SEC Filing Document

Company: Synergy CHC Corp.
Ticker: SNYR
CIK: 1562733
Filing Type: S-1/A
Document Type: S-1/A
Date Filed: 2024-10-15
Accession Number: 0001213900-24-087398
Exchange: Nasdaq
SIC Code: 2833
SIC Description: Medicinal Chemicals & Botanical Products
URL: https://www.sec.gov/Archives/edgar/data/1562733/000121390024087398/ea0208324-12.htm

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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

In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the statements of financial condition, and revenues and expenses for the years then ended. Actual results may differ significantly from those estimates. Significant estimates made by management include, but are not limited to, the assumptions used to calculate stock-based compensation, derivative liabilities and common stock issued for services. Significant estimates are assumptions about collection of accounts receivable, current income taxes, deferred income taxes valuation allowance, useful life of intangible assets, accrual of sales returns and accrual of legal expense. The results of any changes in accounting estimates are reflected in the financial statements in the period in which the changes become evident. Estimates and assumptions are reviewed periodically, and the effects of revisions are reflected in the period that they are determined to be necessary.

Revenue recognition

We recognize revenue in accordance with Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). Revenues are recognized when control is transferred to customers in amounts that reflect the consideration we expect to be entitled to receive in exchange for those goods. Revenue recognition is evaluated through the following five steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when or as a performance obligation is satisfied.

We recognize revenue upon shipment from our fulfillment centers. Certain of our distributors may also perform a separate function as a co-packer on our behalf. In such cases, ownership of and title to our products that are co-packed on our behalf by those co-packers who are also distributors, passes to such distributors when we are notified by them that they have taken transfer or possession of the relevant portion of our finished goods. Freight billed to customers is presented as revenues, and the related freight costs are presented as cost of goods sold. Cancelled orders are refunded if not already dispatched, refunds are only paid if stock is damaged in transit, discounts are only offered with specific promotions and orders will be refilled if lost in transit. We recognize revenue for our digital products in the month the download by the customer occurs.

All product sales were initiated based upon the retailer’s purchase orders at a fixed transaction price and revenues recognized when the products were delivered and accepted by the customer.

Contract Liabilities

Our contract liabilities consist of advance customer payments and deferred revenue. Contract liability results from transactions in which we have been paid for products by customers, but for which all revenue recognition criteria have not yet been met. Once all revenue recognition criteria have been met, the contract liabilities are recognized.

Income Taxes

We utilize 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.

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We generated a deferred tax asset through net operating loss carry-forward. However, a valuation allowance of 100% has been established due to the uncertainty of our realization of the net operating loss carry forward prior to its expiration.

NomadChoice Pty Ltd, our wholly-owned Australian subsidiary, is subject to income taxes in the jurisdictions in which it operates. Significant judgment is required in determining the provision for income tax. There are many transactions and calculations undertaken during the ordinary course of business for which the ultimate tax determination is uncertain. We recognize liabilities for anticipated tax audit issues based on our current understanding of the tax law. Where the final tax outcome of these matters is different from the carrying amounts, such differences will impact the current and deferred tax provisions in the period in which such determination is made.