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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one vendors accounted for 64% and 63%, respectively, of the Company’s accounts payable. Table of Contents SYNERGY CHC CORP. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 6 — Concentration of Credit Risk (cont.) Major suppliers For the year ended December 31, 2023, one supplier accounted for approximately 18% of the Company’s purchases. For the year ended December 31, 2022, one supplier accounted for approximately 28% of the Company’s purchases. Substantially all of the Company’s business is with suppliers in the United States. Note 7 — 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: December 31, 2023 December 31, 2022 Finished goods $ 3,584,343 $ 7,858,250 Components 93,949 109,467 Inventory in transit 2,948 — Raw materials 45,000 — Total inventory $ 3,726,240 $ 7,967,717

As of January 22, 2015, inventory was pledged to Knight under the Loan Agreement (see note 12). As of December 31, 2023, $2,948 of the Company’s inventory was in transit. During the years ended December 31, 2023 and 2022, $251,021 and $12,456,346, respectively, of expiring and slow-moving inventory was written off to cost of sales. As of December 31, 2023 and 2022, the Company has accrued $387,176 and $1,660,000, respectively, related to storing this inventory and ultimate disposal of the obsolete inventory.

Note 8 — Fixed Assets and Intangible Assets

As of December 31, 2023 and 2022, fixed assets and intangible assets consisted of the following:

December 31, 2023 December 31, 2022

Property and equipment $	— $	579,520

Less accumulated depreciation — (528,914	)

Less accumulated impairment — (50,606	)

Fixed assets, net $	— $	—

Depreciation expense for each of the years ended December 31, 2023 and 2022 was $0. During the year ended December 31, 2022, the Company fully impaired remaining assets of $9,778.

December 31, 2023 December 31, 2022

Hand MD intellectual property $	— $	1,700,000

License Fee 450,000 —

Less accumulated amortization (33,333	) (495,833	)

Less accumulated impairment — (1,204,167	)

Intangible assets, net $	416,667 $	—

Amortization expense for the years ended December 31, 2023 and 2022 was $33,333 and $340,000, respectively. Impairment of intangible assets for the year ended December 31, 2022 related to intangible assets from the Hand MD intellectual property purchase in 2021.

Table of Contents

SYNERGY CHC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 8 — Fixed Assets and Intangible Assets (cont.)

The estimated aggregate amortization expense over each of the next five years is as follows:

Note 9 — Related Party Transactions

The Company accrued and paid consulting fees through December 2023 to a company owned by Mr. Jack Ross, Chief Executive Officer of the Company. The Company also paid eight months of a vehicle allowance of $2,500 per month. The Company expensed $500,000 and $738,483, respectively during 2023 and 2022 as consulting fees, advanced $501,321 and $131,894 in the manner of a prepaid consulting fees as of December 31, 2023 and 2022, respectively. During 2023, the Company was advanced $1,170,000 in the form of a short-term note. The Company repaid this during 2023 with interest of $210,000. As of both December 31, 2023 and 2022, the total outstanding balance was $0.

On June 26, 2015, the Company entered into a Security Agreement with Knight Therapeutics, Inc., a related party (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 December 31, 2023 and 2022, the Company owed Knight $287,500 and $325,000 in relation to this agreement (see Note 11). The Company recorded present value of future payments of $204,941 and $213,040 as of December 31, 2023 and 2022, respectively.

The Company entered into transactions with a related party controlled by the CEO during the years ended December 31, 2023 and 2022. The transactions were a pass through and allocation of expenses and reimbursements. During 2023, the Company loaned $426,500 and received repayments of $400,000. As of December 31, 2023 and 2022 the Company was owed $4,459,996 and $4,408,751, respectively.

The Company entered into a transaction with a related party controlled by the CEO during the year ended December 31, 2023. The transaction was in the form of a short-term loan. The Company received $10,000 Canadian dollars (US Dollars $7,561). This amount was owed to the related party as of December 31, 2023 and paid off in February 2024.

On August 9, 2017, the Company entered into a Loan Agreement with Knight Therapeutics (Barbados) Inc., a related party (owner of greater than 10% shares of the Company), for a working capital loan. At both December 31, 2023 and 2022, the Company owed Knight $5,000,000 on this loan, net of debt issuance cost (see Note 11). During the year ended December 31, 2020 a loan success fee of $1,000,000 was earned by Knight payable in August 2022 (see Note 11). At both December 31, 2023 and 2022, the Company owed Knight $1,000,000 on the loan success fee (see Note 11).

On May 8, 2020, the Company entered into a Third Amendment Agreement with Knight Therapeutics (Barbados) Inc., a related party, for working capital loan. At December 31, 2023 and 2022, the Company owed Knight $392,000 and $500,000, respectively on this loan (see Note 11).

On July 7, 2022, the Company entered into a Fourth Amendment Agreement with Knight Therapeutics (Barbados) Inc., a related party, for an additional $2,000,000 loan (the “Second Additional Loan”). At both December 31, 2023 and 2022, the Company owed Knight $2,000,000 on this loan (see Note 11). During the year ended December 31, 2023 a loan success fee of $83,250 was earned by Knight and is payable as of December 31, 2023 (see Note 11).

On September 30, 2023, the Company entered into a Fifth Amendment Agreement with Knight Therapeutics (Barbados) Inc., a related party, to modify prior Agreements. This modification extends the maturity dates of loans to March 31, 2024. The Company will pay Knight a closing fee of $1,000,000 in connection with the Fifth Amendment. This has been accrued for during the year ended December 31, 2022 since this was earned upon renegotiation of the loan during 2022. (see Note 11).

Table of Contents

SYNERGY CHC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 9 — Related Party Transactions (cont.)

The Company recognized interest expense of $1,693,642 and $1,319,295 during the years ended December 31, 2023 and 2022, respectively. Accrued interest was $1,760,076 and $1,771,684 as of December 31, 2023 and 2022, respectively. Accrued interest was capitalized and included in the loan balance as of December 31, 2023 and 2022.

During February 2024, the Company entered into an amended agreement with Knight Therapeutics Inc., a related party, to modify prior Agreements. This modification consolidates outstanding loans and extends the maturity dates of loans to March 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). During the year ended December 31, 2022, the Company expensed $114,363 Canadian dollars (US Dollars $87,920). As of December 31, 2023 and 2022, the total outstanding balance was $549,229 and $415,728 Canadian dollars, respectively. In US Dollars, the total outstanding balance was $415,272 and $306,932 as of December 31, 2023 and 2022, respectively. The outstanding distribution fees have been added to the related party notes payable.

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 December 31, 2023 and 2022, the total outstanding balance was $160,637 and $135,637 Canadian dollars, respectively. In US Dollars, the total outstanding balance was $121,458 and $100,141 as of December 31, 2023 and 2022 respectively. The outstanding distribution fees have been added to the related party notes payable.