SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2024-09-09
Accession Number: 0001213900-24-076929
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000121390024076929/ea0208324-08.htm

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original issue discount of $5,639, which is included in interest expense in the statement of income during the six months ended June 30, 2024. The outstanding loan balance at June 30, 2024 was $333,454. On March 27, 2024 we entered into a confidential settlement agreement and mutual general release with a supplier. During 2024, we made payments of $100,000 toward this loan. The outstanding loan balance at June 30, 2024 was $2,920,824. On May 22, 2024, we entered into a loan agreement with Shopify Capital Inc. for an advancement of working capital from our online processing account. We received $105,000 from Shopify Capital Inc. and $13,650 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 Table of Contents

released upon receipt of total payments of $118,650. We recognized amortization original issue discount of $1,464, which is included in interest expense in the statement of income during the six months ended June 30, 2024. The outstanding loan balance at June 30, 2024 was $93,736.

As of the date of this prospectus, we were in compliance with all of the terms, conditions and covenants associated with the loan agreements described above.

Approximately $4.1 million of our outstanding indebtedness comes due in the year ending December 31, 2024, and approximately $12.3 million comes due in the year ending December 31, 2025. We believe that cash provided by sales of our products will be sufficient to meet these obligations as they come due, or that we may refinance our indebtedness to extend the term. As of September 9, 2024, we have approximately $0.6 million of cash. Furthermore, although BoomBod Ltd. is obligated to repay to us the outstanding balance of $4,424,547 by December 31, 2024, we do not expect to rely on repayment of the outstanding balance to fund our operations or meet our near-term debt obligations.

Operating Activities

For the six months ended June 30, 2024, net cash used by operating activities was $1,140,005 compared to net cash used in operating activities of $1,806,712 for the six months ended June 30, 2023. This decrease in net cash used by operating activities for the six months ended June 30, 2024 was primarily attributable to a decrease in accounts payable and accrued expenses.

For the six months ended June 30, 2024, net cash used in operating activities of $1,140,005 consisted of our net income of $1,235,716 adjusted by:

Depreciation and amortization $	66,667

Foreign currency transaction loss 23,345

Stock based compensation expense 4,611

Remeasurement gain on translation of foreign subsidiary (5,113	)

Non cash implied interest 4,799

Changes in operating assets and liabilities:

Accounts receivable (1,161,992	)

Loan receivable, related party 35,449

Inventory 1,805,950

Prepaid expense (276,818	)

Prepaid expense, related party (326,682	)

Income taxes payable 262,374

Contract liabilities (2,949	)

Accounts payable and accrued liabilities (2,804,381	)

Accounts payable, related party (980	)

For the six months ended June 30, 2023, net cash used by operating activities of $1,806,712 consisted of our net income of $2,463,257 adjusted by:

Foreign currency transaction loss $	(90,237	)

Remeasurement loss on translation of foreign subsidiary (4,161	)

Non cash implied interest 14,854

Changes in operating assets and liabilities:

Accounts receivable (1,430,158	)

Loan receivable, related party 276,367

Inventory 3,194,220

Prepaid expense (926,388	)

Prepaid expense, related party (68,056	)

Income taxes receivable 14,339

Income taxes payable 37,480

Contract liabilities (195	)

Accounts payable and accrued liabilities (5,196,328	)

Accounts payable, related party (91,707	)

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For the year ended December 31, 2023, we had net cash provided by operating activities of $421,729 as compared to $8,431,439 of net cash used in operating activities for the year ended December 31, 2022. The increase was primarily due to decreases of inventory and an increase of accounts payable, related party, which was offset by a decrease in accounts payable and accrued liabilities and an increase in prepaid expense.

For 2023, net cash provided by operating activities of $421,729 consisted of our net income of $6,338,750 adjusted by:

Amortization of debt issuance cost $	48,610

Depreciation and amortization 33,333

Gain on settlement of liabilities (4,635,986	)

Foreign currency transaction gain (105,192	)

Remeasurement gain on translation of foreign subsidiary (1,517	)

Non cash implied interest 29,401

Accrual of loan success fee and warrants converted to loan 83,250

Write-off of inventory 251,021

Changes in operating assets and liabilities:

Accounts receivable 1,378,620

Loan receivable, related party (51,245	)

Inventory 3,990,456

Prepaid expenses (288,789	)

Prepaid expense, related party (369,427	)

Income taxes receivable 14,339

Income taxes payable 185,665

Contract liabilities 9,005

Accounts payable and accrued liabilities (6,645,324	)

Accounts payable, related party 156,759

For 2022, net cash used in operating activities of $8,431,439 consisted of our net loss of $32,631,288 adjusted by:

Amortization of debt issuance cost $	65,026

Depreciation and amortization 340,000

Impairment of intangible assets 1,204,167

Foreign currency transaction loss 287,096

Bad debts 222,357

Remeasurement gain on translation of foreign subsidiary (21,110	)

Non cash implied interest 31,817

Impairment of fixed assets 9,778

Accrual of loan success fee and warrants converted to loan 3,000,000

Write-off of inventory 12,456,346

Changes in operating assets and liabilities:

Accounts receivable 1,773,144

Loan and accounts receivable, related party (392,536	)

Inventory (7,464,832	)

Prepaid expenses 1,499,875

Prepaid expense, related party (131,894	)

Income taxes receivable 34,613

Contract liabilities (12,096	)

Short term disputed payables 8,433,363

Accounts payable and accrued expenses 3,523,160

Accounts payable, related party (658,425	)

Investing Activities

For the six months ended June 30, 2024 and 2023, we used net cash of $0 in investing activities.

For the years ended December 31, 2023 and 2022, we used net cash of $0 in investing activities.

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Financing Activities

For the six months ended June 30, 2024, net cash provided by financing activities was $407,391 compared to net cash used in financing activities of $381,351 for the six months ended June 30, 2023. The increase was attributable to an advance from a related party.

Financing activities during the six months ended June 30, 2024 and June 30, 2023:

Six months ended June 30, 2024 Six months ended June 30, 2023

Advances from related party $	1,509,226 $	—

Repayment of notes payable, related party (84,500	) (12,500	)

Proceeds from notes payable 600,000 200,000

Repayment of notes payable (1,617,335	) (568,851	)

For the year ended December 31, 2023, net cash used in financing activities was $2,090,782, as compared to $8,963,301 provided by financing activities for the year ended December 31, 2022. The decrease was attributable to the issuance of new notes in 2022 and repayment of such notes in 2023.

Financing activities during 2023:

Advances from related party $	1,170,000

Repayments of advances to related party (1,170,000	)

Repayment of notes payable, related party (145,500	)

Proceeds from notes payable 360,000

Repayment of notes payable (2,305,282	)

Financing activities during 2022:

Repayment of notes payable, related party $	(62,500	)

Proceeds from notes payable 8,315,000

Proceeds from note payable, related party 2,000,000

Repayment of notes payable (1,289,699	)

Key Near-Term Initiatives

During 2024, we intend to organically grow our current product lines by developing and launching new products and expanding into new markets. Specifically, for FOCUSfactor, we are working on increased distribution for our recently launched ready-to-drink beverage. Lastly, we intend to grow further through additional strategic acquisitions and we continue to evaluate opportunities and candidates that we believe fit well with our brand portfolio.

Off-Balance Sheet Arrangements

During the six months ended June 30, 2024, and during the years ended December 31, 2023 and 2022, we had no off-balance sheet arrangements.

Inflation

The effect of inflation on our operating results was not significant in the six months ended June 30, 2024 or the years ended December 31, 2023 and 2022.

Critical Accounting Policies

Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these consolidated financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosures of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to

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revenue recognition and allowance for doubtful accounts. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions.

Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements.

Use of Estimates