SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2024-07-29
Accession Number: 0001013762-24-002165
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000101376224002165/ea0208324-02.htm

Chunk 17 of 68
Word Count: 1366
Character Count: 8303

Document Content:

and energy Ready-to-Drink (RTD). The increase was due primarily to sales volume increases, as prices for our products did not increase year-over-year. We had a decrease in Consumer Goods revenue in 2024 as compared to 2023 due to no longer selling consumer goods products. Cost of Revenue For the three months ended March 31, 2024, our cost of revenue was $2,637,139. Our cost of revenue for the three months ended March 31, 2023, was $2,084,964. The increase in cost of sales was primarily due to the increase in revenue. Gross Profit Gross profit was $6,774,724, or 72% of revenue, for the three months ended March 31, 2024, as compared to gross profit of $5,877,202, or 74% of revenue, for the same period in 2023, an increase of $897,522, or 15%. The increase in gross profit is directly related to the increase in net sales. Operating Expenses Selling and Marketing Expenses

For the three months ended March 31, 2024, our selling and marketing expenses were $3,584,677 as compared to $3,071,601 for the three months ended March 31, 2023, which is primarily due to the correlation of the increase in revenue in 2024.

General and Administrative Expenses

For the three months ended March 31, 2024, our general and administrative expenses were $1,348,385. For the three months ended March 31, 2023, our general and administrative expenses were $1,656,897. The decrease is primarily due to improved management of operating costs.

Depreciation and Amortization Expenses

For the three months ended March 31, 2024, our depreciation and amortization expenses were $33,333 as compared to $0 for the three months ended March 31, 2023. The increase is due to amortization of a license fee recorded in the fourth quarter of 2023.

Table of Contents

Other Income and Expenses

For the three months ended March 31, 2024 and 2023 we had other income and expense items as follows:

Three months ended March 31, 2024 Three months ended March 31, 2023

Interest income $	(387	) $	(382	)

Interest expense 1,109,980 836,412

Remeasurement loss (gain) on translation of foreign subsidiary (8,983	) (4,836	)

Total other expense $	1,100,610 $	831,194

For the three months ended March 31, 2024, we had interest expense of $1,109,980 as compared to $836,412 for the three months ended March 31, 2023. The increase is primarily due to fees paid to Knight, a lender, to extend our credit facility in 2024.

Net Income

For the three months ended March 31, 2024, our net income was $580,530 as compared to a net income of $328,428 for the three months ended March 31, 2023 due to higher revenue.

Results of Operations for the Years Ended December 31, 2023 and December 31, 2022

During both 2023 and 2022, we focused on developing our currently owned brands into new markets and by product extensions.

Revenue

For the year ended December 31, 2023, we had revenues of $42,777,633 from sales of our products, as compared to revenue of $38,410,674 for the year ended December 31, 2022. This is comprised of the following categories:

December 31, 2023 December 31, 2022

Nutraceuticals $	42,753,052 $	38,328,591

Consumer Goods 24,581 54,588

Cosmeceuticals — 27,495

The increase in our Nutraceutical category was due to higher sales. The decrease in the Consumer Goods category is due to normalization of business after the 2019 launch of our online application. The decrease in the Cosmeceuticals category was due to the Company focusing on our two platform brands.

Cost of Sales

For the year ended December 31, 2023, our cost of sales was $10,697,323. Our cost of sales for the year ended December 31, 2022 was $25,112,988. The decrease in cost of sales was primarily due to an inventory write-off in 2022 of $12,456,346.

Gross Profit

Gross profit was $32,080,310, or 75% of revenue for the year ended December 31, 2023, as compared to gross profit of $13,297,686 or 35% 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.

Table of Contents

Liquidity and Capital Resources

Overview

As of March 31, 2024, we had $910,749 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