SYNERGY CHC CORP. The following discussion and analysis of the results of operations and financial
condition of Synergy for the three months ended
Overview
The Company is in the business of marketing and distributing consumer branded products through various distribution channels primarily in the health and wellness industry. The Company's strategy is to grow both organically and by future acquisition.
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 condensed consolidated financial statements. Key factors affecting our results of operations include revenues, cost of revenues, operating expenses and income and taxation.
Non-GAAP Financial Measures
We currently focus on Adjusted EBITDA to evaluate our business relationships and our resulting operating performance and financial position. Adjusted EBITDA is defined as EBITDA (net income plus interest expense, income tax expense, depreciation and amortization), further adjusted to exclude certain non-cash expenses and other adjustments as set forth below. We present Adjusted EBITDA because we consider it an important measure of our performance and it is a meaningful financial metric in assessing our operating performance from period to period by excluding certain items that we believe are not representative of our core business, such as certain non-cash items and other adjustments.
We believe that Adjusted EBITDA, viewed in addition to, and not in lieu of, our
reported results in accordance with accounting principles generally accepted in
For the three
months ended
March 31, 2020
Net income after tax $ 262,303
Interest income (66 )
Interest expense 158,522
Taxes 285,540
Depreciation 26,152
Amortization 21,450
EBITDA $ 753,901
One Time Expenses - Listing Fees 15,077
Bad debts recovery (170,309 )
Accounts payable write off (180,000 )
Stock-based compensation 38,679
Loss on foreign currency translation and transaction 389,845
Adjusted EBITDA $ 847,193 EBITDA and Adjusted EBITDA are considered non-GAAP financial measures. EBITDA represents earnings before interest, taxes, depreciation and amortization. Adjusted EBITDA represents EBITDA, further adjusted to exclude the impact of higher-than-normal revenue change other activity and certain expenses and transactions that we believe are not representative of our core operating results, including stock-based compensation; one-time expenses/incomes; and the gain/loss on foreign currency translation and transaction. The Company's definitions of EBITDA and adjusted EBITDA might not be comparable to similarly titled measures reported by other companies.
Results of Operations for the Three months Ended
Revenue
For the three months ended
March 31, 2020 March 31, 2019
Nutraceuticals $ 5,766,691 $ 9,055,444
Over the Counter (OTC) 22,310 8,332
Consumer Goods 302,897 157,623
Cosmeceuticals 25,388 247,556
$ 6,117,286 $ 9,468,955
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Cost of Revenue
For the three months ended
March 31, 2020 March 31, 2019
Nutraceuticals $ 1,425,274 $ 2,472,115
Over the Counter (OTC) - -
Consumer Goods 69,047 13,784
Cosmeceuticals 3,458 54,551
$ 1,497,779 $ 2,540,450
Gross Profit
Gross profit was
Operating Expenses
Selling and Marketing Expenses
For the three months ended
General and Administrative Expenses
For the three months ended
Depreciation and Amortization Expenses
For the three months ended
Other Income and Expenses
For the three months ended
Three months Three months
ended ended
March 31, 2020 March 31, 2019
Interest income $ (66 ) $ (111 )
Interest expense 158,522 340,128
Remeasurement loss (gain) on translation of
foreign subsidiary 278,126 (16,508 )
Amortization of debt issuance cost 20,757 38,368
Total other expense $ 457,339 $ 361,877 For the three months ended
Net Income
For the three months ended
Liquidity and Capital Resources
Overview
As of
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Presentation of Financial Statements - Going Concern
Going Concern Evaluation
In connection with preparing unaudited condensed consolidated financial
statements for the three months ended
The Company considered the following:
? At
? At
? Revenue decline in 2020 as compared to 2019 of
? During the three months ended
? The Company is required to make repayment of loans payable of
Ordinarily, conditions or events that raise substantial doubt about an entity's ability to continue as a going concern relate to the entity's ability to meet its obligations as they become due.
The Company evaluated its ability to meet its obligations as they become due within one year from the date that the financial statements are issued by considering the following:
? The Company raised
? Subsequent to
? During the three months ended
? The Company generated net income of
? Working capital deficit of
? The Company has line of credit facility of
? Subsequent to
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, which may be impacted by the recent outbreak of COVID-19.
? Implement additional restructuring and cost reductions.
? Raise additional capital through a private placement, which may be impacted by the recent outbreak of COVID-19.
As of
Three months ended
Net cash used in operating activities for the three months ended
The
Amortization of debt issuance cost $ 20,756 Depreciation and amortization 26,845 Stock based compensation 38,679 Non cash implied interest 9,299 Remeasurement loss on translation of foreign subsidiary 275,237 Foreign currency transaction loss 114,608 Reversal of allowance for doubtful accounts (170,309 ) Gain on write-off of payables (180,000 ) Increase in accounts receivable (1,259,338 ) Increase in accounts receivable, related party (193,552 ) Decrease in inventory 146,942 Decrease in prepaid expenses 4,534 Decrease in income tax receivable 251,614 Increase in income tax payable 164,338 Decrease in accounts payable and accrued liabilities (635,464 ) Decrease in accounts payable and accrued liabilities, related party (187,804 ) Increase in deferred revenue 9,250
Net cash used in investing activities for the three months ended
Net cash provided by financing activities for the three months ended
Repayment of notes payable $ (12,500 )
Advances from related party 70,490
Key 2020 Initiatives
During 2020, we have plans for organic growth within our current product lines by developing and launching new products. We have new marketing campaigns in process and intend to expand our online presence for each product. While we intend to grow further through additional acquisitions, we feel it is important to also develop our existing products.
The recent outbreak of COVID-19, which has been declared by the
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Contractual Obligations and Off-Balance Sheet Arrangements
Contractual Obligations None.
Off-Balance Sheet Arrangements
None. Inflation
The effect of inflation on the Company's operating results was not significant.
Summary of Significant Accounting Policies
The preparation of financial statements in conformity with
Recent Accounting Pronouncements
Note 2 to our unaudited condensed consolidated financial statements appearing elsewhere in this report includes Recent Accounting Pronouncements.
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