SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: 424B4
Document Type: 424B4
Date Filed: 2024-10-23
Accession Number: 0001213900-24-089987
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000121390024089987/ea0208324-14.htm

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Table of Contents SYNERGY CHC CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 11 — Notes Payable (cont.) 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. The Company recognized amortization original issue discount of $16,250, which is included in interest expense in the statement of income during the three months ended March 31, 2024. The outstanding loan balance at June 30, 2024 was $0. $3,020,824 March 27, 2024 Loan: On March 27, 2024, the Company entered into a confidential settlement agreement and mutual general release with a supplier. During 2024, the Company made payments of $100,000 toward this loan. The outstanding loan balance at June 30, 2024 was $2,920,824. The Company is required to make future payments as follows: $418,100 May 1, 2024 Loan:

On May 1, 2024, the Company entered into a loan agreement of $418,100 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.

The Company recognized amortization of original issue discount of $4,796, 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.

$118,650 May 22, 2024 Loan:

On May 22, 2024, the Company entered into a loan agreement of $118,650 with Shopify Capital Inc. for an advancement of working capital from its online processing account. The Company 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 released upon receipt of total payments of $118,650.

The Company recognized amortization of 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.

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 June 30, 2024 and December 31, 2023, there were 7,553,726 shares of the Company’s common stock issued and outstanding.

Table of Contents

SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 13 — Commitments & 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).

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. During May 2024, the Company paid in full the settlement to L.O.D.C Group, Ltd.

Note 14 — Stock Options

The following table summarizes the options outstanding, option exercisability and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at June 30, 2024:

Options Outstanding Options Exercisable

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

The stock option activity for the six months ended June 30, 2024 is as follows:

Options Outstanding Weighted Average Exercise Price

Outstanding at December 31, 2023 252,102 $	6.15

Granted 84,034 10.71

Exercised — —

Expired or canceled — —

Outstanding at June 30, 2024 336,136 $	7.29

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SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 14 — Stock Options (cont.)

Stock-based compensation expense related to vested options was $4,611 during the six months ended June 30, 2024. The Company determined the value of share-based compensation for options vesting during the six months ended June 30, 2024 using the Black-Scholes fair value option-pricing model with the following weighted average assumptions: estimated fair value of the Company’s common stock of $0.16, risk-free interest rate of 4.33%, volatility of 73%, expected term of 6 years, and dividend yield of 0%. Stock options outstanding as of June 30, 2024, as disclosed in the above table, have an intrinsic value of $0. As of June 30, 2024, unamortized stock-based compensation costs related to options was $50,730, and will be recognized over a period of thirty three months.

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 six months ended June 30, 2024 and 2023 were as follows:

June 30, 2024 June 30, 2023

United States $	14,984,092 $	17,861,718

Foreign countries 2,452,611 891,987

Foreign country sales primarily consist of sales in Canada.

The Company’s net sales by product group for the six months ended June 30, 2024 and 2023 were as follows:

June 30, 2024 June 30, 2023

Nutraceuticals $	17,436,703 $	18,739,200

Consumer Goods — 14,505

(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 six months ended June 30, 2024 and 2023 were as follows:

June 30, 2024 June 30, 2023

Online $	2,150,177 $	6,270,124

Retail 15,286,526 12,483,581

Long-lived assets (net) attributable to operations in the United States and foreign countries as of June 30, 2024 and December 31, 2023 were as follows:

June 30, 2024 December 31, 2023

United States $	350,000 $	416,667

Foreign countries — —

Table of Contents

SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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.

During July and August 2024, the Company received $1,716,496 in exchange for a short term note payable issued to an entity owned and controlled by the Company’s Chief Executive Officer and repaid $130,000 toward the note.

During August 2024, the Company issued a promissory note receivable from a related party for the loan due in the amount of $4,424,547 to be paid on or before December 31, 2024. The note is non-interest bearing.

Note 17 — Reverse Stock Split