SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2024-08-28
Accession Number: 0001213900-24-073419
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000121390024073419/ea0208324-06.htm

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of revenue for the same period in 2022, an increase of $18,782,624 or 141%. The increase in gross profit is largely related to the write off of obsolete inventory of $12,456,346 in 2022 which is recorded through cost of sales. Table of Contents Operating Expenses Selling and Marketing Expenses For the year ended December 31, 2023, our selling and marketing expenses were $15,188,528 as compared to $28,504,524 for the year ended December 31, 2022. The decrease is due to a decrease in promotions and advertising in 2023, including $6,000,000 in media spending with NASCAR in 2022 that did not repeat in 2023. Bad debts For the year ended December 31, 2023, our bad debts expenses were $0. For the year ended December 31, 2022, our bad debts expenses were $222,357. The decrease is due to a write off in 2022 that was not necessary in 2023. General and Administrative Expenses

For the year ended December 31, 2023, our general and administrative expenses were $6,051,703. For the year ended December 31, 2022, our general and administrative expenses were $9,197,068. The decrease is largely due to an accrual for legal fees in 2022 that did not repeat in 2023.

Impairment of Intangible Assets

For the year ended December 31, 2023, our impairment of intangible assets expense was $0 as compared to $1,204,167 for the year ended December 31, 2022. The decrease is due to the impairment of intangible assets in 2022 as a result of management’s reevaluation of such intangible assets arising out of the purchase of Hand MD.

Depreciation and Amortization Expenses

For the year ended December 31, 2023, our depreciation and amortization expenses were $33,333 as compared to $340,000 for the year ended December 31, 2022. The decrease is due to the impairment of intangible assets during 2022, thus lower amortization costs during 2023.

Other Income and Expenses

For the years ended December 31, 2023 and December 31, 2022, we had other (income) and expense items of the following:

Year ended December 31, 2023 Year ended December 31, 2022

Interest income $	(1,616	) $	(569	)

Interest expense 4,236,149 6,450,365

Remeasurement (gain) loss on translation of foreign subsidiary (1,517	) (21,110	)

Total $	4,233,016 $	6,428,686

The decrease in interest expense in 2023 was due to accruals of success fees and warrants converted to debt in 2022.

Income tax expense

For the year ended December 31, 2023, we incurred income tax expense of $234,980. For the year ended December 31, 2022 we incurred income tax expense of $32,172. The increase in 2023 relates to an accrual of estimated future taxes.

Net Income (Loss)

For the year ended December 31, 2023, our net income was $6,338,750. For the year ended December 31, 2022 our net loss was $(32,631,288). This increase was due to an impairment of intangible assets, a write off of obsolete inventory and one time marketing commitments in 2022.

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Liquidity and Capital Resources

Overview

As of June 30, 2024, we had $87,293 cash on hand and restricted cash of $100,000 which is held for credit card collateral.

Our sources of cash have historically consisted of proceeds from issuances of loans from related parties and revenues generated from operations. We believe the existing cash and cash equivalents and cash provided by sales of our products will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months. Our future capital requirements will depend on many factors, including growth rate, the timing and extent of spending to support development efforts, the expansion of sales and marketing activities, the introduction of new and enhanced product offerings, and the continuing market acceptance of our products. In the future, we may enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights.

We may be required to seek additional equity or debt financing, including to fund these acquisitions or investments. In the event that additional financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital or generate cash flows necessary to expand operations and invest in new products, our ability to compete successfully could be reduced and our results of operations may be adversely impacted.

Short- and Long-Term Borrowings

On June 26, 2015, we, through our 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 required that $250,000 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 was 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. During March 2024, this Security Agreement was consolidated with the other outstanding loans to Knight Therapeutics (Barbados) Inc. (“Knight”).

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.

On May 8, 2020, we entered into a Third Amendment Agreement (the “Third Amendment”) to the Amended and Restated Loan Agreement (the “Loan Agreement”) with Knight, pursuant to which Knight agreed to loan us an additional $2.5 million (the “Additional Loan”). That same day (the “Closing”), we 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 we entered into with Knight in January 2015 and subsequently amended (as amended, the “Original Loan Agreement”). The Additional Loan matured on May 8, 2021 (the “TA Maturity Date”) and bore interest at 12.5% per annum compounding quarterly. On the TA Maturity Date, we were obligated to pay Knight a success fee (the “Success Fee”) of $83,250. The Success Fee was 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 for the twelve months ended June 30, 2020 and $4,000,000 for the twelve-month period ending on the last day of each fiscal quarter thereafter.

Terms of the $10,000,000 August 9, 2017 loan (“Third Tranche”) were modified in the Third Amendment. The Third Tranche bore interest from May 8, 2020 at a rate equal to 12.5% per annum compounded quarterly. We were obligated to pay a success fee in the amount of $1,000,000 with respect to the Third Tranche, which was fully earned on May 8, 2020 and payable no later than August 31, 2022. The Third Tranche success fee bore interest at 12.5% per annum compounding quarterly. The loan was extended to a maturity date of December 31, 2021. Because these amendments were considered not substantive changes, we accounted for the modifications as modification of debt.

On July 7, 2022, we entered into a Fourth Amendment Agreement (the “Fourth Amendment”) to the Loan Agreement with Knight, pursuant to which Knight agreed to loan us an additional $2.0 million (the “Second Additional Loan”). The Fourth Amendment amended the Original Loan Agreement. The Second Additional Loan matured on the

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earlier of October 31, 2022 and the date that is ninety days after the date, if any, on which Knight delivers a Second Additional Loan Repayment Notice to us. We were obligated to pay Knight a success fee of $40,000 and an amendment fee of $30,000 which was fully earned and payable as of the Fourth Amendment Date. The loan bore interest at the greater of 14% or the prime rate plus 8% per annum, compounded quarterly. This $2.0 million Second Additional Loan (only) had a personal guarantee by Jack Ross, our chief executive officer and chairman of the board.