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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of warrants. Pursuant to ASC 480 warrants were liability classified and we accrued the warrant liability of $1.5 million on March 8, 2022, the date of issuance. Upon September 8, 2022, the date of exercise of the warrants, we offset this warrant liability and added the $1.5 million balance to the Senior Subordinated Debentures, for a combined outstanding balance of $7.5 million. The terms of the warrants were, at the sole option of the holder, to convert the warrant at a 25% discount in the event we consummated Table of Contents an IPO, a cash option whereby the holder could convert the warrants at a cash value of $1.5 million or convert the warrants into the private entity valued by an independent third-party appraiser. On March 31, 2024, we entered into a Modification Agreement in relation to this loan, which consolidates it with the $2,000,000 February 10, 2022 loan above.

On May 10, 2022, we entered into a loan agreement of $355,950 with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $315,000 from Shopify Capital Inc. and $40,950 was an original issue discount. The loan bears a repayment rate of 17% of daily sales. The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be released upon receipt of total payments of $355,950. We recognized amortization original issue discount of $13,746 and $27,204, respectively, which are included in interest expense in the statement of income during the years ended December 31, 2023 and 2022. The outstanding loan balance at December 31, 2023 and 2022 was $0 and $105,385, respectively.

On April 13, 2023, we entered into a loan agreement of $226,000 with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $200,000 from Shopify Capital Inc. and $26,000 was an original issue discount. The loan bears a repayment rate of 17% of daily sales. The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be released upon receipt of total payments of $226,000. We recognized amortization original issue discount of $26,000, which is included in interest expense in the statement of income during the year ended December 31, 2023. The outstanding loan balance at December 31, 2023 was $0.

On July 12, 2023, we entered into a loan agreement of $180,800 with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $160,000 from Shopify Capital Inc. and $20,800 was an original issue discount. The loan bears a repayment rate of 17% of daily sales. The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be released upon receipt of total payments of $180,800. We recognized amortization original issue discount of $8,512, which is included in interest expense in the statement of income during the year ended December 31, 2023. The outstanding loan balance at December 31, 2023 was $94,525, net of unamortized original issue discount of $12,288.

On December 28, 2023, we entered into a confidential settlement agreement and mutual general release with a former supplier. The loan bears interest at 5% per annum and is payable in full with the last payment. This settlement resulted in a gain to us of $2,235,986 and is reflected as a reduction of cost of sales (See Note 13). During 2023, we made payments of $1,000,000 toward this loan. The outstanding loan balance at December 31, 2023 was $4,802,445, including interest of $352,445.

On January 29, 2024, we entered into a loan agreement of $141,250 with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $125,000 from Shopify Capital Inc. and $16,250 was an original issue discount. The loan bears a repayment rate of 17% of daily sales. The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be released upon receipt of total payments of $141,250. We recognized amortization original issue discount of $16,250, which is included in interest expense in the statement of income during the six months ended June 30, 2024. The outstanding loan balance at June 30, 2024 was $0.

During March 2024, we received $1,400,000 in exchange for a short term note payable issued to an entity owned and controlled by our Chief Executive Officer.

On May 1, 2024, we entered into a loan agreement with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $370,000 from Shopify Capital Inc. and $48,100 was an original issue discount. The loan bears a repayment rate of 25% of daily sales. The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be released upon receipt of total payments of $418,100. The Company recognized amortization original issue discount of $5,639, which is included in interest expense in the statement of income during the six months ended June 30, 2024. The outstanding loan balance at June 30, 2024 was $333,454.

On March 27, 2024 we entered into a confidential settlement agreement and mutual general release with a supplier. During 2024, we made payments of $100,000 toward this loan. The outstanding loan balance at June 30, 2024 was $2,920,824.

On May 22, 2024, we entered into a loan agreement with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $105,000 from Shopify Capital Inc. and $13,650 was an original issue discount. The loan bears a repayment rate of 25% of daily sales. The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be

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released upon receipt of total payments of $118,650. We recognized amortization original issue discount of $1,464, which is included in interest expense in the statement of income during the six months ended June 30, 2024. The outstanding loan balance at June 30, 2024 was $93,736.

As of the date of this prospectus, we were in compliance with all of the terms, conditions and covenants associated with the loan agreements described above.

Approximately $4.1 million of our outstanding indebtedness comes due in the year ending December 31, 2024, and approximately $12.3 million comes due in the year ending December 31, 2025. We believe that cash provided by sales of our products will be sufficient to meet these obligations as they come due, or that we may refinance our indebtedness to extend the term. As of October 15, 2024, we have approximately $0.4 million of cash. Furthermore, although BoomBod Ltd. is obligated to repay to us the outstanding balance of $4,424,547 by December 31, 2024, we do not expect to rely on repayment of the outstanding balance to fund our operations or meet our near-term debt obligations.

Operating Activities

For the six months ended June 30, 2024, net cash used by operating activities was $1,140,005 compared to net cash used in operating activities of $1,806,712 for the six months ended June 30, 2023. This decrease in net cash used by operating activities for the six months ended June 30, 2024 was primarily attributable to a decrease in accounts payable and accrued expenses.

For the six months ended June 30, 2024, net cash used in operating activities of $1,140,005 consisted of our net income of $1,235,716 adjusted by:

Depreciation and amortization $	66,667

Foreign currency transaction loss 23,345

Stock based compensation expense 4,611

Remeasurement gain on translation of foreign subsidiary (5,113	)

Non cash implied interest 4,799

Changes in operating assets and liabilities:

Accounts receivable (1,161,992	)

Loan receivable, related party 35,449

Inventory 1,805,950

Prepaid expense (276,818	)

Prepaid expense, related party (326,682	)

Income taxes payable 262,374

Contract liabilities (2,949	)

Accounts payable and accrued liabilities (2,804,381	)

Accounts payable, related party (980	)

For the six months ended June 30, 2023, net cash used by operating activities of $1,806,712 consisted of our net income of $2,463,257 adjusted by:

Foreign currency transaction loss $	(90,237	)

Remeasurement loss on translation of foreign subsidiary (4,161	)

Non cash implied interest 14,854

Changes in operating assets and liabilities:

Accounts receivable (1,430,158	)

Loan receivable, related party 276,367

Inventory 3,194,220

Prepaid expense (926,388	)

Prepaid expense, related party (68,056	)

Income taxes receivable 14,339

Income taxes payable 37,480

Contract liabilities (195	)

Accounts payable and accrued liabilities (5,196,328	)

Accounts payable, related party (91,707	)

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