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

Chunk 53 of 67
Word Count: 1254
Character Count: 7585

Document Content:

as modification of debt. Minimum interest rate is subjected to the following adjustments: (i) Following an uncured event of default by Synergy, the Interest Rate will increase by 5%. (ii) Synergy shall raise Five Million Dollars ($5,000,000) of equity no later than March 31, 2025. Should Synergy fail to raise equity of Five Million Dollars ($5,000,000) by March 31, 2025, then (1) Knight will earn an additional fee of One Million Dollars ($1,000,000) which will be added to the principal balance of the loan then outstanding and (2) the loan shall be considered to be in default. Any equity raise shall not dilute Knight’s ownership in Synergy below 10% of fully diluted basis. Security: This loan shall be senior secured against all current and future assets (cash, intellectual property, real property, etc.) of Synergy, its affiliates, and subsidiaries. Synergy shall not add any other debt without paying out KTI first.

Bonus Success Fee:    Upon closing of a Sale Transaction (hereinafter defined) of Synergy, KTI, shall be paid a One Million eight hundred thousand Dollar ($1,800,000) Bonus success fee (“Bonus Success Fee”). The Sale Transaction shall include but is not limited to the acquisition of Synergy by a Third Party, the merger of Synergy with a Third Party, partial or complete sale of any asset of Synergy. The obligation of Synergy to KTI under the Success Fee shall survive the Maturity Date and remain in force until a Sale Transaction. As the sole exemption from the above defined Sale transaction and herein Bonus success fee, If Synergy or any of its brands does an IPO on a publicly listed exchange, no such Bonus Success fee will be due nor payable by Synergy. An IPO shall be defined as Synergy raising at least $10 million of cash through the issuance of equity at a $50 million pre-money valuation.

Covenants:    The following covenants shall be added or amended to the existing Loan with KTI;

(i)     Jack Ross’s Synergy total annual compensation (salary, bonus and options) shall be capped at $500,000; until KTI’s loan is paid out or until such a time when Synergy is listed on a publicly traded stock exchange at such time the compensation committee will determine the annual compensation and approve by the Board of Directors.

(ii)    Synergy shall maintain a minimum EBITDA of US$1,250,000 for the three (3) month period ending on the last day of each Fiscal Quarter starting March 31, 2024.

(iii)   Synergy shall provide KTI a quarterly and annual operating budget for approval prior to implementation;

Table of Contents

SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 — Notes Payable (cont.)

(iv)   Synergy shall enter into a Shareholders Agreement with KTI, by June 30, 2024; which shall contain customary terms and conditions acceptable to all parties

(v)    This Loan becomes immediately due if Focus Factor Net Revenues fall below a trailing 12 month net sales of $30 million. Synergy shall provide KTI with monthly Net Revenues for Focus Factor;

(vi)   Synergy is required to communicate to Knight within 2 working days in the event it receives a notice of default from any third party for any debt payables or obligations. If Synergy, default on any of its third party debt obligations, then the Amended Loan will automatically enter into default.

(vii)  Timely payment of royalties due to Knight.

(viii) Synergy shall repay and terminate Shopify debt no later than December 31, 2024.

Other Loan Conditions:    In the event, Synergy does not repay the KTI in full on March 31, 2026, Jack Ross shall sell, for $1, a total of 453,782 of his Synergy shares to KTI. The purchase of the Additional Shares is at Knight’s option and Jack Ross and KTI shall execute a Share Purchase Agreement prior to April 30th, 2024. The value of the contingent guaranty is nominal as the probability of non-payment is remote.

As of June 30, 2024 and December 31, 2023 the total consolidated amount outstanding on these loans, including accrued interest and royalties is $12,333,052 and $12,426,997, respectively.

The Company is required to make future payments as follows:

$1,700,000 July 13, 2021 Loan:

On July 13, 2021, the Company entered into a loan agreement of $1,700,000 with Hand MD, LLC for transfer of ownership to in Hand MD Corp. to The Company. Payments are due as follows: $500,000 within 10 business days of execution, $400,000 on or before the six month anniversary of the agreement, $400,000 on or before the twelve month anniversary of the agreement and $400,000 on or before the eighteen month anniversary of the agreement. During the three months ended March 31, 2023 the Company paid the remaining balance of $400,000 toward the loan. This has been fully repaid during 2023.

$2,000,000 February 10, 2022 Loan:

On February 10, 2022, the Company entered into a promissory note for $2,000,000 with an individual which was to be repaid with subsequent financing.

This interest rate on the promissory note was modified effective June 30, 2022 to 15.5% per annum compounded quarterly. Subsequently and pursuant to the modification agreement entered into on June 14th, 2023, effective September 9, 2022, the promissory loan would bear all the same characteristics as the additional $6,000,000 loan noted below in that, interest would be accrued to December 31, 2022 and added to the outstanding principal loan balance. Interest payments to commence January 31, 2023 on unpaid principal and accrued and unpaid interest through December 31, 2022. The Company shall repay all principal and interest on the earlier of a merger, sale of the Company or Focus Factor or the assets of the Company or September 30, 2023. The Company will pay a closing fee of $500,000 and $50,000 as reimbursement for legal fees incurred in connection with the loan renegotiation of both the $2,000,000 February 10, 2022 Loan and the $6,000,000 March 8, 2022 Loan. To the extent that this Note and $6 million March 8, 2022 Loan is not repaid on the terms, Jack Ross shall personally grant: Warrants struck at $0.12 per share, covering 10% of his stock in the event that Synergy does not make its principal repayment outlined above, in full. The warrant issuance shall be made to the holders of this Note and the $6 million March 8, 2022 Loan (ratably).

Table of Contents

SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 11 — Notes Payable (cont.)

This promissory note was modified effective September 30, 2023 in conjunction with the Senior Subordinated Debentures. Interest payments to commence January 31, 2023 on unpaid principal and accrued and unpaid interest through December 31, 2022. Interest expensed and paid during 2023 has amounted to $332,769. Principal and interest payments shall begin effective October 31, 2023 and continue through March 31, 2024 on the earlier of a merger, sale of the Company or Focus Factor or the assets of the Company or March 31, 2024. To the extent that this Note and $6 million March 8, 2022 Loan is not repaid on the terms, Jack Ross shall personally grant: Warrants struck at $0.12 per share, covering 10% of his stock in the event that Synergy does not make its principal repayment outlined above, in full. The warrant issuance shall be made to the holders of this Note and the $6 million March 8, 2022 Loan (ratably). The value of the contingent guaranty is nominal as the probability of non-payment is remote. The pro-rata closing fee of $125,000 originally due on September 30th 2023 was also extended to March 31, 2024.