8-K: FINRA Blocks Better For You Wellness Reverse Stock Split Citing SEC Actions Against Convertible Note Holder

FINRA has blocked Better For You Wellness's proposed 1-for-3,500 reverse stock split due to concerns related to a convertible note holder's past and present SEC violations.

Summary

• Better For You Wellness, Inc. (BFYW) had planned a reverse stock split with a ratio between 500-for-1 and 5000-for-1, with the exact ratio to be determined by the Board of Directors.
• The company filed a Definitive Information Statement on April 23, 2024, regarding the reverse stock split.
• FINRA has refused to process the 1-for-3,500 reverse stock split due to concerns about a convertible note holder, 1800 Diagonal Lending, LLC, and its connection to Curt Kramer.
• Curt Kramer and his companies are the subject of a recent SEC complaint and a 2016 SEC Cease-and-Desist Order for operating as unregistered securities dealers and violating securities laws.
• 1800 Diagonal holds a convertible note that, if fully converted, could result in them owning approximately 108,837,811 shares of BFYW, representing 17.649% of the total shares outstanding.
• BFYW has decided to abandon the reverse stock split and will instead focus on growing its premium coffee sales in Kroger, Amazon, and other supermarkets.
• The company believes FINRA's decision is arbitrary, capricious, an abuse of discretion, and contrary to the law, but will not appeal the decision.
• The company advises the public that quotations on the Bulletin Board and OTC Pink Sheets do not reflect the planned reverse stock split.

Sentiment

Score: 3

Explanation: The document conveys a negative sentiment due to the regulatory setback and the abandonment of the reverse stock split. The company's management expresses frustration with FINRA's decision, further contributing to the negative tone.

Positives

• BFYW will focus on growing its premium coffee sales in Kroger, Amazon, and other supermarkets.
• The company's communications with retailers have been warmly received.
• The company believes that increasing product sales will assist the company to achieve its goals and projections.

Negatives

• FINRA's decision to block the reverse stock split is a setback for the company's plans.
• The company's relationship with 1800 Diagonal, a convertible note holder, has led to regulatory scrutiny.
• The company believes FINRA's decision is arbitrary and not in the best interest of investors.
• The company's stock price may be negatively impacted by the lack of a reverse stock split.

Risks

• The company's stock price may be negatively impacted by the lack of a reverse stock split.
• The company's relationship with 1800 Diagonal, a convertible note holder, poses a risk due to the SEC actions against Curt Kramer.
• The company's ability to raise capital may be affected by the regulatory issues.
• The company's future growth may be hindered by the inability to execute the reverse stock split.

Future Outlook

The company will focus on expanding its premium coffee sales in Kroger, Amazon, and other supermarkets to achieve its goals and projections.

Management Comments

• The Stock Split was approved by the Board of Directors in the best interests of the Company.
• We believe that FINRA's actions are capricious and erroneous and as such without any basis in law.
• We will not appeal FINRA's decision and will abandon the reverse split.
• We will continue to focus upon the blocking and tackling that is required to expand our premium coffee collection, in Kroger stores, and other large supermarkets across the country.

Industry Context

This announcement highlights the regulatory challenges faced by companies with complex financing structures, particularly those involving convertible notes and individuals with a history of securities violations. It also underscores the importance of due diligence when dealing with convertible note holders.

Comparison to Industry Standards

• The situation is unusual as FINRA rarely blocks a reverse stock split, indicating the severity of the concerns regarding the convertible note holder.
• Other companies have faced similar issues with convertible note holders, but the direct link to SEC violations is a significant factor in this case.
• The decision by FINRA is more stringent than typical regulatory actions, suggesting a high level of concern about the potential for market manipulation or investor harm.

Legal Proceedings

• FINRA cited a May 7, 2024 SEC complaint against Curt Kramer and his companies for operating as unregistered securities dealers.
• FINRA also cited an October 27, 2016 SEC Cease-and-Desist Order against Kramer for securities violations.

Related Party Transactions

• The company borrowed money from 1800 Diagonal pursuant to a January 17, 2024, convertible promissory note.

Stakeholder Impact

• Shareholders may be negatively impacted by the abandonment of the reverse stock split and the regulatory issues.
• The company's employees may be affected by the change in strategic direction.
• The company's customers may not be directly impacted by this announcement.
• The company's suppliers may be affected by the change in strategic direction.
• The company's creditors may be affected by the regulatory issues.

Next Steps

• The company will focus on expanding its premium coffee sales in Kroger, Amazon, and other supermarkets.
• The company will not appeal FINRA's decision regarding the reverse stock split.

Key Dates

Keywords

reverse stock split, FINRA, SEC, convertible note, Curt Kramer, 1800 Diagonal, securities violations, coffee sales, Kroger, Amazon