United States Securities and Exchange Commission Form 10-K Conversion Labs, Inc
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3/31/2020 https://sec.report/Document/0001493152-20-005288/form10-k.htm 10-K 1 form10-k.htm UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the year ended December 31, 2019 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________________ to __________________________ Commission file number 000-55857 CONVERSION LABS, INC. (Exact name of registrant as specified in its charter) Delaware 76-0238453 State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization Identification No.) 800 Third Avenue, Suite 2800 New York, New York 10022 (Address of Principal Executive Offices) (Zip Code) (855) 743-6478 (Registrant’s telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Name of exchange Title of each class Trading symbol(s) on which registered None N/A N/A Securities registered pursuant to Section 12(g) of the Act: Common stock, par value $0.01 (Title of class) Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes [ ] No [X] Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ ] No [X] https://sec.report/Document/0001493152-20-005288/form10-k.htm 1/91 3/31/2020 https://sec.report/Document/0001493152-20-005288/form10-k.htm Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 (§ 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] 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 Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [X] Smaller reporting company [X] Emerging growth company [ ] If an emerging growth company, indicate by checkmark 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 Act). Yes [ ] No [X] The registrant had 54,142,940 shares of common stock outstanding as of March 30, 2020. The aggregate market value of the common stock held by non-affiliates of the registrant as of June 30, 2019 was $3,809,355, as computed by reference to the closing price of such common stock on such date. https://sec.report/Document/0001493152-20-005288/form10-k.htm 2/91 3/31/2020 https://sec.report/Document/0001493152-20-005288/form10-k.htm CONVERSION LABS, INC. 2019 FORM 10-K ANNUAL REPORT TABLE OF CONTENTS Page PART I ITEM 1. BUSINESS 4 ITEM 1A. RISK FACTORS 13 ITEM 1B. UNRESOLVED STAFF COMMENTS 28 ITEM 2. PROPERTIES 28 ITEM 3. LEGAL PROCEEDINGS 29 ITEM 4. MINE SAFETY DISCLOSURES 29 PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES 29 ITEM 6. SELECTED FINANCIAL DATA 30 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 31 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 38 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 38 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 38 ITEM 9A. CONTROLS AND PROCEDURES 38 ITEM 9B. OTHER INFORMATION 39 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 40 ITEM 11. EXECUTIVE COMPENSATION 44 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS 49 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 51 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 53 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES 54 ITEM 16. FORM 10-K SUMMARY https://sec.report/Document/0001493152-20-005288/form10-k.htm 3/91 3/31/2020 https://sec.report/Document/0001493152-20-005288/form10-k.htm SIGNATURES 55 -2- https://sec.report/Document/0001493152-20-005288/form10-k.htm 4/91 3/31/2020 https://sec.report/Document/0001493152-20-005288/form10-k.htm FORWARD-LOOKING STATEMENTS CAUTIONARY STATEMENT FOR PURPOSES OF THE “SAFE HARBOR” PROVISIONS OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The following discussion should be read in conjunction with the financial statements and related notes contained elsewhere in this Annual Report on Form 10-K. Certain statements made in this discussion are “forward-looking statements” within the meaning of 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based upon beliefs of, and information currently available to, the Company’s management as well as estimates and assumptions made by the Company’s management. Readers are cautioned not to place undue reliance on these forward- looking statements, which are only predictions and speak only as of the date hereof. When used herein, the words “anticipate,” “believe,” “estimate,” “expect,” “forecast,” “future,” “intend,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” or the negative of these terms and similar expressions as they relate to the Company or the Company’s management identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to risks, uncertainties, assumptions, and other factors, including the risks relating to the Company’s business, industry, and the Company’s operations and results of operations. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned. Although the Company believes that the expectations reflected in the forward-looking statements are reasonable, the Company cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Company does not intend to update any of the forward-looking statements to conform these statements to actual results. Our financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our financial statements would be affected to the extent there are material differences between these estimates and actual results. The following discussion should be read in conjunction with our financial statements and notes thereto appearing elsewhere in this report. The forward-looking statements made in this report are based only on events or information as of the date on which the statements are made in this report. Except as required by law, we undertake no obligation to update or revise publicly any forward- looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events. You should read this report and the documents we refer to in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. These risks include, by way of example and without limitation: ● our ability to successfully commercialize our products on a large enough scale to generate profitable operations; ● our ability to maintain and develop relationships with customers and suppliers; ● our ability to successfully integrate acquired businesses or new brands; ● the impact of competitive products and pricing; ● supply constraints or difficulties; ● general economic and business conditions; ● business interruptions resulting from geo-political actions, including war, and terrorism or disease outbreaks (such as the recent outbreak of COVID-19, or the novel coronavirus); ● our ability to continue as a going concern; ● our need to raise additional funds in the future; ● our ability to successfully recruit and retain qualified personnel; ● our ability to successfully implement our business plan; ● our ability to successfully acquire, develop or commercialize new products and equipment; ● intellectual property claims brought by third parties; and ● the impact of any industry regulation.