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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released upon receipt of total payments of $141,250. The Company recognized amortization original issue discount of $6,079, which is included in interest expense in the statement of income during the three months ended March 31, 2024. The outstanding loan balance at March 31, 2024 was $83,645. Note 12 — Stockholders’ Equity The total number of shares of all classes of capital stock which the Company is authorized to issue is 300,000,000 shares of common stock with $0.00001 par value. As of both March 31, 2024 and December 31, 2023, there were 89,889,074 shares of the Company’s common stock issued and outstanding. Note 13 — Commitments and Contingencies Litigation: From time to time the Company may become a party to litigation in the normal course of business. Management believes that there are no current legal matters that would have a material effect on the Company’s financial position or results of operations.

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).

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SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 — Commitments and Contingencies (cont.)

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 March 31, 2024:

Options Outstanding Options Exercisable

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

The stock option activity for the three months ended March 31, 2024 is as follows:

Options Outstanding Weighted Average Exercise Price

Outstanding at December 31, 2023 3,000,000 $	0.52

Granted — —

Exercised — —

Expired or canceled — —

Outstanding at March 31, 2024 3,000,000 $	0.52

Stock-based compensation expense related to vested options was $0 during the three months ended March 31, 2024. Stock options outstanding as of March 31, 2024, 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 three months ended March 31, 2024 and 2023 were as follows:

March 31, 2024 March 31, 2023

United States $	8,278,606 $	7,382,237

Foreign countries 1,133,257 579,929

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SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 15 — Segments (cont.)

Foreign country sales primarily consist of sales in Canada.

The Company’s net sales by product group for the three months ended March 31, 2024 and 2023 were as follows:

March 31, 2024 March 31, 2023

Nutraceuticals $	9,411,863 $	7,955,251

Consumer Goods — 6,915

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

The Company’s net sales by major sales channel for the three months ended March 31, 2024 and 2023 were as follows:

March 31, 2024 March 31, 2023

Online $	1,170,637 $	2,846,725

Retail 8,241,226 5,115,441

Long-lived assets (net) attributable to operations in the United States and foreign countries as of March 31, 2024 and December 31, 2023 were as follows:

March 31, 2024 December 31, 2023

United States $	383,333 $	416,667

Foreign countries — —

Note 16 — Subsequent Events

Management evaluated all activities of the Company through the issuance date of the Company’s unaudited condensed consolidated financial statements and concluded that except as noted below, no subsequent events have occurred that would require adjustment or disclosure into the unaudited condensed consolidated financial statements.

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 entered into an Amended 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).

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Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of
Synergy CHC Corp. and subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Synergy CHC Corp. and subsidiaries (the Company) as of December 31, 2023 and 2022, and the related statements of operations, other comprehensive income (loss), stockholders’ deficit, and cash flows for each of the years in the two year period ended December 31, 2023, and the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.