cash Investing and Financing Activities	$	-		$	-

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

6

Synergy CHC Corp.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1 – Nature of the Business

Synergy CHC Corp. (“Synergy”, “we”, “us”, “our” or the “Company”) (formerly Synergy Strips Corp.) was incorporated on December 29, 2010 in Nevada under the name “Oro Capital Corporation.” On April 21, 2014, the Company changed its fiscal year end from July 31 to December 31. On April 28, 2014, the Company changed its name to “Synergy Strips Corp.”. On August 5, 2015, the Company changed its name to “Synergy CHC Corp.”

The Company is a consumer health care company that is in the process of building a portfolio of best-in-class consumer product brands. Synergy’s strategy is to grow its portfolio both organically and by further acquisition.

Effective January 1, 2019 the Company has merged its U.S. subsidiaries (Neuragen Corp., Breakthrough Products, Inc., Sneaky Vaunt Corp., and The Queen Pegasus Corp.) into the parent company.

Synergy is the sole owner of two subsidiaries: NomadChoice Pty Ltd., and Synergy CHC Inc. and the results have been consolidated in these statements.

Note 2 – Summary of Significant Accounting Policies

General

The accompanying condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019 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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. 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, 2019 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 29, 2020.

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

7

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are assumptions about collection of accounts receivable, current income taxes, deferred income taxes valuation allowance, useful life of fixed and intangible assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

Reclassification

Certain amounts in prior periods have been reclassified to conform to current period presentation. These reclassifications had no effect on the previously reported net loss.

Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of March 31, 2020, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2020, the uninsured balance amounted to $94,869.

Restricted Cash

The 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.

	March 31, 2020		December 31, 2019		March 31, 2019
Cash and cash equivalents	$	314,933	$	1,224,514	$	688,836
Restricted cash		100,000		100,000		137,351
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	414,933	$	1,324,514	$	826,187

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

Capitalization of Fixed Assets

The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred.

8

Intangible Assets

We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization except intellectual property of $1,450,000 acquired as part of an Asset Purchase Agreement entered into with Factor Nutrition Labs LLC on January 22, 2015, $10,000 acquired as part of an Asset Purchase Agreement entered into with Perfekt Beauty Holdings LLC and CDG Holdings, LLC (“Perfekt”) on June 21, 2017 and $50,000 acquired as an Asset Purchase entered into with Cocowhite on May 22, 2018. Intangible assets are amortized on a straight line basis over the useful lives. During the year ended December 31, 2018, the Company fully impaired intangible assets related to Perfekt and Cocowhite and charged to operations impairment loss of $60,000. During the year ended December 31, 2019, the Company fully impaired intellectual property related to Focus Factor and charged to operations impairment loss of $1,450,000.

Long-lived Assets

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. However, as of December 31, 2018 our review of intangible assets related to two of our subsidiaries did indicate that the carrying amount of the asset may not be recoverable. During the year ended December 31, 2018, the Company fully impaired related intangible assets and charged to operations impairment loss of $864,067. During the year ended December 31, 2019, the Company fully impaired intangible assets and charged to operations impairment loss of $471,897.

Goodwill

An asset purchase is accounted for under the purchase method of accounting. Under that method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of the acquisition, with any excess of the cost of the acquisition over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. As of December 31, 2019 our qualitative analysis of goodwill indicated potential impairment, thus the Company chose to fully impair goodwill and charged to operations impairment loss of $7,793,240.

9

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

The Company recognizes revenue upon shipment from its fulfillment centers. Certain of our distributors may also perform a separate function as a co-packer on our behalf. In such cases, ownership of and title to our products that are co-packed on our behalf by those co-packers who are also distributors, passes to such distributors when we are notified by them that they have taken transfer or possession of the relevant portion of our finished goods. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Cancelled orders are refunded if not already dispatched, refunds are only paid if stock is damaged in transit, discounts are only offered with specific promotions and orders will be refilled if lost in transit.

Contract Assets

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s condensed consolidated balance sheet are from contracts with customers.

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of March 31, 2020.

Contract Liabilities - Deferred Revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

Accounts receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. As of March 31, 2020 and December 31, 2019, allowance for doubtful accounts was $113,662 and $283,972, respectively. During the three months ended March 31, 2020, the Company reversed allowance for doubtful accounts of $170,309.

Advertising Expense

The 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.

Research and Development

Costs incurred in connection with the development of new products and processing methods are charged to general and administrative expenses as incurred.

Income Taxes

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

10

The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration.

NomadChoice Pty Ltd, the Company’s wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Synergy CHC Inc. is a wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Net Earnings (Loss) Per Common Share

The Company computes earnings per share under ASC subtopic 260-10, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted earnings per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. As of March 31, 2020, and 2019, options to purchase 5,666,667 and 7,166,667 shares of common stock, respectively, were outstanding.

The 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, 2020, and 2019:

	For the three months ended
	March 31, 2020		March 31, 2019
Net income after tax	$	262,303	$	1,467,287
Weighted average common shares outstanding		89,889,074		89,865,319
Incremental shares from the assumed exercise of dilutive stock options		-		-
Dilutive potential common shares		89,889,074		89,865,319
Net earnings (loss) per share:
Basic	$	0.00	$	0.02
Diluted	$	0.00	$	0.02

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

	2020		2019
Options to purchase common stock		5,666,667		7,166,667

Fair Value Measurements

The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure.

11

ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.

Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the asset or liability.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of March 31, 2020, the Company has determined that there were no assets or liabilities measured at fair value.

Inventory

Inventory consists of raw materials, components and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or net realizable value. Finished goods include the cost of labor to assemble the items.

Stock-Based Compensation

ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

Foreign Currency Translation

The functional currency of one of the Company’s foreign subsidiaries (Nomadchoice Pty Ltd.) is the U.S. Dollar. The Company’s foreign subsidiary maintains its records using local currency (Australian Dollar). All monetary assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at quarter end exchange rates, non-monetary assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at transaction day exchange rates. Income and expense items related to non-monetary items were translated at exchange rates prevailing during the transaction date and other incomes and expenses were translated using average exchange rate for the period. The resulting translation adjustments, net of income taxes, were recorded in statements of operations as Remeasurement gain or loss on translation of foreign subsidiary.

The functional currency of the Company’s other foreign subsidiary (Synergy CHC Inc.) is the Canadian Dollar (CAD). The Company’s foreign subsidiary maintains its records using local currency (CAD). All assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at period end exchange rates and stockholders’ equity is translated at the historical rates. Income and expense items were translated using average exchange rate for the period. The resulting translation adjustments, net of income taxes, are reported as other comprehensive income and accumulated other comprehensive income in the stockholder’s equity in accordance with ASC 220 – Comprehensive Income.

The exchange rates used to translate amounts in AUD and CAD into USD for the purposes of preparing the consolidated financial statements were as follows:

Balance sheet:

	March 31, 2020		December 31, 2019
Period-end AUD: USD exchange rate	$	0.6141	$	0.7030
Period-end CAD: USD exchange rate	$	0.7049	$	0.7699

Income statement:

	March 31, 2020		March 31, 2019
Average Quarterly AUD: USD exchange rate	$	0.6585	$	0.7126
Average Quarterly CAD: USD exchange rate	$	0.7445	$	0.7522

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into either Australian Dollars or Canadian Dollars, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.

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Concentrations of Credit Risk

In the normal course of business, the Company provides credit terms to its customers; however, collateral is not required. Accordingly, the Company performs credit evaluations of its customers and maintains allowances for possible losses which, when realized, were within the range of management’s expectations. From time to time, a higher concentration of credit risk exists on outstanding accounts receivable for a select number of customers due to individual buying patterns.

Warehousing costs

Warehouse costs include all third party warehouse rent fees and are charged to selling and marketing expenses as incurred. Any additional costs relating to assembly or special pack-outs of the Company’s products are charged to cost of sales.

Product display costs

All displays manufactured and purchased by the Company are for placement of product in retail stores. This also includes all costs for display execution and setup and retail services are charged to cost of sales and expensed as incurred.

Cost of Sales

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products into the retail stores including buying and transportation costs.

Debt Issuance Costs

Debt issuance costs consist primarily of arrangement fees, professional fees and legal fees. These costs are netted off with the related loan and are being amortized to interest expense over the term of the related debt facilities.

Shipping Costs

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the company are recorded in selling and marketing expenses.

Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment Reporting

Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.

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Presentation of Financial Statements – Going Concern

Going Concern Evaluation

In connection with preparing unaudited condensed consolidated financial statements for the three months ended March 31, 2020, 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.

The Company considered the following:

● At March 31, 2020, the Company had an accumulated deficit of $23,972,266.

● At March 31, 2020, the Company had working capital deficit of $4,444,249.

● Revenue decline in 2020 as compared to 2019 of $3,351,669. 

● During the three months ended March 31, 2020, the Company used cash in operating activities of $1,302,062.

● The Company was required to make repayment of loans payable of $500,000 and accrued interest during the three months ended March 31, 2020.

Ordinarily, conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern relate to the entity’s ability to meet its obligations as they become due.

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:

● The Company raised $10.0 million via debt financing during the year ended December 31, 2017.

● Subsequent to March 31, 2020, the Company raised $2.5 million via debt financing.

● During the three months ended March 31, 2020, the Company repaid $12,500 of loans. Subsequent to March 31, 2020, the Company repaid $500,000 of loans.

● The Company generated net income of $262,303 for the three months ended March 31, 2020.

● Working capital deficit of $4,444,249 at March 31, 2020, includes loans payables to related party of $5,486,377, payables to related party of $839,124 and deferred revenue of $17,137.

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

● Subsequent to March 31, 2020, the Company has secured distribution of a new hand sanitizer product under its Hand MD brand in Canada.

Management concluded that above factors alleviates doubts about the Company’s ability to generate enough cash from operations and other available sources to satisfy its obligations for the next twelve months from the issuance date.

The Company will take the following actions if it starts to trend unfavorably to its internal profitability and cash flow projections, 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, which may be impacted by the recent outbreak of COVID-19.

● Implement additional restructuring and cost reductions.

● Raise additional capital through a private placement, which may be impacted by the recent outbreak of COVID-19.

As of June 29, 2020 and March 31, 2020, the Company had $2,098,237 and $414,933, respectively, in cash and cash equivalents.

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Recent Accounting Pronouncements  

ASU 2016-13

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendment to the initial guidance: ASU 2018-19 (collectively, Topic 326). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adoption of this new standard did not have any impact on the Company’s unaudited condensed consolidated financial statements.

ASU 2016-02

In February 2016, the FASB issued ASU 201602, “Leases” (“ASU 201602”). This guidance, as amended by subsequent ASU’s on the topic, improves transparency and comparability among companies by recognizing right of use (ROU) assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted ASU No. 2016-02 in our fiscal year beginning January 1, 2019 and used the optional transition method provided by the FASB in ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, with no restatement of comparative periods. The Company notes there was no impact on adoption as the leases entered into by the Company were for less than 12 month terms.

The new standard provides optional practical expedients in transition. We will only elect the package of practical expedients where, under the new standard, prior conclusions about lease identification, lease classification and initial direct costs do not need to be reassessed. The new standard also provides practical expedients for ongoing accounting where we elected the practical expedients on adoption and did not record any ROU asset with terms of less than 12 months.

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

Note 3 – Inventory

Inventory consists of finished goods, components and raw materials. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or net realizable value.

The carrying value of inventory consisted of the following:

	March 31, 2020		December 31, 2019
Finished goods	$	1,375,944	$	1,554,013
Components		269,501		264,518
Inventory in transit		451		42,507
Raw materials		68,200		-
Total inventory	$	1,714,096	$	1,861,038

On January 22, 2015, inventory was pledged to Knight Therapeutics under the Loan Agreement (see note 10).

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Note 4 – Accounts Receivable

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

	March 31, 2020		December 31, 2019
Trade accounts receivable (including related party receivable of $470,984 and $277,432, respectively – see note 8)	$	3,151,103	$	1,707,758
Less allowances		113,662		283,972
Total accounts receivable, net	$	3,037,441	$	1,423,786

During the year ended December 31, 2019, the Company charged $283,972 to bad debt expense. During the three months ended March 31, 2020, the Company reversed allowance for doubtful accounts of $170,309.

Note 5 – Prepaid Expenses

Prepaid expenses consisted of the following:

	March 31, 2020		December 31, 2019
Advances for inventory	$	24,082	$	9,071
Insurance		14,589		16,763
Deposits		6,500		10,234
Promotion - Bloggers		84,674		-
Software subscriptions		-		9,536
Promotions		44,455		122,626
Miscellaneous		16,853		17,913
Total	$	191,153	$	186,143

Note 6 – Concentration of Credit Risk

Cash and cash equivalents

The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2020 and December 31, 2019, the uninsured balances amounted to $94,869 and $947,312, respectively.

Accounts receivable

As of March 31, 2020, five customers accounted for 83% of the Company’s accounts receivable. As of December 31, 2019, two customers accounted for 52% of the Company’s accounts receivable.

Major customers

For the three months ended March 31, 2020, three customers accounted for approximately 60% of the Company’s net revenue. For the three months ended March 31, 2019, two customers accounted for approximately 40% of the Company’s net revenue. For the year ended December 31, 2019, two customers accounted for approximately 51% of the Company’s net revenues. Substantially all of the Company’s business is with companies in the United States.

Accounts payable

As of March 31, 2020 and December 31, 2019, two vendors accounted for 72% and 73%, respectively, of the Company’s accounts payable. This includes a related party vendor.

Major suppliers

For the three months ended March 31, 2020, one supplier accounted for approximately 33% of the Company’s purchases. For the three months ended March 31, 2019, two suppliers accounted for approximately 41% of the Company’s purchases. For the year ended December 31, 2019, two suppliers accounted for approximately 40% of the Company’s purchases. Substantially all of the Company’s business is with suppliers in the United States. This includes purchases from a related party supplier.

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Note 7 – Fixed Assets and Intangible Assets

As of March 31, 2020, and December 31, 2019, fixed assets and intangible assets consisted of the following:

	March 31, 2020			December 31, 2019
Property and equipment	$	569,681		$	566,445
Less accumulated depreciation		(456,774	)		(430,547	)
Fixed assets, net	$	112,907		$	135,898

Depreciation expense for the three months ended March 31, 2020 and 2019 was $26,152 and $38,060, respectively.

	March 31, 2020			December 31, 2019
FOCUSfactor intellectual property	$	-		$	1,450,000
Perfekt intellectual property		-			-
Cocowhite intellectual property		-			-
Intangible assets subject to amortization		19,259			5,388,230
Less accumulated amortization		(12,588	)		(4,908,696	)
Less accumulated impairment		-			(1,921,898	)
Intangible assets, net	$	6,671		$	7,636

Amortization expense for the three months ended March 31, 2020 and 2019 was $694 and $268,215, respectively.

Note 8 – Related Party Transactions

The Company accrued and paid consulting fees of $82,917 per month to a company owned by Mr. Jack Ross, Chief Executive Officer of the Company. The Company expensed $258,750 during the three months ended March 31, 2020. As of March 31, 2020, the total outstanding balance was $82,917 for consulting fees and reimbursements.

On June 26, 2015, the Company entered into a Security Agreement with Knight Therapeutics, Inc., (owner of greater than 10% shares of the Company) through its wholly owned subsidiary Neuragen Corp., for the purchase of Knight Therapeutics, Inc.’s assets. At March 31, 2020 and December 31, 2019, the Company owed Knight $462,500 and $475,000 in relation to this agreement. The Company recorded present value of future payments of $257,259 as of March 31, 2020 (see Note 10).

On August 18, 2015, the Company entered into a Consulting Agreement with Kara Harshbarger, the co-founder of Hand MD, LLC, pursuant to which she will provide marketing and sales related service. The Company pays Ms. Harshbarger $10,000 a month for one year unless the Consulting Agreement is terminated earlier by either party. The Company has extended this agreement on a month to month basis. 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, 2020. As of March 31, 2020, the total outstanding balance was $0.

On 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, 2020, the Company owed Knight $5,472,325 on this loan, net of debt issuance cost (see Note 10).

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On 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 March 31, 2020, the total outstanding balance was $100,000 Canadian dollars. In US Dollars, the total outstanding balance was $70,295 as of March 31, 2020.

On December 23, 2016, we entered into an agreement with Knight Therapeutics for the distribution rights of Hand MD into Canada. In conjunction with this agreement, we are required to pay Knight a distribution fee equal to 60% of gross sales for sales achieved through a direct sales channel until the sales in the calendar year equal the threshold amount and then 40% of all such gross sales in such calendar year in excess of the threshold amount and 5% of gross sales for sales achieved through retail sales. The minimum due to Knight under this agreement is $25,000 Canadian dollars. As of March 31, 2020 the total outstanding balance was $25,000 Canadian dollars. In US Dollars, the total outstanding balance was $17,574.

The Company expensed royalty of $35,821   during the three months ended March 31, 2020. At March 31, 2020 NomadChoice Pty Ltd., a subsidiary of the Company, owed Knight Therapeutics $35,821 in connection with a royalty distribution agreement.

The Company expensed royalty of $410   during the three months ended March 31, 2020. At March 31, 2020 the Company owed Knight Therapeutics $410 in connection with a royalty distribution agreement for Sneaky Vaunt.

The Company paid $934 during the three months ended March 31, 2020 to Hand MD, Corp, related to a royalty agreement. At March 31, 2020, the Company owed Hand MD Corp. $0 in minimum future royalties.

A member of the Company’s Board of Directors is an executive officer of a supplier to the Company. During the three months ended March 31, 2020 the Company acquired $124,008 of products from the supplier and included in cost of sales. The Company owed the supplier $559,584 at March 31, 2020.

The Company entered into transactions with a related party controlled by the CEO during the three months ended March 31, 2020. The transactions were a pass through of expenses and reimbursements. During the three months ended March 31, 2020, the Company received advances of $70,490 ($100,000 Canadian Dollars). As of March 31, 2020, there were $70,490 payable and $30,640 receivable.

The Company entered into transactions with a related party controlled by the CEO during the three months ended March 31, 2020. The transactions were a pass through and allocation of expenses and reimbursements. As of March 31, 2020 the Company was owed $440,343.

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Note 9 – Accounts Payable and Accrued Liabilities

As of March 31, 2020, and December 31, 2019, accounts payable and accrued liabilities consisted of the following:

	March 31, 2020		December 31, 2019
Accrued payroll (included related party payable of $82,916 and $0, respectively)	$	173,795	$	110,536
Legal fees		27,047		68,098
Commissions		324,283		229,657
Manufacturers (including related parties of $559,584 and $956,438, respectively)		2,311,659		2,082,256
Promotions		289,621		1,312,541
Accounting fees		30,101		10,873
Customers		23,994		26,206
Royalties, related party		125,720		93,643
Warehousing		5,977		13,746
Taxes		654,119		674,818
Related party loan and reimbursements		70,904		1,135
Others		96,800		50,555
Total	$	4,134,020	$	4,674,064

During the three months ended March 31, 2020, the Company recorded a gain on write-off of payables of $180,000.

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 open. The Company has estimated and accrued for its sales tax liability at $245,717 for the parent entity as of March 31, 2020.

Note 10 – Notes Payable

The Company’s loans payable at March 31, 2020 and December 31, 2019 are as follows:

	March 31, 2020			December 31, 2019
Loans payable	$	5,757,259		$	5,760,461
Unamortized debt issuance cost		(27,675	)		(48,432	)
Total		5,729,584			5,712,029
Less: Current portion		(5,486,377	)		(5,465,113	)
Long-term portion	$	243,207		$	246,916

$950,000 June 26, 2015 Security Agreement:

On June 26, 2015, the Company issued a 0% promissory note in a principal amount of $950,000 in connection with an Asset Purchase Agreement. The note requires $250,000 to be paid on or before June 30, 2016, and $700,000 to be paid in quarterly installments (beginning with the quarter ended September 30, 2015) equal to the greater of $12,500 or 5% of U.S. net sales, and 2% of U.S. net sales of Neuragen for 60 months thereafter. The payment of such amounts is secured by a security interest in certain assets, undertakings and property (“Collateral”) pursuant to the Security Agreement, which will be released upon receipt of total payments of $1.2 million.

The Company recorded present value of future payments of $257,259 and $260,461 as of March 31, 2020 and December 31, 2019, respectively. The Company recorded imputed interest expense of $9,299 for the three months ended March 31, 2020.

During the three months ended March 31, 2020, the Company made a payment of $12,500 in connection with this Security Agreement.

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$10,000,000 August 9, 2017 Loan:

On August 9, 2017, we entered into a Second Amendment to Loan Agreement (“Second Amendment”) with Knight, pursuant to which Knight agreed to loan us an additional $10 million, and an ongoing credit facility of up to $20 million, and which amount was borrowed at closing (the “Financing”) for working capital purposes. At closing, we paid Knight an origination fee of $200,000 and a work fee of $100,000 and also paid $100,000 of Knight’s expenses associated with the Loan.

Additional Tranches under the Loan Agreement are available to the Company until August 9, 2022 provided that no event of default exists. Each Additional Tranche must be for a minimum amount of $1.0 million, may only be used to finance qualified acquisitions (as defined in the Loan Agreement), and can be denied in Knight’s absolute discretion. If an Additional Tranche is denied, the Company can effect a qualified acquisition through a special purpose entity with such special purpose entity being entitled to obtain financing from third parties so long as such financing does not adversely affect Knight or Knight’s rights under the Loan Agreement. Upon the closing of any Additional Tranche, the Company will pay Knight an origination fee equal to 2% of the Additional Tranche, a work fee equal to 1% of the amount of the Additional Tranche, and reimburse Knight for its expenses incurred in connection with its consideration of any Additional Tranche (whether or not advanced).

The Loan bears interest at 10.5% per annum. The amended Loan Agreement matures on August 8, 2020 and (b) the date that Knight, in its discretion, accelerates the Company’s obligations due to an event of default.

On the Maturity Date of the Third Tranche and every Additional Tranche (or upon the acceleration of each such loan), the Company must pay Knight a success fee (the “Success Fee”) of that number of Company common shares equal to 10% of the loan, divided by the lesser of (a) $1.50, (b) the lowest price at which any common shares were issued by the Company in any offering or equity financing or other transaction between the Closing Date and the date the Success Fee is due, and (c) the current market price on the date the Success Fee is due. The Company may also pay the Success Fee in cash pursuant to the terms of the Loan Agreement.

The Loan Agreement includes customary representations, warranties, and affirmative and restrictive covenants, including covenants to attain and maintain certain financial metrics, and to not merge or dispose of assets, acquire other businesses (except for businesses substantially similar or complementary to the Company’s business, and provided that the aggregate consideration to be paid does not exceed $100,000 and the acquired business guarantees the Company’s obligations under the Loan Agreement) or make capital expenditures in excess of $500,000. The Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants, change of control and material adverse effect defaults. Upon the occurrence of an event of default and during the continuation thereof, the principal amount of all loans under the Loan Agreement will bear a default interest rate of an additional 5%.

The Company’s obligations and liabilities under the Loan Agreement are secured and unconditionally guaranteed by certain of the Company’s wholly owned subsidiaries as provided in the Loan Agreement.

We have met all the covenants except for the TTM EBITDA of $5 million during the period ending March 31, 2018. 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. We entered into Loan Amendment Agreement on May 14, 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.

We have amended our covenants under our loan agreement on March 27, 2019. The new covenants are as follows: we will maintain a minimum EBITDA of $1,900,000 for the twelve months ending on December 31, 2018, $2,500,000 for the twelve months ending March 31, 2019, $3,500,000 for the twelve months ending June 30, 2019 and $5,000,000 for the twelve months period ending on last day of each fiscal quarters thereafter. We shall maintain a net debt to TTM EBITDA ratio of no more than 8:1 for the twelve month period ending on December 31, 2018 until March 31, 2019 and shall maintain a net debt to TTM EBITDA ratio of no more than 6:1 thereafter. We shall maintain at all times a positive cash balance of $575,000 for the three month period ending December 31, 2018, $750,000 for the three month period ending March 31, 2019 and $1,000,000 thereafter. The default interest rate of 2.5% applies (from 13% to 15.5%) in accordance to our current agreement and will be in effect as of October 1, 2018 to June 30, 2019. Effective June 30, 2019 the interest rate referred back to 10.5%. (See note 16)

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The Company also recorded deferred financing costs of $452,869 with respect to the above loan. The Company recognized amortization of deferred financing costs of $20,756 during the three months ended March 31, 2020. Unamortized debt issuance cost as of March 31, 2020 amounted to $27,675.

The Company recognized interest expense of $138,542 and paid $138,542 during the three months ended March 31, 2020. Accrued interest was $0 as of March 31, 2020. The loan balance at March 31, 2020 was $5,500,000.

Note 11 – Stockholders’ Equity

The total number of shares of all classes of capital stock which the Company is authorized to issue is 300,000,000 shares of common stock with $0.00001 par value.

During 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.

As of both March 31, 2020 and December 31, 2019, there were 89,889,074 shares of the Company’s common stock issued and outstanding.

Note 12 – Commitments & Contingencies

Litigation:

From time to time the Company may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company’s financial position or results of operations.

Employee Commitments

The Company and Mr. McCullough entered into an employment agreement on October 17, 2017 (the “Employment Agreement”) with an initial term of 3 years. In exchange for his service as President, Mr. McCullough will receive an annual base salary of $340,000. He received a cash signing bonus of $37,500 paid on January 1, 2018, and an additional cash signing bonus of $37,500 paid on July 1, 2018. Mr. McCullough will be eligible for an annual bonus of up to twenty-five percent (25%) of his base salary. The annual bonus will be determined at the discretion of our Board or compensation committee based upon the achievement of financial goals established by the Company’s Chief Executive Officer. Mr. McCullough will also be eligible for additional bonus compensation based on the Company’s achievement of certain annual earnings and retail sales goals established each year by the Company’s Chief Executive Officer. Subject to the Company’s achievement of an annual overall earnings goal and certain adjustments in the event of future acquisitions by the Company, Mr. McCullough will be eligible to receive five percent (5%) of all retail sales by the Company in excess of the annual retail sales goal set by the Chief Executive Officer.

The Company granted Mr. McCullough an option to purchase 1,000,000 shares of the Company’s common stock, subject to the approval of the Company’s Board of Directors (the “Option Grant”). The Option Grant vests in three (3) equal annual installments on the first three anniversaries of Mr. McCullough’s start date with the Company, provided that Mr. McCullough remains employed by the Company on each such date. The Option Grant will be granted under the Company’s 2014 Stock Incentive Plan pursuant to a stock grant agreement between the Company and Mr. McCullough. (See note 16)

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Note 13 – Stock Options

The 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, 2020:

		Options Outstanding					Options Exercisable
Exercise Prices ($)		Number Outstanding	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price ($)		Number Exercisable	Weighted Average Exercise Price ($)
$	0.25 – 0.70	5,666,667		5.8	$	0.52	5,416,666	$	0.52

The stock option activity for the three months ended March 31, 2020 is as follows:

	Options Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2019		6,166,667		$	0.54
Granted		-			-
Exercised		-			-
Expired or canceled		(500,000	)		(0.70	)
Outstanding at March 31, 2020		5,666,667		$	0.52

Stock-based compensation expense related to vested options was $38,679 during the three months ended March 31, 2020, 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 $0.48-0.50, 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, 2020, as disclosed in the above table, have an intrinsic value of $0. As of March 31, 2020, unamortized stock-based compensation costs related to options was $90,251, and will be recognized over a period of 0.5 years.

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Note 14 – Segments

Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.

Net sales attributed to customers in the United States and foreign countries for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
United States	$	5,963,815	$	8,612,521
Foreign countries		153,471		856,434
	$	6,117,286	$	9,468,955

Foreign countries primarily consist of Australia and Canada.

The Company’s net sales by product group for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
Nutraceuticals	$	5,766,691	$	9,055,444
Over the Counter (OTC)		22,310		8,332
Consumer Goods		302,897		157,623
Cosmeceuticals		25,388		247,556
	$	6,117,286	$	9,468,955

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

The Company’s net sales by major sales channel for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
Online	$	2,671,221	$	3,853,024
Retail		3,446,065		5,615,931
	$	6,117,286	$	9,468,955

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Long-lived assets (net) attributable to operations in the United States and foreign countries as of March 31, 2020 and December 31, 2019 were as follows:

	March 31, 2020		December 31, 2019
United States	$	-	$	-
Foreign countries		6,671		7,636
	$	6,671	$	7,636

Note 15 – Income Taxes

Income tax expense (benefit) was $285,540 for the three months ended March 31, 2020, compared to $(5,908) for the same periods in 2019. The current provision is attributable to Australian operations and the current tax rate in effect in that country.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. At this time, the Company does not believe that the CARES Act will have a material impact on its income tax provision for 2020. The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

The total deferred tax asset is calculated by multiplying a domestic federal (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.

For U.S. 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).

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 open.

Note 16 – Subsequent Events

Management evaluated all activities of the Company through the issuance date of the Company’s unaudited condensed consolidated financial statements and concluded that except as noted below, no subsequent events have occurred that would require adjustment or disclosure into the unaudited condensed consolidated financial statements.

On May 8, 2020, the Company entered into a Third Amendment Agreement (the “Third Amendment”) to the Amended and Restated Loan Agreement (the “Loan Agreement”) with Knight Therapeutics (Barbados) Inc. (“Knight”), pursuant to which Knight agreed to loan the Company an additional $2.5 million (the “Additional Loan”). That same day (the “Closing”), the Company paid Knight a work fee of $36,000, and $25,000 for Knight’s legal costs and expenses incurred in connection with the Third Amendment. The Third Amendment amends the original loan agreement that the Company and Knight entered into in January 2015 and subsequently amended (as amended, the “Original Loan Agreement”). The Additional Loan matures on May 8, 2021 (the “TA Maturity Date”) and bears interest at 12.5% per annum compounding quarterly. On the TA Maturity Date, the Company will pay Knight a success fee (the “Success Fee”) of $83,250. The Success Fee is payable in cash or stock as set forth in the Loan Agreement. The Third Amendment includes customary representations, warranties, and affirmative and restrictive covenants, including covenants to attain and maintain certain financial metrics, including an undertaking to maintain at all times a cash balance of $600,000 and EBITDA of $3,000,000.

Terms of the $10,000,000 August 9, 2017 loan (Third Tranche) (see note 10) was modified in the Third amendment. Third tranche shall bear interest from May 8, 2020 at a rate equal to 12.5% per annum compounded quarterly. The Company shall pay success fee in the amount of $1,000,000 with respect to the Third Tranche, which shall be fully earned on May 8, 2020 and payable no later than August 31, 2022. Third Tranche success fee shall bear interest at 12.5% per annum compounding quarterly.

Patrick McCullough, and the Company are in a contractual services relationship till November 2020. On May 5, 2020, Patrick McCullough and the Company mutually agreed that Mr. McCullough would step down as President but remain a consultant under such contract with the Company. This mutual decision was not due to any disagreement on any matter relating to the Company’s operations, policies or practices.

Immediately thereafter, the Company’s Chief Executive Officer, assumed the role as President of the Company.

Subsequent to March 31, 2020 the Company has secured distribution of a new hand sanitizer product under its Hand MD brand in Canada.

The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company may take temporary precautionary measures intended to help minimize the risk of the virus to its employees, including temporarily requiring all employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

24

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations and financial condition of Synergy for the three months ended March 31, 2020 and 2019, 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” and the “Business” section in our Form 10-K filed on April 29, 2020. We use words such as “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “may,” “will,” “should,” “could,” and similar expressions to identify forward-looking statements.

Overview

The Company is in the business of marketing and distributing consumer branded products through various distribution channels primarily in the health and wellness industry. The Company’s strategy is to grow both organically and by future acquisition.

Our management’s discussion and analysis of our financial condition and results of operations are only based on our current business and should be read in conjunction with our unaudited condensed consolidated financial statements. Key factors affecting our results of operations include revenues, cost of revenues, operating expenses and income and taxation.

Non-GAAP Financial Measures

We currently focus on Adjusted EBITDA to evaluate our business relationships and our resulting operating performance and financial position. Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We present Adjusted EBITDA because we consider it an important measure of our performance and it is a meaningful financial metric in assessing our operating performance from period to period by excluding certain items that we believe are not representative of our core business, such as certain non-cash items and other adjustments.

We believe that Adjusted EBITDA, viewed in addition to, and not in lieu of, our reported results in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), provides useful information to investors.

	For the three months ended March 31, 2020
Net income after tax	$	262,303
Interest income		(66	)
Interest expense		158,522
Taxes		285,540
Depreciation		26,152
Amortization		21,450
EBITDA	$	753,901
One Time Expenses – Listing Fees		15,077
Bad debts recovery		(170,309	)
Accounts payable write off		(180,000	)
Stock-based compensation		38,679
Loss on foreign currency translation and transaction		389,845
Adjusted EBITDA	$	847,193

EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA, further adjusted to exclude the impact of higher-than-normal revenue change other activity and certain expenses and transactions that we believe are not representative of our core operating results, including stock-based compensation; one-time expenses/incomes; and the gain/loss on foreign currency translation and transaction. The Company’s definitions of EBITDA and adjusted EBITDA might not be comparable to similarly titled measures reported by other companies.

Results of Operations for the Three months Ended March 31, 2020 and 2019

Revenue

For the three months ended March 31, 2020, we had revenue of $6,117,286 from sales of our products, as compared to revenue of $9,468,955 for the same period in 2019. We had a decrease in Nutraceuticals in 2020 as compared to 2019 due to lower online sales due to the shift from online to retail and 2019 being the launch year of some new products. We had an increase in Over the Counter in 2020 as compared to 2019 due to regular business fluctuations. We had an increase in Consumer Goods in 2020 as compared to 2019 due to a shift in business focus. We had a decrease in Cosmeceuticals in 2020 as compared to 2019 due to a shift in business focus. The revenue is comprised of the following categories:

	March 31, 2020		March 31, 2019
Nutraceuticals	$	5,766,691	$	9,055,444
Over the Counter (OTC)		22,310		8,332
Consumer Goods		302,897		157,623
Cosmeceuticals		25,388		247,556
	$	6,117,286	$	9,468,955

25

Cost of Revenue

For the three months ended March 31, 2020, our cost of revenue was $1,497,779. Our cost of revenue for the three months ended March 31, 2019, was $2,540,450. We had a decrease in Nutraceuticals in 2020 as compared to 2019 due to lower sales and a different mix of products being sold. We had an increase in Consumer Goods in 2020 as compared to 2019 due to an increase in revenue. We had a decrease in Cosmeceuticals in 2020 as compared to 2019 due to a shift in business focus. The cost of revenue is comprised of the following categories:

	March 31, 2020		March 31, 2019
Nutraceuticals	$	1,425,274	$	2,472,115
Over the Counter (OTC)		-		-
Consumer Goods		69,047		13,784
Cosmeceuticals		3,458		54,551
	$	1,497,779	$	2,540,450

Gross Profit

Gross profit was $4,619,507, or 76% for the three months ended March 31, 2020, as compared to gross profit of $6,928,505, or 73% for the same period in 2019, a decrease of $2,308,998, or 33%. The decrease in gross profit margin is directly related to the mix of products being sold.

Operating Expenses

Selling and Marketing Expenses

For the three months ended March 31, 2020, our selling and marketing expenses were $2,253,956 as compared to $3,311,867 for the same period in 2019, which is primarily due to decreased personnel in our advertising and marketing departments.

General and Administrative Expenses

For the three months ended March 31, 2020, our general and administrative expenses were $1,333,524. For the three months ended March 31, 2019, our general and administrative expenses were $1,487,107. The decrease is primarily due to better management of operating costs.

Depreciation and Amortization Expenses

For the three months ended March 31, 2020, our depreciation and amortization expenses were $26,845 as compared to $306,275 for the same period in 2019. The decrease is due to impairment of intangible assets in 2019.

Other Income and Expenses

For the three months ended March 31, 2020 and 2019 we had other (income) and expense items of the following:

	Three months ended March 31, 2020			Three months ended March 31, 2019
Interest income	$	(66	)	$	(111	)
Interest expense		158,522			340,128
Remeasurement loss (gain) on translation of foreign subsidiary		278,126			(16,508	)
Amortization of debt issuance cost		20,757			38,368
Total other expense	$	457,339		$	361,877

For the three months ended March 31, 2020, we had interest expense of $158,522 as compared to $340,128 for the same period in 2019. The decrease was due to decrease in the interest rate of Loan 3 from 15.5% to 13% and decrease in the outstanding principal balance.

Net Income

For the three months ended March 31, 2020, our net income was $262,303 as compared to a net income of $1,467,287 for the same period in 2019.

Liquidity and Capital Resources

Overview

As of March 31, 2020, we had $314,933 cash on hand and a $4,444,249 working capital deficit. In addition, we also had restricted cash of $100,000 which is held for credit card collateral.

26

Presentation of Financial Statements – Going Concern

Going Concern Evaluation

In connection with preparing unaudited condensed consolidated financial statements for the three months ended March 31, 2020, 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.

The Company considered the following:

● At March 31, 2020, the Company had an accumulated deficit of $23,972,266.

● At March 31, 2020, the Company had working capital deficit of $4,444,249.

● Revenue decline in 2020 as compared to 2019 of $3,351,669.

● During the three months ended March 31, 2020, the Company used cash in operating activities of $1,302,062.

● The Company is required to make repayment of loans payable of $500,000 and accrued interest during the three months ended March 31, 2020.

Ordinarily, conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern relate to the entity’s ability to meet its obligations as they become due.

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:

● The Company raised $10.0 million via debt financing during the year ended December 31, 2017.

● Subsequent to March 31, 2020, the Company raised $2.5 million via debt financing.

● During the three months ended March 31, 2020, the Company repaid $12,500 of loans. Subsequent to March 31, 2020, the Company repaid $500,000 of loans.

● The Company generated net income of $262,303 for the three months ended March 31, 2020.

● Working capital deficit of $4,444,249 at March 31, 2020, includes loans payables to related party of $5,486,377, payables to related party of $839,124   and deferred revenue of $17,137.

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

● Subsequent to March 31, 2020, the Company has secured distribution of a new hand sanitizer product under its Hand MD brand in Canada.

Management concluded that above factors alleviates doubts about the Company’s ability to generate enough cash from operations and other available sources to satisfy its obligations for the next twelve months from the issuance date.

The Company will take the following actions if it starts to trend unfavorably to its internal profitability and cash flow projections, 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, which may be impacted by the recent outbreak of COVID-19.

● Implement additional restructuring and cost reductions.

● Raise additional capital through a private placement, which may be impacted by the recent outbreak of COVID-19.

As of June 29 , 2020 and March 31, 2020, the Company had $2,098,237  and $414,933, respectively, in cash and cash equivalents.

Three months ended March 31, 2020 and 2019

Net Cash Used in Operating Activities

Net cash used in operating activities for the three months ended March 31, 2020 was $(1,302,062), compared to net cash provided by operating activities of $813,711 for the same period in 2019. This decrease in net cash provided by operating activities for the three months ended March 31, 2020 was primarily attributable to an increase in accounts receivable and decrease in accounts payable and accrued expenses.

The $(1,302,062) consists of our net income of $262,303 adjusted by:

Amortization of debt issuance cost	$	20,756
Depreciation and amortization		26,845
Stock based compensation		38,679
Non cash implied interest		9,299
Remeasurement loss on translation of foreign subsidiary		275,237
Foreign currency transaction loss		114,608
Reversal of allowance for doubtful accounts		(170,309	)
Gain on write-off of payables		(180,000	)
Increase in accounts receivable		(1,259,338	)
Increase in accounts receivable, related party		(193,552	)
Decrease in inventory		146,942
Decrease in prepaid expenses		4,534
Decrease in income tax receivable		251,614
Increase in income tax payable		164,338
Decrease in accounts payable and accrued liabilities		(635,464	)
Decrease in accounts payable and accrued liabilities, related party		(187,804	)
Increase in deferred revenue		9,250

Net Cash Used in Investing Activities

Net cash used in investing activities for the three months ended March 31, 2020 was $0, compared to net cash used of $0 for the same period in 2019.

Net Cash Used in Financing Activities

Net cash provided by financing activities for the three months ended March 31, 2020 was $57,990, compared to net cash used of $512,500 for the same period in 2019.

Repayment of notes payable	$	(12,500	)
Advances from related party		70,490

Key 2020 Initiatives

During 2020, we have plans for organic growth within our current product lines by developing and launching new products. We have new marketing campaigns in process and intend to expand our online presence for each product. While we intend to grow further through additional acquisitions, we feel it is important to also develop our existing products.

The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company may take temporary precautionary measures intended to help minimize the risk of the virus to its employees, including temporarily requiring all employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

27

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

None.

Off-Balance Sheet Arrangements

None.

Inflation

The effect of inflation on the Company’s operating results was not significant.

Summary of Significant Accounting Policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this report.

Recent Accounting Pronouncements

Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this report includes Recent Accounting Pronouncements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide the information required by this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our Chief Executive Officer (principal executive officer), who is also our Chief Financial Officer (principal financial officer), reviewed the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report and concluded that as of March 31, 2020, (i) the Company’s disclosure controls and procedures were not effective to ensure that material information relating to the Company is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission (the “Commission”), and (ii) the Company’s controls and procedures have not been designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Controls Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

The Company’s management does not expect that its disclosure controls or its internal control over financial reporting, when and if effective, will prevent or detect all error and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. The design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Further, because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls can also be circumvented by the individual acts of some persons, by collusion of two or more people, or management override of the controls. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures.

28

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are currently not aware of any such legal proceedings or claims that we believe will have a material adverse effect on our business, financial condition or operating results.

ITEM 1A. RISK FACTORS

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, we are not required to provide information required by this Item.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULT UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not Applicable.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

Exhibit Number	Description
31.1	Section 302 Certification by the Corporation’s Chief Executive Officer *
31.2	Section 302 Certification by the Corporation’s Chief Financial Officer *
32.1	Section 906 Certification by the Corporation’s Chief Executive Officer *
32.2	Section 906 Certification by the Corporation’s Chief Financial Officer *
101.INS	XBRL Instance Document* **
101.SCH	XBRL Taxonomy Extension Schema Document* **
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document* **
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document* **
101.LAB	XBRL Taxonomy Extension Label Linkbase Document* **
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document* **

*

Filed herewith

**

Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files on Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

29

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Signatures	Title	Date
/s/ Jack Ross	Chief Executive Officer	June 29, 2020
	Chief Financial Officer

30

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Jack Ross, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Synergy CHC Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 29, 2020	By:	/s/ Jack Ross
		Jack Ross
		Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Jack Ross, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Synergy CHC Corp.;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
	a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	b.	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
	c.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	d.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.	The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
	a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
	b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

Date: June 29, 2020	By:	/s/ Jack Ross
		Jack Ross
		Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

In connection with the quarterly report of Synergy CHC Corp. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Jack Ross, Chief Executive Officer (Principal Executive Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: June 29, 2020	By:	/s/ Jack Ross
		Jack Ross
		Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION

In connection with the quarterly report of Synergy CHC Corp. (the “Company”) on Form 10-Q for the quarter ended March 31, 2020, as filed with the Securities and Exchange Commission (the “Report”), I, Jack Ross, Chief Financial Officer (Principal Financial and Accounting Officer) of the Company, hereby certify as of the date hereof, solely for purposes of Title 18, Chapter 63, Section 1350 of the United States Code, that to the best of my knowledge:

(1)	The Report fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and
(2)	The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company at the dates and for the periods indicated.

Date: June 29, 2020	By:	/s/ Jack Ross
		Jack Ross
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	Jun. 22, 2020
Document And Entity Information [Abstract]
Entity Registrant Name	Synergy CHC Corp.
Entity Central Index Key	0001562733
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity's Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business Flag	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		89,889,074
Document Fiscal Period Focus	Q1
Document Fiscal Year Focus	2020

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Condensed Consolidated Balance Sheets - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Current Assets:
Cash and cash equivalents	$ 314,933	$ 1,224,514
Restricted cash	100,000	100,000
Accounts receivable, net (including related party receivable of $470,984 and $277,432, respectively)	3,037,441	1,423,786
Prepaid expenses	191,153	186,143
Income taxes receivable		251,614
Inventory, net	1,714,096	1,861,038
Total Current Assets	5,357,623	5,047,095
Fixed assets, net	112,907	135,898
Intangible assets, net	6,671	7,636
Total Assets	5,477,201	5,190,629
Current Liabilities:
Accounts payable and accrued liabilities (including related party payable of $839,124 and $956,438, respectively)	4,134,020	4,674,064
Deferred revenue	17,137	7,887
Income taxes payable	164,338
Current portion of long-term debt, net of debt discount and debt issuance cost, related party	5,486,377	5,465,113
Total Current Liabilities	9,801,872	10,147,064
Long-term Liabilities:
Note payable, net of debt discount and debt issuance cost, related party	243,207	246,916
Total Long-term Liabilities	243,207	246,916
Total Liabilities	10,045,079	10,393,980
Commitments and contingencies
Stockholders' Deficit:
Common stock, $0.00001 par value; 300,000,000 shares authorized; 89,889,074 shares issued and outstanding	899	899
Additional paid in capital	19,057,634	19,018,955
Accumulated other comprehensive income	345,855	11,364
Accumulated deficit	(23,972,266)	(24,234,569)
Total stockholders' deficit	(4,567,878)	(5,203,351)
Total Liabilities and Stockholders' Deficit	$ 5,477,201	$ 5,190,629

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Condensed Consolidated Balance Sheets (Parenthetical) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Accounts receivable, related parties, current	$ 470,984	$ 277,432
Accounts payable and accrued liabilities, related parties, current	$ 839,124	$ 956,438
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares issued	89,889,074	89,889,074
Common stock, shares outstanding	89,889,074	89,889,074

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Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Revenue	$ 6,117,286	$ 9,468,955
Cost of sales (including related party purchases of $124,008 and $819,633, respectively)	1,497,779	2,540,450
Gross profit	4,619,507	6,928,505
Operating expenses
Selling and marketing	2,253,956	3,311,867
General and administrative	1,333,524	1,487,107
Depreciation and amortization	26,845	306,275
Total operating expenses	3,614,325	5,105,249
Income from operations	1,005,182	1,823,256
Other (income) expenses
Interest income	(66)	(111)
Interest expense	158,522	340,128
Remeasurement loss (gain) on translation of foreign subsidiary	278,126	(16,508)
Amortization of debt issuance cost	20,757	38,368
Total other expenses	457,339	361,877
Net income before income taxes	547,843	1,461,379
Income tax expense (benefit)	285,540	(5,908)
Net income after tax	$ 262,303	$ 1,467,287
Net income per share - basic	$ 0.00	$ 0.02
Net income per share - diluted	$ 0.00	$ 0.02
Weighted average common shares outstanding
Basic	89,889,074	89,865,319
Diluted	89,899,074	89,865,319
Comprehensive income:
Net income	$ 262,303	$ 1,467,287
Foreign currency translation adjustment	334,491	(70,940)
Comprehensive income	$ 596,794	$ 1,396,347

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Condensed Consolidated Statements of Operations and Comprehensive Income (Parenthetical) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Statement [Abstract]
Cost of sales related party purchases	$ 124,008	$ 819,633

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Condensed Consolidated Statement of Stockholders' Equity (Deficit) (Unaudited) - USD ($)	Common Stock [Member]	Additional Paid in Capital [Member]	Accumulated Other Comprehensive Income [Member]	Accumulated Deficit [Member]	Total
Balance at Dec. 31, 2018	$ 899	$ 18,817,800	$ 179,116	$ (15,027,122)	$ 3,970,693
Balance, shares at Dec. 31, 2018	89,862,683
Fair value of vested stock options		45,533			45,533
Foreign currency translation gain (loss)			(70,940)		(70,940)
Common stock issued for Per-fekt settlement		39,586			39,586
Common stock issued for Per-fekt settlement, shares	26,391
Net income				1,467,287	1,467,287
Balance at Mar. 31, 2019	$ 899	18,902,919	108,176	(13,559,835)	5,452,159
Balance, shares at Mar. 31, 2019	89,889,074
Balance at Dec. 31, 2019	$ 899	19,018,955	11,364	(24,234,569)	(5,203,351)
Balance, shares at Dec. 31, 2019	89,889,074
Fair value of vested stock options		38,679			38,679
Foreign currency translation gain (loss)			334,491		334,491
Net income				262,303	262,303
Balance at Mar. 31, 2020	$ 899	$ 19,057,634	$ 345,855	$ (23,972,266)	$ (4,567,878)
Balance, shares at Mar. 31, 2020	89,889,074

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash Flows from Operating Activities
Net income	$ 262,303	$ 1,467,287
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	26,845	306,275
Amortization of debt issuance cost	20,757	38,368
Stock based compensation expense	38,679	85,119
Remeasurement loss (gain) on translation of foreign subsidiary	278,126	(16,508)
Foreign currency transaction loss	114,608	98,357
Non cash implied interest	9,299	9,737
Reversal of allowance for doubtful accounts	(170,309)
Gain on write-off of payables	(180,000)
Changes in operating assets and liabilities:
Accounts receivable	(1,259,338)	120,802
Accounts receivable, related party	(193,552)
Inventory	146,942	1,810
Prepaid expense	4,534	405,766
Income taxes receivable	251,614
Income tax payable	164,338
Accounts payable and accrued liabilities	(635,464)	(2,035,676)
Accounts payable, related party	(187,804)	296,710
Deferred revenue	9,250	34,664
Net cash (used in) provided by operating activities	(1,302,062)	813,711
Cash Flows from Investing Activities
Cash Flows from Financing Activities
Advances from related party	70,490
Repayment of notes payable	(12,500)	(512,500)
Net cash provided by (used in) financing activities	57,990	(512,500)
Effect of exchange rate on cash, cash equivalents and restricted cash	334,491	(70,940)
Net (decrease) increase in cash, cash equivalents and restricted cash	(909,581)	230,271
Cash, Cash Equivalents and restricted cash, beginning of period	1,324,514	595,916
Cash, Cash Equivalents and restricted cash, end of period	414,933	826,187
Supplemental Disclosure of Cash Flow Information:
Interest	145,434	289,598
Income taxes		38,919
Supplemental Disclosure of Non-cash Investing and Financing Activities

XML

Nature of the Business

3 Months Ended

Mar. 31, 2020

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of the Business

Note 1 – Nature of the Business

Synergy CHC Corp. (“Synergy”, “we”, “us”, “our” or the “Company”) (formerly Synergy Strips Corp.) was incorporated on December 29, 2010 in Nevada under the name “Oro Capital Corporation.” On April 21, 2014, the Company changed its fiscal year end from July 31 to December 31. On April 28, 2014, the Company changed its name to “Synergy Strips Corp.”. On August 5, 2015, the Company changed its name to “Synergy CHC Corp.”

The Company is a consumer health care company that is in the process of building a portfolio of best-in-class consumer product brands. Synergy’s strategy is to grow its portfolio both organically and by further acquisition.

Effective January 1, 2019 the Company has merged its U.S. subsidiaries (Neuragen Corp., Breakthrough Products, Inc., Sneaky Vaunt Corp., and The Queen Pegasus Corp.) into the parent company.

Synergy is the sole owner of two subsidiaries: NomadChoice Pty Ltd., and Synergy CHC Inc. and the results have been consolidated in these statements.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

Note 2 – Summary of Significant Accounting Policies

General

The accompanying condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019 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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. 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, 2019 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 29, 2020.

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are assumptions about collection of accounts receivable, current income taxes, deferred income taxes valuation allowance, useful life of fixed and intangible assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

Reclassification

Certain amounts in prior periods have been reclassified to conform to current period presentation. These reclassifications had no effect on the previously reported net loss.

Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of March 31, 2020, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2020, the uninsured balance amounted to $94,869.

Restricted Cash

The 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.

	March 31, 2020		December 31, 2019		March 31, 2019
Cash and cash equivalents	$	314,933	$	1,224,514	$	688,836
Restricted cash		100,000		100,000		137,351
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	414,933	$	1,324,514	$	826,187

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

Capitalization of Fixed Assets

The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred.

Intangible Assets

We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization except intellectual property of $1,450,000 acquired as part of an Asset Purchase Agreement entered into with Factor Nutrition Labs LLC on January 22, 2015, $10,000 acquired as part of an Asset Purchase Agreement entered into with Perfekt Beauty Holdings LLC and CDG Holdings, LLC (“Perfekt”) on June 21, 2017 and $50,000 acquired as an Asset Purchase entered into with Cocowhite on May 22, 2018. Intangible assets are amortized on a straight line basis over the useful lives. During the year ended December 31, 2018, the Company fully impaired intangible assets related to Perfekt and Cocowhite and charged to operations impairment loss of $60,000. During the year ended December 31, 2019, the Company fully impaired intellectual property related to Focus Factor and charged to operations impairment loss of $1,450,000.

Long-lived Assets

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. However, as of December 31, 2018 our review of intangible assets related to two of our subsidiaries did indicate that the carrying amount of the asset may not be recoverable. During the year ended December 31, 2018, the Company fully impaired related intangible assets and charged to operations impairment loss of $864,067. During the year ended December 31, 2019, the Company fully impaired intangible assets and charged to operations impairment loss of $471,897.

Goodwill

An asset purchase is accounted for under the purchase method of accounting. Under that method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of the acquisition, with any excess of the cost of the acquisition over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. As of December 31, 2019 our qualitative analysis of goodwill indicated potential impairment, thus the Company chose to fully impair goodwill and charged to operations impairment loss of $7,793,240.

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

The Company recognizes revenue upon shipment from its fulfillment centers. Certain of our distributors may also perform a separate function as a co-packer on our behalf. In such cases, ownership of and title to our products that are co-packed on our behalf by those co-packers who are also distributors, passes to such distributors when we are notified by them that they have taken transfer or possession of the relevant portion of our finished goods. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Cancelled orders are refunded if not already dispatched, refunds are only paid if stock is damaged in transit, discounts are only offered with specific promotions and orders will be refilled if lost in transit.

Contract Assets

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s condensed consolidated balance sheet are from contracts with customers.

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of March 31, 2020.

Contract Liabilities - Deferred Revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

Accounts receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. As of March 31, 2020 and December 31, 2019, allowance for doubtful accounts was $113,662 and $283,972, respectively. During the three months ended March 31, 2020, the Company reversed allowance for doubtful accounts of $170,309.

Advertising Expense

The 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.

Research and Development

Costs incurred in connection with the development of new products and processing methods are charged to general and administrative expenses as incurred.

Income Taxes

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration.

NomadChoice Pty Ltd, the Company’s wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Synergy CHC Inc. is a wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Net Earnings (Loss) Per Common Share

The Company computes earnings per share under ASC subtopic 260-10, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted earnings per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. As of March 31, 2020, and 2019, options to purchase 5,666,667 and 7,166,667 shares of common stock, respectively, were outstanding.

The 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, 2020, and 2019:

	For the three months ended
	March 31, 2020		March 31, 2019
Net income after tax	$	262,303	$	1,467,287
Weighted average common shares outstanding		89,889,074		89,865,319
Incremental shares from the assumed exercise of dilutive stock options		-		-
Dilutive potential common shares		89,889,074		89,865,319
Net earnings (loss) per share:
Basic	$	0.00	$	0.02
Diluted	$	0.00	$	0.02

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

	2020		2019
Options to purchase common stock		5,666,667		7,166,667

Fair Value Measurements

The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure.

ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.

Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the asset or liability.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of March 31, 2020, the Company has determined that there were no assets or liabilities measured at fair value.

Inventory

Inventory consists of raw materials, components and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or net realizable value. Finished goods include the cost of labor to assemble the items.

Stock-Based Compensation

ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

Foreign Currency Translation

The functional currency of one of the Company’s foreign subsidiaries (Nomadchoice Pty Ltd.) is the U.S. Dollar. The Company’s foreign subsidiary maintains its records using local currency (Australian Dollar). All monetary assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at quarter end exchange rates, non-monetary assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at transaction day exchange rates. Income and expense items related to non-monetary items were translated at exchange rates prevailing during the transaction date and other incomes and expenses were translated using average exchange rate for the period. The resulting translation adjustments, net of income taxes, were recorded in statements of operations as Remeasurement gain or loss on translation of foreign subsidiary.

The functional currency of the Company’s other foreign subsidiary (Synergy CHC Inc.) is the Canadian Dollar (CAD). The Company’s foreign subsidiary maintains its records using local currency (CAD). All assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at period end exchange rates and stockholders’ equity is translated at the historical rates. Income and expense items were translated using average exchange rate for the period. The resulting translation adjustments, net of income taxes, are reported as other comprehensive income and accumulated other comprehensive income in the stockholder’s equity in accordance with ASC 220 – Comprehensive Income.

The exchange rates used to translate amounts in AUD and CAD into USD for the purposes of preparing the consolidated financial statements were as follows:

Balance sheet:

	March 31, 2020		December 31, 2019
Period-end AUD: USD exchange rate	$	0.6141	$	0.7030
Period-end CAD: USD exchange rate	$	0.7049	$	0.7699

Income statement:

	March 31, 2020		March 31, 2019
Average Quarterly AUD: USD exchange rate	$	0.6585	$	0.7126
Average Quarterly CAD: USD exchange rate	$	0.7445	$	0.7522

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into either Australian Dollars or Canadian Dollars, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.

Concentrations of Credit Risk

In the normal course of business, the Company provides credit terms to its customers; however, collateral is not required. Accordingly, the Company performs credit evaluations of its customers and maintains allowances for possible losses which, when realized, were within the range of management’s expectations. From time to time, a higher concentration of credit risk exists on outstanding accounts receivable for a select number of customers due to individual buying patterns.

Warehousing costs

Warehouse costs include all third party warehouse rent fees and are charged to selling and marketing expenses as incurred. Any additional costs relating to assembly or special pack-outs of the Company’s products are charged to cost of sales.

Product display costs

All displays manufactured and purchased by the Company are for placement of product in retail stores. This also includes all costs for display execution and setup and retail services are charged to cost of sales and expensed as incurred.

Cost of Sales

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products into the retail stores including buying and transportation costs.

Debt Issuance Costs

Debt issuance costs consist primarily of arrangement fees, professional fees and legal fees. These costs are netted off with the related loan and are being amortized to interest expense over the term of the related debt facilities.

Shipping Costs

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the company are recorded in selling and marketing expenses.

Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment Reporting

Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.

Presentation of Financial Statements – Going Concern

Going Concern Evaluation

In connection with preparing unaudited condensed consolidated financial statements for the three months ended March 31, 2020, 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.

The Company considered the following:

● At March 31, 2020, the Company had an accumulated deficit of $23,972,266.

● At March 31, 2020, the Company had working capital deficit of $4,444,249.

● Revenue decline in 2020 as compared to 2019 of $3,351,669. 

● During the three months ended March 31, 2020, the Company used cash in operating activities of $1,302,062.

● The Company was required to make repayment of loans payable of $500,000 and accrued interest during the three months ended March 31, 2020.

Ordinarily, conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern relate to the entity’s ability to meet its obligations as they become due.

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:

● The Company raised $10.0 million via debt financing during the year ended December 31, 2017.

● Subsequent to March 31, 2020, the Company raised $2.5 million via debt financing.

● During the three months ended March 31, 2020, the Company repaid $12,500 of loans. Subsequent to March 31, 2020, the Company repaid $500,000 of loans.

● The Company generated net income of $262,303 for the three months ended March 31, 2020.

● Working capital deficit of $4,444,249 at March 31, 2020, includes loans payables to related party of $5,486,377, payables to related party of $839,124 and deferred revenue of $17,137.

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

● Subsequent to March 31, 2020, the Company has secured distribution of a new hand sanitizer product under its Hand MD brand in Canada.

Management concluded that above factors alleviates doubts about the Company’s ability to generate enough cash from operations and other available sources to satisfy its obligations for the next twelve months from the issuance date.

The Company will take the following actions if it starts to trend unfavorably to its internal profitability and cash flow projections, 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, which may be impacted by the recent outbreak of COVID-19.

● Implement additional restructuring and cost reductions.

● Raise additional capital through a private placement, which may be impacted by the recent outbreak of COVID-19.

As of June 29, 2020 and March 31, 2020, the Company had $2,098,237 and $414,933, respectively, in cash and cash equivalents.

Recent Accounting Pronouncements  

ASU 2016-13

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendment to the initial guidance: ASU 2018-19 (collectively, Topic 326). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adoption of this new standard did not have any impact on the Company’s unaudited condensed consolidated financial statements.

ASU 2016-02

In February 2016, the FASB issued ASU 201602, “Leases” (“ASU 201602”). This guidance, as amended by subsequent ASU’s on the topic, improves transparency and comparability among companies by recognizing right of use (ROU) assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted ASU No. 2016-02 in our fiscal year beginning January 1, 2019 and used the optional transition method provided by the FASB in ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, with no restatement of comparative periods. The Company notes there was no impact on adoption as the leases entered into by the Company were for less than 12 month terms.

The new standard provides optional practical expedients in transition. We will only elect the package of practical expedients where, under the new standard, prior conclusions about lease identification, lease classification and initial direct costs do not need to be reassessed. The new standard also provides practical expedients for ongoing accounting where we elected the practical expedients on adoption and did not record any ROU asset with terms of less than 12 months.

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

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Inventory

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Inventory

Note 3 – Inventory

Inventory consists of finished goods, components and raw materials. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or net realizable value.

The carrying value of inventory consisted of the following:

	March 31, 2020		December 31, 2019
Finished goods	$	1,375,944	$	1,554,013
Components		269,501		264,518
Inventory in transit		451		42,507
Raw materials		68,200		-
Total inventory	$	1,714,096	$	1,861,038

On January 22, 2015, inventory was pledged to Knight Therapeutics under the Loan Agreement (see note 10).

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Accounts Receivable

3 Months Ended

Mar. 31, 2020

Receivables [Abstract]

Accounts Receivable

Note 4 – Accounts Receivable

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

	March 31, 2020		December 31, 2019
Trade accounts receivable (including related party receivable of $470,984 and $277,432, respectively – see note 8)	$	3,151,103	$	1,707,758
Less allowances		113,662		283,972
Total accounts receivable, net	$	3,037,441	$	1,423,786

During the year ended December 31, 2019, the Company charged $283,972 to bad debt expense. During the three months ended March 31, 2020, the Company reversed allowance for doubtful accounts of $170,309.

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Prepaid Expenses

3 Months Ended

Mar. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Prepaid Expenses

Note 5 – Prepaid Expenses

Prepaid expenses consisted of the following:

	March 31, 2020		December 31, 2019
Advances for inventory	$	24,082	$	9,071
Insurance		14,589		16,763
Deposits		6,500		10,234
Promotion - Bloggers		84,674		-
Software subscriptions		-		9,536
Promotions		44,455		122,626
Miscellaneous		16,853		17,913
Total	$	191,153	$	186,143

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Concentration of Credit Risk

3 Months Ended

Mar. 31, 2020

Risks and Uncertainties [Abstract]

Concentration of Credit Risk

Note 6 – Concentration of Credit Risk

Cash and cash equivalents

The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2020 and December 31, 2019, the uninsured balances amounted to $94,869 and $947,312, respectively.

Accounts receivable

As of March 31, 2020, five customers accounted for 83% of the Company’s accounts receivable. As of December 31, 2019, two customers accounted for 52% of the Company’s accounts receivable.

Major customers

For the three months ended March 31, 2020, three customers accounted for approximately 60% of the Company’s net revenue. For the three months ended March 31, 2019, two customers accounted for approximately 40% of the Company’s net revenue. For the year ended December 31, 2019, two customers accounted for approximately 51% of the Company’s net revenues. Substantially all of the Company’s business is with companies in the United States.

Accounts payable

As of March 31, 2020 and December 31, 2019, two vendors accounted for 72% and 73%, respectively, of the Company’s accounts payable. This includes a related party vendor.

Major suppliers

For the three months ended March 31, 2020, one supplier accounted for approximately 33% of the Company’s purchases. For the three months ended March 31, 2019, two suppliers accounted for approximately 41% of the Company’s purchases. For the year ended December 31, 2019, two suppliers accounted for approximately 40% of the Company’s purchases. Substantially all of the Company’s business is with suppliers in the United States. This includes purchases from a related party supplier.

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Fixed Assets and Intangible Assets

3 Months Ended

Mar. 31, 2020

Assets

Fixed Assets and Intangible Assets

Note 7 – Fixed Assets and Intangible Assets

As of March 31, 2020, and December 31, 2019, fixed assets and intangible assets consisted of the following:

	March 31, 2020			December 31, 2019
Property and equipment	$	569,681		$	566,445
Less accumulated depreciation		(456,774	)		(430,547	)
Fixed assets, net	$	112,907		$	135,898

	March 31, 2020			December 31, 2019
FOCUSfactor intellectual property	$	-		$	1,450,000
Perfekt intellectual property		-			-
Cocowhite intellectual property		-			-
Intangible assets subject to amortization		19,259			5,388,230
Less accumulated amortization		(12,588	)		(4,908,696	)
Less accumulated impairment		-			(1,921,898	)
Intangible assets, net	$	6,671		$	7,636

Amortization expense for the three months ended March 31, 2020 and 2019 was $694 and $268,215, respectively.

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Related Party Transactions

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related Party Transactions

Note 8 – Related Party Transactions

The Company accrued and paid consulting fees of $82,917 per month to a company owned by Mr. Jack Ross, Chief Executive Officer of the Company. The Company expensed $258,750 during the three months ended March 31, 2020. As of March 31, 2020, the total outstanding balance was $82,917 for consulting fees and reimbursements.

On June 26, 2015, the Company entered into a Security Agreement with Knight Therapeutics, Inc., (owner of greater than 10% shares of the Company) through its wholly owned subsidiary Neuragen Corp., for the purchase of Knight Therapeutics, Inc.’s assets. At March 31, 2020 and December 31, 2019, the Company owed Knight $462,500 and $475,000 in relation to this agreement. The Company recorded present value of future payments of $257,259 as of March 31, 2020 (see Note 10).

On August 18, 2015, the Company entered into a Consulting Agreement with Kara Harshbarger, the co-founder of Hand MD, LLC, pursuant to which she will provide marketing and sales related service. The Company pays Ms. Harshbarger $10,000 a month for one year unless the Consulting Agreement is terminated earlier by either party. The Company has extended this agreement on a month to month basis. 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, 2020. As of March 31, 2020, the total outstanding balance was $0.

On 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, 2020, the Company owed Knight $5,472,325 on this loan, net of debt issuance cost (see Note 10).

On 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 March 31, 2020, the total outstanding balance was $100,000 Canadian dollars. In US Dollars, the total outstanding balance was $70,295 as of March 31, 2020.

On December 23, 2016, we entered into an agreement with Knight Therapeutics for the distribution rights of Hand MD into Canada. In conjunction with this agreement, we are required to pay Knight a distribution fee equal to 60% of gross sales for sales achieved through a direct sales channel until the sales in the calendar year equal the threshold amount and then 40% of all such gross sales in such calendar year in excess of the threshold amount and 5% of gross sales for sales achieved through retail sales. The minimum due to Knight under this agreement is $25,000 Canadian dollars. As of March 31, 2020 the total outstanding balance was $25,000 Canadian dollars. In US Dollars, the total outstanding balance was $17,574.

The Company expensed royalty of $35,821   during the three months ended March 31, 2020. At March 31, 2020 NomadChoice Pty Ltd., a subsidiary of the Company, owed Knight Therapeutics $35,821 in connection with a royalty distribution agreement.

The Company expensed royalty of $410   during the three months ended March 31, 2020. At March 31, 2020 the Company owed Knight Therapeutics $410 in connection with a royalty distribution agreement for Sneaky Vaunt.

The Company paid $934 during the three months ended March 31, 2020 to Hand MD, Corp, related to a royalty agreement. At March 31, 2020, the Company owed Hand MD Corp. $0 in minimum future royalties.

A member of the Company’s Board of Directors is an executive officer of a supplier to the Company. During the three months ended March 31, 2020 the Company acquired $124,008 of products from the supplier and included in cost of sales. The Company owed the supplier $559,584 at March 31, 2020.

The Company entered into transactions with a related party controlled by the CEO during the three months ended March 31, 2020. The transactions were a pass through of expenses and reimbursements. During the three months ended March 31, 2020, the Company received advances of $70,490 ($100,000 Canadian Dollars). As of March 31, 2020, there were $70,490 payable and $30,640 receivable.

The Company entered into transactions with a related party controlled by the CEO during the three months ended March 31, 2020. The transactions were a pass through and allocation of expenses and reimbursements. As of March 31, 2020 the Company was owed $440,343.

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Accounts Payable and Accrued Liabilities

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Accounts Payable and Accrued Liabilities

Note 9 – Accounts Payable and Accrued Liabilities

As of March 31, 2020, and December 31, 2019, accounts payable and accrued liabilities consisted of the following:

	March 31, 2020		December 31, 2019
Accrued payroll (included related party payable of $82,916 and $0, respectively)	$	173,795	$	110,536
Legal fees		27,047		68,098
Commissions		324,283		229,657
Manufacturers (including related parties of $559,584 and $956,438, respectively)		2,311,659		2,082,256
Promotions		289,621		1,312,541
Accounting fees		30,101		10,873
Customers		23,994		26,206
Royalties, related party		125,720		93,643
Warehousing		5,977		13,746
Taxes		654,119		674,818
Related party loan and reimbursements		70,904		1,135
Others		96,800		50,555
Total	$	4,134,020	$	4,674,064

During the three months ended March 31, 2020, the Company recorded a gain on write-off of payables of $180,000.

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 open. The Company has estimated and accrued for its sales tax liability at $245,717 for the parent entity as of March 31, 2020.

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Notes Payable

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Notes Payable

Note 10 – Notes Payable

The Company’s loans payable at March 31, 2020 and December 31, 2019 are as follows:

	March 31, 2020			December 31, 2019
Loans payable	$	5,757,259		$	5,760,461
Unamortized debt issuance cost		(27,675	)		(48,432	)
Total		5,729,584			5,712,029
Less: Current portion		(5,486,377	)		(5,465,113	)
Long-term portion	$	243,207		$	246,916

$950,000 June 26, 2015 Security Agreement:

On June 26, 2015, the Company issued a 0% promissory note in a principal amount of $950,000 in connection with an Asset Purchase Agreement. The note requires $250,000 to be paid on or before June 30, 2016, and $700,000 to be paid in quarterly installments (beginning with the quarter ended September 30, 2015) equal to the greater of $12,500 or 5% of U.S. net sales, and 2% of U.S. net sales of Neuragen for 60 months thereafter. The payment of such amounts is secured by a security interest in certain assets, undertakings and property (“Collateral”) pursuant to the Security Agreement, which will be released upon receipt of total payments of $1.2 million.

The Company recorded present value of future payments of $257,259 and $260,461 as of March 31, 2020 and December 31, 2019, respectively. The Company recorded imputed interest expense of $9,299 for the three months ended March 31, 2020.

During the three months ended March 31, 2020, the Company made a payment of $12,500 in connection with this Security Agreement.

$10,000,000 August 9, 2017 Loan:

On August 9, 2017, we entered into a Second Amendment to Loan Agreement (“Second Amendment”) with Knight, pursuant to which Knight agreed to loan us an additional $10 million, and an ongoing credit facility of up to $20 million, and which amount was borrowed at closing (the “Financing”) for working capital purposes. At closing, we paid Knight an origination fee of $200,000 and a work fee of $100,000 and also paid $100,000 of Knight’s expenses associated with the Loan.

Additional Tranches under the Loan Agreement are available to the Company until August 9, 2022 provided that no event of default exists. Each Additional Tranche must be for a minimum amount of $1.0 million, may only be used to finance qualified acquisitions (as defined in the Loan Agreement), and can be denied in Knight’s absolute discretion. If an Additional Tranche is denied, the Company can effect a qualified acquisition through a special purpose entity with such special purpose entity being entitled to obtain financing from third parties so long as such financing does not adversely affect Knight or Knight’s rights under the Loan Agreement. Upon the closing of any Additional Tranche, the Company will pay Knight an origination fee equal to 2% of the Additional Tranche, a work fee equal to 1% of the amount of the Additional Tranche, and reimburse Knight for its expenses incurred in connection with its consideration of any Additional Tranche (whether or not advanced).

The Loan bears interest at 10.5% per annum. The amended Loan Agreement matures on August 8, 2020 and (b) the date that Knight, in its discretion, accelerates the Company’s obligations due to an event of default.

On the Maturity Date of the Third Tranche and every Additional Tranche (or upon the acceleration of each such loan), the Company must pay Knight a success fee (the “Success Fee”) of that number of Company common shares equal to 10% of the loan, divided by the lesser of (a) $1.50, (b) the lowest price at which any common shares were issued by the Company in any offering or equity financing or other transaction between the Closing Date and the date the Success Fee is due, and (c) the current market price on the date the Success Fee is due. The Company may also pay the Success Fee in cash pursuant to the terms of the Loan Agreement.

The Loan Agreement includes customary representations, warranties, and affirmative and restrictive covenants, including covenants to attain and maintain certain financial metrics, and to not merge or dispose of assets, acquire other businesses (except for businesses substantially similar or complementary to the Company’s business, and provided that the aggregate consideration to be paid does not exceed $100,000 and the acquired business guarantees the Company’s obligations under the Loan Agreement) or make capital expenditures in excess of $500,000. The Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants, change of control and material adverse effect defaults. Upon the occurrence of an event of default and during the continuation thereof, the principal amount of all loans under the Loan Agreement will bear a default interest rate of an additional 5%.

The Company’s obligations and liabilities under the Loan Agreement are secured and unconditionally guaranteed by certain of the Company’s wholly owned subsidiaries as provided in the Loan Agreement.

We have met all the covenants except for the TTM EBITDA of $5 million during the period ending March 31, 2018. 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. We entered into Loan Amendment Agreement on May 14, 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.

We have amended our covenants under our loan agreement on March 27, 2019. The new covenants are as follows: we will maintain a minimum EBITDA of $1,900,000 for the twelve months ending on December 31, 2018, $2,500,000 for the twelve months ending March 31, 2019, $3,500,000 for the twelve months ending June 30, 2019 and $5,000,000 for the twelve months period ending on last day of each fiscal quarters thereafter. We shall maintain a net debt to TTM EBITDA ratio of no more than 8:1 for the twelve month period ending on December 31, 2018 until March 31, 2019 and shall maintain a net debt to TTM EBITDA ratio of no more than 6:1 thereafter. We shall maintain at all times a positive cash balance of $575,000 for the three month period ending December 31, 2018, $750,000 for the three month period ending March 31, 2019 and $1,000,000 thereafter. The default interest rate of 2.5% applies (from 13% to 15.5%) in accordance to our current agreement and will be in effect as of October 1, 2018 to June 30, 2019. Effective June 30, 2019 the interest rate referred back to 10.5%. (See note 16)

The Company also recorded deferred financing costs of $452,869 with respect to the above loan. The Company recognized amortization of deferred financing costs of $20,756 during the three months ended March 31, 2020. Unamortized debt issuance cost as of March 31, 2020 amounted to $27,675.

The Company recognized interest expense of $138,542 and paid $138,542 during the three months ended March 31, 2020. Accrued interest was $0 as of March 31, 2020. The loan balance at March 31, 2020 was $5,500,000.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Stockholders' Equity

Note 11 – Stockholders’ Equity

The total number of shares of all classes of capital stock which the Company is authorized to issue is 300,000,000 shares of common stock with $0.00001 par value.

During 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.

As of both March 31, 2020 and December 31, 2019, there were 89,889,074 shares of the Company’s common stock issued and outstanding.

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Commitments & Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments & Contingencies

Note 12 – Commitments & Contingencies

Litigation:

From time to time the Company may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company’s financial position or results of operations.

Employee Commitments

The Company and Mr. McCullough entered into an employment agreement on October 17, 2017 (the “Employment Agreement”) with an initial term of 3 years. In exchange for his service as President, Mr. McCullough will receive an annual base salary of $340,000. He received a cash signing bonus of $37,500 paid on January 1, 2018, and an additional cash signing bonus of $37,500 paid on July 1, 2018. Mr. McCullough will be eligible for an annual bonus of up to twenty-five percent (25%) of his base salary. The annual bonus will be determined at the discretion of our Board or compensation committee based upon the achievement of financial goals established by the Company’s Chief Executive Officer. Mr. McCullough will also be eligible for additional bonus compensation based on the Company’s achievement of certain annual earnings and retail sales goals established each year by the Company’s Chief Executive Officer. Subject to the Company’s achievement of an annual overall earnings goal and certain adjustments in the event of future acquisitions by the Company, Mr. McCullough will be eligible to receive five percent (5%) of all retail sales by the Company in excess of the annual retail sales goal set by the Chief Executive Officer.

The Company granted Mr. McCullough an option to purchase 1,000,000 shares of the Company’s common stock, subject to the approval of the Company’s Board of Directors (the “Option Grant”). The Option Grant vests in three (3) equal annual installments on the first three anniversaries of Mr. McCullough’s start date with the Company, provided that Mr. McCullough remains employed by the Company on each such date. The Option Grant will be granted under the Company’s 2014 Stock Incentive Plan pursuant to a stock grant agreement between the Company and Mr. McCullough. (See note 16)

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Stock Options

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Stock Options

Note 13 – Stock Options

The 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, 2020:

		Options Outstanding					Options Exercisable
Exercise Prices ($)		Number Outstanding	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price ($)		Number Exercisable	Weighted Average Exercise Price ($)
$	0.25 – 0.70	5,666,667		5.8	$	0.52	5,416,666	$	0.52

The stock option activity for the three months ended March 31, 2020 is as follows:

	Options Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2019		6,166,667		$	0.54
Granted		-			-
Exercised		-			-
Expired or canceled		(500,000	)		(0.70	)
Outstanding at March 31, 2020		5,666,667		$	0.52

Stock-based compensation expense related to vested options was $38,679 during the three months ended March 31, 2020, 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 $0.48-0.50, 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, 2020, as disclosed in the above table, have an intrinsic value of $0. As of March 31, 2020, unamortized stock-based compensation costs related to options was $90,251, and will be recognized over a period of 0.5 years.

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Segments

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Segments

Note 14 – Segments

Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.

Net sales attributed to customers in the United States and foreign countries for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
United States	$	5,963,815	$	8,612,521
Foreign countries		153,471		856,434
	$	6,117,286	$	9,468,955

Foreign countries primarily consist of Australia and Canada.

The Company’s net sales by product group for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
Nutraceuticals	$	5,766,691	$	9,055,444
Over the Counter (OTC)		22,310		8,332
Consumer Goods		302,897		157,623
Cosmeceuticals		25,388		247,556
	$	6,117,286	$	9,468,955

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

The Company’s net sales by major sales channel for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
Online	$	2,671,221	$	3,853,024
Retail		3,446,065		5,615,931
	$	6,117,286	$	9,468,955

23

Long-lived assets (net) attributable to operations in the United States and foreign countries as of March 31, 2020 and December 31, 2019 were as follows:

	March 31, 2020		December 31, 2019
United States	$	-	$	-
Foreign countries		6,671		7,636
	$	6,671	$	7,636

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Note 15 – Income Taxes

Income tax expense (benefit) was $285,540 for the three months ended March 31, 2020, compared to $(5,908) for the same periods in 2019. The current provision is attributable to Australian operations and the current tax rate in effect in that country.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020. The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods and modifications to the net interest deduction limitations. At this time, the Company does not believe that the CARES Act will have a material impact on its income tax provision for 2020. The Company will continue to evaluate the impact of the CARES Act on its financial position, results of operations and cash flows.

The total deferred tax asset is calculated by multiplying a domestic federal (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.

For U.S. 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).

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 open.

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Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Note 16 – Subsequent Events

Management evaluated all activities of the Company through the issuance date of the Company’s unaudited condensed consolidated financial statements and concluded that except as noted below, no subsequent events have occurred that would require adjustment or disclosure into the unaudited condensed consolidated financial statements.

On May 8, 2020, the Company entered into a Third Amendment Agreement (the “Third Amendment”) to the Amended and Restated Loan Agreement (the “Loan Agreement”) with Knight Therapeutics (Barbados) Inc. (“Knight”), pursuant to which Knight agreed to loan the Company an additional $2.5 million (the “Additional Loan”). That same day (the “Closing”), the Company paid Knight a work fee of $36,000, and $25,000 for Knight’s legal costs and expenses incurred in connection with the Third Amendment. The Third Amendment amends the original loan agreement that the Company and Knight entered into in January 2015 and subsequently amended (as amended, the “Original Loan Agreement”). The Additional Loan matures on May 8, 2021 (the “TA Maturity Date”) and bears interest at 12.5% per annum compounding quarterly. On the TA Maturity Date, the Company will pay Knight a success fee (the “Success Fee”) of $83,250. The Success Fee is payable in cash or stock as set forth in the Loan Agreement. The Third Amendment includes customary representations, warranties, and affirmative and restrictive covenants, including covenants to attain and maintain certain financial metrics, including an undertaking to maintain at all times a cash balance of $600,000 and EBITDA of $3,000,000.

Terms of the $10,000,000 August 9, 2017 loan (Third Tranche) (see note 10) was modified in the Third amendment. Third tranche shall bear interest from May 8, 2020 at a rate equal to 12.5% per annum compounded quarterly. The Company shall pay success fee in the amount of $1,000,000 with respect to the Third Tranche, which shall be fully earned on May 8, 2020 and payable no later than August 31, 2022. Third Tranche success fee shall bear interest at 12.5% per annum compounding quarterly.

Patrick McCullough, and the Company are in a contractual services relationship till November 2020. On May 5, 2020, Patrick McCullough and the Company mutually agreed that Mr. McCullough would step down as President but remain a consultant under such contract with the Company. This mutual decision was not due to any disagreement on any matter relating to the Company’s operations, policies or practices.

Immediately thereafter, the Company’s Chief Executive Officer, assumed the role as President of the Company.

Subsequent to March 31, 2020 the Company has secured distribution of a new hand sanitizer product under its Hand MD brand in Canada.

The recent outbreak of COVID-19, which has been declared by the World Health Organization to be a pandemic, has spread across the globe and is impacting worldwide economic activity. A pandemic, including COVID-19, or other public health epidemic poses the risk that the Company or its employees, suppliers, and other partners may be prevented from conducting business activities at full capacity for an indefinite period of time, including due to spread of the disease within these groups or due to shutdowns that may be requested or mandated by governmental authorities. While it is not possible at this time to estimate the impact that COVID-19 could have on the Company’s business, the continued spread of COVID-19 and the measures taken by the governments of countries affected and in which the Company operates could disrupt the operation of the Company’s business. The COVID-19 outbreak and mitigation measures may also have an adverse impact on global economic conditions, which could have an adverse effect on the Company’s business and financial condition, including on its potential to conduct financings on terms acceptable to the Company, if at all. In addition, the Company may take temporary precautionary measures intended to help minimize the risk of the virus to its employees, including temporarily requiring all employees to work remotely, and discouraging employee attendance at in-person work-related meetings, which could negatively affect the Company’s business. The extent to which the COVID-19 outbreak impacts the Company’s results will depend on future developments that are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of the virus and the actions to contain its impact.

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Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

General

General

The accompanying condensed consolidated financial statements as of March 31, 2020 and December 31, 2019 and for the three months ended March 31, 2020 and 2019 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 months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020. 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, 2019 and footnotes thereto included in the Company’s Annual Report on Form 10-K filed with the SEC on April 29, 2020.

Basis of Presentation

Basis of Presentation

The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

All amounts referred to in the notes to the consolidated financial statements are in United States Dollars ($) unless stated otherwise.

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

Use of Estimates

The preparation of the consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Significant estimates are assumptions about collection of accounts receivable, current income taxes, deferred income taxes valuation allowance, useful life of fixed and intangible assets, and assumptions used in Black-Scholes-Merton, or BSM, valuation methods, such as expected volatility, risk-free interest rate, and expected dividend rate. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

Reclassification

Reclassification

Certain amounts in prior periods have been reclassified to conform to current period presentation. These reclassifications had no effect on the previously reported net loss.

Cash and Cash Equivalents

Cash and Cash Equivalents

The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents. As of March 31, 2020, the Company had no cash equivalents. The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At March 31, 2020, the uninsured balance amounted to $94,869.

Restricted Cash

Restricted Cash

The 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.

	March 31, 2020		December 31, 2019		March 31, 2019
Cash and cash equivalents	$	314,933	$	1,224,514	$	688,836
Restricted cash		100,000		100,000		137,351
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	414,933	$	1,324,514	$	826,187

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

Capitalization of Fixed Assets

Capitalization of Fixed Assets

The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred.

Intangible Assets

Intangible Assets

We evaluate the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization except intellectual property of $1,450,000 acquired as part of an Asset Purchase Agreement entered into with Factor Nutrition Labs LLC on January 22, 2015, $10,000 acquired as part of an Asset Purchase Agreement entered into with Perfekt Beauty Holdings LLC and CDG Holdings, LLC (“Perfekt”) on June 21, 2017 and $50,000 acquired as an Asset Purchase entered into with Cocowhite on May 22, 2018. Intangible assets are amortized on a straight line basis over the useful lives. During the year ended December 31, 2018, the Company fully impaired intangible assets related to Perfekt and Cocowhite and charged to operations impairment loss of $60,000. During the year ended December 31, 2019, the Company fully impaired intellectual property related to Focus Factor and charged to operations impairment loss of $1,450,000.

Long-lived Assets

Long-lived Assets

Long-lived assets include equipment and intangible assets other than those with indefinite lives. We assess the carrying value of our long-lived asset groups when indicators of impairment exist and recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable when compared to undiscounted cash flows expected to result from the use and eventual disposition of the asset.

Indicators of impairment include significant underperformance relative to historical or projected future operating results, significant changes in our use of the assets or in our business strategy, loss of or changes in customer relationships and significant negative industry or economic trends. When indications of impairment arise for a particular asset or group of assets, we assess the future recoverability of the carrying value of the asset (or asset group) based on an undiscounted cash flow analysis. If carrying value exceeds projected, net, undiscounted cash flows, an additional analysis is performed to determine the fair value of the asset (or asset group), typically a discounted cash flow analysis, and an impairment charge is recorded for the excess of carrying value over fair value. However, as of December 31, 2018 our review of intangible assets related to two of our subsidiaries did indicate that the carrying amount of the asset may not be recoverable. During the year ended December 31, 2018, the Company fully impaired related intangible assets and charged to operations impairment loss of $864,067. During the year ended December 31, 2019, the Company fully impaired intangible assets and charged to operations impairment loss of $471,897.

Goodwill

Goodwill

An asset purchase is accounted for under the purchase method of accounting. Under that method, assets and liabilities of the business acquired are recorded at their estimated fair values as of the date of the acquisition, with any excess of the cost of the acquisition over the estimated fair value of the net tangible and intangible assets acquired recorded as goodwill. As of December 31, 2019 our qualitative analysis of goodwill indicated potential impairment, thus the Company chose to fully impair goodwill and charged to operations impairment loss of $7,793,240.

Revenue Recognition

Revenue Recognition

The Company recognizes revenue in accordance with the Financial Accounting Standards Board’s (“FASB”), Accounting Standards Codification (“ASC”) ASC 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration the Company expects to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

The Company recognizes revenue upon shipment from its fulfillment centers. Certain of our distributors may also perform a separate function as a co-packer on our behalf. In such cases, ownership of and title to our products that are co-packed on our behalf by those co-packers who are also distributors, passes to such distributors when we are notified by them that they have taken transfer or possession of the relevant portion of our finished goods. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Cancelled orders are refunded if not already dispatched, refunds are only paid if stock is damaged in transit, discounts are only offered with specific promotions and orders will be refilled if lost in transit.

Contract Assets

Contract Assets

The Company does not have any contract assets such as work-in-process. All trade receivables on the Company’s condensed consolidated balance sheet are from contracts with customers.

Contract Costs

Contract Costs

Costs incurred to obtain a contract are capitalized unless short term in nature. As a practical expedient, costs to obtain a contract that are short term in nature are expensed as incurred. The Company does not have any contract costs capitalized as of March 31, 2020.

Contract Liabilities - Deferred Revenue

Contract Liabilities - Deferred Revenue

The Company’s contract liabilities consist of advance customer payments and deferred revenue. Deferred revenue results from transactions in which the Company has been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the deferred revenues are recognized.

Accounts Receivable

Accounts receivable

Accounts receivable are generally unsecured. The Company establishes an allowance for doubtful accounts receivable based on the age of outstanding invoices and management’s evaluation of collectability. Accounts are written off after all reasonable collection efforts have been exhausted and management concludes that likelihood of collection is remote. Any future recoveries are applied against the allowance for doubtful accounts. As of March 31, 2020 and December 31, 2019, allowance for doubtful accounts was $113,662 and $283,972, respectively. During the three months ended March 31, 2020, the Company reversed allowance for doubtful accounts of $170,309.

Advertising Expense

Advertising Expense

The 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.

Research and Development

Research and Development

Costs incurred in connection with the development of new products and processing methods are charged to general and administrative expenses as incurred.

Income Taxes

Income Taxes

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

The Company generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of the Company’s realization of the net operating loss carry forward prior to its expiration.

NomadChoice Pty Ltd, the Company’s wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Synergy CHC Inc. is a wholly-owned foreign subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. The company recognizes liabilities for anticipated tax audit issues based on the Company’s current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.

Net Earnings (Loss) Per Common Share

Net Earnings (Loss) Per Common Share

The Company computes earnings per share under ASC subtopic 260-10, Earnings Per Share. Basic earnings (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods. Diluted earnings per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock (using the “treasury stock” method), unless their effect on net loss per share is anti-dilutive. As of March 31, 2020, and 2019, options to purchase 5,666,667 and 7,166,667 shares of common stock, respectively, were outstanding.

The 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, 2020, and 2019:

	For the three months ended
	March 31, 2020		March 31, 2019
Net income after tax	$	262,303	$	1,467,287
Weighted average common shares outstanding		89,889,074		89,865,319
Incremental shares from the assumed exercise of dilutive stock options		-		-
Dilutive potential common shares		89,889,074		89,865,319
Net earnings (loss) per share:
Basic	$	0.00	$	0.02
Diluted	$	0.00	$	0.02

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

	2020		2019
Options to purchase common stock		5,666,667		7,166,667

Fair Value Measurements

Fair Value Measurements

The Company measures and discloses the fair value of assets and liabilities required to be carried at fair value in accordance with ASC 820, Fair Value Measurements and Disclosures. ASC 820 defines fair value, establishes a framework for measuring fair value, and enhances fair value measurement disclosure.

ASC 825 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices for identical assets or liabilities in active markets to which we have access at the measurement date.

Level 2 - Inputs other than quoted prices within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 - Unobservable inputs for the asset or liability.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

As of March 31, 2020, the Company has determined that there were no assets or liabilities measured at fair value.

Inventory

Inventory

Inventory consists of raw materials, components and finished goods. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or net realizable value. Finished goods include the cost of labor to assemble the items.

Stock-Based Compensation

Stock-Based Compensation

ASC 718, “Compensation – Stock Compensation,” prescribes accounting and reporting standards for all share-based payment transactions in which employee services are acquired. Transactions include incurring liabilities, or issuing or offering to issue shares, options, and other equity instruments such as employee stock ownership plans and stock appreciation rights. Share-based payments to employees, including grants of employee stock options, are recognized as compensation expense in the financial statements based on their fair values. That expense is recognized over the period during which an employee is required to provide services in exchange for the award, known as the requisite service period (usually the vesting period).

Foreign Currency Translation

Foreign Currency Translation

The functional currency of one of the Company’s foreign subsidiaries (Nomadchoice Pty Ltd.) is the U.S. Dollar. The Company’s foreign subsidiary maintains its records using local currency (Australian Dollar). All monetary assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at quarter end exchange rates, non-monetary assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at transaction day exchange rates. Income and expense items related to non-monetary items were translated at exchange rates prevailing during the transaction date and other incomes and expenses were translated using average exchange rate for the period. The resulting translation adjustments, net of income taxes, were recorded in statements of operations as Remeasurement gain or loss on translation of foreign subsidiary.

The functional currency of the Company’s other foreign subsidiary (Synergy CHC Inc.) is the Canadian Dollar (CAD). The Company’s foreign subsidiary maintains its records using local currency (CAD). All assets and liabilities of the foreign subsidiary were translated into U.S. Dollars at period end exchange rates and stockholders’ equity is translated at the historical rates. Income and expense items were translated using average exchange rate for the period. The resulting translation adjustments, net of income taxes, are reported as other comprehensive income and accumulated other comprehensive income in the stockholder’s equity in accordance with ASC 220 – Comprehensive Income.

The exchange rates used to translate amounts in AUD and CAD into USD for the purposes of preparing the consolidated financial statements were as follows:

Balance sheet:

	March 31, 2020		December 31, 2019
Period-end AUD: USD exchange rate	$	0.6141	$	0.7030
Period-end CAD: USD exchange rate	$	0.7049	$	0.7699

Income statement:

	March 31, 2020		March 31, 2019
Average Quarterly AUD: USD exchange rate	$	0.6585	$	0.7126
Average Quarterly CAD: USD exchange rate	$	0.7445	$	0.7522

Translation gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are translated into either Australian Dollars or Canadian Dollars, as the case may be, at the rate on the date of the transaction and included in the results of operations as incurred.

Concentrations of Credit Risk

Concentrations of Credit Risk

In the normal course of business, the Company provides credit terms to its customers; however, collateral is not required. Accordingly, the Company performs credit evaluations of its customers and maintains allowances for possible losses which, when realized, were within the range of management’s expectations. From time to time, a higher concentration of credit risk exists on outstanding accounts receivable for a select number of customers due to individual buying patterns.

Warehousing Costs

Warehousing costs

Warehouse costs include all third party warehouse rent fees and are charged to selling and marketing expenses as incurred. Any additional costs relating to assembly or special pack-outs of the Company’s products are charged to cost of sales.

Product Display Costs

Product display costs

All displays manufactured and purchased by the Company are for placement of product in retail stores. This also includes all costs for display execution and setup and retail services are charged to cost of sales and expensed as incurred.

Cost of Sales

Cost of Sales

Cost of sales includes the purchase cost of products sold and all costs associated with getting the products into the retail stores including buying and transportation costs.

Debt Issuance Costs

Debt Issuance Costs

Debt issuance costs consist primarily of arrangement fees, professional fees and legal fees. These costs are netted off with the related loan and are being amortized to interest expense over the term of the related debt facilities.

Shipping Costs

Shipping Costs

Shipping and handling costs billed to customers are recorded in sales. Shipping costs incurred by the company are recorded in selling and marketing expenses.

Related Parties

Related parties

Parties are considered to be related to the Company if the parties, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests.

Segment Reporting

Segment Reporting

Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregate basis.

Presentation of Financial Statements - Going Concern

Presentation of Financial Statements – Going Concern

Going Concern Evaluation

In connection with preparing unaudited condensed consolidated financial statements for the three months ended March 31, 2020, 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.

The Company considered the following:

● At March 31, 2020, the Company had an accumulated deficit of $23,972,266.

● At March 31, 2020, the Company had working capital deficit of $4,444,249.

● Revenue decline in 2020 as compared to 2019 of $3,351,669. 

● During the three months ended March 31, 2020, the Company used cash in operating activities of $1,302,062.

● The Company was required to make repayment of loans payable of $500,000 and accrued interest during the three months ended March 31, 2020.

Ordinarily, conditions or events that raise substantial doubt about an entity’s ability to continue as a going concern relate to the entity’s ability to meet its obligations as they become due.

The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:

● The Company raised $10.0 million via debt financing during the year ended December 31, 2017.

● Subsequent to March 31, 2020, the Company raised $2.5 million via debt financing.

● During the three months ended March 31, 2020, the Company repaid $12,500 of loans. Subsequent to March 31, 2020, the Company repaid $500,000 of loans.

● The Company generated net income of $262,303 for the three months ended March 31, 2020.

● Working capital deficit of $4,444,249 at March 31, 2020, includes loans payables to related party of $5,486,377, payables to related party of $839,124 and deferred revenue of $17,137.

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

● Subsequent to March 31, 2020, the Company has secured distribution of a new hand sanitizer product under its Hand MD brand in Canada.

Management concluded that above factors alleviates doubts about the Company’s ability to generate enough cash from operations and other available sources to satisfy its obligations for the next twelve months from the issuance date.

The Company will take the following actions if it starts to trend unfavorably to its internal profitability and cash flow projections, 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, which may be impacted by the recent outbreak of COVID-19.

● Implement additional restructuring and cost reductions.

● Raise additional capital through a private placement, which may be impacted by the recent outbreak of COVID-19.

As of June 29, 2020 and March 31, 2020, the Company had $2,098,237 and $414,933, respectively, in cash and cash equivalents.

Recent Accounting Pronouncements

Recent Accounting Pronouncements  

ASU 2016-13

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments and subsequent amendment to the initial guidance: ASU 2018-19 (collectively, Topic 326). ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019, with early adoption permitted. Adoption of this new standard did not have any impact on the Company’s unaudited condensed consolidated financial statements.

ASU 2016-02

In February 2016, the FASB issued ASU 201602, “Leases” (“ASU 201602”). This guidance, as amended by subsequent ASU’s on the topic, improves transparency and comparability among companies by recognizing right of use (ROU) assets and lease liabilities on the balance sheet and by disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for public business entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2018, with early adoption permitted. We adopted ASU No. 2016-02 in our fiscal year beginning January 1, 2019 and used the optional transition method provided by the FASB in ASU No. 2018-10, “Codification Improvements to Topic 842, Leases” and ASU No. 2018-11, “Leases (Topic 842): Targeted Improvements”, with no restatement of comparative periods. The Company notes there was no impact on adoption as the leases entered into by the Company were for less than 12 month terms.

The new standard provides optional practical expedients in transition. We will only elect the package of practical expedients where, under the new standard, prior conclusions about lease identification, lease classification and initial direct costs do not need to be reassessed. The new standard also provides practical expedients for ongoing accounting where we elected the practical expedients on adoption and did not record any ROU asset with terms of less than 12 months.

There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to a have a material impact on the Company’s financial position, results of operations or cash flows.

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Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Schedule of Cash, Cash Equivalents, and Restricted Cash

The 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.

	March 31, 2020		December 31, 2019		March 31, 2019
Cash and cash equivalents	$	314,933	$	1,224,514	$	688,836
Restricted cash		100,000		100,000		137,351
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$	414,933	$	1,324,514	$	826,187

Schedule of Number of Shares Used in Calculation of Basic and Diluted Loss Per Share

The 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, 2020, and 2019:

	For the three months ended
	March 31, 2020		March 31, 2019
Net income after tax	$	262,303	$	1,467,287
Weighted average common shares outstanding		89,889,074		89,865,319
Incremental shares from the assumed exercise of dilutive stock options		-		-
Dilutive potential common shares		89,889,074		89,865,319
Net earnings (loss) per share:
Basic	$	0.00	$	0.02
Diluted	$	0.00	$	0.02

Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share

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

	2020		2019
Options to purchase common stock		5,666,667		7,166,667

Schedule of Foreign Currencies Translation Exchange Rate

The exchange rates used to translate amounts in AUD and CAD into USD for the purposes of preparing the consolidated financial statements were as follows:

Balance sheet:

	March 31, 2020		December 31, 2019
Period-end AUD: USD exchange rate	$	0.6141	$	0.7030
Period-end CAD: USD exchange rate	$	0.7049	$	0.7699

Income statement:

	March 31, 2020		March 31, 2019
Average Quarterly AUD: USD exchange rate	$	0.6585	$	0.7126
Average Quarterly CAD: USD exchange rate	$	0.7445	$	0.7522

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Inventory (Tables)

3 Months Ended

Mar. 31, 2020

Inventory Disclosure [Abstract]

Schedule of Carrying Value of Inventory

The carrying value of inventory consisted of the following:

	March 31, 2020		December 31, 2019
Finished goods	$	1,375,944	$	1,554,013
Components		269,501		264,518
Inventory in transit		451		42,507
Raw materials		68,200		-
Total inventory	$	1,714,096	$	1,861,038

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Accounts Receivable (Tables)

3 Months Ended

Mar. 31, 2020

Receivables [Abstract]

Schedule of Accounts Receivable, Net of Allowances for Doubtful Accounts

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

	March 31, 2020		December 31, 2019
Trade accounts receivable (including related party receivable of $470,984 and $277,432, respectively – see note 8)	$	3,151,103	$	1,707,758
Less allowances		113,662		283,972
Total accounts receivable, net	$	3,037,441	$	1,423,786

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Prepaid Expenses (Tables)

3 Months Ended

Mar. 31, 2020

Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]

Schedule of Prepaid Expenses

Prepaid expenses consisted of the following:

	March 31, 2020		December 31, 2019
Advances for inventory	$	24,082	$	9,071
Insurance		14,589		16,763
Deposits		6,500		10,234
Promotion - Bloggers		84,674		-
Software subscriptions		-		9,536
Promotions		44,455		122,626
Miscellaneous		16,853		17,913
Total	$	191,153	$	186,143

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Fixed Assets and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Assets

Summary of Fixed and Intangible Assets

As of March 31, 2020, and December 31, 2019, fixed assets and intangible assets consisted of the following:

	March 31, 2020			December 31, 2019
Property and equipment	$	569,681		$	566,445
Less accumulated depreciation		(456,774	)		(430,547	)
Fixed assets, net	$	112,907		$	135,898

	March 31, 2020			December 31, 2019
FOCUSfactor intellectual property	$	-		$	1,450,000
Perfekt intellectual property		-			-
Cocowhite intellectual property		-			-
Intangible assets subject to amortization		19,259			5,388,230
Less accumulated amortization		(12,588	)		(4,908,696	)
Less accumulated impairment		-			(1,921,898	)
Intangible assets, net	$	6,671		$	7,636

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Accounts Payable and Accrued Liabilities (Tables)

3 Months Ended

Mar. 31, 2020

Payables and Accruals [Abstract]

Schedule of Accounts Payable and Accrued Liabilities

As of March 31, 2020, and December 31, 2019, accounts payable and accrued liabilities consisted of the following:

	March 31, 2020		December 31, 2019
Accrued payroll (included related party payable of $82,916 and $0, respectively)	$	173,795	$	110,536
Legal fees		27,047		68,098
Commissions		324,283		229,657
Manufacturers (including related parties of $559,584 and $956,438, respectively)		2,311,659		2,082,256
Promotions		289,621		1,312,541
Accounting fees		30,101		10,873
Customers		23,994		26,206
Royalties, related party		125,720		93,643
Warehousing		5,977		13,746
Taxes		654,119		674,818
Related party loan and reimbursements		70,904		1,135
Others		96,800		50,555
Total	$	4,134,020	$	4,674,064

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Notes Payable (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of Loans Payable

The Company’s loans payable at March 31, 2020 and December 31, 2019 are as follows:

	March 31, 2020			December 31, 2019
Loans payable	$	5,757,259		$	5,760,461
Unamortized debt issuance cost		(27,675	)		(48,432	)
Total		5,729,584			5,712,029
Less: Current portion		(5,486,377	)		(5,465,113	)
Long-term portion	$	243,207		$	246,916

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Stock Options (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Summary of Options Outstanding by Price Range

The 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, 2020:

		Options Outstanding					Options Exercisable
Exercise Prices ($)		Number Outstanding	Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price ($)		Number Exercisable	Weighted Average Exercise Price ($)
$	0.25 – 0.70	5,666,667		5.8	$	0.52	5,416,666	$	0.52

Schedule of Stock Options Activity

The stock option activity for the three months ended March 31, 2020 is as follows:

	Options Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2019		6,166,667		$	0.54
Granted		-			-
Exercised		-			-
Expired or canceled		(500,000	)		(0.70	)
Outstanding at March 31, 2020		5,666,667		$	0.52

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Segments (Tables)

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Summary of Net Sales Attributed to Customers Geographical Segment

Net sales attributed to customers in the United States and foreign countries for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
United States	$	5,963,815	$	8,612,521
Foreign countries		153,471		856,434
	$	6,117,286	$	9,468,955

Summary of Net Sales Attributed to Customers Product Group

The Company’s net sales by product group for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
Nutraceuticals	$	5,766,691	$	9,055,444
Over the Counter (OTC)		22,310		8,332
Consumer Goods		302,897		157,623
Cosmeceuticals		25,388		247,556
	$	6,117,286	$	9,468,955

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

Summary of Net Sales Attributed to Major Sales Channel

The Company’s net sales by major sales channel for the three months ended March 31, 2020 and 2019 were as follows:

	March 31, 2020		March 31, 2019
Online	$	2,671,221	$	3,853,024
Retail		3,446,065		5,615,931
	$	6,117,286	$	9,468,955

Summary of Long-lived Assets (Net) Attributable to Operations Geographical Segment

Long-lived assets (net) attributable to operations in the United States and foreign countries as of March 31, 2020 and December 31, 2019 were as follows:

	March 31, 2020		December 31, 2019
United States	$	-	$	-
Foreign countries		6,671		7,636
	$	6,671	$	7,636

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Summary of Significant Accounting Policies (Details Narrative)	3 Months Ended			12 Months Ended
	Jun. 27, 2020 USD ($)	Mar. 31, 2020 USD ($) Segment shares	Mar. 31, 2019 USD ($) shares	Dec. 31, 2019 USD ($)	Dec. 31, 2018 USD ($)	Dec. 31, 2017 USD ($)	Jun. 29, 2020 USD ($)	May 22, 2018 USD ($)	Jun. 21, 2017 USD ($)	Jan. 22, 2015 USD ($)
Cash federally insured limit per bank		$ 250,000
Cash uninsured amount		94,869		$ 947,312
Intangible assets and charged to operations impairment loss				1,450,000	$ 60,000
Impairment loss on intangible assets				471,897	$ 864,067
Impairment loss of goodwill				7,793,240
Allowance for doubtful accounts		113,662		283,972
Reserved allowance for doubtful accounts		$ 170,309
Percentage of valuation allowance		100.00%
Anti-dilutive securities | shares		5,666,667	7,166,667
Number of operating segment | Segment		1
Accumulated deficit		$ (23,972,266)		(24,234,569)
Working capital deficit		4,444,249
Revenue decline		3,351,669
Cash in operating activities		(1,302,062)	$ 813,711
Repayment of loans payable		500,000
Proceeds from debt financing						$ 10,000,000
Net income		262,303	1,467,287
Loans payable		5,486,377		5,465,113
Available line of credit		20,000,000
Cash and cash equivalents		314,933	$ 688,836	$ 1,224,514
Related Party [Member]
Working capital deficit		4,444,249
Due to related party		839,124
Deferred revenue		17,137
Loans [Member]
Repayment of loans payable		$ 12,500
Subsequent Event [Member]
Repayment of loans payable	$ 500,000
Proceeds from debt financing	$ 2,500,000
Cash and cash equivalents							$ 2,098,237
Factor Nutrition Labs LLC [Member]
Value of intellectual property acquired										$ 1,450,000
Perfekt Beauty Holdings LLC and CDG Holdings, LLC [Member]
Value of intellectual property acquired									$ 10,000
Cocowhite [Member]
Value of intellectual property acquired								$ 50,000

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Summary of Significant Accounting Policies - Schedule of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019	Dec. 31, 2018
Accounting Policies [Abstract]
Cash and cash equivalents	$ 314,933	$ 1,224,514	$ 688,836
Restricted cash	100,000	100,000	137,351
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows	$ 414,933	$ 1,324,514	$ 826,187	$ 595,916

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Summary of Significant Accounting Policies - Schedule of Number of Shares Used in Calculation of Basic and Diluted Loss Per Share (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Accounting Policies [Abstract]
Net income after tax	$ 262,303	$ 1,467,287
Weighted average common shares outstanding	89,889,074	89,865,319
Incremental shares from the assumed exercise of dilutive stock options
Dilutive potential common shares	89,889,074	89,865,319
Net loss per share - Basic	$ 0.00	$ 0.02
Net loss per share - Diluted	$ 0.00	$ 0.02

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Summary of Significant Accounting Policies - Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Anti-dilutive securities	5,666,667	7,166,667
Options to Purchase Common Stock [Member]
Anti-dilutive securities	5,666,667	7,166,667

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Summary of Significant Accounting Policies - Schedule of Foreign Currencies Translation Exchange Rate (Details)	Mar. 31, 2020	Dec. 31, 2019	Mar. 31, 2019
Period-End AUD: USD Exchange Rate [Member]
Foreign currency translation exchange rate	0.6141	0.7030
Period-End CAD: USD Exchange Rate [Member]
Foreign currency translation exchange rate	0.7049	0.7699
Average Quarterly AUD: USD Exchange Rate [Member]
Foreign currency translation exchange rate	0.6585		0.7126
Average Quarterly CAD: USD Exchange Rate [Member]
Foreign currency translation exchange rate	0.7445		0.7522

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Inventory - Schedule of Carrying Value of Inventory (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Inventory Disclosure [Abstract]
Finished goods	$ 1,375,944	$ 1,554,013
Components	269,501	264,518
Inventory in transit	451	42,507
Raw materials	68,200
Total inventory	$ 1,714,096	$ 1,861,038

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Accounts Receivable (Details Narrative) - USD ($)	12 Months Ended
	Dec. 31, 2019	Mar. 31, 2020
Receivables [Abstract]
Bad debt expense	$ 283,972
Reserved allowance for doubtful accounts		$ 170,309

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Accounts Receivable - Schedule of Accounts Receivable, Net of Allowances for Doubtful Accounts (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Receivables [Abstract]
Trade accounts receivable (including related party receivable of $470,984 and $277,432, respectively - see note 8)	$ 3,151,103	$ 1,707,758
Less allowances	113,662	283,972
Total accounts receivable, net	$ 3,037,441	$ 1,423,786

XML

Accounts Receivable - Schedule of Accounts Receivable, Net of Allowances for Doubtful Accounts (Details) (Parenthetical) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Receivables [Abstract]
Accounts receivable, related parties, current	$ 470,984	$ 277,432

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Prepaid Expenses - Schedule of Prepaid Expenses (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Deferred Costs, Capitalized, Prepaid, and Other Assets Disclosure [Abstract]
Advances for inventory	$ 24,082	$ 9,071
Insurance	14,589	16,763
Deposits	6,500	10,234
Promotion - Bloggers	84,674
Software subscriptions		9,536
Promotions	44,455	122,626
Miscellaneous	16,853	17,913
Total	$ 191,153	$ 186,143

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Concentration of Credit Risk (Details Narrative) - USD ($)	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Cash federally insured limit per bank	$ 250,000
Cash uninsured amount	$ 94,869		$ 947,312
Five Customers [Member] | Accounts Receivable [Member]
Concentration risk percentage	83.00%
Two Customers [Member] | Accounts Receivable [Member]
Concentration risk percentage			52.00%
Two Customers [Member] | Sales Revenue, Net [Member]
Concentration risk percentage		40.00%	51.00%
Three Customers [Member] | Sales Revenue, Net [Member]
Concentration risk percentage	60.00%
Two Vendors [Member] | Accounts Payable [Member]
Concentration risk percentage	72.00%		73.00%
One Supplier [Member]
Concentration risk percentage	33.00%
Two Suppliers [Member]
Concentration risk percentage		41.00%	40.00%

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Fixed Assets and Intangible Assets (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Assets
Depreciation expense	$ 26,152	$ 38,060
Amortization expense	$ 694	$ 268,215

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Fixed Assets and Intangible Assets - Summary of Fixed and Intangible Assets (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Property and equipment	$ 569,681	$ 566,445
Less accumulated depreciation	(456,774)	(430,547)
Fixed assets, net	112,907	135,898
Intangible assets subject to amortization	19,259	5,388,230
Less accumulated amortization	(12,588)	(4,908,696)
Less accumulated impairment		(1,921,898)
Intangible assets, net	6,671	7,636
Focus Factor [Member]
Intellectual property		1,450,000
Per-fekt [Member]
Intellectual property
Cocowhite [Member]
Intellectual property

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Related Party Transactions (Details Narrative)		3 Months Ended
	Dec. 23, 2016 CAD ($)	Mar. 31, 2020 USD ($)	Mar. 31, 2020 CAD ($)	Mar. 31, 2019 USD ($)	Mar. 31, 2020 CAD ($)	Dec. 31, 2019 USD ($)	Aug. 18, 2015 USD ($)	Jun. 26, 2015
Consulting fees		$ 258,750
Outstanding balance of consulting fees and reimbursement		82,917
Amount owed to related party		440,343
Cost of sales related party purchases		124,008		$ 819,633
Suppliers owed		559,584
Advances from related party		70,490
Receivables related to services		470,984				$ 277,432
CAD [Member]
Advances from related party			$ 100,000
Knight Therapeutics Inc [Member]
Debt outstanding balance		70,295
Distribution gross sale percentage description	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.
Knight Therapeutics Inc [Member] | CAD [Member]
Due to related party	$ 100,000
Debt outstanding balance					$ 100,000
Hand MD [Member]
Debt outstanding balance		17,574
Distribution gross sale percentage description	Knight a distribution fee equal to 60% of gross sales for sales achieved through a direct sales channel until the sales in the calendar year equal the threshold amount and then 40% of all such gross sales in such calendar year in excess of the threshold amount and 5% of gross sales for sales achieved through retail sales.
Hand MD [Member] | CAD [Member]
Due to related party	$ 25,000
Debt outstanding balance					$ 25,000
CEO [Member]
Amount owed to related party		30,640
Due to related party		70,490
Hand MD LLC [Member]
Percentage of ownership interest							50.00%
Payroll expense		30,000
Debt outstanding balance		0
NomadChoice Pty Limited's [Member]
Royalty expense		35,821
Sneaky Vaunt Corp [Member]
Royalty expense		410
Hand MD Corp [Member]
Minimum royalty payment		0
Security Agreement [Member] | Knight Therapeutics Inc [Member]
Ownership interest rate								10.00%
Amount owed to related party		462,500				$ 475,000
Present value of future payments		257,259
Loan Agreement [Member] | Knight Therapeutics Inc [Member]
Amount owed to related party		5,472,325
Royalty Distribution Agreement [Member] | NomadChoice Pty Limited's [Member]
Royalty expense		35,821
Royalty Distribution Agreement [Member] | Sneaky Vaunt Corp [Member]
Royalty expense		410
Royalty Agreement [Member] | Hand MD Corp [Member]
Minimum royalty payment		934
Mr. Jack Ross [Member]
Accrued consulting fees per month		$ 82,917
Ms. Harshbarger [Member] | Consulting Agreement [Member]
Due to related party							$ 10,000

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Accounts Payable and Accrued Liabilities (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Payables and Accruals [Abstract]
Gain on write-off of payables	$ (180,000)
Sales tax liability	$ 245,717

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Accounts Payable and Accrued Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Payables and Accruals [Abstract]
Accrued payroll (included related party payable of $82,916 and $0, respectively)	$ 173,795	$ 110,536
Legal fees	27,047	68,098
Commissions	324,283	229,657
Manufacturers (including related parties of $559,584 and $956,438, respectively)	2,311,659	2,082,256
Promotions	289,621	1,312,541
Accounting Fees	30,101	10,873
Customers	23,994	26,206
Royalties, related party	125,720	93,643
Warehousing	5,977	13,746
Taxes	654,119	674,818
Related party loan and reimbursements	70,904	1,135
Others	96,800	50,555
Total	$ 4,134,020	$ 4,674,064

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Accounts Payable and Accrued Liabilities - Schedule of Accounts Payable and Accrued Liabilities (Details) (Parenthetical) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Related party payable	$ 839,124	$ 956,438
Accrued Payroll [Member]
Related party payable	82,916	0
Manufacturers [Member]
Related party payable	$ 559,584	$ 956,438

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Notes Payable (Details Narrative) - USD ($)				3 Months Ended		12 Months Ended
	Mar. 31, 2018	Aug. 09, 2017	Jun. 26, 2015	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018	Dec. 31, 2017	Jun. 30, 2019	May 14, 2018
Debt instrument interest rate percentage									10.50%
Payments made during period				$ 12,500	$ 512,500
Recognized amortization of deferred financing costs				20,757	$ 38,368
Unamortized debt issuance costs				27,675		$ 48,432
June 26, 2015 Security Agreement [Member] | United States [Member]
Percentage of sale revenue net			5.00%
June 26, 2015 Security Agreement [Member] | June 30, 2016 [Member]
Note payable			$ 250,000
June 26, 2015 Security Agreement [Member] | June 30, 2016 [Member] | Minimum [Member]
Note payable			12,500
June 26, 2015 Security Agreement [Member] | Quarter Ending September 30, 2015 [Member]
Note payable			$ 700,000
Neuragen Corp [Member] | June 26, 2015 Security Agreement [Member]
Debt instrument interest rate percentage			0.00%
Note principal amount			$ 950,000
Total payments of acquire assets			$ 1,200,000
Neuragen Corp [Member] | June 26, 2015 Security Agreement [Member] | United States [Member]
Percentage of sale revenue net			2.00%
Focus Factor [Member] | Minimum [Member]
Net sales								$ 15,000,000
Security Agreement [Member] | June 26, 2015 Security Agreement [Member]
Present value of future payments				257,259		$ 260,461
Interest expense paid				9,299
Payments made during period				12,500
Security Agreement [Member] | Knight Therapeutics Inc [Member]
Present value of future payments				257,259
Loan Agreement [Member]
Debt instrument interest rate percentage	5.00%	5.00%				2.50%
Loan balance amount				5,500,000
Capital expenditures		$ 500,000
Debt EBITDA	$ 5,000,000
Debt covenants, net debt to TTM EBITDA ratio							8:1
Deferred financing costs				452,869
Recognized amortization of deferred financing costs				20,756
Unamortized debt issuance costs				27,675
Interest expense				138,542
Accrued interest				$ 0
Loan Agreement [Member] | After March 31, 2019 [Member]
Debt covenants, net debt to TTM EBITDA ratio							6:1
Loan Agreement [Member] | Additional Tranche [Member]
Percentage of loan, description		Additional Tranches under the Loan Agreement are available to the Company until August 9, 2022 provided that no event of default exists. Each Additional Tranche must be for a minimum amount of $1.0 million, may only be used to finance qualified acquisitions (as defined in the Loan Agreement), and can be denied in Knight's absolute discretion. If an Additional Tranche is denied, the Company can effect a qualified acquisition through a special purpose entity with such special purpose entity being entitled to obtain financing from third parties so long as such financing does not adversely affect Knight or Knight's rights under the Loan Agreement. Upon the closing of any Additional Tranche, the Company will pay Knight an origination fee equal to 2% of the Additional Tranche, a work fee equal to 1% of the amount of the Additional Tranche, and reimburse Knight for its expenses incurred in connection with its consideration of any Additional Tranche (whether or not advanced).
Loan agreement, description		On the Maturity Date of the Third Tranche and every Additional Tranche (or upon the acceleration of each such loan), the Company must pay Knight a success fee (the "Success Fee") of that number of Company common shares equal to 10% of the loan, divided by the lesser of (a) $1.50, (b) the lowest price at which any common shares were issued by the Company in any offering or equity financing or other transaction between the Closing Date and the date the Success Fee is due, and (c) the current market price on the date the Success Fee is due. The Company may also pay the Success Fee in cash pursuant to the terms of the Loan Agreement.
Loan Agreement [Member] | Minimum [Member]
Debt instrument interest rate percentage	10.50%					13.00%
Debt covenants, minimum EBITDA							$ 1,900,000
Debt covenants, minimum cash balance						$ 575,000
Loan Agreement [Member] | Minimum [Member] | Twelve Months Ending March 31, 2019 [Member]
Debt covenants, minimum EBITDA						2,500,000
Loan Agreement [Member] | Minimum [Member] | Twelve Months Ending June 30, 2019 [Member]
Debt covenants, minimum EBITDA						3,500,000
Loan Agreement [Member] | Minimum [Member] | Thereafter [Member]
Debt covenants, minimum EBITDA						5,000,000
Debt covenants, minimum cash balance						1,000,000
Loan Agreement [Member] | Minimum [Member] | Quarters Ending After March 31, 2019 [Member]
Debt covenants, minimum cash balance						$ 750,000
Loan Agreement [Member] | Minimum [Member] | Additional Tranche [Member]
Loan balance amount		$ 1,000,000
Loan Agreement [Member] | Maximum [Member]
Debt instrument interest rate percentage	15.50%					15.50%
Payment for business acquisition consideration		$ 100,000
Loan Agreement [Member] | Knight Therapeutics Inc [Member]
Debt instrument interest rate percentage		10.50%
Loan balance amount		$ 10,000,000
Expenses associated with loan		$ 100,000
Note maturity date		Aug. 09, 2022
Credit facility maximum borrowing amount		$ 20,000,000
Loan Agreement [Member] | Knight Therapeutics Inc [Member] | Origination Fee [Member]
Expenses associated with loan		200,000
Loan Agreement [Member] | Knight Therapeutics Inc [Member] | Work Fee [Member]
Expenses associated with loan		$ 100,000
Loan Amendment Agreement [Member]
Debt instrument interest rate percentage										13.00%

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Notes Payable - Schedule of Loans Payable (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Debt Disclosure [Abstract]
Loans payable	$ 5,757,259	$ 5,760,461
Unamortized debt issuance cost	(27,675)	(48,432)
Total	5,729,584	5,712,029
Less: Current portion	(5,486,377)	(5,465,113)
Long-term portion	$ 243,207	$ 246,916

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Stockholders' Equity (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2019	Mar. 31, 2020	Dec. 31, 2019
Number of capital stock shares authorized		300,000,000	300,000,000
Common stock par value		$ 0.00001	$ 0.00001
Common stock, shares issued		89,889,074	89,889,074
Common stock, shares outstanding		89,889,074	89,889,074
Perfekt Beauty Holdings LLC [Member]
Number of common stock issued	26,391
Number of common stock issued, value	$ 39,586

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Commitments & Contingencies (Details Narrative) - Employment Agreement [Member]	Oct. 17, 2017 USD ($) Integer shares
Agreement initial term	3 years
Mr. McCullough [Member]
Salary received	$ 340,000
Mr. McCullough [Member] | Option Grant [Member]
Purchase of granted option of stock based payments | shares	1,000,000
Number of vesting annual installments | Integer	3
Mr. McCullough [Member] | Retail Sales [Member]
Percentage of sale revenue net	5.00%
Mr. McCullough [Member] | Maximum [Member]
Percentage of bonus based salary	25.00%
Mr. McCullough [Member] | January 1, 2018 [Member]
Received annual bonus	$ 37,500
Mr. McCullough [Member] | July 1, 2018 [Member]
Received annual bonus	$ 37,500

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Stock Options (Details Narrative)	3 Months Ended
	Mar. 31, 2020 USD ($) $ / shares
Stock-based compensation expense	$ 38,679
Expected lives	10 years
Dividend yield	0.00%
Stock option outstanding intrinsic value	$ 0
Unamortized stock-based compensation	$ 90,251
Recognized, period for recognition	6 months
Minimum [Member]
Estimated fair value of common stock | $ / shares	$ 0.48
Risk-free interest rate	1.95%
Volatility rate	116.00%
Maximum [Member]
Estimated fair value of common stock | $ / shares	$ 0.50
Risk-free interest rate	1.99%
Volatility rate	117.00%

XML

Stock Options - Summary of Options Outstanding by Price Range (Details)	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Share-based Payment Arrangement [Abstract]
Options Outstanding, Exercise Prices Lower Limit	$ 0.25
Options Outstanding, Exercise Prices Upper Limit	$ 0.70
Options Outstanding, Number Outstanding | shares	5,666,667
Options Outstanding, Weighted Average Remaining Contractual Life (Years)	5 years 9 months 18 days
Options Outstanding, Weighted Average Exercise Price	$ 0.52
Options Exercisable, Number Exercisable | shares	5,416,666
Options Exercisable, Weighted Average Exercise Price	$ 0.52

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Stock Options - Schedule of Stock Options Activity (Details) - Stock Option Plan [Member]	3 Months Ended
	Mar. 31, 2020 $ / shares shares
Options Outstanding, at Beginning Balance | shares	6,166,667
Options Outstanding, Granted | shares
Options Outstanding, Exercised | shares
Options Outstanding, Expired or Canceled | shares	(500,000)
Options Outstanding, at Ending Balance | shares	5,666,667
Weighted Average Exercise Price, at Beginning Balance | $ / shares	$ 0.54
Weighted Average Exercise Price, Granted | $ / shares
Weighted Average Exercise Price, Exercised | $ / shares
Weighted Average Exercise Price, Expired or Canceled | $ / shares	(0.70)
Weighted Average Exercise Price, at Ending Balance | $ / shares	$ 0.52

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Segments (Details Narrative) - Segment	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Number of operating segments	1
Sales Revenue, Net [Member]
Concentration risk percentage	10.00%	10.00%

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Segments - Summary of Net Sales Attributed to Customers Geographical Segment (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue	$ 6,117,286	$ 9,468,955
United States [Member]
Revenue	5,963,815	8,612,521
Foreign Countries [Member]
Revenue	$ 153,471	$ 856,434

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Segments - Summary of Net Sales Attributed to Customers Product Group (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue	$ 6,117,286	$ 9,468,955
Nutraceuticals [Member]
Revenue	5,766,691	9,055,444
Over the Counter (OTC) [Member]
Revenue	22,310	8,332
Consumer Goods [Member]
Revenue	302,897	157,623
Cosmeceuticals [Member]
Revenue	$ 25,388	$ 247,556

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Segments - Summary of Net Sales Attributed to Major Sales Channel (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue	$ 6,117,286	$ 9,468,955
Online [Member]
Revenue	2,671,221	3,853,024
Retail [Member]
Revenue	$ 3,446,065	$ 5,615,931

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Segments - Summary of Long-lived Assets (Net) Attributable to Operations Geographical Segment (Details) - USD ($)	Mar. 31, 2020	Dec. 31, 2019
Long-lived assets net	$ 6,671	$ 7,636
United States [Member]
Long-lived assets net
Foreign Countries [Member]
Long-lived assets net	$ 6,671	$ 7,636

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Income Taxes (Details Narrative) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Income tax expense (benefit)	$ 285,540	$ (5,908)
Percentage of marginal tax rate used for calculation of deferred tax asset	21.00%
Operating loss carryforwards expiration year	2035
Valuation allowance percentage	100.00%

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Subsequent Events (Details Narrative) - USD ($)	May 08, 2020	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019	Aug. 09, 2017
Loans payable		$ 5,729,584	$ 5,712,029
Loan interest rate				10.50%
Third Amendment Agreement [Member] | Third Tranche [Member]
Loan balance amount					$ 10,000,000
Subsequent Event [Member] | Third Amendment Agreement [Member] | Third Tranche [Member]
Loan maturity date	Aug. 31, 2022
Loan interest rate	12.50%
Success fee	$ 1,000,000
Subsequent Event [Member] | Third Amendment Agreement [Member] | Knight [Member]
Loans payable	2,500,000
Work fee	36,000
Legal costs and expenses	$ 25,000
Subsequent Event [Member] | Original Loan Agreement [Member] | Knight [Member]
Loan maturity date	May 08, 2021
Loan interest rate	12.50%
Success fee	$ 83,250
Cash balance	600,000
EBITDA	$ 3,000,000