BFYW.OTC.PinkBetter for You Wellness, INC
10-Q: Better For You Wellness Reports Q3 2023 Results, Revenue Declines Amidst Restructuring
Sentiment:
Quarterly Report
Better For You Wellness, Inc. reported a decrease in revenue for the third quarter of 2023, primarily due to the reformulation and repackaging of its Mango Moi product line.
Capital raiseThe company is reliant on related party contributions to fund operating expenses.The company may require further funding to implement its operations plan for the next twelve months.The company has a Standby Equity Commitment Agreement with MacRab LLC, providing an option to sell up to $5,000,000 worth of common stock.
Worse than expectedThe company's revenue decreased significantly, indicating worse than expected sales performance.The company's cash balance is very low, indicating worse than expected liquidity.The company's net loss, while improved, is still substantial, indicating worse than expected profitability.
Summary
- Better For You Wellness, Inc. reported its financial results for the third quarter of 2023, showing a net loss of $397,565, compared to a net loss of $770,347 in the same period of 2022.
- The company's revenue decreased to $995 for the three months ended November 30, 2023, from $6,986 in the same period of 2022, a decrease of 86%.
- For the nine months ended November 30, 2023, revenue was $4,649, down from $9,008 in the same period of 2022, a decrease of 48%.
- The decrease in revenue is primarily attributed to the reformulation and repackaging of the Mango Moi product line.
- Operating expenses decreased to $286,175 for the three months ended November 30, 2023, from $715,575 in the same period of 2022, due to reduced stock option expenses and lower general and administrative costs.
- The company's cash balance was $386 as of November 30, 2023, compared to $13,773 as of February 28, 2023.
- The company is reliant on related party contributions to fund operating expenses and has a going concern warning.
- The company entered into an Asset Purchase Agreement to acquire The Ideation Lab, LLC, issuing 300,000 Series A Preferred Shares as consideration.
Sentiment
Score: 3
Explanation: The document presents a concerning financial situation with significant revenue decline, low cash balance, and a going concern warning. While there are some positive aspects like reduced operating expenses, the overall sentiment is negative due to the company's financial instability and reliance on related party funding.
Positives
- The net loss decreased for both the three and nine months ended November 30, 2023, compared to the same periods in 2022.
- Operating expenses were significantly reduced for both the three and nine months ended November 30, 2023, compared to the same periods in 2022.
- The company is actively pursuing acquisitions to expand its business.
Negatives
- Revenue decreased significantly for both the three and nine months ended November 30, 2023, compared to the same periods in 2022.
- The company's cash balance is very low at $386 as of November 30, 2023.
- The company is heavily reliant on related party contributions to fund operating expenses.
- The company has a going concern warning due to negative financial trends and a working capital deficiency.
Risks
- The company's ability to continue as a going concern is in doubt due to negative financial trends and a working capital deficiency.
- The company is heavily reliant on related party contributions to fund operating expenses, and there is no guarantee that this support will continue.
- The company's revenue has decreased significantly due to the reformulation and repackaging of the Mango Moi product line.
- The company faces competition from companies with greater financial resources and market presence.
- The company's operating costs are subject to fluctuations, particularly due to changes in commodity prices and transportation costs.
Future Outlook
The company plans to expand its product offerings, grow sales through direct-to-consumer marketing, subscription box sales, and pursue wholesale sales relationships. The company also intends to acquire other businesses in the wellness sector.
Management Comments
- Management plans to fund operating expenses with related party contributions to capital.
- Management expects legal costs to taper as a percentage of overall SG&A as the company grows.
- Management believes wellness consumers purchase with intention and specifically seek out the brands and products that improve their quality of life.
Industry Context
The company operates in the rapidly growing wellness industry, targeting six goals-based wellness categories. The company is competing with other companies in the plant-based and science-focused wellness market, many of which have greater financial resources and market presence.
Comparison to Industry Standards
- The company's revenue decline is significant compared to industry growth trends in the wellness sector, which is generally experiencing expansion.
- The company's reliance on related party funding is not typical for established companies in the wellness industry, which often have access to broader capital markets.
- The company's negative cash flow and going concern warning are concerning compared to industry benchmarks for financial stability.
- The company's operating expense reductions are a positive sign, but the overall financial performance is still weak compared to industry averages.
Management Changes
| Role | Previous Person | New Person | Effective Date | Reason |
|---|---|---|---|---|
| Director | Leslie Bumgarner | Christina Jefferson | 2022-01-01 | Resignation |
| Director | Nicola Finley | Mellise Gelula (temporary) | 2022-06-18 | Resignation |
| Director | Mellise Gelula | Vacant | 2022-08-01 | Unable to commit to the director role |
Corporate Governance
| Change Type | Description | Effective Date | Impact Assessment |
|---|---|---|---|
| Internal Control | The company identified a material weakness in its internal control over financial reporting and is implementing improvements and remedial measures. | 2023-11-30 | The company is hiring a fractional Chief Financial Officer and engaging Apari Solutions for accounting and audit-related services. |
Related Party Transactions
- The company received loans from related parties, including Ian James, David Deming, and GOV, a wholly-owned subsidiary of Ian James.
- The company settled loans from related parties by issuing common shares.
- The company entered into an Asset Purchase Agreement with The Ideation Lab, LLC, a related party, issuing 300,000 Series A Preferred Shares as consideration.
Stakeholder Impact
- Shareholders are impacted by the company's decreased revenue, net loss, and going concern warning.
- Employees are impacted by the company's cost-cutting measures, including a reduction in the labor force.
- Customers may be impacted by the reformulation and repackaging of the Mango Moi product line.
- Creditors are impacted by the company's low cash balance and reliance on related party funding.
Next Steps
- The company plans to optimize Mango Moi's product formulae and packaging.
- The company plans to secure new manufacturing relationships to scale production capacity.
- The company plans to expand Mango Moi's product offerings.
- The company plans to grow sales through direct-to-consumer marketing, subscription box sales, and pursuing wholesale sales relationships.
- The company plans to implement improvements and remedial measures in response to the material weakness in internal control over financial reporting.
Key Dates
| Date | Description |
|---|---|
| 2020-12-01 | Better For You Wellness, Inc. was initially incorporated as Fast Track Solutions, Inc. |
| 2021-08-27 | Independent Directors were appointed to the Board of Directors. |
| 2021-09-30 | Stock options were granted to directors. |
| 2021-12-31 | Director Leslie Bumgarner resigned. |
| 2022-01-01 | Christina Jefferson was appointed to the Board of Directors. |
| 2022-01-01 | Stock options were granted. |
| 2022-02-28 | The company's fiscal year end. |
| 2022-03-01 | Employment Agreements for key personnel began. |
| 2022-04-12 | The company entered into a Securities Purchase Agreement with Mast Hill Fund, L.P. |
| 2022-04-18 | The company entered into a Standby Equity Commitment Agreement with MacRab LLC. |
| 2022-04-29 | The company entered into an asset purchase agreement to acquire Mango Moi. |
| 2022-05-26 | The company closed the acquisition of Mango Moi. |
| 2022-06-07 | The company entered into a second Securities Purchase Agreement with Mast Hill Fund, L.P. |
| 2022-06-18 | Director Nicola Finley resigned. |
| 2022-07-11 | Mast Hill agreed to extend the timeframes in the Registration Rights Agreement. |
| 2022-07-11 | The company entered into a Common Share Option Cancellation and Forfeiture Agreement with Nicola Finley. |
| 2022-07-21 | Formal Employment Agreements were approved for key personnel. |
| 2022-09-01 | Internal control over financial reporting changes began. |
| 2022-10-11 | Mast Hill agreed to further extend the timeframes in the Registration Rights Agreement. |
| 2022-10-12 | The company acquired a loan payable by Mango Moi, LLC. |
| 2023-02-28 | The company's fiscal year end. |
| 2023-03-01 | Employment Agreements for key personnel began. |
| 2023-04-01 | The company entered into an office lease agreement. |
| 2023-05-31 | The remaining balance of a loan was paid in cash. |
| 2023-07-18 | The Board of Directors authorized the issuance of common shares to settle a loan and deferred compensation. |
| 2023-08-31 | The company recorded a default interest rate on a convertible note. |
| 2023-09-18 | The company entered into an amendment of the two promissory notes held by Mast Hill Fund L.P. |
| 2023-09-18 | The company entered into a Membership Interest Purchase Agreement (MIPA) with The Ideation Lab, LLC. |
| 2023-09-30 | Restricted Common Stock was issuable to a director. |
| 2023-11-30 | The end of the reporting period for the quarterly report. |
| 2023-12-04 | The company terminated the MIPA and entered into an Asset Purchase Agreement with The Ideation Lab, LLC. |
| 2024-01-17 | The increase in authorized common shares will go into effect. |
| 2024-01-19 | The date of the report. |
Keywords
wellness, plant-based, skincare, acquisitions, revenue, net loss, operating expenses, going concern, related party, Mango Moi
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