SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2024-09-16
Accession Number: 0001213900-24-079034
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000121390024079034/ea0208324-09.htm

Chunk 66 of 69
Word Count: 1497
Character Count: 9507

Document Content:

States District Court for the Eastern District of New York, Case No. 1:22-cv-4361-BMC, for alleged violations of New York General Business Law Sections 349 and 350, arising out of advertising for the FOCUSfactor product. On August 18, 2022, Synergy filed a motion to dismiss and a motion to strike class claims. Valenti’s counsel filed an opposition to the motions on August 30, 2022, and Synergy withdrew the motions on September 1, 2022. Synergy filed an answer to the complaint on September 16, 2022. On December 29, 2022, and while denying all liability, Synergy settled with Valenti for a payment of $340,000 to be paid in twelve installments ending on December 1, 2023, in exchange for a full release of Valenti’s individual claims. On December 29, 2022, plaintiff filed a stipulation of voluntarily dismissal of the individual claims with prejudice. During 2023, the Company has fully paid $340,000, per the agreement.

In August 2022, the Company filed a lawsuit in the Superior Court of Maine against one of its contract manufacturers, bringing several claims arising out of allegations that the contract manufacturer’s failure to timely produce and deliver the Company’s products in 2020 and 2021 damaged the Company’s business. The contract manufacturer brought counterclaims demanding payment in full for its manufacture of these products. This lawsuit was moved to federal court and remains pending in the United States District Court for the District of Maine, Synergy CHC Corp. v. HVL, LLC d/b/a Atrium Innovations, Case No. 2:22-cv-00301-JAW (D. Me). The case was settled during December 2023, resulting in a net gain to the company of $2,235,986, reflected as a reduction of cost of sales, and a loan payable of $5,450,000 (see Note 11).

L.O.D.C. Group, Ltd. v. Synergy CHC Corp., 4:23-cv-691; United States District Court for the Eastern District of Texas, Sherman Division.    On July 28, 2023, L.O.D.C. Group (“LODC”) asserted claims of over $1,000,000 against Synergy for breach of contract arising from their alleged failure to comply with contracts related to the delivery of hand sanitizer. Synergy denies all allegations and believes Synergy is the aggrieved party in the relationship between Synergy and LODC and Synergy has filed a counterclaim. The case was settled during April 2024 by way of a confidential settlement agreement and mutual release, the settlement of the claim has been accounted for and reported as a charge to operations for the year ended December 31, 2023.

Note 14 — Stock Options

The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at December 31, 2023:

Options Outstanding Options Exercisable

Exercise Price ($) Number Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price ($) Number Exercisable Weighted Average Exercise Price ($)

Table of Contents

SYNERGY CHC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 14 — Stock Options (cont.)

The stock option activity for the year ended December 31, 2023 and 2022 is as follows:

Options Outstanding Weighted Average Exercise Price

Outstanding at December 31, 2021 291,318 $	6.44

Granted — —

Exercised — —

Expired or canceled (39,216	) (8.33	)

Outstanding at December 31, 2022 252,102 6.15

Granted — —

Exercised — —

Expired or canceled — —

Outstanding at December 31, 2023 252,102 $	6.15

Stock-based compensation expense related to vested options was $0 during both the years ended December 31, 2023 and 2022. Stock options outstanding as of December 31, 2023, as disclosed in the above table, have an intrinsic value of $0.

Note 15 — Segments

Segment identification and selection is consistent with the management structure used by the Company’s chief operating decision maker to evaluate performance and make decisions regarding resource allocation, as well as the materiality of financial results consistent with that structure. Based on the Company’s management structure and method of internal reporting, the Company has one operating segment. The Company’s chief operating decision maker does not review operating results on a disaggregated basis; rather, the chief operating decision maker reviews operating results on an aggregated basis.

Net sales attributed to customers in the United States and foreign countries for the years ended December 31, 2023 and 2022 were as follows:

December 31, 2023 December 31, 2022

United States $	40,621,985 $	35,644,296

Foreign countries 2,155,648 2,766,378

Foreign country sales primarily consist of sales in Canada.

The Company’s net sales by product group for the years ended December 31, 2023 and 2022 were as follows:

December 31, 2023 December 31, 2022

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

Consumer Goods 24,581 54,588

Cosmeceuticals — 27,495

(1)      Net sales for any other product group of similar products are less than 10% of consolidated net sales.

Table of Contents

SYNERGY CHC CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 15 — Segments (cont.)

The Company’s net sales by major sales channel for the years ended December 31, 2023 and 2022 were as follows:

December 31, 2023 December 31, 2022

Online $	11,001,906 $	11,667,465

Retail 31,775,727 26,743,209

Long-lived assets (net) attributable to operations in the United States and foreign countries as of December 31, 2023 and 2022 were as follows:

December 31, 2023 December 31, 2022

United States $	416,667 $	—

Foreign countries — —

Note 16 — Subsequent Events

The Company evaluated its December 31, 2023 consolidated financial statements for subsequent events through the date the consolidated financial statements were issued.

On January 29, 2024, the Company entered into a loan agreement with Shopify Capital Inc. for an advancement of working capital from its online processing account. The Company 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. As of June 12, 2024, the balance owing is $0.

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

On May 1, 2024, the Company entered into a loan agreement with Shopify Capital Inc. for an advancement of working capital from its online processing account. The Company 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. As of June 12, 2024, the balance owing is $404,919.

During May 2024, the Company finalized a confidential settlement agreement with a current supplier. The agreement calls for scheduled monthly payments through June 2026.

During May 2024, the Company paid in full the settlement to L.O.D.C Group, Ltd. (see Note 13).

During June 2024, the Company finalized the Sixth Amendment Agreement with Knight Therapeutics for its existing secured debt. The consolidated loan will bear minimum interest rate at 12% per annum compounded quarterly and will be paid on the last day of each month. The principal repayment will begin in the first quarter of 2025 with $1,000,000 due quarterly until March 31, 2026 when the loan becomes due in full. As part of this agreement the outstanding royalties of $536,730 were converted to long term debt (see Note 11).

Note 17 — Reverse Stock Split

On September 11, 2024, the Company effected a 1 for 11.9 reverse stock split with respect to the issued and outstanding shares of the Company’s common stock. All share and per-share amounts included in the accompanying consolidated financial statements are presented as if the stock split had been effective from the beginning of the earliest period presented.

Table of Contents

2,000,000 Shares of Common Stock

Synergy CHC Corp.

PRELIMINARY PROSPECTUS

Roth Capital Partners

Through and including            , 2024 (25 days after the date of this prospectus), all dealers that effect transactions in our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to the dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to unsold allotments or subscriptions.

Table of Contents

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13.     Other Expenses of Issuance and Distribution

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the listing fee for the Nasdaq Global Market.

Amount Paid or to be Paid

SEC registration fee $	4,171

FINRA filing fee 4,739

Nasdaq listing fee 295,000

Printing and engraving expenses 5,000

Legal fees and expenses 400,000

Accounting fees and expenses 75,000