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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Synergy CHC Corporation (CE) | USOTC:SNYR | OTCMarkets | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 0.10 | 0.00 | 01:00:00 |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 12, 2015
Synergy CHC Corp. | ||
(Exact name of registrant as specified in its charter) |
Nevada | 000-55098 | 99-0379440 | ||
(State or other jurisdiction of incorporation) |
(Commission File Number) |
(IRS Employer ID Number) |
865 Spring Street, Westbrook, ME | 04092 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code | (615) 939-9004 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
[ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
[ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
[ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
EXPLANATORY NOTE
This Current Report on Form 8-K/A (Amendment No. 1) amends the Current Report on Form 8-K we filed with the Securities and Exchange Commission (the “SEC”) on November 18, 2015 (the “Original 8-K”). Among other things, the Original 8-K reported our acquisition of NomadChoice Pty Limited ACN 160 729 939 trading as Flat Tummy Tea, an Australian proprietary limited company (“NomadChoice”), through the purchase of all of its outstanding capital stock. The acquisition was consummated on November 15, 2015.
The purpose of this Amendment No. 1 is to provide financial statement information required by Item 9.01, which was excluded from the Original 8-K in reliance on Items 9.01(a)(4) and 9.01(b)(2).
Item 9.01. Financial Statements and Exhibits.
(a) Financial statements of businesses acquired.
The financial statements for NomadChoice required by Item 9.01(a) of Form 8-K are included as Exhibit 99.1 and Exhibit 99.2 to this Amendment No. 1 to the Original Form 8-K and incorporated herein by reference.
(b) Pro forma financial information.
The pro forma financial information for NomadChoice required by Item 9.01(b) of Form 8-K is included as Exhibit 99.3 to this Amendment No. 1 to the Original Form 8-K and incorporated herein by reference.
(c) Shell company transactions.
Not applicable.
(d) Exhibits
Exhibit No. | Description | ||
99.1 | Audited financial statements for NomadChoice, including notes thereto, as of and for the years ended June 30, 2015 and 2014. | ||
99.2 | Unaudited financial statements for NomadChoice, including the notes thereto, for the three months ended September 30, 2015 and 2014. | ||
99.3 | Unaudited pro forma balance sheet of Synergy CHC Corp. as of September 30, 2015 and unaudited pro forma statement of operations of Synergy CHC Corp. for the nine months ended September 30, 2015 and for the year ended December 31, 2014, giving effect to the NomadChoice acquisition. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
SYNERGY CHC CORP. | |
Date: February 9, 2016 | /s/ Jack Ross |
Jack Ross | |
President and Chief Executive Officer |
Nomadchoice Pty Limited
Annual Report – June 30, 2015 and 2014
Nomadchoice Pty Limited
June 30, 2015 and 2014
Index to Financial Statements
Report of Independent Registered Public Accounting Firm | 3 |
Balance sheets at June 30, 2015 and 2014 | 4 |
Statements of income and comprehensive income for the years ended June 30, 2015 and 2014 | 5 |
Statements of stockholders’ equity for the two years ended June 30, 2015 | 6 |
Statements of cash flows for the years ended June 30, 2015 and 2014 | 7 |
Notes to the financial statements | 8 |
2 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To The Board of Directors and Shareholders
Nomadchoice Pty Limited
We have audited the accompanying balance sheets of Nomadchoice Pty Limited (the “Company”), as of June 30, 2015 and 2014, and the related statements of operations, members’ equity and cash flows for each of the two years in the period ended June 30, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.
We have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Nomadchoice Pty Limited as of June 30, 2015 and 2014, and the results of its operations and its cash flows for each of the two years in the period ended June 30, 2015, in conformity with accounting principles generally accepted in the United States of America.
/s/ RBSM LLP
New York, New York
February 9, 2016
3 |
Nomadchoice Pty Limited
Balance Sheets
At June 30, 2015 and 2014
2015 | 2014 | |||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 402,695 | $ | 278,840 | ||||
Inventory | 50,827 | - | ||||||
Due from shareholders | 681,558 | - | ||||||
Total current assets | 1,135,080 | 278,840 | ||||||
Fixed assets, net of accumulated depreciation of $4,582 and $1,287, respectively | 2,951 | 4,470 | ||||||
Intangibles, net of accumulated amortization | 4,166 | 780 | ||||||
Total other assets | 7,117 | 5,250 | ||||||
TOTAL ASSETS | $ | 1,142,197 | $ | 284,090 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payables and accrued expenses | $ | 47,256 | $ | 22,711 | ||||
Provision for income tax payable | 310,302 | 70,316 | ||||||
Due to shareholders | 1,784 | 26,874 | ||||||
Total current liabilities | 359,342 | 119,902 | ||||||
Total liabilities | 359,342 | 119,902 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common shares no par value; unlimited shares authorized; 1,200 shares issued and outstanding | 127 | 127 | ||||||
Retained earnings | 871,070 | 159,884 | ||||||
Accumulated other comprehensive (loss) income – cumulative translation adjustment | (88,342 | ) | 4,178 | |||||
Total stockholders’ equity | 782,855 | 164,189 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,142,197 | $ | 284,090 |
The accompanying notes are an integral part of these financial statements
4 |
Nomadchoice Pty Limited
Statements of income and comprehensive income
For the years ended June 30, 2015 and 2014
2015 | 2014 | |||||||
Revenues : | ||||||||
Net Sales Revenue | $ | 2,485,654 | $ | 522,053 | ||||
Cost of goods sold | 556,566 | 74,849 | ||||||
Gross profit | 1,929,088 | 447,204 | ||||||
Operating Expenses : | ||||||||
Sales and marketing | 368,177 | 63,047 | ||||||
General and administrative | 376,256 | 154,308 | ||||||
Depreciation and amortization | 4,576 | 1,444 | ||||||
Total operating expenses | 749,009 | 218,799 | ||||||
Income from operations | 1,180,079 | 228,405 | ||||||
Other income (expense) | ||||||||
Interest income | 8,369 | - | ||||||
Income before provision for income taxes | 1,188,448 | 228,405 | ||||||
Income taxes | (341,619 | ) | (68,521 | ) | ||||
Net income | $ | 846,829 | $ | 159,884 | ||||
Comprehensive income | ||||||||
Net income | $ | 846,829 | $ | 159,883 | ||||
Foreign currency translation adjustments | (92,520 | ) | 4,178 | |||||
Comprehensive income | $ | 754,309 | $ | 164,061 |
The accompanying notes are an integral part of these financial statements
5 |
Nomadchoice Pty Limited
Statements of Stockholders’ Equity
For the two years ended June 30, 2015
Accumulated | ||||||||||||||||||||
Ordinary shares | Retained | Other Comprehensive | Total Stockholders’ | |||||||||||||||||
Number | Amount | Earnings | Income (Loss) | Equity | ||||||||||||||||
Balance at July 1, 2013 | 1,200 | $ | 127 | $ | - | $ | - | $ | 127 | |||||||||||
Net income for the year | - | - | 159,884 | 159,884 | ||||||||||||||||
Foreign currency translation adjustment | - | 4,178 | 4,178 | |||||||||||||||||
Balance at June 30, 2014 | 1,200 | 127 | 159,884 | 4,178 | 164,189 |
Accumulated | ||||||||||||||||||||
Ordinary shares | Retained | Other Comprehensive | Total Stockholders’ | |||||||||||||||||
Number | Amount | Earnings | Income (Loss) | Equity | ||||||||||||||||
Balance at July 1, 2014 | 1,200 | 127 | 159,884 | 4,178 | 164,189 | |||||||||||||||
Distribution to members | - | - | (135,643 | ) | - | (135,643 | ) | |||||||||||||
Net income for the year | - | - | 846,829 | - | 846,829 | |||||||||||||||
Foreign currency translation adjustment | - | - | (92,520 | ) | (92,520 | ) | ||||||||||||||
Balance at June 30, 2015 | 1,200 | $ | 127 | $ | 871,070 | $ | (88,341 | ) | $ | 782,855 |
The accompanying notes are an integral part of these financial statements
6 |
Nomadchoice Pty Limited
Statements of cash flows
For the years ended June 30, 2015 and 2014
2015 | 2014 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 846,829 | $ | 159,884 | ||||
Adjustments to reconcile net income to net cash provided by operating activities | ||||||||
Depreciation and amortization | 4,576 | 1,444 | ||||||
Changes in operating assets and liabilities: | ||||||||
Inventory | (50,827 | ) | - | |||||
Accounts payable and accrued expenses | 24,545 | 22,711 | ||||||
Provision for income taxes payable | 239,986 | 70,316 | ||||||
Net cash provided by operating activities | 1,065,109 | 254,355 | ||||||
Cash flows from investing activities | ||||||||
Payment to shareholders | (681,558 | ) | - | |||||
Payment for intangibles | (4,127 | ) | (970 | ) | ||||
Payments for property, plant and equipment | (2,316 | ) | (5,724 | ) | ||||
Net cash used in investing activities | (688,001 | ) | (6,694 | ) | ||||
Cash flows from financing activities | ||||||||
Proceeds from /(repayment of) dues from shareholders | (25,090 | ) | 26,874 | |||||
Dividends paid | (135,643 | ) | - | |||||
Net cash (used in) provided by financing activities | (160,733 | ) | 26,874 | |||||
Effect of exchange rate on cash and cash equivalents | (92,520 | ) | 4,178 | |||||
Net increase in cash and cash equivalents | 123,855 | 278,713 | ||||||
Cash and cash equivalents at the beginning of the year | 278,840 | 127 | ||||||
Cash and cash equivalents at the end of the year | $ | 402,695 | $ | 278,840 | ||||
Supplemental Disclosures of Cash Flow Information: | ||||||||
Cash paid during the year for interest | $ | - | $ | - | ||||
Cash paid during the year for income taxes | $ | 72,074 | $ | - | ||||
Supplemental Disclosure of Non cash Investing and Financing Activities | $ | - | $ | - |
The accompanying notes are an integral part of these financial statements
7 |
Nomadchoice Pty Limited
Notes to the financial statements
Note 1. Significant accounting policies
A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:
Organization and nature of operations
Nomadchoice Pty Limited (the “Company”) was incorporated on October 11, 2012 in Tasmania, Australia .During the financial year the principal continuing activities of the company consisted of online marketing and sales of a product known as flat tummy tea.
As a limited liability company, the members are not personally liable for any of the debts, obligations, losses, claims, or judgements on any of the liabilities of the Company, whether arising in tort, contract, or otherwise, unless a member has signed a specific guarantee.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Ownership and title of our products pass to customers upon delivery of the products to the customers. 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.
Cash and cash equivalents
For financial statement purposes, the Company considers all highly-liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Accounts receivable - trade
All sales to customers are made through the website www.flattummytea.com with payment being made at the time an order is placed. As a result the company has no accounts receivable at any time as orders are not accepted without payment first being made via credit card or PayPal.
Fixed assets
Fixed assets are carried at cost less accumulated depreciation. The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred. The costs of assets sold, retired, or otherwise disposed of, and the related accumulated depreciation, are eliminated from the accounts, and any resulting gain or loss is reflected in income.
Depreciation is recorded on a straight-line basis over the estimated useful lives of the respective assets as follows:
Office equipment & furniture | 2-5 years |
8 |
Nomadchoice Pty Limited
Notes to the financial statements
Note 1. Significant accounting policies (continued)
Inventory
Inventory consists of finished goods, raw materials and packaging material. Inventory is recorded on a first in first out basis and is valued at lower of cost or market. Finished goods include the cost of labour to assemble the items.
Advertising
The Company expenses advertising costs as they are incurred. Advertising includes direct online advertising and blogging. The company spending on advertising for the year ended June 30, 2015 and 2014 was $368,177 and $63,047 respectively.
Related Party Transactions
All transactions with related parties are made on normal commercial terms and conditions and at market rates.
Other Comprehensive Income
The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Functional Currency
The Company’s reporting currency is US Dollars and functional currency is Australian Dollars (AUD). The accounts of the Company are maintained using the local currency (Australian Dollars) as the functional currency. All assets and liabilities are translated into U.S. Dollars at the balance sheet date, equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the statements of operations.
The relevant translation rates are as follows: For the year ended June 30, 2015 closing rate at 0.8012 US$:AUD, average rate at 0.8715 US$:AUD and for the year ended June 30, 2014 closing rate at 0.9756 US$:AUD, average rate at 0.9507 US$:AUD.
Concentration of payables
The company is dependent on Caraway Tea Company for approximately 20.8% and 0% of its’ purchases in the years ended June 30, 2015 and 2014 respectively.
The company is dependent on Facebook for approximately 5.1% and 17.1% of its’ purchases in the years ended June 30, 2015 and 2014, respectively.
Recent Accounting Pronouncements
ASU 2015-03
In April 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
9 |
Nomadchoice Pty Limited
Notes to the financial statements
ASU 2015-02
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (“VIE”), and changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
ASU 2015-01
In January 2015, the FASB issued ASU No. 2015-01, “Income Statement - Extraordinary and Unusual Items (Subtopic 225-20): Simplifying Income Statement Presentation by Eliminating the Concept of Extraordinary Items.” This ASU eliminates from U.S. GAAP the concept of extraordinary items. ASU 2015-01 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. We do not expect the adoption of ASU 2015-01 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-17
In November 2014, the FASB issued ASU No. 2014-17, “Business Combinations (Topic 805): Pushdown Accounting.” This ASU provides an acquired entity with an option to apply pushdown accounting in its separate financial statements upon occurrence of an event in which an acquirer obtains control of the acquired entity. An acquired entity may elect the option to apply pushdown accounting in the reporting period in which the change-in-control event occurs. If pushdown accounting is applied to an individual change-in-control event, that election is irrevocable. ASU 2014-17 was effective on November 18, 2014. The adoption of ASU 2014-17 did not have any effect on financial position, results of operations or cash flows.
ASU 2014-16
In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows.
ASU 2014-15
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40)”. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have a material effect on our financial position, results of operations or cash flows
ASU 2014-12
In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-09
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue recognition standard by one year.
10 |
Nomadchoice Pty Limited
Notes to the financial statements
ASU 2014-08
In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 amends the definition for what types of asset disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. The adoption of ASU 2014-08 did not have any effect on our financial position, results of operations or cash flows.
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Estimation of useful lives of assets
The company determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Income tax
The company is subject to income taxes in the jurisdictions in which it operates. Significant judgement 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. The company recognises liabilities for anticipated tax audit issues based on the company’s 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. The deferred tax liability was not material as of June 30, 2015 and 2014.
11 |
Nomadchoice Pty Limited
Notes to the financial statements
Note 3. Sales revenue | ||||||||
2015 | 2014 | |||||||
Sales - Australia | $ | 247,879 | $ | 171,272 | ||||
Sales - export | 2,144,978 | 322,247 | ||||||
Sales - shipping | 92,797 | 28,535 | ||||||
$ | 2,485,654 | $ | 522,053 |
Note 4. Cost of sales | ||||||||
2015 | 2014 | |||||||
Freight & Postage | $ | 41,896 | $ | 21,133 | ||||
Packaging | 28,025 | 9,216 | ||||||
Fees | 80,629 | 16,440 | ||||||
Raw Material | 48,270 | 24,782 | ||||||
Export Distribution Charges | 408,573 | 3,279 | ||||||
Less: Closing inventory | (50,827 | ) | - | |||||
$ | 556,566 | $ | 74,850 |
Note 5. Operating expenses | ||||||||
2015 | 2014 | |||||||
Sales and marketing | ||||||||
Advertising Facebook | $ | 51,860 | $ | 31,091 | ||||
Advertising Google Adwords | 8,726 | 10,820 | ||||||
Advertising Adroll | 33,740 | - | ||||||
Advertising- Other | 14,574 | 776 | ||||||
Blogging expenses | 240,827 | 20,360 | ||||||
Marketing | 7,665 | - | ||||||
Photography | 10,785 | - | ||||||
$ | 368,177 | $ | 63,047 | |||||
General and administrative | ||||||||
Accounting & book-keeping | $ | 6,823 | $ | 1,418 | ||||
Bank charges | 3,174 | 542 | ||||||
Branding | 40,243 | - | ||||||
Consulting | - | 6,180 | ||||||
Insurance | 7,625 | 2,592 | ||||||
Legal Expenses | 3,891 | - | ||||||
Office supplies | 4,093 | 1,386 | ||||||
Other administrative expenses | 8,906 | 3,098 | ||||||
Postage & courier | 997 | 12,591 | ||||||
Rent | 15,617 | 3,643 | ||||||
Sub-contractors | - | 7,533 | ||||||
Subscriptions | 8,315 | 3,135 | ||||||
Wages & superannuation | 276,574 | 112,190 | ||||||
$ | 376,258 | $ | 154,308 | |||||
Depreciation and amortization | ||||||||
Depreciation of office equipment | $ | 3,835 | $ | 1,254 | ||||
Amortization of domain name and setup costs | 741 | 190 | ||||||
$ | 4,576 | $ | 1,444 |
Note 6. Income tax expense | ||||||||
2015 | 2014 | |||||||
Income tax expense | ||||||||
Current tax | $ | 341,619 | $ | 68,521 | ||||
Numerical reconciliation of income tax expense and tax at the statutory rate | ||||||||
Profit before income tax expense | 1,188,448 | 228,405 | ||||||
Tax at the statutory tax rate of 30% | 356,534 | 68,521 | ||||||
Tax effect amounts which are not deductible/(taxable) in calculating taxable income: | ||||||||
Entertainment expenses | 333 | - | ||||||
Adjustment recognized for closing stock | (15,248 | ) | - | |||||
Income tax expense | 341,619 | 68,521 |
12 |
Nomadchoice Pty Limited
Notes to the financial statements
Note 7. Due from Shareholders | ||||||||
2015 | 2014 | |||||||
Loan- Polmear Family Trust (Shareholder) | $ | 681,020 | $ | - | ||||
Loan- Polmear Holdings Pty Ltd (Beneficiary of shareholder) | 538 | - | ||||||
$ | 681,558 | $ | - |
The receivable represents an advance to the shareholder on June 26, 2015 in anticipation of a dividend to be declared in favour of the shareholder on July 1, 2015. The receivable is non-interest bearing and receivable on demand. Subsequent to June 30, 2015, the Company declared dividends to offset loan receivable from shareholder (see note 16).
Note 8. Accounts Payable and Accrued Expenses | ||||||||
2015 | 2014 | |||||||
Credit card | $ | 7,874 | $ | 9 | ||||
Accounts payable | 18,536 | 1,013 | ||||||
GST payable/(receivable) | (2,195 | ) | (1,704 | ) | ||||
PAYG withholdings payable | 13,945 | 23,394 | ||||||
Superannuation payable | 9,096 | - | ||||||
$ | 47,256 | $ | 22,712 |
Note 9. Due to shareholders | ||||||||
2015 | 2014 | |||||||
Due to shareholders | $ | 1,784 | $ | 26,874 |
During the years ended June 30, 2014, the Company received funds from shareholders of $26,874 of which $25,090 was repaid during the year ended June 30, 2015. The payable is non-interest bearing and due on demand.
13 |
Nomadchoice Pty Limited
Notes to the financial statements
30 June 2015
Note 10. Equity - issued capital | ||||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Shares | Shares | |||||||||||||||
Ordinary shares - fully paid | 1,200 | 1,200 | $ | 127 | $ | 127 |
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Dividend
Dividends paid during the financial year were as follows :
2015 | 2014 | ||||||||
Dividend for the year ended June 30, 2015 of $1,130.36 per ordinary share | $ | 135,643 | - |
During the year ended June 30, 2015, the Company declared and paid dividends to shareholder of the Company of $135,643.
Note 11. Contingent liabilities
The company had no contingent liabilities as at June 30, 2015 and 2014.
Note 12. Commitments
The company had no commitments for expenditure as at June 30, 2015 and 2014.
14 |
Nomadchoice Pty Limited
Notes to the financial statements
Note 13. Fixed assets
2015 | 2014 | |||||||
Office equipment and computers | $ | 7,533 | $ | 5,757 | ||||
Less : Accumulated depreciation | (4,582 | ) | (1,287 | ) | ||||
$ | 2,951 | $ | 4,470 |
Depreciation expense for the years ended June 30, 2015 and 2014 was $3,835 and $1,254, respectively.
Note 14. Inventory
2015 | 2014 | |||||||
Raw materials and packaging material | $ | 50,827 | - | |||||
50,827 | - |
Note 15. Intangible assets
2015 | 2014 | |||||||
Organisational costs | $ | 801 | $ | 976 | ||||
Domain name | 4,206 | - | ||||||
Less : Accumulated amortization | (841 | ) | (196 | ) | ||||
$ | 4,166 | $ | 780 |
Amortization expense for the years ended June 30, 2015 and 2014 was $741 and $190, respectively.
Note 16. Subsequent Events
The company declared a dividend of $700,113 on July 1, 2015 out of retained earnings to offset against the loan receivable identified in Note 7.
On November 15, 2015 the Company entered into a stock purchase agreement with Synergy CHC Corp., a United States of America based consumer health care company, for the purchase of all of the issued and outstanding capital stock for $4,000,000 Australian dollars in cash and 3,571,428 shares of Synergy’s common stock. In addition to the cash and equity consideration, Synergy will pay the Company certain earn-out payments of up to $3,500,000 Australian dollars in aggregate upon certain EBITDA thresholds as of June 30, 2016.
15 |
Nomadchoice Pty Limited
Quarterly Report – September 30, 2015 and 2014
Index to Unaudited Condensed Financial Statements
Condensed balance sheets at September 30, 2015 (unaudited) and June 30, 2015 | 3 | |
Unaudited condensed statements of income and comprehensive income for three months ended September 30, 2015 and 2014 | 4 | |
Unaudited condensed statements of stockholders’ equity for the three months ended September 30, 2015 | 5 | |
Unaudited condensed statements of cash flows for the three months ended September 30, 2015 and 2014 | 6 | |
Notes to the unaudited condensed financial statements | 7 |
Nomadchoice Pty Limited
Condensed Balance Sheets
At September 30, 2015 and June 30, 2015
September 30, 2015 | June 30, 2015 | |||||||
(unaudited) | ||||||||
ASSETS | ||||||||
Current assets | ||||||||
Cash and cash equivalents | $ | 1,240,595 | $ | 402,695 | ||||
Inventory | 52,248 | 50,827 | ||||||
Prepayment | 36,464 | - | ||||||
Due from shareholders | 31,463 | 681,558 | ||||||
Total current assets | 1,360,770 | 333,551 | ||||||
Fixed assets, net of accumulated depreciation of $4,596 and $4,582 respectively | 3,497 | 2,951 | ||||||
Intangibles, net of accumulated amortization | 3,659 | 4,166 | ||||||
Total other assets | 7,156 | 7,117 | ||||||
TOTAL ASSETS | $ | 1,367,926 | $ | 1,142,197 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
Current liabilities | ||||||||
Accounts payable and accrued expenses | $ | 120,096 | $ | 47,256 | ||||
Provision for income tax payable | 439,046 | 310,302 | ||||||
Provision for dividend payable | 47,633 | - | ||||||
Due to shareholders | - | 1,784 | ||||||
Total current liabilities | 606,775 | 359,342 | ||||||
Total liabilities | 606,775 | 359,342 | ||||||
Commitments and contingencies | - | - | ||||||
Stockholders’ Equity | ||||||||
Common shares no par value; unlimited shares authorized; 1,200 shares issued and outstanding | 127 | 127 | ||||||
Retained earnings | 875,256 | 871,070 | ||||||
Accumulated other comprehensive loss - cumulative translation adjustment | (114,232 | ) | (88,342 | ) | ||||
Total stockholders’ equity | 761,151 | 782,855 | ||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY | $ | 1,367,926 | $ | 1,142,197 |
The accompanying notes are an integral part of these unaudited condensed financial statements
3 |
Nomadchoice Pty Limited
Unaudited Condensed Statements of income and comprehensive income
For the three month periods ended September 30, 2015 and 2014
2015 | 2014 | |||||||
Revenues : | ||||||||
Net Sales Revenue | $ | 2,188,134 | $ | 256,350 | ||||
Cost of goods sold | 548,092 | 55,232 | ||||||
Gross profit | 1,640,042 | 201,118 | ||||||
Operating Expenses : | ||||||||
Sales and marketing | 439,471 | 36,910 | ||||||
General and administrative | 143,051 | 76,617 | ||||||
Depreciation and amortization | 662 | - | ||||||
Total operating expenses | 583,184 | 113,527 | ||||||
Income from operations | 1,056,858 | 87,592 | ||||||
Other income (expense) | ||||||||
Interest income | 1,557 | 637 | ||||||
Income before provision for income taxes | 1,058,415 | 88,229 | ||||||
Income taxes | (319,556 | ) | - | |||||
Net income | $ | 738,859 | $ | 88,229 | ||||
Comprehensive income | ||||||||
Net income | $ | 738,859 | $ | 88,229 | ||||
Foreign currency translation adjustments | (25,889 | ) | 8,409 | |||||
Comprehensive income | $ | 712,970 | $ | 96,638 |
The accompanying notes are an integral part of these unaudited condensed financial statements
4 |
Nomadchoice Pty Limited
Unaudited Condensed Statements of Stockholders’ Equity
For the three month period ended September 30, 2015
Ordinary Shares | Retained | Accumulated Other Comprehensive | Total Stockholders | |||||||||||||||||
Shares | Amount | Earnings | Income (loss) | Equity | ||||||||||||||||
Balance at June 30, 2015 | 1,200 | $ | 127 | $ | 871,070 | (88,342 | ) | $ | 782,855 | |||||||||||
Dividends to stockholders | - | - | (734,673 | ) | - | (734,673 | ) | |||||||||||||
Net income for the period | - | - | 738,859 | - | 738,859 | |||||||||||||||
Foreign currency translation adjustment | - | - | - | (25,889 | ) | (25,889 | ) | |||||||||||||
Balance at September 30, 2015 | 1,200 | $ | 127 | $ | 875,256 | $ | (114,231 | ) | $ | 1,367,926 |
The accompanying notes are an integral part of these unaudited condensed financial statements
5 |
Nomadchoice Pty Limited
Unaudited Condensed Statements of cash flows
For the three month periods ended September 30, 2015 and 2014
2015 | 2014 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 738,859 | $ | 88,229 | ||||
Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortisation | 662 | - | ||||||
Change in operating assets and liabilities: | ||||||||
(Increase)/decrease in inventory | (1,421 | ) | - | |||||
(Increase)/decrease in prepayments | (36,464 | ) | - | |||||
Increase/(decrease) in trade and other payables | 72,840 | (10,128 | ) | |||||
Increase/(decrease) in provision for income tax | 128,744 | (5,067 | ) | |||||
Net cash provided by operating activities | 903,220 | 73,034 | ||||||
Cash flows from investing activities | ||||||||
Payment for fixed & intangibles assets | (701 | ) | 378 | |||||
Net cash (used in) provided by investing activities | (701 | ) | 378 | |||||
Cash flows from financing activities | ||||||||
Repayment of dues from shareholders | (1,784 | ) | (1,937 | ) | ||||
Dividends paid | (36,945 | ) | - | |||||
Net cash used in financing activities | (38,729 | ) | (1,937 | ) | ||||
Effect of exchange rate on cash and cash equivalents | (25,891 | ) | (16,764 | ) | ||||
Net increase in cash and cash equivalents | 837,900 | 54,711 | ||||||
Cash and cash equivalents at the beginning of the period | 402,695 | 278,840 | ||||||
Cash and cash equivalents at the end of the period | $ | 1,240,595 | $ | 333,351 | ||||
Supplemental Disclosure of Non cash Investing and Financing Activities | ||||||||
Dividends declared and paid to partially set off loan amounts due to shareholders | $ | 734,673 | $ | - |
The accompanying notes are an integral part of these unaudited condensed financial statements
6 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 1. Significant accounting policies
A summary of the significant accounting policies applied in the presentation of the accompanying financial statements follows:
Organization and nature of operations
Nomadchoice Pty Limited (the “Company”) was incorporated on October 11, 2012 in Tasmania, Australia .During the financial year the principal continuing activities of the company consisted of online marketing and sales of a product known as flat tummy tea.
As a limited liability company, the members are not personally liable for any of the debts, obligations, losses, claims, or judgements on any of the liabilities of the Company, whether arising in tort, contract, or otherwise, unless a member has signed a specific guarantee.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.
Revenue recognition
The Company recognizes revenue in accordance with Accounting Standards Codification (“ASC”) 605, Revenue Recognition (“ASC 605”). ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred and/or service has been performed; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Ownership and title of our products pass to customers upon delivery of the products to the customers. 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.
Cash and cash equivalents
For financial statement purposes, the Company considers all highly-liquid investments with original maturities of three months or less at the time of purchase to be cash equivalents.
Accounts receivable - trade
All sales to customers are made through the website flattummytea.com with payment being made at the time an order is placed. As a result the company has no accounts receivable at any time as orders are not accepted without payment first being made via credit card or PayPal.
Fixed assets
Fixed assets are carried at cost less accumulated depreciation. The Company capitalizes expenditures related to property and equipment, subject to a minimum rule, that have a useful life greater than one year for: (1) assets purchased; (2) existing assets that are replaced, improved or the useful lives have been extended; or (3) all land, regardless of cost. Acquisitions of new assets, additions, replacements and improvements (other than land) costing less than the minimum rule in addition to maintenance and repair costs, including any planned major maintenance activities, are expensed as incurred. The costs of assets sold, retired, or otherwise disposed of, and the related accumulated depreciation, are eliminated from the accounts, and any resulting gain or loss is reflected in income.
Depreciation is recorded on a straight-line basis over the estimated useful lives of the respective assets as follows:
Office equipment & furniture | 2-5 years |
7 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 1. Significant accounting policies (continued)
Inventory
Inventory consists of finished goods, raw materials and packaging material. Inventory is recorded on a first in first out basis and is valued at lower of cost or market. Finished goods include the cost of labour to assemble the items.
Advertising
The Company expenses advertising costs as they are incurred. Advertising includes direct online advertising and blogging. The company spending on advertising for the three months ended September 30, 2015 and 2014 was $51,956 and $14,043, respectively.
Related Party Transactions
All transactions with related parties are made on normal commercial terms and conditions and at market rates.
Other Comprehensive Income
The Company applies Statement of Accounting Standards Codification subtopic 220-10, Comprehensive Income (“ASC 220-10”). ASC 220-10 establishes standards for the reporting and displaying of comprehensive income and its components. Comprehensive income is defined as the change in equity of a business during a period from transactions and other events and circumstances from non-owners sources. It includes all changes in equity during a period except those resulting from investments by owners and distributions to owners. ASC 220-10 requires other comprehensive income (loss) to include foreign currency translation adjustments and unrealized gains and losses on available for sale securities.
Foreign Currency Translation Adjustment
The Company’s reporting currency is US Dollars and functional currency is Australian Dollars (AUD). The accounts of the Company are maintained using the local currency (Australian Dollars) as the functional currency. All assets and liabilities are translated into U.S. Dollars at the balance sheet date, equity is translated at historical rates and revenue and expense accounts are translated at the average exchange rate for the year or the reporting period. The translation adjustments are deferred as a separate component of stockholders’ equity, captioned as accumulated other comprehensive (loss) gain. Transaction gains and losses arising from exchange rate fluctuation on transactions denominated in a currency other than the functional currency are included in the statements of operations.
The relevant translation rates are as follows: For the three months ended September 30, 2015 closing rate at 0.7317 US$:AUD, average rate at 0.7570 US$:AUD and for the three months ended September 30, 2014 closing rate at 0.9083 US$:AUD, average rate at 0.9589 US$:AUD.
Concentration of payables
The company is dependent on Caraway Tea Company for approximately 21.8% and 0% of its’ purchases in the three month periods ended September 30, 2015 and 2014 respectively.
Recent Accounting Pronouncements
ASU 2015-03
In April 2015, the FASB issued Accounting Standards Update (“ASU”) No. 2015-03, Interest - Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs. The amendments in this ASU require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and measurement guidance for debt issuance costs are not affected by the amendments in this ASU. The amendments are effective for financial statements issued for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. The amendments are to be applied on a retrospective basis, wherein the balance sheet of each individual period presented is adjusted to reflect the period-specific effects of applying the new guidance. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
8 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
ASU 2015-02
In February 2015, the FASB issued ASU No. 2015-02, Consolidation (Topic 810): Amendments to the Consolidation Analysis, which is intended to improve targeted areas of consolidation guidance for legal entities such as limited partnerships, limited liability corporations, and securitization structures (collateralized debt obligations, collateralized loan obligations, and mortgage-backed security transactions). The ASU focuses on the consolidation evaluation for reporting organizations that are required to evaluate whether they should consolidate certain legal entities. In addition to reducing the number of consolidation models from four to two, the new standard simplifies the FASB Accounting Standards Codification and improves current U.S. GAAP by placing more emphasis on risk of loss when determining a controlling financial interest, reducing the frequency of the application of related-party guidance when determining a controlling financial interest in a variable interest entity (“VIE”), and changing consolidation conclusions for companies in several industries that typically make use of limited partnerships or VIEs. The ASU will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. Early adoption is permitted, including adoption in an interim period. We do not expect the adoption of ASU 2015-02 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-16
In November 2014, the FASB issued ASU 2014-16, “Derivatives and Hedging (Topic 815).” ASU 2014-16 addresses whether the host contract in a hybrid financial instrument issued in the form of a share should be accounted for as debt or equity. ASU 2014-16 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not currently have issued, nor are we investors in, hybrid financial instruments. Accordingly, we do not expect the adoption of ASU 2014-16 to have any effect on our financial position, results of operations or cash flows.
ASU 2014-15
In August 2014, the FASB issued ASU No. 2014-15, “Presentation of Financial Statements - Going Concern (Subtopic 205-40)”. ASU 2014-15 provides guidance related to management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosure. ASU 2014-15 is effective for annual periods ending after December 15, 2016, and for interim and annual periods thereafter. Early application is permitted. We do not expect the adoption of ASU 2014-15 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-12
In June 2014, the FASB issued ASU No. 2014-12, “Compensation – Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.” This ASU requires that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. ASU 2014-12 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2015. We do not expect the adoption of ASU 2014-12 to have a material effect on our financial position, results of operations or cash flows.
ASU 2014-09
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” ASU 2014-09 affects any entity using U.S. GAAP that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (e.g., insurance contracts or lease contracts). ASU 2014-09 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. We are still evaluating the effect of the adoption of ASU 2014-09. On April 1, 2015, the FASB voted to propose to defer the effective date of the new revenue recognition standard by one year.
ASU 2014-08
In April 2014, the FASB issued ASU No. 2014-08, “Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360) and Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity.” ASU 2014-08 amends the definition for what types of asset disposals are to be considered discontinued operations, as well as amending the required disclosures for discontinued operations and assets held for sale. ASU 2014-08 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2014. The adoption of ASU 2014-08 did not have any effect on our financial position, results of operations or cash flows.
There were various updates recently issued, most of which represented technical corrections to the accounting literature or application to specific industries and are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
9 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 2. Critical accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts in the financial statements. Management continually evaluates its judgements and estimates in relation to assets, liabilities, contingent liabilities, revenue and expenses. Management bases its judgements, estimates and assumptions on historical experience and on other various factors, including expectations of future events, management believes to be reasonable under the circumstances. The resulting accounting judgements and estimates will seldom equal the related actual results. The judgements, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities (refer to the respective notes) within the next financial year are discussed below.
Estimation of useful lives of assets
The company determines the estimated useful lives and related depreciation and amortization charges for its property, plant and equipment and finite life intangible assets. The useful lives could change significantly as a result of technical innovations or some other event. The depreciation and amortization charge will increase where the useful lives are less than previously estimated lives, or technically obsolete or non-strategic assets that have been abandoned or sold will be written off or written down.
Impairment of long-lived assets to be held and used
The company assesses impairment of long-lived assets to be held and used at each reporting date by evaluating conditions specific to the company and to the particular asset that may lead to impairment. If an impairment trigger exists, the undiscounted future cash flows related to use and disposal of asset is determined, which is then compared with the carrying amount of the asset. This involves a number of key estimates and assumptions.
Income tax
The company is subject to income taxes in the jurisdictions in which it operates. Significant judgement 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. The company recognises liabilities for anticipated tax audit issues based on the company’s 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. The deferred tax liability was not material as of September 30, 2015 and 2014.
10 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 3. Sales revenue
2015 | 2014 | |||||||
Sales - Australia | $ | 60,534 | $ | 49,544 | ||||
Sales - export | 2,030,732 | 196,367 | ||||||
Sales - shipping | 96,869 | 10,439 | ||||||
$ | 2,188,134 | $ | 256,350 |
Note 4. Cost of sales
2015 | 2014 | |||||||
Freight & Postage | $ | 710 | $ | 14,864 | ||||
Packaging | 191,720 | 5,955 | ||||||
Fees | 73,206 | 15,040 | ||||||
Raw Material | 326,213 | 19,373 | ||||||
Less Closing stock | (43,757 | ) | — | |||||
$ | 548,092 | $ | 55,232 |
Note 5. Operating expenses
2015 | 2014 | |||||||
Sales and marketing | ||||||||
Advertising Facebook | $ | 18,984 | $ | 8,502 | ||||
Advertising Google Adwords | 8,526 | 67 | ||||||
Advertising Adroll | 21,914 | 3,744 | ||||||
Advertising- Other | 2,531 | 1,730 | ||||||
Blogging expenses | 378,164 | 22,867 | ||||||
Marketing | 9,351 | — | ||||||
$ | 439,471 | $ | 36,910 | |||||
General and administrative | ||||||||
Accounting & book-keeping | $ | 5,110 | $ | 1,050 | ||||
Bank charges | 2,045 | 287 | ||||||
Branding | 4,941 | 14,518 | ||||||
Consulting | 7,570 | — | ||||||
Insurance | — | 4,361 | ||||||
Office supplies | 684 | 2,002 | ||||||
Other administrative expenses | 4,425 | 2,161 | ||||||
Postage & courier | 2,221 | 250 | ||||||
Rent | 3,653 | 3,416 | ||||||
Subscriptions | 5,601 | 831 | ||||||
Wages & superannuation and other payroll related costs | 106,801 | 47,741 | ||||||
$ | 143,051 | $ | 76,584 | |||||
Depreciation and amortization | ||||||||
Depreciation of office equipment | $ | 425 | $ | — | ||||
Amortisation of domain name and setup costs | 237 | — | ||||||
$ | 662 | $ | — |
11 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 6. Income tax expense
2015 | 2014 | |||||||
Income tax expense | ||||||||
Current tax | $ | 319,056 | $ | — | ||||
Numerical reconciliation of income tax expense and tax at the statutory rate | ||||||||
Profit before income tax expense | 1,058,415 | 88,231 | ||||||
Tax at the statutory tax rate of 30% | 317,525 | 26,469 | ||||||
Tax effect amounts which are not deductible/(taxable) in calculating taxable income: | ||||||||
Others | 1,531 | (26,469 | ) | |||||
Income tax expense | $ | 319,056 | $ | — |
Note 7. Due from shareholders
September 30, 2015 | June 30, 2015 | |||||||
Loan- Tim Polmear (Shareholder) | $ | 31,463 | $ | 681,020 | ||||
Loan- Polmear Holdings Pty Ltd (Beneficiary of shareholder) | — | 538 | ||||||
$ | 31,463 | $ | 681,558 |
The receivable at June 30, 2015 represented an advance to the shareholder in anticipation of a dividend to be declared in favour of the shareholder. The receivable is non-interest bearing and receivable on demand. The Company declared dividends to offset loan receivable from shareholder (see note 10).
Note 8. Accounts Payable and Accrued Expenses
September 30, 2015 | June 30, 2015 | |||||||
Credit card | $ | 6,113 | $ | 7,874 | ||||
Accounts payable | 89,091 | 18,536 | ||||||
GST payable/(receivable) | (4,702 | ) | (2,195 | ) | ||||
Superannuation and other payable | 13,862 | 9,096 | ||||||
PAYG withholdings payable | 15,732 | 13,945 | ||||||
$ | 120,096 | $ | 47,256 |
Note 9. Due to shareholders
September 30, 2015 | June 30, 2015 | |||||||
Due to shareholders | $ | — | $ | 1,784 |
During the years ended June 30, 2014, the Company received funds from shareholders of $26,874 of which $25,090 was repaid during the year ended June 30, 2015. Remaining balance of $1,784 was repaid during the three months ended September 30, 2015. The payable is non-interest bearing and due on demand.
12 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 10. Equity - issued capital
September 30, 2015 | June 30, 2015 | September 30, 2015 | June 30, 2015 | |||||||||||||
Shares | Shares | |||||||||||||||
Ordinary shares - fully paid | 1,200 | 1,200 | $ | 127 | $ | 127 |
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote.
Dividend
Dividends paid during the period were as follows :
2015 | 2014 | ||||||||
Dividend for the three months ended September 30, 2015 of $612.20 per ordinary share | $ | 734,673 | — |
During the three months ended September 30, 2015, the Company adjusted dues from receivable by $687,040, paid dividend of $36,945 by cash and balance of $47,633 of dividend is payable as of September 30, 2015.
Note 11. Contingent liabilities
The company had no contingent liabilities as at September 30, 2015 and June 30, 2015.
Note 12. Commitments
The company had no commitments for expenditure as at September 30, 2015 and June 30, 2015.
13 |
Nomadchoice Pty Limited
Notes to the unaudited condensed financial statements
Note 13. Fixed assets
September 30, 2015 | June 30, 2015 | |||||||
Office equipment and computers | $ | 8,093 | $ | 7,533 | ||||
Less : Accumulated depreciation | (4,596 | ) | (4,582 | ) | ||||
$ | 3,497 | $ | 2,951 |
Depreciation expense for the three months ended September 30, 2015 and 2014 was $155 and $0, respectively.
Note 14. Inventory
September 30, 2015 | June 30, 2015 | |||||||
Raw materials and packaging material | $ | 52,248 | $ | 50,827 | ||||
$ | 52,248 | $ | 50,827 |
Note 15. Intangible assets
September 30, 2015 | June 30, 2015 | |||||||
Organisational costs | $ | 732 | $ | 801 | ||||
Domain name | 3,841 | 4,206 | ||||||
Trademark | 88 | — | ||||||
Less : Accumulated depreciation | (1,001 | ) | (841 | ) | ||||
$ | 3,659 | $ | 4,166 |
Amortization expense for the three months ended September 30, 2015 and 2014 was $507 and $0, respectively.
Note 16. Subsequent Events
On November 15, 2015 the Company entered into a stock purchase agreement with Synergy CHC Corp., a United States of America based consumer health care company, for the purchase of all of the issued and outstanding capital stock for $4,000,000 Australian dollars in cash and 3,571,428 shares of Synergy’s common stock. In addition to the cash and equity consideration, Synergy will pay the Company certain earn-out payments of up to $3,500,000 Australian dollars in aggregate upon certain EBITDA thresholds as of June 30, 2016.
14 |
PRO FORMA FINANCIAL INFORMATION
● | Condensed Consolidated Pro Forma Unaudited Balance Sheet as of September 30, 2015 | |
● | Condensed Consolidated Pro Forma Unaudited Statement of Operations and Comprehensive Loss for the Year Ended December 31, 2014 | |
● | Condensed Consolidated Pro Forma Unaudited Statement of Operations and Comprehensive Loss for the Nine Months Ended September 30, 2015 | |
● | Notes to Condensed Consolidated Pro Forma Unaudited Financial Statements |
On November 15, 2015, Synergy CHC Corp. (“Synergy” or “the Company”) acquired Nomadchoice Pty Ltd. (“Nomad”), a distributor and producer of flat tummy teas (the “Acquisition”).
The unaudited condensed combined pro forma statements of operations are presented as if the Acquisition had been completed on January 1, 2014 combining Nomad’s audited condensed statement of operations for the year ended June 30, 2015 and the Company’s audited condensed statement of operations for the year ended December 31, 2014 and the Company’s condensed unaudited statement of operations for the nine months ended September 30, 2015, respectively. The unaudited condensed combined pro forma balance sheet gives effect to the acquisition as if the Acquisition had taken place on September 30, 2015 and combines Nomad’s unaudited condensed balance sheet as of September 30, 2015 with the Company’s unaudited condensed balance sheet as of September 30, 2015.
The unaudited pro forma combined statement of income is presented for illustrative purposes only and, therefore, is not necessarily indicative of the operating results that might have been achieved had the transaction occurred as of an earlier date, nor is it necessarily indicative of the operating results that may be achieved in the future. You should not rely on the pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined companies will experience after the Acquisition.
The unaudited pro forma combined statement of operations and comprehensive loss, including the notes thereto, should be read in conjunction with the Company’s audited historical consolidated financial statements for the year ended December 31, 2014 included in our Annual Report on Form 10-K for the year ended December 31, 2014, as well as Nomad’s audited financial statements for the years ended June 30, 2015 and 2014 and unaudited condensed financial statements for the three month ended September 30, 2015 and 2014 included in Exhibit 99.1 to this Form 8-K/A.
Synergy CHC Corp.
Unaudited Pro Forma Balance Sheet
September 30, 2015
Balance Sheet Synergy CHC Corp. September 30, 2015 |
NomadChoice Pty Ltd. September 30, 2015 |
Pro Forma Adjustments | Balance Sheet Consolidated Pro Forma September 30, 2015 | |||||||||||||||||
Dr | Cr | |||||||||||||||||||
Assets | ||||||||||||||||||||
Current Assets | ||||||||||||||||||||
Cash and cash equivalents | $ | 824,948 | $ | 1,240,595 | 2,307,825 | (1) | $ | 4,373,368 | ||||||||||||
Accounts receivable | 1,327,154 | 1,327,154 | ||||||||||||||||||
Receivable from related party | 175,422 | 31,463 | 206,885 | |||||||||||||||||
Inventory | 499,448 | 52,248 | 551,696 | |||||||||||||||||
Prepaid expenses | 122,576 | 36,464 | 159,040 | |||||||||||||||||
Total current assets | 2,949,548 | 1,360,770 | 6,618,143 | |||||||||||||||||
Other assets | ||||||||||||||||||||
Fixed assets, net | 3,614 | 3,497 | 7,111 | |||||||||||||||||
Investment in Hand MD Corp. | 1,500,000 | 1,500,000 | ||||||||||||||||||
Goodwill and Intangible assets, net | 5,694,584 | 3,659 | 2,316,792 | (1) | 8,015,035 | |||||||||||||||
Debt issuance cost, net | 198,429 | 2,515,221 | ||||||||||||||||||
Total other assets | 7,396,627 | 7,156 | 12,037,368 | |||||||||||||||||
Total Assets | $ | 10,346,175 | $ | 1,367,926 | $ | 18,655,510 | ||||||||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||||||
Current liabilities | ||||||||||||||||||||
Accounts payable and accrued liabilities | $ | 1,653,296 | $ | 120,096 | $ | 1,773,392 | ||||||||||||||
Provision for income taxes payable | 439,046 | 439,046 | ||||||||||||||||||
Provision for dividends payable | 47,633 | 47,633 | ||||||||||||||||||
Current portion of long-term debt | 750,000 | 750,000 | ||||||||||||||||||
Current portion of long-term debt, related party | 300,000 | — | 300,000 | |||||||||||||||||
Total current liabilities | 2,703,296 | 606,775 | 3,310,071 | |||||||||||||||||
Long-term liabilities | ||||||||||||||||||||
Note payable | 750,000 | 750,000 | ||||||||||||||||||
Note payable, net of debt discount, related party | 5,047,178 | 5,500,000 | (1)(2) | 10,547,178 | ||||||||||||||||
Total long-term liabilities | 5,797,178 | 11,297,178 | ||||||||||||||||||
Total Liabilities | 8,500,474 | 606,775 | 14,607,249 | |||||||||||||||||
Stockholders’ Equity | ||||||||||||||||||||
Common stock, $0.00 par value unlimited shares authorized, 1,200 issued and outstanding | 127 | 127 | (2) | 0 | ||||||||||||||||
Common stock, $0.00001 par value; 300,000,000 shares authorized, 69,238,044 issued and outstanding | 692 | 692 | ||||||||||||||||||
Common stock to be issued | 68,000 | 68,000 | ||||||||||||||||||
Additional paid in capital | 5,882,448 | 5,882,448 | ||||||||||||||||||
Cumulative translation adjustment | (114,232 | ) | (114,232 | ) | ||||||||||||||||
Accumulated (deficit)/Retained earnings | (4,105,439 | ) | 875,256 | 875,256 | (2) | (4,105,439 | ) | |||||||||||||
Total stockholders’ equity | 1,845,701 | 761,151 | 1,731,469 | |||||||||||||||||
Total liabilities and stockholders’ equity | $ | 10,346,175 | $ | 1,367,926 | 5,500,000 | 5,500,000 | $ | 16,338,718 |
(1) | To record the issuance of $5,500,000 of debt in connection with the acquisition of NomadChoice and eliminate NomadChoice’s equity as of September 30, 2015 |
(2) | To eliminate Nomad’s retained earnings and capital structure. |
Synergy CHC Corp.
Unaudited Pro Forma Statement of Operations and Comprehensive Loss
Nine months ended September 30, 2015
Synergy
CHC Corp. Nine months ended September 30, 2015 | NomadChoice
Pty Ltd. Twelve months ended June 30, 2015 | Add:NomadChoice
Pty Ltd. Three months ended September 30, 2015 | Less:
NomadChoice Pty Ltd. Three months ended September 30, 2014 | Pro Forma Adjustments | Consolidated
Pro Forma Nine months ended September 30, 2015 | |||||||||||||||||||||||
Revenue, Less returns, allowances and discounts | $ | 7,237,619 | $ | 2,485,654 | $ | 2,188,134 | $ | 256,350 | $ | 11,655,057 | ||||||||||||||||||
Cost of sales | 3,103,244 | 556,566 | 548,092 | 55,232 | 4,152,670 | |||||||||||||||||||||||
Gross profit | 4,134,375 | 1,929,088 | 1,640,042 | 201,118 | 7,502,387 | |||||||||||||||||||||||
Operating expenses | ||||||||||||||||||||||||||||
Selling and marketing | 2,228,418 | 368,177 | 439,471 | 36,910 | 2,999,156 | |||||||||||||||||||||||
General and administrative | 1,407,458 | 376,256 | 143,051 | 76,617 | 1,850,148 | |||||||||||||||||||||||
Depreciation and amortization | 282,256 | 4,576 | 662 | - | 287,494 | |||||||||||||||||||||||
Total operating expenses | 3,918,132 | 749,009 | 583,184 | 113,527 | 5,136,798 | |||||||||||||||||||||||
Income (loss) from operations | 216,243 | 1,180,079 | 1,056,858 | 87,591 | 2,365,589 | |||||||||||||||||||||||
Other income (expenses) | ||||||||||||||||||||||||||||
Interest expense | (612,094 | ) | (615,548 | ) | (1) | (1,227,642 | ) | |||||||||||||||||||||
Interest income | 8,369 | 1,557 | 637 | 9,289 | ||||||||||||||||||||||||
Amortization of debt discount | (2,575,192 | ) | (2,575,192 | ) | ||||||||||||||||||||||||
Amortization of debt issuance cost | (101,105 | ) | (101,105 | ) | ||||||||||||||||||||||||
Total other expenses | (3,288,391 | ) | 8,369 | 1,557 | 637 | (3,279,102 | ) | |||||||||||||||||||||
Net income (loss) before provision for income taxes | (3,072,148 | ) | $ | 1,188,448 | $ | 1,058,415 | $ | 88,228 | $ | (913,513 | ) | |||||||||||||||||
Income Taxes | 341,619 | 319,556 | - | 661,175 | ||||||||||||||||||||||||
Net income (loss) | $ | (3,072,148 | ) | $ | 846,829 | $ | 738,859 | $ | 88,228 | (1,574,688 | ) | |||||||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||||||||||
Net income (loss) | (3,072,148 | ) | 846,829 | 738,859 | 88,228 | (1,574,688 | ) | |||||||||||||||||||||
Foreign currency translation adjustments | — | (92,520 | ) | (25,889 | ) | 8,409 | (126,818 | ) | ||||||||||||||||||||
Total Comprehensive income | $ | (3,072,148 | ) | $ | 754,309 | $ | 712,970 | $ | 96,637 | $ | (1,701,506 | ) | ||||||||||||||||
Net loss per share - basic and diluted | $ | (0.05 | ) | - | $ | (0.02 | ) | |||||||||||||||||||||
Weighted average common shares - basic | ||||||||||||||||||||||||||||
and diluted | 67,033,094 | - | 67,033,094 |
(1) To record interest expense in connection with the debt issuance of $5,500,000
The pro forma condensed statement of income for the nine months ended September 30, 2015 is presented using the Company’s quarter ended September 30, 2015 and Nomad’s fiscal year end of June 30, 2015 plus their next quarter ended September 30, 2015, less the quarter ended September 30, 2014. Due to different year ends, this is the most practical way to reconcile to the quarter ended September 30, 2015.
Synergy CHC Corp.
Unaudited Pro Forma Statement of Operations and Comprehensive Loss
Twelve months ended December 31, 2014
Synergy
CHC Corp. Twelve months ended December 31, 2014 | NomadChoice
Pty Ltd. Twelve months ended June 30, 2015 | Pro Forma Adjustments | Consolidated Pro Forma Twelve Months | |||||||||||||||||
Revenue less: returns, allowances and discounts | $ | 9,158 | $ | 2,485,654 | $ | 2,494,812 | ||||||||||||||
Cost of sales | 5,616 | 556,566 | 562,182 | |||||||||||||||||
Gross profit | 3,542 | 1,929,088 | 1,932,630 | |||||||||||||||||
Operating expenses | ||||||||||||||||||||
Selling and marketing | 368,177 | 368,177 | ||||||||||||||||||
General and administrative | 961,636 | 376,256 | 1,337,892 | |||||||||||||||||
Depreciation and amortization | 4,576 | 4,576 | ||||||||||||||||||
Total operating expenses | 961,636 | 749,009 | 1,710,645 | |||||||||||||||||
Income (loss) from operations | (958,094 | ) | 1,180,079 | 221,985 | ||||||||||||||||
Other income (expenses) | — | - | ||||||||||||||||||
Interest expense | (1,998 | ) | (796,017 | ) | (1) | (798,015 | ) | |||||||||||||
Interest income | 8,369 | 8,369 | ||||||||||||||||||
Other expenses | - | |||||||||||||||||||
Total other income (expenses) | (1,998 | ) | 8,369 | (789,646 | ) | |||||||||||||||
Net income (loss) before provision for income taxes | (960,092 | ) | $ | 1,188,448 | $ | (567,661 | ) | |||||||||||||
Income Taxes | 341,619 | 341,619 | ||||||||||||||||||
Net income (loss) | $ | (960,092 | ) | $ | 846,829 | $ | (909,280 | ) | ||||||||||||
Comprehensive income (loss) | ||||||||||||||||||||
Net income (loss) | (960,092 | ) | 846,829 | (909,280 | ) | |||||||||||||||
Foreign currency translation adjustments | - | (92,520 | ) | (92,520 | ) | |||||||||||||||
Comprehensive income (loss) | $ | (960,092 | ) | $ | 754,309 | $ | (1,001,800 | ) | ||||||||||||
Net loss per share - basic and diluted | $ | (0.01 | ) | - | $ | (0.01 | ) | |||||||||||||
Weighted average common shares - basic and diluted | 97,165,479 | - | 97,165,479 |
(1) To record interest expense in connection with the debt issuance of $5,500,000
The pro forma condensed statement of income for the year ended December 31, 2014 is presented using the Company’s fiscal year end of December 31, 2014 and Nomad’s fiscal year end of June 30, 2015, a difference greater than 93 days. Management has determined it is not practicable for Nomad’s fiscal year end to be brought up to within 93 days of the Company’s fiscal year end.
SYNERGY CHC CORP.
NOTES TO CONDENSED PRO FORMA UNAUDITED FINANCIAL STATEMENTS
Unaudited Pro Forma Condensed Financial Information.
The Pro Forma Unaudited Condensed Financial Statements have been prepared in order to present consolidated financial position and results of operations of Synergy CHC Corp. (the “Company”) and Nomadchoice Pty Ltd. (“Nomad”) as if the Acquisition had occurred as of September 30, 2015 for the pro forma condensed consolidated balance sheet and to give effect to the Acquisition by the Company, as if the transaction had taken place at January 1, 2014 for the pro forma condensed consolidated statements of operations and comprehensive loss for the year ended December 31, 2014 and the nine months ended September 30, 2015, respectively.
The following pro forma adjustments are incorporated into the pro forma condensed consolidated balance sheet as of September 30, 2015 and the pro forma condensed consolidated statement of operations and comprehensive loss for the year ended December 31, 2014 and nine months ended September 30, 2015, respectively.
(1) Acquisition of Nomad and issuance of note payable
The Acquisition has been accounted for under the acquisition method of accounting. Under the acquisition method of accounting, the total acquisition consideration price was allocated to the assets acquired and liabilities assumed based on their preliminary estimated fair values. In order to ultimately determine the fair values of tangible and intangible assets acquired and liabilities assumed for Nomad, we may engage a third party independent valuation specialist, however as of the date of this report, the valuation has not been undertaken.
During the measurement period (which is the period required to obtain all necessary information that existed at the acquisition date, or to conclude that such information is unavailable, not to exceed one year), additional assets or liabilities may be recognized, or there could be changes to the amounts of assets. The Company expects the purchase price allocations for the acquisition of Nomad to be completed by the end of the fourth quarter of 2016.
This pro forma adjustments do not reflect the amortization of intangible assets acquired, if any, in the Acquisition
(2) To eliminate Nomad’s retained earnings and capital structure
1 Year Synergy CHC (CE) Chart |
1 Month Synergy CHC (CE) Chart |
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