Note 11 – Notes Payable

The Company’s notes payable at March 31, 2025 and December 31, 2024 are as follows:

$10,000,000 August 9, 2017 Loan:

On August 9, 2017, the Company entered into a Second Amendment to Loan Agreement (“Second Amendment”) with Knight, pursuant to which Knight agreed to loan the Company an additional $10 million.

The Loan Agreement includes customary representations, warranties, and affirmative and restrictive covenants, including covenants to attain and maintain certain financial metrics, and to not merge or dispose of assets, acquire other businesses (except for businesses substantially similar or complementary to the Company’s business, and provided that the aggregate consideration to be paid does not exceed $100,000 and the acquired business guarantees the Company’s obligations under the Loan Agreement) or make capital expenditures in excess of $500,000. The Loan Agreement also includes customary events of default, including payment defaults, breaches of covenants, change of control and material adverse effect defaults. Upon the occurrence of an event of default and during the continuation thereof, the principal amount of all loans under the Loan Agreement will bear a default interest rate of an additional 5%.

The Company’s obligations and liabilities under the Loan Agreement are secured and unconditionally guaranteed by certain of the Company’s wholly-owned subsidiaries as provided in the Loan Agreement.

On July 7, 2022, the Company entered into a Fourth Amendment Agreement (the “Fourth Amendment”) to the Amended and Restated Loan Agreement (the “Loan Agreement”) with Knight Therapeutics (Barbados) Inc. (“Knight”), pursuant to which Knight agreed to loan the Company an additional $2.0 million (the “Second Additional Loan”). This $2.0 million Second Additional Loan (only) has a personal guarantee by a shareholder, Jack Ross.

On September 30, 2023, the Company entered into a Fifth Amendment Agreement (the “Fifth Amendment”) to the Loan Agreement with Knight, pursuant to which Knight agreed to extend the maturity date of the Loan to March 31, 2024. The loan will bear interest at 15.5% per annum compounding quarterly. The Company will pay Knight a closing fee of $1,000,000 and $150,000 as reimbursement for Knights legal fees incurred in connection with the Fifth Amendment. These have been accrued for during the year ended December 31, 2022 since this was earned upon renegotiation of the loan during 2022. The Company has also paid Knight an extension fee of $136,000 per month from October 2023 through February 2024.

The Company amended the financial covenants in the Fifth Amendment to as follows: The Company will maintain a minimum EBITDA of $1,000,000 for the three (3) month period ending on the last day of each Fiscal Quarter starting June 30, 2023. The Company shall at all times maintain FOCUSfactor’s net sales on a trailing twelve-month basis of at least $30,000,000.

The Company recognized interest expense of $369,992 and $414,158 during the three months ended March 31, 2025 and 2024, respectively. Accrued interest was $127,442 as of March 31, 2025.

During March 2024, the Company has entered into an Amended Agreement with Knight Therapeutics for its existing secured debt, which was finalized in June 2024. The consolidated loan will bear minimum interest rate at 12% per annum compounded quarterly and will be paid on the last day of each month. The principal repayment was to begin in the first quarter of 2025 with $1,000,000 due quarterly until March 31, 2026 when the loan becomes due in full. The lender agreed to postpone the payment due March 31, 2025 of $1,000,000 as the Company is in process of renegotiating this loan. As part of this agreement the outstanding royalties of $536,730 were converted to long term debt (see note 9). The loan has been extended to a maturity date of March 31, 2026. Because these amendments were considered not substantive changes, the Company accounted for the modifications as modification of debt.

Minimum interest rate is subjected to the following adjustments:

(i) Following an uncured event of default by Synergy, the Interest Rate will increase by 5%.

(ii) Synergy shall raise Five Million Dollars ($5,000,000) of equity no later than March 31, 2025. Should Synergy fail to raise equity of Five Million Dollars ($5,000,000) by March 31, 2025, then (1) Knight will earn an additional fee of One Million Dollars ($1,000,000) which will be added to the principal balance of the loan then outstanding and (2) the loan shall be considered to be in default. Any equity raise shall not dilute Knight’s ownership in Synergy below 10% of fully diluted basis.

Security: This loan shall be senior secured against all current and future assets (cash, intellectual property, real property, etc.) of Synergy, its affiliates, and subsidiaries. Synergy shall not add any other debt without paying out KTI first.

Bonus Success Fee: Upon closing of a Sale Transaction (hereinafter defined) of Synergy, KTI, shall be paid a $1,800,000 bonus success fee (“Bonus Success Fee”). A “Sale Transaction” shall include but is not limited to the acquisition of Synergy by a Third Party, the merger of Synergy with a Third Party, or the partial or complete sale of any asset of Synergy. The obligation of Synergy to KTI under the Bonus Success Fee shall survive the Maturity Date and remain in force until a Sale Transaction. As the sole exemption from the above defined Sale Transaction and Bonus Success Fee, if Synergy or any of its brands completes an IPO on a publicly listed exchange, no such Bonus Success Fee will be due nor payable by Synergy. An IPO shall be defined as Synergy raising at least $10 million of cash through the issuance of equity at a $50 million pre-money valuation.

Covenants: The following covenants were added or amended to the existing Loan with KTI:

(i) Jack Ross’s Synergy total annual compensation (salary, bonus and options) shall be capped at $500,000; until KTI’s loan is paid out or until such a time when Synergy is listed on a publicly traded stock exchange at such time the compensation committee will determine the annual compensation and approve by the Board of Directors.

(ii) Synergy shall maintain a minimum EBITDA of US$1,250,000 for the three (3) month period ending on the last day of each Fiscal Quarter starting March 31, 2024.

(iii) Synergy shall provide KTI a quarterly and annual operating budget for approval prior to implementation;

(iv) Synergy shall enter into a Shareholders Agreement with KTI, by June 30, 2024; which shall contain customary terms and conditions acceptable to all parties;

(v) This Loan becomes immediately due if Focus Factor Net Revenues fall below a trailing 12-month net sales of $30 million. Synergy shall provide KTI with monthly Net Revenues for Focus Factor;

(vi) Synergy is required to communicate to Knight within 2 working days in the event it receives a notice of default from any third party for any debt payables or obligations. If Synergy, default on any of its third-party debt obligations, then the Amended Loan will automatically enter into default.

(vii) Timely payment of royalties due to Knight.

(viii) Synergy shall repay and terminate Shopify debt no later than December 31, 2024.

Other Loan Conditions: In the event Synergy does not repay the KTI in full on March 31, 2026, Jack Ross shall sell, for $1, a total of 5,400,000 of his Synergy shares to KTI. The purchase of the Additional Shares is at Knight’s option and Jack Ross and KTI shall execute a Share Purchase Agreement prior to April 30, 2024. The value of the contingent guaranty is nominal as the probability of non-payment is remote.

As of both March 31, 2025 and December 31, 2024 the total consolidated amount outstanding on these loans, including accrued interest and royalties is $12,333,052.

The Company is required to make future payments as follows:

$2,000,000 February 10, 2022 Loan:

On February 10, 2022, the Company entered into a promissory note for $2,000,000 with an individual which was to be repaid with subsequent financing.

Subsequently and pursuant to the modification agreement entered into on June 14^th, 2023, effective September 9, 2022, the promissory loan would bear all the same characteristics as the additional $6,000,000 loan noted below.

On March 31, 2024, the Company entered into a Modification Agreement in relation to this loan. Effective March 31, 2024, the interest rate is 12%, compounded quarterly. Cash payments of interest shall be made monthly, on the final day of each month commencing in April 2024. The Company is required to make principal payments of $1,000,000 each quarter, starting from March 31, 2025 through December 31, 2025. The lender agreed to postpone the payment due March 31, 2025 of $1,000,000 as the Company is in process of renegotiating this loan. . The remaining principal and unpaid interest is fully due on March 31, 2026. In addition, a loan renegotiation fee of $500,000 shall be earned and payable on March 31, 2026 or at such time the loan is paid in full. Upon closing of a sale transaction, as defined in the agreement, a bonus success fee of $1,800,000 will be earned and payable. An event of default, as defined in the agreement, will trigger a default interest rate increase by 5% to 17%. An incentive fee of a maximum of $563,092 will be paid, prorated if the loan is paid off early. If the loan is not repaid by March 31, 2026, Jack Ross, majority shareholder shall grant warrants covering 10% of his stock struck at $0.01 per share. The value of the contingent guaranty is nominal as the probability of non-payment is remote. There is a cross-default clause in the agreement which states that if Knight triggers an event of default on its own loan facility, this loan will also be under default. This Agreement consolidates this $2,000,000 loan and the $6,000,000 March 8, 2022 loan as detailed below. The loan has been extended to a maturity date of March 31, 2026. Because these amendments were considered not substantive changes, the Company accounted for the modifications as modification of debt.

The Company is required to make future payments as follows:

$6,000,000 March 8, 2022 Loans:

On March 8, 2022, the Company entered into Securities Purchase Agreements with debenture holders for the Senior Subordinated Debentures in the amount of $6,000,000 with an original maturity date of September 8, 2022 and warrants with a term of 3 years. The Senior Subordinated Debentures were modified on June 14, 2023 in conjunction with the promissory note.

Covenants pursuant to the loan were as follows: The Company will maintain a minimum EBITDA of $1,000,000 for the three (3) month period ending on the last day of each Fiscal Quarter starting June 30, 2023. The Company shall at all times maintain FOCUSfactor’s net sales on a trailing twelve-month basis of at least $30,000,000. The Company also agreed to pay $50,000 as reimbursement for the debenture holders legal fees incurred in connection with the modification agreement.

These debentures were modified effective September 30, 2023 to the following terms: Interest rate adjusted to 15.5% compounded quarterly, effective September 9, 2022.

On March 31, 2024, the Company entered into a Modification Agreement in relation to this loan, which consolidated it with the $2,000,000 February 10, 2022 loan above. The loan has been extended to a maturity date of March 31, 2026. Because these amendments were considered not substantive changes, the Company accounted for the modifications as modification of debt.

$5,450,000 December 28, 2023 Loan:

On December 28, 2023, the Company entered into a confidential settlement agreement and mutual general release with a former supplier. The loan bears interest at 5% per annum and is payable in full with the last payment. This settlement resulted in a gain to the Company of $2,235,986 and is reflected as a reduction of cost of sales (See Note 13).

During 2024, the Company made payments of $2,000,000 each toward this loan. The outstanding loan balance at both March 31, 2025 and December 31, 2024 was $2,802,445, including interest of $352,445.

The Company is required to make future payments as follows:

$3,020,824 March 27, 2024 Loan:

On March 27, 2024, the Company entered into a confidential settlement agreement and mutual general release with a supplier.

During 2025 and 2024, the Company made payments of $560,412 and $700,000 toward this loan. The outstanding loan balance at March 31, 2025 and December 31, 2024 was $1,760,412 and $2,320,824, respectively.

The Company is required to make future payments as follows:

$418,100 May 1, 2024 Loan:

On May 1, 2024, the Company entered into a loan agreement of $418,100 with Shopify Capital Inc. for an advancement of working capital from its online processing account. The Company received $370,000 from Shopify Capital Inc. and $48,100 was an original issue discount. The loan bears a repayment rate of 25% of daily sales.

The payment of such amounts is secured by a security interest in certain assets, undertakings and property pursuant to the Security Agreement, which will be released upon receipt of total payments of $418,100.

The Company recognized amortization of original issue discount of $10,308, which is included in interest expense in the statement of income during the three months ended March 31, 2025. The outstanding loan balance at March 31, 2025 was $169,143, net of unamortized original discount of $21,989. 

$800,000 December 5, 2024 Loan:

On December 5, 2024, the Company entered into a cash advance agreement of $800,000 with Cedar Advance LLC for an advancement of working capital. The Company received $760,000 and recorded $40,000 as interest expense. The loan bears a repayment rate of $41,100 per week. In conjunction with the advance, the Company issued 18,000 shares of common stock to the consultant who facilitated the facility and thus recognized $97,920 as interest expense.

The Company recognized total interest expense of $136,000 during the year ended December 31, 2024. The outstanding loan balance at December 31, 2024 was $0.

$2,268,000 February 2025 Loan:

On January 29, 2025, the Company entered into a cash advance agreement of $2,268,000 with Cedar Advance LLC for an advancement of working capital. The Company received $1,496,250 and recorded $771,750 as original issue discount. The loan bears a repayment rate of $81,000 per week with a total payment of $2,268,000. In conjunction with the advance, the Company issued 30,360 shares of common stock to the consultant who facilitated the facility and thus recognized $117,648 as financing cost.

The Company recognized total interest expense of $394,398 during the three months ended March 31, 2025. The outstanding loan balance at March 31, 2025 was $1,125,000, net of unamortized debt discount and financing costs of $495,000.