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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raise additional capital. • The Company has restructured its debt agreements in 2024 which extends the terms into 2026. Table of Contents SYNERGY CHC CORP. NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS Note 2 — Summary of Significant Accounting Policies (cont.) Management concluded that above factors alleviates doubts about the Company’s ability to generate enough cash from operations and other available sources to satisfy its obligations for the next twelve months from the issuance date. The Company will take the following actions if it starts to trend unfavorably to its internal profitability and cash flow projections, in order to mitigate conditions or events that would raise substantial doubt about its ability to continue as a going concern: • Raise additional capital through line of credit and/or loans financing for future mergers and acquisition. • Implement restructuring and cost reductions. • Raise additional capital through a private placement. Recent Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU’) No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 amends the rules on income tax disclosures to require entities to disclose specific categories in the rate reconciliation, the income or loss from continuing operations before income tax expense or benefit (separated between domestic and foreign) and income tax expense or benefit from continuing operations (separated by federal, state, and foreign). In addition, ASU 2023-09 requires entities to disclose their income tax payments to international, federal, state, and local jurisdictions, among other changes. The amendments can be applied on a prospective basis although retrospective application is permitted. The amendments are effective for the fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact this update will have on its Consolidated Financial Statements.

In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 expands segment disclosure requirements through enhanced disclosures related to significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), a description of other segment items by reportable segment, and any additional measures of a segment’s profit or loss used by the CODM when deciding how to allocate resources. All disclosure requirements under ASU 2023- 07 are also required for public entities with a single reportable segment. The amendments are effective for the fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024. The Company is currently evaluating the impact this update will have on its Consolidated Financial Statements.

In October 2023, the FASB issued ASU No. 2023-06, “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”). ASU 2023-06 amends U.S. GAAP to reflect updates and simplifications to certain disclosure and presentation requirements referred to FASB by the Securities and Exchange Commission (“SEC”). The targeted amendments incorporate 14 of the 27 disclosures referred by the SEC into codification. Each amendment in ASU 2023-06 is effective on either the date on which the SEC’s removal of the related disclosure requirement from Regulation S-X or Regulation S-K becomes effective, or on June 30, 2027, if the SEC has not removed the requirements by that date. The Company is currently evaluating the impact this update will have on its Consolidated Financial Statements.

Note 3 — Income Taxes

The Company utilizes FASB ASC 740, “Income Taxes,” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are determined based on the difference between the tax basis of assets and liabilities and their financial reporting amounts based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. A valuation allowance is recorded when it is “more likely-than-not” that a deferred tax asset will not be realized.

Table of Contents

SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 3 — Income Taxes (cont.)

Deferred income taxes arise from temporary differences resulting from income and expense items reported for financial accounting and tax purposes in different periods. Deferred taxes are classified as current or non-current, depending on the classification of assets and liabilities to which they relate. Deferred taxes arising from temporary differences that are not related to an asset or liability are classified as current or noncurrent depending on the periods in which the temporary differences are expected to reverse. The Company does not have any uncertain tax positions.

For U.S. purposes, the Company has not completed its evaluation of NOL utilization limitations under Internal Revenue Code, as amended (the “Code”) Section 382/383, change of ownership rules. If the Company has had a change in ownership, the NOL’s would be limited or eliminated, as to the amount that could be utilized each year, based on the Code. NOL’s attributable to Breakthrough Products, Inc., which are the majority of the Company’s domestic NOL’s are Separate Return Limitation Year (SRLY) NOL’s. Such losses may generally not be available for use (limited or eliminated).

The Company has not filed its State & Local Income/Franchise tax returns in states it is required to file, as such returns and liability remain open. The Company does not expect this to be a significant liability.

The Company had tax expense of $306,571 for the six months ended June 30, 2024 and a tax expense of $52,262 for the six months ended June 30, 2023. The Company’s provision for tax expense amount, computed by applying the statutory federal income tax rate of 21% in 2024 and 2023 to income before taxes, differs from the effective tax rate, due primarily to state income taxes and permanent items (plus utilization of NOL carryforwards in 2023.

The Company also has net operating loss carryforwards of approximately $53,100,000 and approximately $52,800,000 (United States and Canada) included in the deferred tax assets for June 30, 2024 and December 31, 2023, respectively, the majority attributable to the acquisition of Breakthrough Products, Inc. However, due to limitations of carryover attributes and separate return limitation year rules, it is unlikely the company will benefit from the NOL’s and thus Management has determined a 100% valuation allowance is required. Further, the Company has not completed an evaluation of the NOL’s attributable to Breakthrough Products, Inc. at the date of this report.

Note 4 — Accounts Receivable

Accounts receivable, net of allowances for doubtful accounts, consisted of the following:

June 30, 2024 December 31, 2023

Trade accounts receivable $	3,275,508 $	2,255,540

Less allowances (7,422	) (149,446	)

Total accounts receivable, net $	3,268,086 $	2,106,094

During the six months ended June 30, 2024 and 2023, the Company charged $0 to bad debt expense.

Note 5 — Prepaid Expenses

At June 30, 2024 and December 31, 2023, prepaid expenses consisted of the following:

June 30, 2024 December 31, 2023

Advances for inventory $	298,099 $	128,025

Insurance 18,154 6,133

Deposits 14,000 60,000

Contract employee, related party 500,000 501,321

Components 116,959 97,606

Promotions 100,000 —

IT Expenses 10,404 —

Miscellaneous 15,866 4,900

Total $	1,073,482 $	797,985

Table of Contents

SYNERGY CHC CORP.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 6 — Concentration of Credit Risk

Cash and cash equivalents

The Company maintains its cash and cash equivalents in banks insured by the Federal Deposit Insurance Corporation (FDIC) in accounts that at times may be in excess of the federally insured limit of $250,000 per bank. The Company minimizes this risk by placing its cash deposits with major financial institutions. At June 30, 2024 and December 31, 2023, the uninsured balance amounted to $50,667 and $441,711, respectively.

Accounts receivable

As of June 30, 2024 and December 31, 2023, three and two customers accounted for 80% and 68%, respectively, of the Company’s accounts receivable.

Major customers

For the six months ended June 30, 2024, two customers accounted for approximately 70% of the Company’s net revenue. For the six months ended June 30, 2023, four customers accounted for approximately 83% of the Company’s net revenue. Substantially all of the Company’s business is with companies in the United States.

Accounts payable

As of both June 30, 2024 and December 31, 2023, two vendors accounted for 37% and 64%, respectively, of the Company’s accounts payable.

Major suppliers

For the six months ended June 30, 2024, one supplier accounted for approximately 21% of the Company’s purchases. For the six months ended June 30, 2023, two suppliers accounted for approximately 14% of the Company’s purchases. Substantially all of the Company’s business is with suppliers in the United States.

Note 7 — Inventory

Inventory consists of finished goods, components and raw materials. The Company’s inventory is stated at the lower of cost (FIFO cost basis) or net realizable value.

The carrying value of inventory consisted of the following:

June 30, 2024 December 31, 2023

Finished goods $	1,781,341 $	3,584,343