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

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$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.

The Company expensed royalty of $849 for the year ended December 31, 2022. At December 31, 2022, the Company owed Knight Therapeutics $41 in connection with a royalty distribution agreement.

The Company expensed royalty of $82,810 and $74,088 for the years ended December 31, 2023 and 2022, respectively. At December 31, 2023 and 2022, the Company owed Knight Therapeutics $19,324 and $11,084, respectively, in connection with a royalty distribution agreement.

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 December 31, 2023 was $450,000.

Note 10 — Accounts Payable and Accrued Liabilities

As of December 31, 2023 and 2022, accounts payable and accrued liabilities consisted of the following:

December 31, 2023 December 31, 2022

Accrued payroll $	329,652 $	273,214

Legal fees 707,590 2,428,031

Commissions 601,988 362,705

Manufacturers 4,424,146 7,107,763

Promotions 3,315,755 6,804,395

Accounting Fees 223,286 —

Interest — 30,557

Table of Contents

SYNERGY CHC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 10 — Accounts Payable and Accrued Liabilities (cont.)

December 31, 2023 December 31, 2022

Royalties, related party 19,324 418,197

Warehousing 962,260 2,259,933

Sales taxes 18,364 76,044

Payroll taxes 871,047 706,944

Professional Fees 41,556 —

Inventory 49,972 109,972

Rent — 90,000

Related party advance 7,561 —

Others 154,989 129,754

Total $	11,727,490 $	20,797,509

The Company has estimated and accrued for its sales tax liability at $6,098 and $13,277 for the parent entity as of December 31, 2023 and 2022, respectively.

During 2023 the Company recognized a gain on forgiveness of accounts payable of $2,400,000. This gain was included as a reduction of selling and marketing expenses.

Note 11 — Notes Payable

The Company’s notes payable at December 31, 2023 and 2022 are as follows:

December 31, 2023 December 31, 2022

Notes payable $	27,630,420 $	22,839,277

Unamortized debt issuance cost (12,288	) (13,746	)

Total 27,618,132 22,825,531

Current portion, related party (—	) (21,068	)

Current portion, other (2,094,525	) (1,005,385	)

Long-term portion, related party 12,426,997 11,463,656

Long-term portion, other $	13,096,610 $	10,335,422

$950,000 June 26, 2015 Security Agreement: