SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: 424B4
Document Type: 424B4
Date Filed: 2024-10-23
Accession Number: 0001213900-24-089987
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000121390024089987/ea0208324-14.htm

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31, 2026 (see Note 11). On December 23, 2016, the Company entered into an agreement with Knight Therapeutics for the distribution rights of FOCUSFactor in Canada. In conjunction with this agreement, the Company is 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. During the year ended December 31, 2023, the Company expensed $133,502 Canadian dollars (US Dollars $98,939). As of both March 31, 2024 and December 31, 2023, the total outstanding balance was $549,229 Canadian dollars. In US Dollars, the total outstanding balance was $403,936 and $415,272 as of March 31, 2024 and December 31, 2023, respectively. At June 30, 2024 these distribution fees have been consolidated into one loan under the sixth amendment.

On December 23, 2016, the Company entered into an agreement with Knight Therapeutics for the distribution rights of Hand MD into Canada. In conjunction with this agreement, the Company is 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. During the year ended December 31, 2023, the Company expensed was $25,000 Canadian dollars (US Dollars $18,531). As of both March 31, 2024 and December 31, 2023, the total outstanding balance was $160,637 Canadian dollars. In US Dollars, the total outstanding balance was $118,550 and $121,428 as of March 31, 2024 and December 31, 2023, respectively. At June 30, 2024 these distribution fees have been consolidated into one loan under the sixth amendment.

The Company expensed royalty of $41,277 and $45,492 for the six months ended June 30, 2024 and 2023, respectively. At June 30, 2024 and December 31, 2023, the Company owed Knight Therapeutics $25,905 and $19,324, respectively, in connection with a royalty distribution agreement.

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SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 9 — Related Party Transactions (cont.)

On October 1, 2023 (effective date), the Company entered into second amendment to the Distribution Agreement with Knight with an initial term ending on February 25, 2026 with an automatic renewal of one year for a payment of $450,000 by the Company within 180 days from the effective date. The Company has recorded this payable in terms of a Note Payable to Knight Therapeutics in relation to a license fee of an intangible asset. The balance outstanding at both March 31, 2024 and December 31, 2023 was $450,000. At June 30, 2024 this Distribution Agreement was consolidated into one loan under the sixth amendment.

Note 10 — Accounts Payable and Accrued Liabilities

As of June 30, 2024 and December 31, 2023, accounts payable and accrued liabilities consisted of the following:

June 30, 2024 December 31, 2023

Accrued payroll $	98,472 $	329,652

Legal fees 262,375 707,590

Commissions 910,833 601,988

Manufacturers 901,427 4,424,146

Promotions 651,109 3,315,755

Accounting Fees 274,666 223,286

Royalties, related party 25,905 19,324

Warehousing 887,832 962,260

Sales taxes 9,734 18,364

Payroll taxes 843,252 871,047

Professional Fees 35,722 41,556

Inventory — 49,972

Related party advance — 7,561

Others 282,453 154,989

Total $	5,183,780 $	11,727,490

The Company has estimated and accrued for its sales tax liability at $6,621 and $6,098 for the parent entity as of June 30, 2024 and December 31, 2023, respectively.

Note 11 — Notes Payable

The Company’s notes payable at June 30, 2024 and December 31, 2023 are as follows:

June 30, 2024 December 31, 2023

Kenek, related party $	1,181,222 $	—

Knight 12,333,053 12,426,997

Sanders 9,794,165 10,294,165

Atrium 4,802,445 4,802,445

VitBest 2,920,824 —

Shopify 482,725 94,525

Total notes payable $	31,514,434 $	27,630,420

Unamortized debt issuance cost (55,535	) (12,288	)

Total notes payable, net 31,458,899 27,618,132

Short term loan payable, related party (1,181,222	) —

Current portion, related party (2,000,000	) —

Current portion, other (5,887,602	) (2,094,525	)

Long-term portion, related party 10,333,053 12,426,997

Long-term portion, other $	12,057,022 $	13,096,610

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SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 — Notes Payable (cont.)

$950,000 June 26, 2015 Security Agreement:

On June 26, 2015, the Company, through its wholly owned subsidiary, Neuragen Corp. (“Neuragen”), 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 ending 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 $199,640 and $204,941 as of March 31, 2024 and December 31, 2023, respectively. At March 31, 2024 and December 31, 2023 the Company owed Knight $275,000 and $287,500 in relation to this agreement. The Company recorded interest expense of $7,199 and $7,520 for the three months March 31, 2024 and 2023, respectively. The Company made payments of $12,500 and $12,500 during the three months ended March 31, 2024 and 2023, respectively.

During June 2024, this Security Agreement was consolidated with the other outstanding loans to Knight.

$10,000,000 August 9, 2017 Loan:

On August 9, 2017, the Company entered into a Second Amendment to Loan Agreement (“Second Amendment”) with Knight, pursuant to which Knight agreed to loan the Company 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, the Company 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 Success Fees have been added to the outstanding loan balance.

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

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SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 — Notes Payable (cont.)