Synergy CHC Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations References in this report (the “Quarterly Report”) to “we,” “us” or the “Company” refer to Synergy CHC Corp. References to our “management” or our “management team” refer to our officers and directors. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this Quarterly Report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Our actual results may differ significantly from the results, expectations and plans discussed in these forward-looking statements. Special Note Regarding Forward-Looking Statements This Quarterly Report includes “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act that are not historical facts, and involve risks and uncertainties that could cause actual results to differ materially from those expected and projected. All statements, other than statements of historical fact included in this Quarterly Report including, without limitation, statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” regarding our financial position, business strategy and the plans and objectives of management for future operations, are forward-looking statements. Words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intends,” “may,” “might,” “plan,” “possible,” “potential,” “predict,” “project,” “should,” “would” and variations thereof and similar words and expressions are intended to identify such forward-looking statements. Such forward-looking statements relate to future events or future performance, but reflect management’s current beliefs, based on information currently available. A number of factors could cause actual events, performance or results to differ materially from the events, performance and results discussed in the forward-looking statements. For information identifying important factors that could cause actual results to differ materially from those anticipated in the forward-looking statements, please refer to the Risk Factors section of our final prospectus for our initial public offering filed with the SEC on October 23, 2024 (the “Prospectus”) and the “Risk Factors” section of this report. Our securities filings can be accessed on the EDGAR section of the SEC’s website at www.sec.gov. Except as expressly required by applicable securities law, we disclaim any intention or obligation to update or revise any forward-looking statements whether as a result of new information, future events or otherwise. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Overview We are a provider of consumer health care, beauty, and lifestyle products. Our current brand portfolio consists of two core brands: FOCUSfactor, a clinically-tested brain health supplement (this study was performed independently and is not related to any FDA-approved Investigational New Drug application) that has been shown to improve memory, concentration and focus and Flat Tummy, a lifestyle brand that provides a suite of nutritional products to help women achieve their weight management goals. Our management’s discussion and analysis of our financial condition and results of operations are only based on our current business and should be read in conjunction with our unaudited interim condensed consolidated financial statements and audited consolidated financial statements and accompanying notes thereto included elsewhere in this Quarterly Report. Key factors affecting our results of operations include revenues, cost of revenue, operating expenses and income and taxation. 27 Non-GAAP Financial Measures We currently focus on EBITDA to evaluate our business relationships and our resulting operating performance and financial position. EBITDA is defined as net income plus interest expense, income tax expense, depreciation and amortization. We believe that EBITDA, viewed in addition to, and not in lieu of, our reported results in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”), provides useful information to investors. Three Months Ended September 30, 2025 Three Months Ended September 30, 2024 (Unaudited) (Unaudited) Net income $ 125,327 $ 783,593 Interest income (385 ) (381 ) Interest expense 1,164,402 705,088 Income tax benefit (11,107 ) (192,299 ) Depreciation and amortization 33,333 33,333 EBITDA $ 1,311,570 $ 1,329,334 Nine Months Ended September 30, 2025 Nine Months Ended September 30, 2024 (Unaudited) (Unaudited) Net income $ 2,474,827 $ 2,019,309 Interest income (14,647 ) (1,142 ) Interest expense 4,367,487 2,560,596 Income tax expense 167,540 114,272 Depreciation and amortization 100,000 100,000 EBITDA $ 7,095,207 $ 4,793,035 EBITDA is considered non-GAAP financial measures. EBITDA represents earnings before interest, taxes, depreciation and amortization. Our definition of EBITDA might not be comparable to similarly titled measures reported by other companies. Results of Operations for the Three Months Ended September 30, 2025 and September 30, 2024 During both the three months ended September 30, 2025 and 2024, we focused on developing our currently owned brands into new markets and by product extensions. Our objective is to grow our two targeted verticals (Nutraceuticals and Ready To Drinks (RTDs)) to provide a balanced and synergistic portfolio that drives consumer demand via multiple channels. Our Nutraceuticals vertical consists of FOCUSfactor, including RTDs, and Flat Tummy consumables. Revenue For the three months ended September 30, 2025, we had revenue of $8,010,112 from sales of our products as compared to revenue of $7,126,333 for the three months ended September 30, 2024. The revenue is comprised of the following categories: September 30, 2025 September 30, 2024 Nutraceuticals $ 8,010,112 $ 7,126,333 License Revenue - - $ 8,010,112 $ 7,126,333 28 We had an increase in Nutraceuticals revenue in the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 due to a packaging upgrade that occurred in 2024 which delayed shipments that did not repeat in 2025. Cost of Revenue For the three months ended September 30, 2025, our cost of revenue was $2,329,296. Our cost of revenue for the three months ended September 30, 2024, was $2,335,901. The decrease in cost of sales was primarily due to product mix sold. Gross Profit Gross profit was $5,680,816, or 71% of revenue, for the three months ended September 30, 2025, as compared to gross profit of $4,790,432, or 67% of revenue, for the same period in 2024, an increase of $890,384, or 19%. The increase in gross profit is directly related to the product mix sold. Operating Expenses Selling and Marketing Expenses For the three months ended September 30, 2025, our selling and marketing expenses were $2,729,767 as compared to $2,509,440 for the three months ended September 30, 2024, which is an immaterial increase. General and Administrative Expenses For the three months ended September 30, 2025, our general and administrative expenses were $1,637,706. For the three months ended September 30, 2024, our general and administrative expenses were $1,196,784. The increase is primarily due to public market expenses. Depreciation and Amortization Expenses For the three months ended September 30, 2025, our depreciation and amortization expenses were $33,333 as compared to $33,333 for the three months ended September 30, 2024. Other Income and Expenses For the three months ended September 30, 2025 and 2024 we had other income and expense items as follows: Three months ended September 30, 2025 Three months ended September 30, 2024 Interest expense $ 1,164,402 $ 705,088 Interest income (385 ) (381 ) Other income - (252,405 ) Remeasurement loss on translation of foreign subsidiary 1,773 7,279 Total other (income) expense $ 1,165,790 $ 459,581 For the three months ended September 30, 2025, we had interest expense of $1,164,402 as compared to $705,088 for the three months ended September 30, 2024. The increase is primarily due to the advance and the amortization of original debt discount on the new loan. 29 Net Income For the three months ended September 30, 2025, our net income was $125,327 as compared to a net income of $783,593 for the three months ended September 30, 2024 due to other income in 2024 and higher expenses in 2025. Results of Operations for the Nine Months Ended September 30, 2025 and September 30, 2024 During both the nine months ended September 30, 2025 and 2024, we focused on developing our currently owned brands into new markets and by product extensions. Our objective is to grow our two targeted verticals (Nutraceuticals and RTDs) to provide a balanced and synergistic portfolio that drives consumer demand via multiple channels. Our Nutraceuticals vertical consists of FOCUSfactor, including RTDs, and Flat Tummy consumables. Revenue For the nine months ended September 30, 2025, we had revenue of $21,415,642 from sales of our products and $2,900,000 from a license agreement, as compared to revenue of $24,563,039 for the nine months ended September 30, 2024. The revenue is comprised of the following categories: September 30, 2025 September 30, 2024 Nutraceuticals $ 21,415,642 $ 24,563,039 License Revenue 2,900,000 - $ 24,315,642 $ 24,563,039 We had a decrease in Nutraceuticals revenue in the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024 due to a new product sell-in to one customer in 2024 that did not repeat in 2025. We also had revenue from a license agreement to expand into selected foreign territories. Cost of Revenue For the nine months ended September 30, 2025, our cost of revenue was $6,232,201. Our cost of revenue for the nine months ended September 30, 2024, was $7,421,930. The decrease in cost of sales was primarily due to the decrease in product revenue. Gross Profit Gross profit was $18,083,441, or 74% of revenue, for the nine months ended September 30, 2025, as compared to gross profit of $17,141,106, or 70% of revenue, for the same period in 2024, an increase of $942,335, or 5%. The increase in gross profit is related to the license revenue. Operating Expenses Selling and Marketing Expenses For the nine months ended September 30, 2025, our selling and marketing expenses were $8,668,249 as compared to $9,149,303 for the nine months ended September 30, 2024, which is primarily due to lower revenue and an improved management of promotions in 2025. General and Administrative Expenses For the nine months ended September 30, 2025, our general and administrative expenses were $4,463,745. For the nine months ended September 30, 2024, our general and administrative expenses were $3,449,007. The increase is primarily public market expenses. 30 Depreciation and Amortization Expenses For the nine months ended September 30, 2025, our depreciation and amortization expenses were $100,000 as compared to $100,000 for the nine months ended September 30, 2024. Other Income and Expenses For the nine months ended September 30, 2025 and 2024 we had other income and expense items as follows: Nine months ended September 30, 2025 Nine months ended September 30, 2024 Interest expense $ 4,367,487 $ 2,560,596 Interest income (14,647 ) (1,142 ) Other income - (252,405 ) Gain on settlement of loans (2,154,522 ) - Remeasurement loss on translation of foreign subsidiary 10,762 2,166 Total other expense $ 2,209,080 $ 2,309,215 For the nine months ended September 30, 2025, we had interest expense of $4,367,487 as compared to $2,560,596 for the nine months ended September 30, 2024. The increase is primarily due to an advance taken in 2025, shares issued related to the modification of notes payable and new May 2025 loan. Net Income For the nine months ended September 30, 2025, our net income was $2,474,827 as compared to a net income of $2,019,309 for the nine months ended September 30, 2024 due to a gain on loan settlements. Liquidity and Capital Resources Overview As of September 30, 2025, we had $1,006,489 cash on hand and restricted cash of $100,000 which is held for credit card collateral. Cash Flows from Operating Activities For the nine months ended September 30, 2025, net cash used in operating activities was $3,209,149 compared to net cash used in operating activities of $1,377,479 for the nine months ended September 30, 2024. This increase in net cash used by operating activities for the nine months ended September 30, 2025 is detailed in the table below. 31 For the nine months ended September 30, 2025, net cash used in operating activities of $3,209,149 consisted of our net income of $2,474,827 adjusted by: Amortization of debt discount and debt issuance cost 1,128,795 Depreciation and amortization 100,000 Stock based compensation 19,941 Stock issued for modification of notes payable 847,062 Stock issued for services 127,200 Foreign currency transaction gain 5,655 Remeasurement loss on translation of foreign subsidiary 10,763 Gain on settlement of debt (2,154,522 ) Accounts receivable (1,491,612 ) Other receivables (183,118 ) Loan receivable, related party (32,390 ) Inventory (429,414 ) Prepaid expenses (1,255,502 ) Prepaid expense, related party (737,246 ) Income taxes payable 11,786 Contract liabilities (22,398 ) Accounts payable and accrued liabilities (2,009,905 ) Accounts payable, shareholder 380,929 For the nine months ended September 30, 2024, net cash used in operating activities of $1,377,479 consisted of our net income of $2,019,309 adjusted by: Amortization of debt discount and debt issuance cost $ 47,519 Depreciation and amortization 100,000 Stock based compensation expense 9,224 Foreign currency transaction loss 23,777 Remeasurement gain on translation of foreign subsidiary 2,166 Non cash implied interest 4,799 Accounts receivable (1,965,936 ) Loan receivable, related party 21,269 Inventory 1,815,725 Prepaid expenses (205,975 ) Prepaid expense, related party (396,683 ) Income taxes payable 68,607 Contract liabilities (12,102 ) Accounts payable and accrued liabilities (3,011,384 ) Accounts payable, shareholder 102,206 32 Cash Flows from Investing Activities For the nine months ended September 30, 2025 and 2024, we used net cash of $0 in investing activities. Cash Flows from Financing Activities For the nine months ended September 30, 2025, net cash provided by financing activities was $3,515,856 compared to net cash provided by financing activities of $895,972 for the nine months ended September 30, 2024. The increase was attributable to new loans. Financing activities during the nine months ended September 30, 2025 and 2024: Nine months ended September 30, 2025 Nine months ended September 30, 2024 Proceeds from issuing common stock $ 3,880,462 $ - Advances from related party 135,000 3,395,587 Repayment of notes payable, related party (135,000 ) (157,425 ) Proceeds from notes payable 18,996,250 600,000 Payment of loan financing fees (2,010,953 ) - Repayment of notes payable, shareholder (10,000,000 ) (84,500 ) Repayment of notes payable (7,349,903 ) (2,857,690 ) Key Near-Term Initiatives 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 nine months ended September 30, 2025, and during the year ended December 31, 2024, we had no off-balance sheet arrangements. Inflation The effect of inflation on our operating results was not significant in the nine months ended September 30, 2025 or 2024. Critical Accounting Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. The more critical accounting estimates include estimates related to revenue recognition and accounts receivable allowances. We also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are significant to understanding our results, which are described in Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this report. Recent Accounting Pronouncements Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this report includes Recent Accounting Pronouncements. 33 Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, we have elected not to provide the disclosure required by this item.