Synergy CHC Corp. 10-K

ITEM 9A. CONTROLS AND PROCEDURES. Evaluation of Disclosure Controls and Procedures Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As required by paragraph (b) of Rules 13a-15 or 15d-15 under the Exchange Act, our management, with the participation of our chief executive officer (our principal executive officer) and our chief financial officer (our principal financial officer and principal accounting officer) evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this annual report, being December 31, 2019. Based on this evaluation, these officers concluded that, as of December 31, 2019, these disclosure controls and procedures were not effective to ensure that the information required to be disclosed by our company in reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. The conclusion that our disclosure controls and procedures were not effective was due to the presence of material weaknesses in internal control over financial reporting as identified below under the heading “Management’s Report on Internal Control over Financial Reporting.” Management anticipates that such disclosure controls and procedures will not be effective until the material weaknesses are remediated. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within our company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Management’s Annual Report on Internal Control over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The term “internal control over financial reporting” is defined as a process designed by, or under the supervision of, an issuer’s principal executive and principal financial officers, or persons performing similar functions, and effected by the issuer’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that: (1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the issuer; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the issuer; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements. Under the supervision of our chief executive officer (our principal executive officer) and, our chief financial officer (our principal financial officer and principal accounting officer), we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2019 using the criteria established in Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This evaluation included review of the documentation of controls, evaluation of the design effectiveness of controls, testing of the operating effectiveness of controls and a conclusion on this evaluation. Based on this evaluation, our management concluded our internal control over financial reporting was not effective as at December 31, 2019. 17 A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019, we determined that there were control deficiencies that constituted material weaknesses which are indicative of many small companies with small staff, such as: (1) inadequate segregation of duties and effective risk assessment; and (2) insufficient written policies and procedures for accounting and financial reporting with respect to the requirements and application of both generally accepted accounting principles in the United States and guidelines of the Securities and Exchange Commission. These control deficiencies resulted in a reasonable possibility that a material misstatement of the annual or interim financial statements could not have been prevented or detected on a timely basis. As a result of the material weaknesses described above, we concluded that we did not maintain effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control Integrated Framework issued by COSO. Our management is currently evaluating remediation plans for the above deficiencies. During the period covered by this annual report on Form 10-K, we have not been able to remediate the remaining weaknesses described above. However, we plan to take steps to enhance and improve the design of our internal control over financial reporting. Changes in Internal Control There has been no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the year ended December 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As a “smaller reporting company,” as defined by Item 10 of the Regulation S-K, we are not required to include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. ITEM 9B. OTHER INFORMATION. None. 18 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE. Directors and Executive Officers The following table sets forth the names of the members of our Board of Directors and executive officers, and the position with the Company held by each. Name Age Title Tenure Jack Ross 54 Chief Executive Officer, Chief Financial Officer and Director Since October 2014 Stephen Fryer 81 Director Since December 2014 Paul SoRelle 63 Director Since December 2014 Gale Bensussen 72 Director Since October 2017 Patrick McCullough 55 President Since October 2017 Each director is elected to hold office until the next annual meeting of shareholders and until his/her successor has been qualified and elected. Our President, Chief Executive Officer and Chief Financial Officer serve at the discretion of our Board of Directors. There are no understandings between any of our directors or executive officer or any other person pursuant to which any executive officer or director was or is to be selected as an executive officer or director. Furthermore, there are no family relationships between any director, executive officer, or person nominated or chosen by us to become a director or executive officer. Background of Executive Officer and Board of Directors The following is a brief account of the business experience of each director, director nominee and executive officer of the Company. Jack Ross - Chief Executive Officer, Chief Financial Officer and Director Mr. Ross serves as our Chief Executive Officer and Chief Financial Officer and prior to October 2017 served as our President. Mr. Ross is currently the sole officer and director of Pure Sports Inc., positions he has held since February 2009, the sole officer and director of Gowan Capital Inc., positions he has held since May 2011, the sole officer and director of Synergy Energy Strips World Wide Inc., positions he has held since August 2011, the sole officer and director of Rio e Cigs Inc., positions he has held since December 2011, and the sole officer and director of Kenek Brands Inc., positions he has held since May 2014. From January 2012 to April 2014, Mr. Ross served as the sole officer and director of Synergy Strips Corp., which was acquired by and became a wholly owned subsidiary of the Company in April 2014 (the “Subsidiary”) in connection with the Merger. Other than the Subsidiary, none of these companies are related to or affiliated with the Company. Mr. Ross’s significant leadership experience at various private and public companies led to the conclusion that he should serve as a member of our Board of Directors, in light of our business and structure. Mr. Stephen Fryer - Director Since April 2003, Mr. Fryer has been the Chief Executive Officer and Managing Partner of SC Capital Partners, Inc., a private micro-market investment banking and private equity intermediary. Prior to joining SC Capital Partners, Inc., Mr. Fryer was a consulting investment banker with Grant Bettingen, Inc., a broker-dealer based in California, from January 2001 to March 2003. From May 1989 to August 1997, Mr. Fryer was the Principal and Managing Director of Ventana International, Ltd., a venture capital and private investment banking firm with operations and investors in the United States, Latin America, Europe and Asia. Mr. Fryer earned a B.S. in Mechanical Engineering, with a minor in Economics, from the University of Southern California. Mr. Fryer’s substantial experience in the investment banking industry, and his demonstrated skill in corporate finance, led to the conclusion that he should serve as a member of our Board of Directors, in light of our business and structure. Mr. Paul SoRelle - Director Since November 1999, Mr. SoRelle has been the Chief Executive Officer and Managing Partner of Pioneer Press of Greeley, Inc., a commercial offset printing company. Prior to joining Pioneer Press, Mr. SoRelle worked in the gaming business as well as the retail gasoline and convenience store business. Mr. SoRelle’s significant leadership experience at Pioneer Press of Greeley, Inc. led to the conclusion that he should serve as a member of our Board of Directors, in light of our business and structure. Mr. Gale Bensussen - Director On October 12, 2017, our Board of Directors appointed Gale Bensussen as an independent member of the Board of Directors. Since October 2017, Mr. Bensussen has served as a director of Kingdomway U.S.A. Corp, a wholly-owned subsidiary of Kingdomway Group Companies publicly traded on the Shenzen stock exchange. Since January 2017, Mr. Bensussen has served as Chairman of Vit-Best, and from September 2017 to January 2017 he served as President and CEO. Mr. Bensussen has served as President and CEO, and Chairman of Doctor’s Best since November 2013 and May 2016, respectively. Since January 2012, Mr. Bensussen has served as Advisor to North Castle Partners, LLC. Mr. Bensussen holds a Bachelor’s degree from the University of Southern California and a Juris Doctor degree from Southwestern University School of Law. Mr. Bensussen’s considerable experience in one of our main industries led to the conclusion that he should serve as a member of our Board of Directors. Patrick S. McCullough - President From 2014 to October 2017, Mr. McCullough served as Chief Commercial Officer of InterHealth Nutraceuticals, Inc., a supplier of nutritional ingredient for use in dietary supplements, which was acquired in September of 2016 by Lonza Group Ltd, a multinational chemicals and biotechnology company based in Switzerland. From 2013 to 2014, Mr. McCullough was a Senior Vice President of Sales for Corr-Jensen Inc., a manufacturer of exercise and weight-loss products and dietary supplements. Prior to Corr-Jensen, Mr. McCullough was the President of Unique Nutritional Supplements, LLC, a dietary supplements company. From 2008 to 2011, Mr. McCullough served as President, Chief Operating Officer, and Vice President of Sales for Natrol LLC, a manufacturer of vitamins and dietary supplements. Legal Proceedings No director, director nominee, executive officer, or control person of the Company has been involved in any legal proceeding listed in Item 401(f) of Regulation S-K in the past 10 years. 19 CORPORATE GOVERNANCE Director Independence As of April 7, 2020, we have four directors. Each director is elected to hold office for a one year period or until the next Annual Meeting of Shareholders and until his/her successor has been qualified and elected following the one year of service. Our common stock is not listed on any exchange. Consequently, no exchange rules regarding director independence are applicable to us. However, we have applied the director independence test of The NASDAQ Capital Market and Mr. Fryer and Mr. SoRelle are independent directors. Officers serve at the discretion of the Company’s directors. There are no understandings between the director of the Company or any other person pursuant to which any officer or director was or is to be selected as an officer or director. Code of Ethics The Company does not have a code of ethics for our principal executive or principal financial officers, due to our size and current stage of development. The Company’s management intends to promote honest and ethical conduct, full and fair disclosure in our reports to the SEC, and compliance with applicable governmental laws and regulations. Committees The Company does not have any standing committees and the Board of Directors performs the duties of an audit committee, nominating committee and compensation committee. Since the Company has no standing committees, the Company does not have any written charters governing such committees’ conduct. Nominating Committee We do not have a nominating committee, as we believe the Company is too small to warrant a separate standing nominating committee. Director Jack Ross is responsible for selecting individuals to stand for election as members of our Board of Directors. The Company does not have a policy with regards to the consideration of any director candidates recommended by our stockholders. Our Board of Directors has determined that it is in the best position to evaluate our Company’s requirements as well as the qualifications of each candidate when it considers a nominee for a position on our Board of Directors. If stockholders wish to recommend candidates directly to our Board of Directors, they may do so by communicating directly with Jack Ross, our Chief Executive Officer and the Chairman of our Board of Directors by mail, at Synergy CHC Corp., Attn: CEO, 865 Spring Street, Westbrook, ME 04092, or by telephone at (615) 939-9004. Audit Committee We do not have an audit committee currently serving and, as a result, our Board of Directors performs the duties of an audit committee. We also do not have an “audit committee financial expert,” as such term is defined in Item 407(d)(5)(ii) of Regulation S-K, however we feel that our directors’ backgrounds and financial sophistication is sufficient to fulfill the duties of the audit committee. Compensation Committee We do not have a compensation committee, as we believe the Company is too small to warrant a separate standing compensation committee. As a result, our Board of Directors performs the duties of a compensation committee. While the Company believes that its current size does not warrant a separate standing compensation committee, it will reassess that need if and when additional directors are appointed and/or elected. Shareholder Communications Shareholders may send written communications on the Company’s web site: www.synergychc.com 20 SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE Section 16(a) of the Exchange Act requires the Company’s executive officers, directors, and persons who beneficially own more than 10% of a registered class of the Company’s equity securities to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock and other equity securities. These executive officers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms filed by such reporting persons. Based solely upon the Company’s review of such forms furnished to it, the Company believes that during the fiscal year ended December 31, 2019, all of its executive officers, directors, and every person who is directly or indirectly the beneficial owner of more than 10% of any class of the Company’s securities, complied with the filing requirements of Section 16(a) of the Exchange Act. ITEM 11. EXECUTIVE COMPENSATION. The following table sets forth certain information about compensation paid, earned or accrued for services for each executive officer for the past two fiscal years. Summary Compensation Table Year Salary Bonus Stock Awards Option Awards All Other Compensation Total Jack Ross (1) 2019 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 Chairman, Chief Financial Officer and Chief Executive Officer 2018 0 0 0 0 0 0 Patrick S. McCullough (2) 2019 299,994 0 0 0 0 299,994 President 2018 299,994 37,500 0 0 0 337,494 Jeffrey Kadanoff (3) 2019 0 0 0 0 0 0 Chief Financial Officer (former) 2018 472,535 0 0 0 0 472,535 (1) Mr. Ross also served as our President until October 2017. (2) Mr. McCullough was hired in October 2017. (3) Mr. Kadanoff was hired in October 2017 and terminated in August 2018. We have not made provisions for paying cash or non-cash compensation to our directors. No salary is being paid to Mr. Ross for serving as our Chief Executive Officer and no fees are being paid at the present time to our directors. Employment Agreements On October 17, 2017, we entered into an employment agreement with Patrick S. McCullough to serve as our President. Mr. McCullough receives an annual base salary of $340,000. He received a cash signing bonus of $37,500, paid on January 1, 2018, and an additional cash signing bonus of $37,500, paid on July 1, 2018. Mr. McCullough will be eligible for an annual bonus of up to 25% of his base salary. The annual bonus will be determined at the discretion of our Board or compensation committee based upon the achievement of financial goals established by our Chief Executive Officer. Mr. McCullough will also be eligible for additional bonus compensation based on our achievement of certain annual earnings and retail sales goals established each year by our Chief Executive Officer. Subject to our achievement of an annual overall earnings goal and certain adjustments in the event of future acquisitions we make, Mr. McCullough will be eligible to receive 5% of all of our retail sales in excess of the annual retail sales goal set by the Chief Executive Officer. The Employment Agreement has a three-year initial term ending on November 6, 2020 that will automatically renew for additional one-year terms unless terminated by us or by Mr. McCullough. If we terminate Mr. McCullough’s employment for cause or due to his disability, as each term is defined in the employment agreement, Mr. McCullough will be entitled to receive only the accrued compensation due to him as of the date of such termination. If Mr. McCullough resigns for any reason he will be entitled only to payment of his accrued compensation as of such date. If we terminate Mr. McCullough’s employment without cause, then conditioned upon Mr. McCullough executing a release following such termination, Mr. McCullough will continue to receive his base salary and certain benefits for a period of time following the effective date of the termination of his employment (i) for a period of 12 months if Mr. McCullough is terminated within one year of his start date or (ii) for the remainder of the then-current term of the employment agreement if Mr. McCullough is terminated after the first anniversary of his start date. In addition, Mr. McCullough’s eligibility for his annual bonus and retail sales bonus will be pro-rated for the time before his termination. If more than 50% of the equity ownership interest in our company is sold or transferred to a third party who is not an affiliate of an existing stockholder during the initial term of the employment agreement, Mr. McCullough will be entitled to all base salary and car allowance payments for the remainder of the term of the employment agreement. In addition, the unvested portion of the options granted upon execution of the employment agreement will immediately vest and become exercisable. 21 On October 10, 2017, we entered into an employment agreement with Jeffrey Kadanoff to serve as our Chief Financial Officer, effective as of October 16, 2017. Mr. Kadanoff will receive an annual base salary of $450,000. He received a signing bonus consisting of: (i) 100,000 shares of our common stock, and (ii) a cash payment equal to the value of 100,000 shares of our common stock based on a price of $0.55 per share. He received an agreed upon annual bonus for 2017 of $37,500. Beginning with calendar year 2018, Mr. Kadanoff will be eligible for an annual target bonus of up to half his base salary. The target bonus will be determined at the discretion of our Board or compensation committee based upon the achievement of financial and other performance-related goals and may be paid in cash or shares of our common stock. Subject to the approval by the Board, during each calendar year of Mr. Kadanoff’s employment beginning with 2018, we will grant him an option to purchase 500,000 shares of our common stock, with an exercise price equal to the fair market value of the common stock on the date of each respective grant and that will vest in three equal annual installments on the first three anniversaries of the respective date of grant, provided that Mr. Kadanoff remains employed on each such date. Upon the occurrence of a change in control a defined in the agreement, the vesting of stock options granted to Mr. Kadanoff will be accelerated subject to his continued service on such date and provided further that Mr. Kadanoff’s stock options will be treated no less favorably than those of any other senior executive officer or our Chairman. If we terminate Mr. Kadanoff’s employment for Cause, death or Disability, or Mr. Kadanoff resigns for a purpose other than Good Reason (all as defined in the agreement), Mr. Kadanoff will be entitled to receive only the accrued compensation due to him as of the date of such termination. If we terminate Mr. Kadanoff’s employment without Cause, or if Mr. Kadanoff resigns for Good Reason, and conditioned upon Mr. Kadanoff executing a Release following such termination, Mr. Kadanoff will be entitled to receive separation benefits equal to the sum of his then current annual base salary plus his target annual bonus and a pro-rated rated amount of the target annual bonus for the year in which termination occurs. All unvested stock options granted to Mr. Kadanoff which would otherwise have vested had Mr. Kadanoff remained employed for 12 additional months beyond the date of termination will be accelerated and deemed to have vested as of the effective date of the termination of his employment under such circumstances. If we terminate Mr. Kadanoff’s employment without Cause, or if Mr. Kadanoff resigns for Good Reason, in either case at the time of or within 24 months following a Change in Control, and conditioned upon Mr. Kadanoff executing a Release following such termination, Mr. Kadanoff will be entitled to receive CIC Separation Benefits equal to the greater of: (i) two times the sum of Mr. Kadanoff’s then-current annual base salary plus his target annual bonus, or (ii) two times the sum of (A) Mr. Kadanoff’s average base salary actually paid over the preceding two years, plus (B) the average annual bonus actually paid over the preceding two years. In addition to the foregoing benefits, all stock and options granted to Mr. Kadanoff will be accelerated subject to his continued employment as of such date and provided further that Mr. Kadanoff’s stock options will be treated no less favorably than those of any other senior executive or our chairman. On October 23, 2018 we entered into a release agreement with Mr. Kadanoff whereby the Company agreed to pay $675,000 in four equal installments payable on November 30, 2018, February 28, 2019, May 31, 2019 and August 30, 2019. If the Company completes a financing or asset sale resulting in proceeds to the Company greater than $10,000,000 or an acquisition with financing resulting in an increase of greater than $3,000,000 in working capital before the final installment is made, the Company will accelerate any remaining installments and will pay Mr. Kadanoff within ten days of closing such transaction. The Company immediately vested 500,000 of Mr. Kadanoff’s unvested stock options, however they expired on December 28, 2018. Within ten days of execution of the release, the Company paid to Mr. Kadanoff a one-time fee of $74,189. 22 Equity Compensation Plans The following table summarizes the changes in options outstanding and the related prices for the shares of the Company’s common stock issued to employees and consultants under a stock option plan at December 31, 2019: Options Outstanding Options Exercisable Exercise Prices ($) Number Outstanding Weighted Average Remaining Contractual Life (Years) Weighted Average Exercise Price ($) Number Exercisable Weighted Average Exercise Price ($) $ 0.25-0.70 6,166,667 5.6 $ 0.54 5,833,333 $ 0.53 The stock option activity for the year ended December 31, 2019 is as follows: Options Outstanding Weighted Average Exercise Price Outstanding at December 31, 2017 8,666,667 $ 0.51 Granted - - Exercised - - Expired or canceled (1,500,000 ) (0.55 ) Outstanding at December 31, 2018 7,166,667 $ 0.50 Granted - - Exercised - - Expired or canceled (1,000,000 ) 0.25 Outstanding at December 31, 2019 6,166,667 $ 0.54 Stock-based compensation expense related to vested options was $161,570 and $440,999 during the years ended December 31, 2019 and 2018, respectively. The Company determined the value of share-based compensation for options vesting during the year ended December 31, 2017 using the Black-Scholes fair value option-pricing model with the following weighted average assumptions: estimated fair value of Company’s common stock of $0.48-0.50, risk-free interest rate of 1.95-1.99%, volatility of 116-117%, expected lives of 10 years, and dividend yield of 0%. Stock options outstanding as of December 31, 2019, as disclosed in the above table, have an intrinsic value of $0. Outstanding Equity Awards at Fiscal Year-End The following table contains certain information concerning unexercised options for our executive officers as of December 31, 2019. Option awards Stock awards Name Number of securities underlying unexercised options exercisable Number of securities underlying unexercised options unexercisable Equity incentive plan awards: Number of securities underlying unexercised unearned options Option exercise price Option expiration date Number of shares or units of stock that have not vested Market value of shares of units of stock that have not vested Equity incentive plan awards: Number of unearned shares, units or other rights that have not vested Equity incentive plan awards: Market or payout value of unearned shares, units or other rights that have not vested - - - - - - - - - Patrick McCullough 1,000,000 0.70 10/10/27 Director Compensation The following table provides information regarding all compensation paid to non-employee directors during the fiscal year ended December 31, 2019. Name Fees earned or paid in cash Stock awards Option awards Non-equity incentive plan compensation Nonqualified deferred compensation earnings All other compensation Total Jack Ross $ - - - - - - $ - Stephen Fryer $ - - - - - - $ - Paul SoRelle $ - - - - - - $ - Gale Bensussen $ - - - - - - $ - 23 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS. The following table sets forth certain information regarding our common stock beneficially owned as of April 7, 2020, for (i) each stockholder known to be the beneficial owner of 5% or more of our outstanding common stock, (ii) each executive officer and director, and (iii) all executive officers and directors as a group. To the best of our knowledge, subject to community and marital property laws, all persons named have sole voting and investment power with respect to such shares, except as otherwise noted. Common Stock Beneficially Owned Number of shares beneficially owned (1) Percentage of shares beneficially owned (2) Executive officers and directors: (1) Jack Ross (3) 48,614,433 53.5 % Stephen Fryer (4) 1,000,000 1.10 % Paul SoRelle (5) 2,296,658 2.53 % Gale Bensussen - - Patrick McCullough (4) 1,000,000 1.10 % All directors and executive officers as a group (5 persons) 52,911,091 57.44 % 5% Stockholders: (2) Gowan Private Equity Inc (3) 43,780,750 48.71 % Knight Therapeutics (Barbados) Inc.(6) 17,645,812 19.63 % (1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote, or to direct the voting of shares; and (ii) investment power, which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. As a result, the percentage of outstanding shares of any person as shown in this table does not necessarily reflect the person’s actual ownership or voting power with respect to the number of shares of common stock actually outstanding. (2) Based on 89,889,074 shares outstanding on April 7, 2020. (3) This stockholder’s address is: 275 Canterbury Lane, Fall River NS B2T 1A4, Canada. Jack Ross is the Chief Executive Officer of Kenek Brands, Inc., Dunhill Distribution Group, Inc. and Gowan Private Equity Inc. Gowan Private Equity owns 43,780,750 shares. Dunhill Distribution Group owns 3,208,649 shares and Gowan Capital Inc. owns 1,625,034 shares. (4) Consists of an option to purchase 1,000,000 shares of common stock. (5) Consists of 1,296,658 shares of common stock owned by the SoRelle Family Partnership LLP and an option to purchase 1,000,000 shares of common stock held by Mr. SoRelle. (6) Consists of 17,645,812 shares of common stock. This stockholder’s address is Chancery House, High Street, Bridgetown, Barbados. 24 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE. TRANSACTIONS WITH RELATED PERSONS The information required by Item 407(a) of Regulation S-K is included in this Annual Report on Form 10-K under the heading Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE – Director Independence. The Company has not been a party to any transaction in which the amount involved exceeded or will exceed the lesser of $120,000 or 1% of the average of its total assets at year end for the last two fiscal years, and in which any of its directors, named executive officers or beneficial owners of more than 5% of the Company’s capital stock, or an affiliate or immediate family member thereof, had or will have a direct or indirect material interest, other than described below: The Company accrued and paid consulting fees of $57,917 per month through December 2019 to a company owned by Mr. Jack Ross, Chief Executive Officer of the Company. The Company also paid thirteen months of a vehicle allowance of $1,500 per month. The Company expensed $824,413 and $648,944, respectively during 2019 and 2018 as consulting fees, and made payments totaling $852,626 and $648,944 towards services to an entity owned and controlled by an officer and shareholder of the Company for the year ended December 31, 2019 and 2018, respectively. As of December 31, 2019 and 2018, the total outstanding balance was $0 and $28,213, respectively. On January 22, 2015, the Company entered into a Loan Agreement with Knight Therapeutics (Barbados) Inc. a related party (owner of greater than 10% shares of the Company), for the purchase of the Focus Factor assets. At December 31, 2017, the Company owed Knight $559,243 on this loan, net of discount, which was paid-off during 2018 (see Note 11). On June 26, 2015, the Company entered into a Security Agreement with Knight Therapeutics, Inc., through its wholly owned subsidiary Neuragen Corp. for the purchase of Knight Therapeutics, Inc.’s assets. At December 31, 2019 and 2018, the Company owed Knight $475,000 and $525,000 on this agreement (see Note 11). The Company recorded present value of future payments of $260,461 and $272,151 as of December 31, 2019 and 2018, respectively. On August 18, 2015, the Company entered into a Consulting Agreement with Kara Harshbarger, the co-founder of Hand MD, LLC, pursuant to which she will provide marketing and sales related service. The Company will pay Ms. Harshbarger $10,000 a month for one year unless the Consulting Agreement is terminated earlier by either party. Hand MD, LLC is a 50% owner in Hand MD Corp. The Company expensed $120,000 through payroll for each of the years ended December 31, 2019 and 2018. As of December 31, 2019 and 2018, the total outstanding balance was $0. On December 23, 2016, we entered into an agreement with Knight Therapeutics for the distribution rights of FOCUSFactor in Canada. In conjunction with this agreement, we are required to pay Knight a distribution fee equal to 30% of gross sales for sales achieved through a direct sales channel and 5% of gross sales for sales achieved through retail sales. The minimum due to Knight under this agreement is $100,000 Canadian dollars. As of December 31, 2019 and 2018, the total outstanding balance was $100,000 and $200,000 Canadian dollars. In US Dollars, the total outstanding balance was $70,295 and $152,834 as of December 31, 2019 and 2018, respectively. On December 23, 2016, we entered into an agreement with Knight Therapeutics for the distribution rights of Hand MD into Canada. In conjunction with this agreement, we are required to pay Knight a distribution fee equal to 60% of gross sales for sales achieved through a direct sales channel until the sales in the calendar year equal the threshold amount and then 40% of all such gross sales in such calendar year in excess of the threshold amount and 5% of gross sales for sales achieved through retail sales. The minimum due to Knight under this agreement is $25,000 Canadian dollars. As of both December 31, 2019 and 2018, the total outstanding balance was $25,000 Canadian dollars. In US Dollars, the total outstanding balance was $17,574 and $18,325 as of December 31, 2019 and 2018, respectively. On August 9, 2017, the Company entered into a Loan Agreement with Knight Therapeutics (Barbados) Inc., a related party, for a working capital loan. At December 31, 2019 and 2018, the Company owed Knight $5,451,568 and $7,320,739, respectively, on this loan, net of debt issuance cost (see Note 11). The Company expensed royalty of $4,867 and $16,066 for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company owed Knight Therapeutics $246 and $5,906, respectively, in connection with a royalty distribution agreement. The Company expensed commissions of $9,065 and $43,374 for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company owed Founded Ventures, owned by a shareholder in the Company, $0 and $10,579, respectively, in connection with a commission agreement. The Company expensed commissions of $644 and $10,016 for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company owed Founded Ventures $0 and $3,547, respectively in connection with a commission agreement. The Company expensed royalty of $0 and $2,361 for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company owed Knight Therapeutics $0 and $193, respectively, in connection with a royalty distribution agreement. The Company paid $14,801 and $250,000 for the years ended December 31, 2019 and 2018, respectively, to Hand MD, Corp, related to a royalty agreement. As of both December 31, 2019 and 2018, the Company owed Hand MD Corp. $0 in minimum future royalties. The Company expensed royalty of $192,700 and $392,589 for the years ended December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, the Company owed Knight Therapeutics $5,528 and $109,329, respectively, in connection with a royalty distribution agreement. A member of the Company’s Board of Directors is an executive officer of a supplier to the Company. During the years ended December 31, 2019 and 2018, the Company acquired $4,847,626 and $4,392,245, of products from the supplier, respectively, and included in cost of sales. The Company owed the supplier $956,438 and $1,775,617, respectively at December 31, 2019 and 2018. The Company entered into transactions with a related party controlled by CEO, during the year ended December 31, 2019. The transactions were a pass through of expenses and reimbursements. During the year ended December 31, 2019, the Company received advances of $324,102 ($430,000 Canadian Dollars), which were fully repaid. As of December 31, 2019, there was $0 due or payable. The Company entered into transactions with a related party controlled by the CEO, during the year ended December 31, 2019. The transactions were a pass through and allocation of expenses and reimbursements. As of December 31, 2019 the Company was owed $277,432. 25 ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES. Audit Committee’s Pre-Approval Practice Prior to our engagement of our independent auditor, such engagement was approved by our board of directors. The services provided under this engagement may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. Pursuant our requirements, the independent auditors and management are required to report to our board of directors at least quarterly regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. Our board of directors may also pre-approve particular services on a case-by-case basis. All audit-related fees, tax fees and other fees incurred by us for the year ended December 31, 2019 and 2018, were approved by our board of directors. RBSM LLP serves as our independent registered public accounting firm. Independent Registered Public Accounting Firm Fees and Services The following table sets forth the aggregate fees including expenses billed to us for the years ended December 31, 2019 and 2018 by our auditors. Year Ended Year Ended December 31, 2019 December 31, 2018 Audit Fees (1) $ 145,000 $ 172,000 Audit-Related Fees (2) - - Tax Fees (3) - 21,900 All Other Fees (4) - - Total $ 145,000 $ 193,900 (1) Audit Fees - This category includes the audit of the Company’s annual financial statements, review of financial statements included in its Quarterly Reports on Form 10-Q, and services that are normally provided by independent auditors in connection with the engagement for fiscal years. (2) Audit-Related Fees - This category consists of fees reasonably related to the performance of the audit or review of the Company’s financial statements that are not reported as “Audit Fees.” (3) Tax Fees - This category consists of tax compliance, tax advice, and tax planning work. (4) All Other Fees - This category consists of fees for other miscellaneous items. 26 PART IV ITEM 15. EXHIBITS FINANCIAL STATEMENT SCHEDULES. The following documents are filed as part of this report: 1. Consolidated Financial Statements INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Financial Statements Report of Independent Registered Public Accounting Firm F-1 Consolidated Balance Sheets F-2 Consolidated Statements of Operations and Comprehensive Loss F-3 Consolidated Statements of Stockholders’ Equity F-4 Consolidated Statements of Cash Flows F-5 – F-6 Notes to Consolidated Financial Statements F-7 2. Consolidated Financial Statement Schedules None. 3. Exhibits Incorporated by Reference Exhibit (Unless Otherwise Indicated) Number Exhibit Title Form File Exhibit Filing Date 2.1 Agreement and Plan of Merger, dated April 7, 2014, by and among Oro Capital Corporation, Synergy Merger Sub, Inc. and Synergy Strips Corp. 8-K 000-55098 2.1 4/9/2014 2.2 Agreement and Plan of Merger dated April 21, 2014 (incorporated by reference to the Registrant’s Current Report on Form 8-K filed on April 9, 2014). 8-K 000-55098 2.1 5/7/2014 2.3 Asset Purchase Agreement, dated January 22, 2015, by and among Synergy Strips Corp.; Factor Nutrition Labs, LLC; Vita Partners, LLC, RPR Partners, LLC, and Thor Associates, Inc. 10-K 000-55098 2.3 3/31/2015 2.4 Asset Purchase Agreement, dated June 26, 2015, by and between Neuragen Corp. and Knight Therapeutics, Inc. 8-K 000-55098 2.4 7/2/2015 3.1 Articles of Incorporation S-1 333-185103 3.1 11/21/2012 3.2 Amendment to Articles of Incorporation 8-K 000-55098 3.1(b) 5/7/2014 3.3 Certificate of Amendment to Articles of Incorporation 8-K 000-55098 3.4 8/6/2015 3.4 By-Laws S-1 333-185103 3.2 11/21/2012 3.5 Amendment to By-Laws 8-K 000-55098 3.2 6/26/2015 4.1 Form of Subscription Agreement S-1/A 333-185103 4.1 2/19/2013 27 4.2 Synergy Strips Corp. Common Stock Purchase Warrant, dated January 22, 2015. 10-K 000-55098 4.2 3/31/2015 4.3 Synergy Strips Corp. Common Stock Purchase Warrant (10-Year Warrant), dated January 22, 2015. 10-K 000-55098 4.3 3/31/2015 4.4 Synergy CHC Corp. Common Stock Purchase Warrant, dated November 12, 2015. 8-K 000-55098 4.4 11/18/2015 4.5 Synergy CHC Corp. Common Stock Purchase Warrant (10-Year Warrant), dated November 12, 2015. 8-K 000-55098 4.5 11/18/2015 4.6 Synergy CHC Corp. Common Stock Warrant dated December 17, 2015. 8-K 000-55098 4.6 12/22/2015 10.1 Form of Sales and Marketing Consultant and Distribution Agreement, dated April 2, 2014. 8-K 000-55098 10.1 5/7/2014 10.2 Sales and Marketing Consultant and Distribution Agreement, dated April 2, 2014, between Synergy Strips Corp. and Kenek Brands Inc. 8-K 000-55098 10.1 5/7/2014 10.3 Loan Agreement, dated January 22, 2015, between Knight Therapeutics (Barbados) Inc. and Synergy Strips Corp. 10 -K 000-55098 10.5 3/31/2015 10.4 Product Distribution Option Agreement, dated January 22, 2015, between Knight Therapeutics (Barbados) Inc. and Synergy Strips Corp. 10-K 000-55098 10.6 3/31/2015 10.5 Distribution, License and Supply Agreement, dated January 22, 2015, by and between Synergy Strips Corp. and Knight Therapeutics (Barbados) Inc. 10-K 000-55098 - 3/31/2015 10.6 Synergy Strips Corp. 2014 Equity Incentive Plan 8-K 000-55098 10.8 8/6/2015 10.7 Contribution Agreement, dated August 18, 2015, between Synergy CHC Corp. and Hand MD Corp. 8-K 000-55098 10.9 8/21/2015 10.8 Contribution Agreement, dated August 18, 2015, among Hand MD, LLC, Principal Owners as listed therein, Synergy CHC Corp. and Hand MD. Corp. 8-K 000-55098 10.10 8/21/2015 10.9 Intellectual Property License Agreement, dated August 18, 2015, by and between Synergy CHC Corp. and Hand MD. Corp. 8-K 000-55098 10.11 8/21/2015 10.10 Consulting Agreement, dated August 18, 2015, by and between Synergy CHC Corp. And Kara Harshbarger. 8-K 000-55098 10.12 8/21/2015 10.11 Stock Purchase Agreement, dated November 12, 2015, by and among Breakthrough Products, Inc., URX ACQUISITION TRUST, Jordan Eisenberg, other shareholders as listed therein and Synergy CHC Corp. 8-K 000-55098 10.13 11/18/2015 10.12 Share Purchase Agreement, dated November 15, 2015, between TPR Investments Pty Ltd CAN 128 396 654 as trustee for Polmear Family Trust, Timothy Polmear and Rebecca Polmear, NomadChoice Pty Limited ACN 160 729 939 trading as Flat Tummy Tea and Synergy CHC Corp. 8-K 000-55098 10.14 11/18/2015 28 10.13 First Amendment to Loan Agreement, dated November 12, 2015, between Knight Therapeutics (Barbados) Inc. and Synergy CHC Corp. 8-K 000-55098 10.15 11/18/2015 10.14 Amendment to First Amendment Agreement, dated December 3, 2015, between Knight Therapeutics (Barbados) Inc. and Synergy CHC Corp. 8-K 000-55098 10.16 12/9/2015 10.15 Amendment and Confirmation Agreement, dated December 3, 2015, by and among Knight Therapeutics (Barbados) Inc., Nomad Choice Pty Ltd., Synergy CHC Corp. and Breakthrough Products, Inc. 8-K 000-55098 10.17 12/9/2015 10.16 Settlement and Release Agreement, dated December 17, 2015, by and between Synergy CHC Corp., the former shareholders of Breakthrough Products, Inc. and URX ACQUISITION TRUST and as representative of certain shareholders. 8-K 000-55098 10.18 12/22/2015 21.1 Subsidiaries of the Registration - - - Filed herewith 31.1 Certification of Principal Executive Officer pursuant to Rule 13a-14(a) - - - Filed herewith 31.2 Certification of Principal Financial Officer pursuant to Rule 13a-14(a) - - - Filed herewith 32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350 - - - Filed herewith 32.2 Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350 - - - Filed herewith 101.INS XBRL Instance Document. - - - Furnished herewith 101.SCH XBRL Taxonomy Extension Schema Document. - - - Furnished herewith 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document. - - - Furnished herewith 101.DEF XBRL Taxonomy Extension Definition Linkbase Document. - - - Furnished herewith 101.LAB XBRL Taxonomy Extension Label Linkbase Document. - - - Furnished herewith 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. - - - Furnished herewith 29 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SYNERGY CHC CORP. Date: April 29, 2020 By: /s/ Jack Ross Chief Executive Officer Pursuant to the requirements of the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURE TITLE DATE /s/ Jack Ross Chief Executive Officer April 29, 2020 Jack Ross (principal executive officer) /s/ Stephen Fryer Director April 29, 2020 Stephen Fryer /s/ Paul SoRelle Director April 29, 2020 Paul SoRelle /s/ Gale Bensussen Director April 29, 2020 Gale Bensussen /s/ Patrick McCullough President April 29, 2020 Patrick McCullough 30