What changed in SRx Health Solutions, Inc.'s 2023 10-K compared to 2022?

Across the narrative sections we track, SRx Health Solutions, Inc. (SRXH) added 169 paragraphs, removed 185, and edited 136 between the 2022 and 2023 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+89/−91), Item 1. Business (+41/−47), Item 5. Market for Registrant's Common Equity (+23/−32).

Did SRx Health Solutions, Inc. add new Risk Factors in the 2023 10-K?

Yes — Item 1A Risk Factors shows 15 new/edited paragraphs and 14 removed paragraphs versus the 2022 10-K.

What changed in SRx Health Solutions, Inc.'s MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 89 new/edited paragraphs and 91 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Where does this SRXH 10-K diff come from?

The source filings are SRx Health Solutions, Inc.'s official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in SRx Health Solutions, Inc.'s 10-K — 2022 vs 2023

Paragraph-level year-over-year comparison of SRx Health Solutions, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+169 added−185 removedSource: 10-K (2023-03-28) vs 10-K (2022-03-29)

Item 1. Business

Business — how the company describes what it does

36 edited+5 added−11 removed41 unchanged

2022 filing

2023 filing

Biggest changeOur products sold under the TruDog brand are manufactured and sourced from a variety of third-party suppliers in both the U.S. and New Zealand and use healthy, natural ingredients, with all purchases transacted in U.S. dollars. Many products are preserved using either freeze drying or gentle air dehydration to eliminate the need for artificial preservatives and added chemicals.

Biggest changeSome products are preserved using either freeze drying or gentle air dehydration to eliminate the need for artificial preservatives and added chemicals. Our treats and chews are oven-baked, using natural ingredients for maximum nutrition and protein content.

Our Products and Brands We have a broad portfolio of over 100 active premium and super premium animal health and wellness products for dogs and cats, which includes products sold under the Halo and TruDog brands across multiple forms, including foods, treats, toppers, dental products, chews, grooming products and supplements.

Our Products and Brands We have a broad portfolio of over 100 active premium and super premium animal health and wellness products for dogs and cats, which includes products sold under the Halo brand across multiple forms, including foods, treats, toppers, dental products, chews, grooming products and supplements.

Our outsourced manufacturing model is flexible, scalable and encourages innovation allowing us to offer a breadth of assortment in dog and cat food products under the Halo and TruDog brands, serving a wide variety of customer needs. Halo is the brand for a new generation of pet parents.

Our outsourced manufacturing model is flexible, scalable and encourages innovation allowing us to offer a breadth of assortment in dog and cat food products under the Halo brand, serving a wide variety of customer needs. Halo is the brand for a new generation of pet parents.

Although approximately 53% of Better Choice’s sales are made online today, we remain committed to partnering with select Brick & Mortar retailers in pet specialty and neighborhood pet, as in-store recommendation and trial represent a significant opportunity for new customer acquisition.

Although approximately 39% of Better Choice’s sales are made online today, we remain committed to partnering with select Brick & Mortar retailers in pet specialty and neighborhood pet, as in-store recommendation and trial represent a significant opportunity for new customer acquisition.

Overview of Our Business Better Choice is a rapidly growing pet health and wellness company committed to leading the industry shift toward pet products and services that help dogs and cats live healthier, happier and longer lives.

Overview of Our Business Better Choice is a pet health and wellness company committed to leading the industry shift toward pet products and services that help dogs and cats live healthier, happier and longer lives.

If any raw material is adulterated and does not meet our specifications, it could significantly impact our ability to source manufactured products and could materially and adversely impact our business, financial condition and results of operations. For the supply and co-manufacturing of our products, we have relied on Alphia, Inc. (“Alphia” f/k/a “C.J.

If any raw material is adulterated and does not meet our specifications, it could significantly impact our ability to source manufactured products and could materially and adversely impact our business, financial condition and results of operations. 5 Table of Contents For the supply and co-manufacturing of our products, we have relied on Alphia, Inc. (“Alphia” f/k/a “C.J.

In addition to directly targeting and educating consumers of our products, we partner with a number of retailers such as Amazon, Chewy and Petco to develop joint sales and marketing initiatives to increase sales and acquire new customers. 6 Table of Contents In recent years, consumer purchasing behaviors have shifted dramatically and E-Commerce penetration has significantly increased.

In addition to directly targeting and educating consumers of our products, we partner with a number of retailers such as Amazon, Chewy and Petco to develop joint sales and marketing initiatives to increase sales and acquire new customers. In recent years, consumer purchasing behaviors have shifted dramatically and E-Commerce penetration has significantly increased.

We monitor changes in these laws and believe that we are in material compliance with applicable laws. See additional information under the heading “Risks Related to the Regulation of our Business and Products” in this Annual Report on Form 10-K for a discussion of risks relating to federal, state, local and international regulation of our business.

We monitor changes in these laws and believe that we are in material compliance with applicable laws. See additional information under the heading “Risks Related to the Regulation of our 7 Table of Contents Business and Products” in this Annual Report on Form 10-K for a discussion of risks relating to federal, state, local and international regulation of our business.

We believe that our portfolio of brands are well positioned to benefit from the trends of growing pet humanization and an increased consumer focus on health and wellness, and have adopted a laser focused, channel specific approach to growth that is driven by new product innovation.

We believe that our broad portfolio of pet health and wellness products are well positioned to benefit from the trends of growing pet humanization and an increased consumer focus on health and wellness, and have adopted a laser focused, channel specific approach to growth that is driven by new product innovation.

Department of Agriculture ("USDA") and other regulatory authorities at the federal, state and local levels, as well as authorities in foreign countries, extensively regulate, among other things, the research, development, testing, composition, manufacture, import, export, labeling, storage, distribution, promotion, marketing, and post-market reporting of animal foods.

Federal Trade Commission ("FTC"), the U.S. Department of Agriculture ("USDA") and other regulatory authorities at the federal, state and local levels, as well as authorities in foreign countries, extensively regulate, among other things, the research, development, testing, composition, manufacture, import, export, labeling, storage, distribution, promotion, marketing, and post-market reporting of animal foods.

By sourcing cage-free poultry, pasture-raised beef, and wild-caught fish from certified sustainable fisheries and not including meat meals or other animal byproducts in its formulations, our Halo brand is able to provide pets and pet parents with a nutritious and highly digestible suite of food and treats. Halo partners with a number of co-manufacturing partners to produce its products.

Our products consist of naturally formulated premium kibble and canned dog and cat food, freeze-dried raw dog food and treats, vegan dog food and treats, oral care products and supplements. Our products sold under the Halo brand are sustainably sourced, derived from real whole meat and no rendered meat meal and include non-GMO fruits and vegetables.

Our products consist of naturally formulated premium kibble and canned dog and cat food, freeze-dried raw dog food and treats, vegan dog food and treats, oral care products and supplements. Our products are sustainably sourced, derived from real whole meat and no rendered meat meal and include non-GMO fruits and vegetables.

We believe that our growth in Asia is fueled by increasing levels of economic financial status and demand for premium and super-premium, western manufactured products, with China representing the largest market opportunity for growth and 62% of Better Choice’s $14.8 million of international sales in 2021.

We believe that our growth in Asia is fueled by increasing levels of economic financial status and demand for premium and super-premium, western manufactured products, with China representing the largest market opportunity for growth and 81% of Better Choice’s $21.9 million of international sales in 2021.

We believe this culture provides the ability for us to attract the best talent and we now have employees all over the U.S. that are winning from anywhere. Government Regulation The regulation of animal food products is complex, multi-faceted, and continually changing. The U.S. Food and Drug Administration ("FDA"), the U.S. Federal Trade Commission ("FTC"), the U.S.

We believe this culture provides the ability for us to attract the best talent and we now have employees all over the U.S. that are winning from anywhere. Government Regulation 6 Table of Contents The regulation of animal food products is complex, multi-faceted, and continually changing. The U.S. Food and Drug Administration ("FDA"), the U.S.

Halo Holistic is the only super-premium pet food certified by the Global Animal Partnership and the Marine Stewardship Council, both of which are animal welfare organizations recognized worldwide. Halo Holistic also supports complete digestive health with prebiotics, probiotics and postbiotics.

Halo Holistic is designed for the pet parent seeking high-quality ingredients for digestive health. Halo Holistic is the only super-premium pet food certified by the Global Animal Partnership and the Marine Stewardship Council, both of which are animal welfare organizations recognized worldwide. Halo Holistic also supports complete digestive health with prebiotics, probiotics and postbiotics.

The following chart provides a breakdown of our net sales by channel for the year ended December 31, 2021: In 2021, 53% of our net sales were made online, through a combination of E-Commerce partner websites, such as Amazon, Chewy, Petflow, Thrive Market and Vitacost, and our Direct-to-Consumer website, hosted on Shopify.

The following chart provides a breakdown of our net sales by channel for the year ended December 31, 2022: In 2022, 39% of our net sales were made online, through a combination of E-commerce partner websites, such as Amazon, Chewy, Petflow, Thrive Market and Vitacost, and our DTC website, hosted on Shopify.

On October 15, 2019, Better Choice Company entered into a Stock Purchase Agreement (as amended, the “Halo Agreement”) with Halo, Thriving Paws, LLC, a Delaware limited liability company (“Thriving Paws”), HH-Halo LP, a Delaware limited partnership (“HH-Halo” and, together with Thriving Paws, the “Sellers”) and HH-Halo, in the capacity of the representative of the Sellers.

("Bona Vida") and we closed the acquisition on May 6, 2019. 3 Table of Contents On October 15, 2019, Better Choice Company entered into a Stock Purchase Agreement (as amended, the “Halo Agreement”) with Halo, Thriving Paws, LLC, a Delaware limited liability company (“Thriving Paws”), HH-Halo LP, a Delaware limited partnership (“HH-Halo” and, together with Thriving Paws, the “Sellers”) and HH-Halo, in the capacity of the representative of the Sellers.

By channel in 2021, E-Commerce generated approximately $21.8 million of gross sales and $15.1 million of net sales, Direct-to-Consumer generated approximately $10.8 million of gross sales and $9.4 million of net sales, Brick & Mortar generated approximately $8.6 million of gross sales and $6.7 million of net sales and International generated approximately $14.8 million of gross sales and $14.8 million of net sales.

By channel in 2022, E-Commerce generated approximately $21.1 million of gross sales and $14.6 million of net sales, Direct-to-Consumer generated approximately $8.1 million of gross sales and $6.6 million of net sales, Brick & Mortar generated approximately $14.6 million of gross sales and $11.6 million of net sales and International generated approximately $21.9 million of gross sales and $21.9 million of net sales.

Raw Materials and Principal Suppliers We rely upon the supply of raw materials that meet our specifications, such as USA farm-raised beef, Global Animal Partnership Certified Step 2 ("GAP 2") cage-free whole chicken and associated broths, GAP 2 certified cage-free whole turkey and associated broths, Marine Stewardship Council ("MSC") certified wild-caught salmon and MSC certified wild-caught whitefish and associated broths, and select non-GMO fruits and vegetables, such as peas, sweet potatoes and lentils.

Raw Materials and Principal Suppliers We rely upon the supply of raw materials that meet our high-quality specifications and sourcing requirements. We source Global Animal Partnership ("GAP") certified cage-free chicken, GAP certified cage-free turkey, Marine Stewardship Council ("MSC") certified wild-caught salmon and whitefish and select non-GMO fruits and vegetables, such as peas, sweet potatoes and lentils.

Additionally, it's made with whole animal proteins only and no meat meals. 4 Table of Contents Halo Elevate®, our second sub-line launching in 2022, provides best-in-class nutrition.

Additionally, it's made with whole animal proteins only and no meat meals. Halo Elevate®, our second sub-line which launched during 2022, provides best-in-class nutrition.

Our DTC ecosystem allows us to efficiently manage and customize the online shopping experience for customers, including a customer dashboard where shoppers can manage and track orders and order history. Our products are shipped by trusted carriers for expeditious and reliable delivery.

Our warehouse was located in Lebanon, Tennessee throughout 2021 and relocated to Wauconda, Illinois in 2022. Our DTC ecosystem allows us to efficiently manage and customize the online shopping experience for customers, including a customer dashboard where shoppers can manage and track orders and order history. Our products are shipped by trusted carriers for expeditious and reliable delivery.

We have maintained each of our key co-manufacturing relationships for more than four years, with certain relationships in place for more than ten years and with the launch of Halo Elevate®, we have expanded and engaged two new co-manufacturing partners in 2022.

Our products are manufactured by an established network of co-manufacturers in partnership with Better Choice. We have maintained each of our key co-manufacturing relationships for more than four years, with certain relationships in place for more than ten years and with the launch of Halo Elevate®, we have expanded and engaged two new co-manufacturing partners in 2022.

We group these channels of trade into four distinct categories: E-Commerce, which includes the sale of product to online retailers such as Amazon and Chewy; Brick & Mortar, which includes the sale of product to pet specialty chains such as Petco, PetSmart, Pet Supplies Plus, select grocery chains and neighborhood pet stores; Direct to Consumer (“DTC”) which includes the sale of product through our online web platform to more than 20,000 unique customers and access to more than 500,000 customer emails; and International, which includes the sale of product to foreign distribution partners and to select international retailers.

We group these channels of trade into four distinct categories: E-commerce, which includes the sale of product to online retailers such as Amazon and Chewy; Brick & Mortar, which primarily includes the sale of product to Pet Specialty retailers such as Petco, Pet Supplies Plus and neighborhood pet stores, as well as to select grocery chains; Direct to Consumer (“DTC”) which includes the sale of product through our website halopets.com; and International, which includes the sale of product to foreign distribution partners and to select international retailers.

Among other things, the facilities in which our products and ingredients are manufactured must register with the FDA, comply with current good manufacturing practices (“cGMPs”) and comply with a range of food safety requirements. 7 Table of Contents Although pet foods are not required to obtain premarket approval from the FDA, any substance that is added to or is expected to become a component of a pet food must be used in accordance with a food additive regulation, unless it is generally recognized as safe (“GRAS”) under the conditions of its intended use or if it appears on an FDA-recognized list of acceptable animal food ingredients in the Official Publication of AAFCO.

Although pet foods are not required to obtain premarket approval from the FDA, any substance that is added to or is expected to become a component of a pet food must be used in accordance with a food additive regulation, unless it is generally recognized as safe (“GRAS”) under the conditions of its intended use or if it appears on an FDA-recognized list of acceptable animal food ingredients in the Official Publication of AAFCO.

Employees and Human Capital Resources As of December 31, 2021, we had 43 employees, all of whom are full-time. Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.

Employees and Human Capital Resources As of December 31, 2022, we had 46 full time employees and one part time employee. Our human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and additional employees.

At the same time, we believe that our long-established relationships with key brick & mortar customers such as Petco and Pet Supplies Plus will enable us to jointly launch new products that are designed for in-store success, such as the national launch of Halo Elevate® in more than 2,000 Brick & Mortar locations in 2022. 5 Table of Contents In addition to our domestic sales channels, the Halo brand's international sales grew 71% in 2021, driven primarily by significant new customer acquisition and increased brand awareness in our key Asian markets.

At the same time, we believe that our long-established relationships with key Brick & Mortar customers such as Petco and Pet Supplies Plus will enable us to jointly launch new products that are designed for in-store success, such as the national launch of Halo Elevate® in more than 2,000 Brick & Mortar locations in 2022.

Effective March 11, 2019, we changed our name to Better Choice Company Inc. after reincorporating in Delaware. We have four subsidiaries - Halo, Purely for Pets, Inc., TruPet LLC, Bona Vida, Inc. and Wamore Corporation S.A. Our principal executive offices are located at 12400 Race Track Road, Tampa, FL 33626. Our website is available at https://www.betterchoicecompany.com .

We have three subsidiaries - Halo, Purely for Pets, Inc., Bona Vida, Inc. and Wamore Corporation S.A. Our principal executive offices are located at 12400 Race Track Road, Tampa, FL 33626. Our website is available at https://www.betterchoicecompany.com .

For millennial pet moms who view their pets as children, we believe Halo provides the world’s best nutrition for the world’s best kids. Halo offers two premium sub-lines of natural dog and cat food for this audience. Halo Holistic is designed for the pet parent seeking high-quality ingredients for digestive health.

For millennial pet parents who view their pets as children, we believe Halo provides the world’s best nutrition for the world’s best kids. Halo offers two premium sub-lines of natural dog and cat food for this audience - Halo Holistic, which includes the former TruDog brand and Halo Elevate.

In addition to trademark protection, we have registered more than 100 domain names, including www.betterchoicecompany.com, www.halopets.com, www.trupet.com, www.trudog.com and www.rawgo.com, that are important to the successful implementation of our marketing and advertising strategy. We rely on and carefully protect unpatented proprietary expertise, recipes and formulations, continuing innovation and other trade secrets to develop and maintain our competitive position.

We believe this growth is sustainable and we have more than $85.0 million of contracted minimum sales with our key Asian distribution partners from 2022 to 2025. Supply Chain, Manufacturing and Logistics Our products sold today under the Halo Holistic brand are made strictly from naturally raised animals on sustainable farms and are manufactured in the U.S.

We believe this growth is sustainable and we have more than $70.0 million of contracted minimum sales with our key Asian distribution partners from 2023 to 2025. Supply Chain, Manufacturing and Logistics Halo partners with a number of co-manufacturing partners to produce its products.

Halo’s dog and cat foods meet The Association of American Feed Control Officials (“AAFCO”) guidelines and are small-batch tested for common contaminants prior to leaving the manufacturer.

Halo’s dog and cat foods meet The Association of American Feed Control Officials (“AAFCO”) guidelines and are small-batch tested for common contaminants prior to leaving the manufacturer. We utilize logistics service providers as a part of our supply chain, primarily for shipping and logistics support. Fulfillment of orders is managed by a third-party warehousing and logistics partner, Fidelitone.

(“Simmons”) for the majority of canned wet food sold under the Halo brand, BrightPet Nutrition Group, LLC (“BrightPet”) for vegan kibble and freeze dried treats sold under the Halo brand and Carnivore Meat Company, LLC (“Carnivore”) for the supply and co-manufacturing of freeze-dried food and treats sold under the TruDog brand.

Foods”) for dry kibble which has been transitioned to Barrett Petfood Innovations during 2022, Simmons Pet Food, Inc. (“Simmons”) and Thai Union Manufacturing Co., LTD. for canned wet food, BrightPet Nutrition Group, LLC (“BrightPet”) for vegan kibble and freeze dried treats, Carnivore Meat Company, LLC (“Carnivore”) for the supply and co-manufacturing of freeze-dried food and treats.

We sell our premium and super-premium products (which we believe generally includes products with a retail price greater than $0.20 per ounce) under the Halo and TruDog brands, both of which have a long history of providing high quality products to pet parents.

We sell our premium and super-premium products (which we believe generally includes products with a retail price greater than $0.20 per ounce) under the Halo brand umbrella, which includes Halo Holistic™, Halo Elevate® and the former TruDog brand, which has been rebranded and successfully integrated under the Halo brand umbrella during the third quarter of 2022.

We rely on and carefully protect unpatented proprietary expertise, recipes and formulations, continuing innovation and other trade secrets to develop and maintain our competitive position. 8 Table of Contents Corporate Information We were incorporated in the State of Nevada in 2001 under the name Cayenne Construction, Inc., and in 2009, changed our name to Sports Endurance, Inc.

Corporate Information We were incorporated in the State of Nevada in 2001 under the name Cayenne Construction, Inc., and in 2009, changed our name to Sports Endurance, Inc. Effective March 11, 2019, we changed our name to Better Choice Company Inc. after reincorporating in Delaware.

The FDA also imposes certain requirements on animal foods relating to their composition, manufacturing, labeling, and marketing.

The FDA also imposes certain requirements on animal foods relating to their composition, manufacturing, labeling, and marketing. Among other things, the facilities in which our products and ingredients are manufactured must register with the FDA, comply with current good manufacturing practices (“cGMPs”) and comply with a range of food safety requirements.

With the launch of Halo Elevate®, we have expanded our co-manufacturing partners in 2022 to include Barrett Petfood Innovations and Thai Union Manufacturing Co., LTD. Sales and Marketing Our marketing strategies are designed to clearly communicate to consumers about the benefits of our products and to build awareness of our brands.

We sourced approximately 69% of inventory purchases from three vendors for the year ended December 31, 2022 and approximately 65% from two vendors for the year ended December 31, 2021. Sales and Marketing Our marketing strategies are designed to clearly communicate to consumers about the benefits of our products and to build awareness of our brands.

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("Bona Vida") and we closed the acquisition on May 6, 2019.

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Our core products sold under the Halo brand are made with high-quality, thoughtfully sourced ingredients for natural, science based nutrition. Each innovative recipe is formulated with leading veterinary and nutrition experts to deliver optimal health.

Removed

We believe this omni-channel approach has also helped us respond more quickly to changing channel dynamics that have accelerated as a result of the COVID-19 pandemic, such as the increasing percentage of pet food that is sold online.

Added

Both Halo Holistic and Halo Elevate® provide confidence and validation to empower millennial pet parents.

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Both Halo Holistic and Halo Elevate® provide confidence and validation to empower millennial pet moms. Founded in 2013, the TruDog brand offers ultra-premium, freeze-dried raw dog food, toppers, treats and supplements sold predominantly on its DTC website.

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Our Customers and Channels 4 Table of Contents In 2022, we generated $65.7 million of gross sales and $54.7 million of net sales.

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Freeze-dried raw dog food is one of the fastest growing sub-categories of premium pet food, with Packaged Facts reporting 39% year-over-year growth in the sub-category in 2019. We believe that both brands are positioned to take advantage of the increasing desire in pet parents to feed only the highest quality ingredients to their pets.

Added

In addition to our domestic sales channels, the Halo brand's international sales grew 48% in 2022, driven primarily by significant new customer acquisition and increased brand awareness in our key Asian markets.

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We're confident that innovative opportunities for brand consolidation will continue over time.

Added

Our products sold today under the Halo brand are made strictly from naturally raised animals on sustainable farms and are manufactured in the U.S and use healthy, natural ingredients, with all purchases transacted in U.S. dollars.

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Our products sold under the TruDog brand are made according to our nutritional philosophy of raw, meat-based nutrition and minimal processing. Our products are manufactured by an established network of co-manufacturers in partnership with Better Choice.

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Halo and TruDog products are co-manufactured in the U.S. and our third-party warehousing and logistics provider, Fidelitone, was located in Lebanon, Tennessee throughout 2021 and moved to Wauconda, Illinois in 2022. Our Customers and Channels In 2021, we generated $56.0 million of gross sales and $46.0 million of net sales.

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Our treats and chews are oven-baked, using natural ingredients for maximum nutrition and protein content. Like Halo, TruDog raw dog foods meet AAFCO guidelines and are small-batch tested for common contaminants prior to leaving the manufacturer. We utilize logistics service providers as a part of our supply chain, primarily for shipping and logistics support.

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Fulfillment of orders for both the Halo and TruDog brands is managed by a third-party warehousing and logistics partner, Fidelitone. Our warehouse was located in Lebanon, Tennessee throughout 2021 and relocated to Wauconda, Illinois in 2022.

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Foods”) for dry kibble sold under the Halo brand, Simmons Pet Food, Inc.

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Together, Alphia, Simmons, and Carnivore represent approximately 74% of product volume sold across the Better Choice platform. In addition, we sourced approximately 65% of inventory purchases from two vendors for the year ended December 31, 2021 and approximately 76% from three vendors for the year ended December 31, 2020.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

11 edited+4 added−3 removed251 unchanged

2022 filing

2023 filing

Biggest changeWe have a history of losses, have a significant accumulated deficit and we expect to incur losses in the future; we may not be able to achieve or maintain profitability which could raise substantial doubt regarding our ability to continue as a going concern. We have experienced operating losses during last three years and have a significant accumulated deficit.

Biggest changeOur recurring losses and significant accumulated deficit have raised substantial doubt regarding our ability to continue as a going concern. We have experienced recurring operating losses, have a significant accumulated deficit and are required to maintain certain minimum liquidity thresholds to comply with the financial covenants associated with the Wintrust Credit Facility.

If we need to seek additional financing to fund our business activities in the future and there is doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all.

If we need to seek additional financing to fund our business activities in the future and there remains doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide additional funding on commercially reasonable terms or at all.

From time to time, a co-manufacturer may experience financial difficulties, bankruptcy or other business disruptions, which could disrupt our supply of products or require that we incur additional expense by providing financial accommodations to the co-manufacturer or taking other steps to seek to minimize or avoid supply disruption, such as establishing a new co-manufacturing arrangement with another provider.

From time to time, a co-manufacturer may 8 Table of Contents experience financial difficulties, bankruptcy or other business disruptions, which could disrupt our supply of products or require that we incur additional expense by providing financial accommodations to the co-manufacturer or taking other steps to seek to minimize or avoid supply disruption, such as establishing a new co-manufacturing arrangement with another provider.

Without generating future sufficient cash flow from operations or additional debt or equity financing, these conditions could raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to continue operations in the future or realize assets and discharge liabilities in the ordinary course of operations.

Without generating sufficient cash flow from operations or additional debt or equity financing, these conditions raise substantial doubt about our ability to continue as a going concern, meaning that we may be unable to continue operations for the foreseeable future or realize assets and discharge liabilities in the ordinary course of operations.

The occurrence of any of the foregoing could increase our costs, disrupt our operations, or could have a materially adverse impact on our business, financial condition, results of operations or prospects. 9 Table of Contents If we fail to maintain and expand our brand, or the quality of our products that customers have come to expect, our business could suffer.

The occurrence of any of the foregoing could increase our costs, disrupt our operations, or could have a materially adverse impact on our business, financial condition, results of operations or prospects. If we fail to maintain and expand our brand, or the quality of our products that customers have come to expect, our business could suffer.

Failure to manage our growth effectively could cause us to misallocate management or financial resources, and result in additional expenditures and inefficient use of existing human and capital resources. Such slower than expected growth may require us to restrict or cease our operations and go out of business.

Failure to manage our growth effectively could cause us to misallocate management 9 Table of Contents or financial resources, and result in additional expenditures and inefficient use of existing human and capital resources. Such slower than expected growth may require us to restrict or cease our operations and go out of business.

If we are unable to obtain future profitability or sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern.

If we are unable to obtain sufficient funding, our business, prospects, financial condition and results of operations will be materially and adversely affected and we may be unable to continue as a going concern.

For information regarding our outstanding stockholders’ equity and potentially dilutive securities, refer to "Note 8 - Debt", "Note 10 - Convertible preferred stock", "Note 11 - Stockholders’ equity (deficit)", "Note 12 - Warrants" and "Note 13 - Share-based compensation" in the Notes to Consolidated Financial Statements included in Item 8.

For information regarding our outstanding stockholders’ equity and potentially dilutive securities, refer to "Note 8 - Debt", "Note 10 - Stockholders’ equity", "Note 11 - Warrants" and "Note 12 - Share-based compensation" in the Notes to Consolidated Financial Statements included in Item 8.

The success of our innovation and product development efforts is affected by, among other things, the technical capability of our team; our ability to establish new supplier relationships and third-party consultants in developing and testing new products, and complying with governmental regulations; our attractiveness as a partner for outside research and development scientists and entrepreneurs; and the success of our management and sales team in introducing and marketing new products. 10 Table of Contents We have already and may have to continue to commit significant resources to commercializing new products before knowing whether our investments will result in products the market will accept.

We have already and may have to continue to commit significant resources to commercializing new products before knowing whether our investments will result in products the market will accept. Substantial promotional expenditures may be required to introduce new products to the market, or improve our market position.

Substantial promotional expenditures may be required to introduce new products to the market, or improve our market position.

We expect to continue to generate operating losses and consume significant cash resources for the foreseeable future. Because we have a short operating history at scale, it is difficult for us to predict our future operating results.

We expect to continue to generate operating losses and consume cash resources in the near term.

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Thus, our losses may be larger than anticipated, and we may not achieve profitability when expected, or at all. 10 Table of Contents Also, we expect our operating expenses to increase over the next several years as we further increase marketing spend, hire more employees, continue to develop new products and services, and expand internationally.

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If our goodwill or amortizable intangible assets become impaired, then we could be required to record a significant charge to earnings. We evaluate goodwill for impairment at least annually.

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These efforts may be more costly than we expect and may not result in increased revenue or growth in our business. Any failure to increase our revenue sufficiently to keep pace with our investments and other expenses could prevent us from achieving or maintaining profitability or positive cash flow on a consistent basis.

Added

We monitor the existence of potential impairment indicators throughout the year and will evaluate for impairment whenever events or circumstances indicate that the fair value of a reporting unit is below its carrying value.

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Furthermore, if our future growth and operating performance fail to meet investor or analyst expectations, or if we have future negative cash flow or losses resulting from our investment in acquiring new customers or expanding our business, our business, financial condition and operating results may be materially adversely affected.

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Factors that may be considered a change in circumstances indicating that the carrying value of our goodwill or amortizable intangible assets may not be recoverable include declines in stock price, market capitalization or cash flows, and slower growth rates in our industry.

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Depending on the results of these evaluations, we could be required to record a significant charge to earnings in our consolidated financial statements during the period in which any impairment of our goodwill or amortizable intangible assets were determined, negatively impacting our results of operations.

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed1 unchanged

2022 filing

2023 filing

Biggest changeITEM 2. PROPERTIES Our principal place of business is located at 12400 Race Track Road, Tampa, FL 33626, which consists of approximately 5,000 square feet of office space which we lease. Our lease for this location is scheduled to expire on January 31, 2023. We do not own any properties or land.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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2022 filing

2023 filing

Biggest changeHolders of Common Stock As of March 25, 2022, we had 29,364,712 shares of our common stock issued and outstanding. As of March 25, 2022, there were 156 record holders of our common stock. Certain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number.

Biggest changeCertain shares are held in “street” name and accordingly, the number of beneficial owners of such shares is not known or included in the foregoing number. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.

Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is included in Item 12 of Part III of this Annual Report on Form 10‑K. Recent Sales of Unregistered Securities Since January 1, 2019, the registrant made the following issuances and purchases of its unregistered securities as described below.

Securities Authorized for Issuance under Equity Compensation Plans Information about our equity compensation plans is included in Item 12 of Part III of this Annual Report on Form 10‑K. Recent Sales of Unregistered Securities Since January 1, 2020, the registrant made the following issuances and purchases of its unregistered securities as described below.

(18) On July 20, 2020, the registrant issued a total of 50,000 common stock purchase warrants to certain of our directors as consideration for the shareholder guaranty in connection with the Citizens ABL Agreement with an exercise price of $6.30 per share.

(9) On July 20, 2020, the registrant issued a total of 50,000 common stock purchase warrants to certain of our directors as consideration for the shareholder guaranty in connection with the Citizens ABL Agreement with an exercise price of $6.30 per share.

(20) On October 1, 2020, October 12, 2020 and October 23, 2020, the registrant issued (i) 17,763.55 shares, 1,106.015 shares and 2,832 shares, respectively, of Series F Preferred Stock and (ii) 5,921,184 warrants, 368,672 warrants, 944,000 warrants, respectively, to acquire shares of registrant’s common stock.

(11) On October 1, 2020, October 12, 2020 and October 23, 2020, the registrant issued (i) 17,763.55 shares, 1,106.015 shares and 2,832 shares, respectively, of Series F Preferred Stock and (ii) 5,921,184 warrants, 368,672 warrants, 944,000 warrants, respectively, to acquire shares of registrant’s common stock.

The subordinated convertible promissory notes were convertible at a conversion price of $4.50 per share and the warrants have an exercise price of $7.50 per share. (17) On June 24, 2020, the registrant issued 166,668 warrants to two of our directors with an exercise price of $7.50 per share.

The subordinated convertible promissory notes were convertible at a conversion price of $4.50 per share and the warrants have an exercise price of $7.50 per share. (8) On June 24, 2020, the registrant issued 166,668 warrants to two of our directors with an exercise price of $7.50 per share.

(19) On July 20, 2020, the registrant issued a total of 33,334 common stock purchase warrants to certain of our directors with an exercise price of $6.30 per share.

(10) On July 20, 2020, the registrant issued a total of 33,334 common stock purchase warrants to certain of our directors with an exercise price of $6.30 per share.

(27) On June 29, 2021, upon commencement of the trading of the registrant's common stock on the NYSE on June 29, 2021, all of its outstanding convertible notes payable automatically converted into 4,732,420 shares of common stock.

(18) On June 29, 2021, upon commencement of the trading of the registrant's common stock on the NYSE on June 29, 2021, all of its outstanding convertible notes payable automatically converted into 4,732,420 shares of common stock.

(26) On June 28, 2021, the registrant issued 1,081 shares of common stock in lieu of fractional shares in connection with the Reverse Stock Split.

(17) On June 28, 2021, the registrant issued 1,081 shares of common stock in lieu of fractional shares in connection with the Reverse Stock Split.

(24) On February 1, 2021, the registrant issued (i) 16,204 shares of common stock in connection with a separation agreement. (25) On February 1, 2021, the registrant issued (i) 5,000 shares of common stock to a third-party as consideration for services.

(15) On February 1, 2021, the registrant issued (i) 16,204 shares of common stock in connection with a separation agreement. (16) On February 1, 2021, the registrant issued (i) 5,000 shares of common stock to a third-party as consideration for services.

Purchases of Equity Securities by the Issuer The following table presents information with respect to our repurchases of Better Choice Company common stock during the three months ended December 31, 2021: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2021 to October 31, 2021 — $ — — $ 726,590 November 1, 2021 to November 30, 2021 35,985 $ 3.85 35,985 $ 690,605 December 1, 2021 to December 31, 2021 (1) 58,965 $ 3.20 58,965 $ 631,640 Total 94,950 $ 3.45 94,950 (1) In August 2021, our Board of Directors approved a share repurchase program that authorized the repurchase of up to $2.0 million of the Company's outstanding common stock in the open market through December 31, 2021 .

Purchases of Equity Securities by the Issuer The following table presents information with respect to our repurchases of Better Choice Company common stock during the three months ended December 31, 2022: Period (1) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2021 to October 31, 2021 — $ — — $ 3,000,000 November 1, 2021 to November 30, 2021 — $ — — $ 3,000,000 December 1, 2021 to December 31, 2021 — $ — — $ 3,000,000 Total — $ — — (1) In May 2022, our Board of Directors approved a share repurchase program that authorized the repurchase of up to $3.0 million of the Company's outstanding common stock in the open market through December 31, 2022 .

The Series F Preferred Stock and related warrants were issued as units, with each (i) share of Series F Preferred Stock having a Stated Value of $1,000 and was convertible into shares of registrant’s common stock at a price of $3.00 per share and (ii) related warrant being exercisable to acquire such number of shares of common stock as the related share of Series F Preferred Stock was convertible into with an exercise price of $4.50 per share of common stock. 26 Table of Contents (21) On October 23, 2020, the registrant issued a total of 100 shares of Series F Preferred Stock in connection with a marketing agreement.

Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-downs or commissions, and may not necessarily represent actual transactions: High Low 2020 First Quarter (1) $16.20 $3.00 Second Quarter (1) $12.00 $3.57 Third Quarter (1) $12.00 $1.44 Fourth Quarter (2) $7.68 $2.70 2021 First Quarter (3) $10.80 $6.84 Second Quarter (3) $9.72 $4.02 Third Quarter (4) $4.78 $2.96 Fourth Quarter (4) $4.30 $2.85 (1) The high and low bid prices for this quarter were reported by the OTCQB marketplace.

Such over-the-counter market quotations reflect inter-dealer prices, without retail mark-up, mark-downs or commissions, and may not necessarily represent actual transactions: High Low 2021 First Quarter (1) $10.80 $6.84 Second Quarter (1) $9.72 $4.02 Third Quarter (2) $4.78 $2.96 Fourth Quarter (2) $4.30 $2.85 2022 First Quarter (2) $3.95 $2.11 Second Quarter (2) $3.04 $1.86 Third Quarter (2) $2.65 $0.78 Fourth Quarter (2) $1.24 $0.44 (1) The high and low bid prices for this quarter were reported by the OTCQX marketplace.

(16) On June 24, 2020, the registrant issued an aggregate principal amount of $1.5 million subordinated convertible promissory notes and 83,334 warrants to one of our directors and 83,334 warrants to one of our shareholders.

(6) On March 30, 2020, the registrant issued 993 restricted shares of common stock to an officer. (7) On June 24, 2020, the registrant issued an aggregate principal amount of $1.5 million subordinated convertible promissory notes and 83,334 warrants to one of our directors and 83,334 warrants to one of our shareholders.

Unless otherwise stated above, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.

(22) On December 30, 2022, the registrant issued 24,738 shares of common stock to a member of its board of directors for service as interim CEO. 26 Table of Contents Unless otherwise stated above, the issuances of the above securities were deemed to be exempt from registration under the Securities Act in reliance upon Section 4(a)(2) of the Securities Act, or Regulation D promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act as transactions by an issuer not involving any public offering or pursuant to benefit plans and contracts relating to compensation as provided under Rule 701.

This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. Dividend Policy We do not currently anticipate declaring or paying cash dividends on our common stock in the foreseeable future. We currently intend to retain our future earnings, if any, to finance the development and expansion of our business.

Dividend Policy We do not currently anticipate declaring or paying cash dividends on our common stock in the foreseeable future. We currently intend to retain our future earnings, if any, to finance the development and expansion of our business.

(23) On January 22, 2021, the registrant issued (i) a total of 548,082 shares of common stock and (ii) 548,082 shares of common stock purchase warrants to acquire shares of registrant’s common stock.

(13) On November 30, 2020, the registrant issued (i) 66,667 warrants to acquire shares of the registrant's common stock to a third-party as consideration for services. (14) On January 22, 2021, the registrant issued (i) a total of 548,082 shares of common stock and (ii) 548,082 shares of common stock purchase warrants to acquire shares of registrant’s common stock.

(14) On March 17, 2020, the registrant issued an additional 167,206 warrants to holders of warrants acquired on May 6, 2019 due to dilutive impact of subsequent issuances. (15) On March 30, 2020, the registrant issued 993 restricted shares of common stock to an officer.

(4) On March 5, 2020, the registrant issued 20,834 shares of common stock to an affiliate of iHeartMedia Entertainment, Inc. (“iHeart”) for future advertising. (5) On March 17, 2020, the registrant issued an additional 167,206 warrants to holders of warrants acquired on May 6, 2019 due to dilutive impact of subsequent issuances.

(11) On January 13, 2020 and January 20, 2020, respectively, the registrant issued 12,120 shares of common stock and 10,204 common stock warrants to a third party in connection with a contract termination.

(2) On January 13, 2020 and January 20, 2020, respectively, the registrant issued 12,120 shares of common stock and 10,204 common stock warrants to a third party in connection with a contract termination. 25 Table of Contents (3) On March 3, 2020, the registrant issued 75,000 shares of restricted common stock to three non-employee directors in return for services provided in their capacity as directors.

(10) On January 2, 2020, the registrant issued 51,441 shares of common stock to an investor for net proceeds of $0.5 million, net of issuance costs of less than $0.1 million.

All share amounts have been retroactively adjusted to give effect to a reverse stock split of 1-for-6 effective June 28, 2021 in connection with the IPO. (1) On January 2, 2020, the registrant issued 51,441 shares of common stock to an investor for net proceeds of $0.5 million, net of issuance costs of less than $0.1 million.

Each share of Series F Preferred Stock had a Stated Value of $1,000 and was convertible into shares of registrant’s common stock at a price of $3.00 per share. (22) On November 30, 2020, the registrant issued (i) 66,667 warrants to acquire shares of the registrant's common stock to a third-party as consideration for services.

(12) On October 23, 2020, the registrant issued a total of 100 shares of Series F Preferred Stock in connection with a marketing agreement. Each share of Series F Preferred Stock had a Stated Value of $1,000 and was convertible into shares of registrant’s common stock at a price of $3.00 per share.

(28) Upon the consummation of the IPO on July 1, 2021, all shares of the Series F convertible preferred stock were converted into 5,764,533 shares of common stock.

(19) Upon the consummation of the IPO on July 1, 2021, all shares of the Series F convertible preferred stock were converted into 5,764,533 shares of common stock. (20) On February 1, 2022, the registrant issued 218,345 shares of common stock to five non-employee directors in return for services provided in their capacity as directors.

(2) The high and low bid prices for this quarter were reported by the OTCQB & OTCQX marketplaces. (3) The high and low bid prices for this quarter were reported by the OTCQX marketplace. (4) The high and low bid prices for this quarter were reported by the NYSE American marketplace.

(2) The high and low bid prices for this quarter were reported by the NYSE American marketplace. Holders of Common Stock As of March 24, 2023, we had 30,541,148 shares of our common stock issued and outstanding. As of March 24, 2023, there were 152 record holders of our common stock.

Removed

All share amounts have been retroactively adjusted to give effect to the reverse stock split of 26-for-1 of the registrant’s common stock effective on March 15, 2019 and a reverse stock split of 1-for-6 effective June 28, 2021 in connection with the IPO.

Added

(21) On November 2, 2022, the registrant issued 40,817 shares of common stock to a member of its board of directors for service as interim CEO.

Removed

(1) In connection with the acquisition of Bona Vida, Inc., on May 6, 2019, the registrant issued an aggregate of 3,000,546 shares of common stock to new investors and certain of our directors and executive officers in exchange for all outstanding shares of common stock of Bona Vida, Inc. 25 Table of Contents (2) In connection with the acquisition of TruPet LLC, on May 6, 2019, the registrant issued an aggregate of 2,504,589 shares of common stock to new investors and certain of our directors and executive officers in exchange for all remaining outstanding membership interests of TruPet LLC.

Removed

(3) On May 6, 2019, the registrant issued an aggregate of 957,499 shares of common stock and 957,499 warrants at an offering price of $18.00 per share to new investors and certain of our directors. The warrants had an exercise price of $25.50 per share.

Removed

(4) On May 6, 2019, the registrant issued certain directors and employees stock options to purchase 920,000 shares of the registrant’s common stock with an exercise price of $30.00 per share.

Removed

(5) On August 28, 2019, the registrant issued an aggregate of 166,667 shares of common stock at a price per share of $30.00 to an affiliate of iHeartMedia + Entertainment, Inc. (“iHeart”) as consideration for iHeart’s provision of advertising inventory.

Removed

(6) On September 17, 2019, the registrant issued an advisor (i) 416,668 share purchase warrants, with each warrant entitling the advisor to acquire one share of common stock at a price of $0.60 per share and (ii) an additional 250,000 share purchase warrants entitling the advisor to acquire one share of common stock at a price of $60.00 per share as consideration for services to our Chief Executive Officer, other senior executives and our board of directors.

Removed

(7) On November 11, 2019, the registrant issued subordinated convertible notes and warrants to one of our directors and an investor in an aggregate principal amount of $2,750,000.

Removed

(8) On December 19, 2019, the registrant issued a total of 355,732 shares of common stock, 156,250 warrants and an aggregate amount of $15,000,000 of convertible subordinated notes as consideration to the former stockholders of Halo as part of the Halo Acquisition.

Removed

(9) On December 19, 2019, the registrant issued a total of 1,083,334 warrants to certain of our directors as consideration for the shareholder guaranty in connection with the Halo Acquisition.

Removed

(12) On March 3, 2020, the registrant issued 75,000 shares of restricted common stock to three non-employee directors in return for services provided in their capacity as directors. (13) On March 5, 2020, the registrant issued 20,834 shares of common stock to an affiliate of iHeartMedia Entertainment, Inc. (“iHeart”) for future advertising.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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2023 filing

Biggest changeFurthermore, our public company structure has historically enabled us to offer transaction consideration in the form of cash and stock. 29 Table of Contents Results of Operations for the Years Ended December 31, 2021 and 2020 The following table sets forth our consolidated results for the periods presented (in thousands): Years Ended December 31, Change 2021 2020 $ % Net sales $ 46,006 $ 42,590 $ 3,416 8 % Cost of goods sold 30,638 26,485 4,153 16 % Gross profit 15,368 16,105 (737) (5) % Operating expenses: Selling, general and administrative 28,507 34,487 (5,980) (17) % Share-based compensation 4,140 8,940 (4,800) (54) % Total operating expenses 32,647 43,427 (10,780) (25) % Loss from operations (17,279) (27,322) 10,043 37 % Other income (expense): Interest expense, net (3,217) (9,247) 6,030 65 % Gain (Loss) on extinguishment of debt 457 (88) 545 619 % Change in fair value of warrant liabilities 23,463 (22,678) 46,141 203 % Total other income (expense), net 20,703 (32,013) 52,716 165 % Net income (loss) before income taxes 3,424 (59,335) 62,759 106 % Income tax expense 37 — 37 100 % Net income (loss) 3,387 (59,335) 62,722 106 % Preferred dividends — 103 (103) (100) % Net income (loss) available to common stockholders $ 3,387 $ (59,438) $ 62,825 106 % Net sales We sell our products through online retailers, pet specialty retailers, our online portal directly to our consumers and internationally to foreign distribution partners (transacted in U.S. dollars).

Biggest changeOn March 21, 2023, we announced that Sharla Cook was resigning from her role as Chief Financial Officer, effective April 3, 2023. 29 Table of Contents Results of Operations for the Years Ended December 31, 2022 and 2021 The following table sets forth our consolidated results for the periods presented (in thousands): Years Ended December 31, Change 2022 2021 $ % Net sales $ 54,660 $ 46,006 $ 8,654 19 % Cost of goods sold 39,399 30,638 8,761 29 % Gross profit 15,261 15,368 (107) (1) % Operating expenses: Selling, general and administrative 32,461 28,507 3,954 14 % Share-based compensation 2,969 4,140 (1,171) (28) % Impairment of goodwill 18,614 — 18,614 100 % Total operating expenses 54,044 32,647 21,397 66 % Loss from operations (38,783) (17,279) (21,504) (124) % Other (expense) income: Interest expense, net (551) (3,217) 2,666 83 % Gain on extinguishment of debt, net — 457 (457) (100) % Change in fair value of warrant liabilities — 23,463 (23,463) (100) % Total other (expense) income, net (551) 20,703 (21,254) 103 % Net (loss) income before income taxes (39,334) 3,424 (42,758) (1,249) % Income tax (benefit) expense (18) 37 (55) (149) % Net (loss) income available to common stockholders $ (39,316) $ 3,387 $ (42,703) (1,261) % Net sales We sell our products through online retailers, pet specialty retailers, our online portal directly to our consumers and internationally to foreign distribution partners (transacted in U.S. dollars).

The expected life is estimated based on contractual terms as well expected exercise dates. The dividend yield is based on the historical dividends issued by us. The valuation of the warrants is subject to uncertainty as a result of the unobservable inputs.

The expected life is estimated based on contractual terms as well as expected exercise dates. The dividend yield is based on the historical dividends issued by us. The valuation of the warrants is subject to uncertainty as a result of the unobservable inputs.

See "Note 8 - Debt" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information. Contractual Commitments and Obligations We are contractually obligated to make future cash payments for various items, including debt arrangements, certain purchase obligations, as well as the lease arrangement for our office.

Contractual Commitments and Obligations We are contractually obligated to make future cash payments for various items, including debt arrangements, certain purchase obligations, as well as the lease arrangement for our office. See "Note 8 - Debt" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information about our debt obligations.

Based on the analysis, we record inventories at the lower of cost or net realizable value, with any reduction in value expensed as cost of goods sold. Our products are manufactured to our specifications by our co-manufacturers using raw materials. We work with our co-manufacturers to secure a supply of raw materials that meet our specifications.

Based on this analysis, we record inventories at the lower of cost or net realizable value, with any reduction in value expensed as cost of goods sold. Our products are manufactured to our specifications by our co-manufacturers using raw materials. We work with our co-manufacturers to secure a supply of raw materials that meet our specifications.

Taken holistically, these traits suggest a preference to purchase more premium and super-premium pet food and treats from brands like Halo and TruDog, with a tendency to purchase products in the channels where we compete. Globally, Asia is the second largest market for pet products, with China representing the largest market opportunity for growth.

Taken holistically, these traits suggest a preference to purchase more premium and super-premium pet food and treats from brands like Halo, with a tendency to purchase products in the channels where we compete. Globally, Asia is the second largest market for pet products, with China representing the largest market opportunity for growth.

The Global Pet Food and Treat Market The U.S. represents the largest and most developed market for pet food globally, with food and treats accounting for approximately $39 billion of consumer sales in 2019, or 36% of the total US pet care market, according to AlphaWise and Morgan Stanley Research.

The Global Pet Food and Treat Market The U.S. represents the largest and most developed market for pet food globally, with food and treats accounting for approximately $39 billion of consumer sales in 2019, or 36% of the total U.S. pet care market, according to AlphaWise and Morgan Stanley Research.

Change in fair value of warrant liabilities Common stock warrants classified as liabilities are revalued at each balance sheet date subsequent to the initial issuance and changes in the fair value are reflected in the Consolidated Statements of Operations as Change in fair value of warrant liability.

We believe that this growth drove the increase in the number of dog-owning Chinese households as measured by Euromontior, which increased from 12% in 2015 to 20% in 2020, according to Euromonitor.

We believe that this growth drove the increase in the number of dog-owning Chinese households as measured by Euromonitor, which increased from 12% in 2015 to 20% in 2020, according to Euromonitor.

We believe our combination of innovative products designed specifically for certain channels can assist our growth to become a leader in the premium and super-premium categories across dog and cat food. • Well Positioned to Capitalize On a Once-in-a-Generation Demographic Shift in China. We believe that China represents the largest macro-growth opportunity in the global pet food industry.

We believe our combination of innovative products designed specifically for certain channels can assist our growth to become a leader in the premium and super-premium categories across dog and cat food. • Well Positioned to Capitalize on a Once-in-a-Generation Demographic Shift in Asia. We believe that Asia represents the largest macro-growth opportunity in the global pet food industry.

See "Note 13 - Share-based compensation" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information. Accounting for Warrants The fair value of warrants is estimated using a Monte Carlo and/or Black-Scholes valuation model.

See "Note 12 - Share-based compensation" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information. Accounting for Warrants The fair value of warrants is estimated using a Monte Carlo and/or Black-Scholes valuation model.

We are subject to risks common in the pet wellness consumer market including, but not limited to, dependence on key personnel, competitive forces, successful marketing and sale of its products, the successful protection of proprietary technologies, ability to grow into new markets, and compliance with government regulations.

We are subject to risks common in the pet wellness consumer market including, but not limited to, dependence on key personnel, competitive forces, successful marketing and sale of our products, the successful protection of our proprietary technologies, ability to grow into new markets, and compliance with government regulations.

Warrants that are classified as liabilities due to the terms of the warrant obligation are measured at fair value on a recurring basis at the end of each reporting period and as a result, we recorded an adjustment to the warrant liabilities to reflect the fair value as of December 31, 2021 and 2020, respectively.

Operating expenses Our Selling, general and administrative ("SG&A") expenses consist of the following: • Sales and marketing costs , including specific customer promotional programs, paid media, content creation expenses and our DTC selling platform. Marketing costs are geared towards customer acquisition and retention and building brand awareness.

Operating expenses Our Selling, general and administrative ("SG&A") expenses consist of the following: • Sales and marketing costs , for specific customer promotional programs, paid media, content creation expenses and our DTC selling platform. Marketing costs are geared towards customer acquisition and retention and building brand awareness.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the input of the subjective assumptions described in "Note 13 - Share-based compensation". The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment.

Determining the appropriate fair value model and calculating the fair value of share-based payment awards requires the input of the subjective assumptions described in "Note 12 - Share-based compensation". The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, which involve inherent uncertainties and the application of management’s judgment.

Overview and Outlook Better Choice is a rapidly growing pet health and wellness company committed to leading the industry shift toward pet products and services that help dogs and cats live healthier, happier and longer lives.

Overview and Outlook Better Choice is a pet health and wellness company committed to leading the industry shift toward pet products and services that help dogs and cats live healthier, happier and longer lives.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, net sales, costs and expenses and related disclosures.

The preparation of our consolidated financial statements and related disclosures requires us to make estimates, assumptions and judgements that affect the reported amounts of assets, liabilities, net sales, costs and expenses and related disclosures.

Key factors that we expect to affect our future sales growth include new product innovation, our new product launch, our expansion strategy in each of the sales channels and our key supplier relationships.

Key factors that we expect to affect our future sales growth include new product innovation and launches, our expansion strategy in each of the sales channels and our key supplier relationships.

Additionally, on March 25, 2022, the Company entered into the second amendment to the Wintrust Credit Facility, which removed the financial covenant to maintain a fixed charge coverage ratio and included a new financial covenant to maintain a minimum liquidity, as well updated the rate at which the Wintrust Credit Facility bears interest.

Additionally, on March 25, 2022, we entered into the second amendment to the Wintrust Credit Facility, which removed the financial covenant to maintain a fixed charge coverage ratio and included a new financial covenant to maintain a minimum liquidity, as well updated the rate at which the Wintrust Credit Facility bore interest.

Warrants that are classified as equity or considered compensation are measured at fair value on a non-recurring basis on the date of issuance. See "Note 12 - Warrants" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.

Warrants that are classified as equity or considered compensation are measured at fair 35 Table of Contents value on a non-recurring basis on the date of issuance. See "Note 11 - Warrants" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.

We are focused on targeting Chinese pet owners with the highest willingness to pay, which tend to be urban dwelling millennial and Gen-Z women. In 2021, 80% of our products were purchased online, and approximately 50% of our end-consumers were born after 1990.

Goodwill Impairment We evaluate goodwill for impairment at least annually at the reporting unit level. We monitor the existence of potential impairment indicators throughout the year and will evaluate for impairment whenever events or circumstances indicate that the fair value of a reporting unit is below its carrying value.

We believe that the estimates, assumptions and judgments involved in the accounting policies described below have the greatest potential impact on our financial statements and, therefore, we consider these to be our critical accounting estimates. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions.

These customers had $7.6 million and $7.0 million of net sales for the year ended December 31, 2021, respectively and $6.8 million and $6.9 million of net sales for the year ended December 31, 2020, respectively.

These customers had $7.5 million and $6.6 million of net sales for the year ended December 31, 2022, respectively and $7.0 million and $7.6 million of net sales for the year ended December 31, 2021, respectively.

We believe that this strategy will allow us to deliver on core consumer needs, maximize gross margin and respond to changing channel dynamics that have accelerated because of the COVID-19 pandemic. • Capitalize on Continuing Trends of Humanization of Pets.

We believe that this strategy will allow us to deliver on core consumer needs, maximize gross margin and respond to changing channel dynamics that have accelerated in recent years. • Capitalize on Continuing Trends of Humanization of Pets.

The change in fair value for the year ended December 31, 2021 relates to the change in the fair value of the Series F Warrants.

The change in fair value for the year ended December 31, 2021 relates to the change in the fair value of the Series F Warrants. See "Note 11 - Warrants" for additional information.

Gain (Loss) on extinguishment of debt During the year ended December 31, 2021, we incurred a net gain on extinguishment of debt of $0.5 million, while there was a loss on extinguishment of debt of $0.1 million for the year ended December 31, 2020.

Gain on extinguishment of debt, net During the year ended December 31, 2021, we incurred a net gain on extinguishment of debt of $0.5 million, while there was no corresponding activity for the year ended December 31, 2022.

The cash used in investing activities is related to capital expenditures. 33 Table of Contents Cash flows from Financing Activities Cash provided by financing activities was $37.2 million, during the year ended December 31, 2021 and $9.1 million during the year ended December 31, 2020.

Cash flows from investing activities 33 Table of Contents Cash used in investing activities was $0.2 million during the year ended December 31, 2022 and $0.4 million during the year ended December 31, 2021. The cash used in investing activities is related to capital expenditures.

A summary of our cash flows is as follows (in thousands): Year Ended December 31, 2021 2020 Cash flows (used in) provided by: Operating activities $ (11,858) $ (7,505) Investing activities (353) (151) Financing activities 37,164 9,111 Net increase (decrease) in cash and cash equivalents $ 24,953 $ 1,455 Cash flows from Operating Activities Cash used in operating activities increased $4.4 million, or 58%, during the year ended December 31, 2021 compared to the year ended December 31, 2020.

A summary of our cash flows is as follows (in thousands): Year Ended December 31, 2022 2021 Cash flows (used in) provided by: Operating activities $ (20,553) $ (11,858) Investing activities (198) (353) Financing activities 1,282 37,164 Net (decrease) increase in cash and cash equivalents $ (19,469) $ 24,953 Cash flows from operating activities Cash used in operating activities increased $8.7 million, or 73%, during the year ended December 31, 2022 compared to the year ended December 31, 2021.

During the year ended December 31, 2021, gross profit decreased $0.7 million, or 5%, to $15.4 million compared to $16.1 million during the year ended December 31, 2020. Gross profit margin decreased 5% to 33% for the year ended December 31, 2021 compared to 38% for the year ended December 31, 2020.

During the year ended December 31, 2022, gross profit decreased $0.1 million, or 1%, to $15.3 million compared to $15.4 million during the year ended December 31, 2021. Gross profit margin decreased 6% to 28% for the year ended December 31, 2022 compared to 33% for the year ended December 31, 2021.

During 2021, we have added several key members to our management team that have significant operating experience in the pet and consumer-packaged good sectors which we believe will enable us to successfully execute our growth strategy. • Freight , which is primarily related to the shipping of DTC orders to customers, increased $0.3 million or 24% during the year ended December 31, 2021 to $1.8 million from $1.5 million during the year ended December 31, 2020.

The increase was primarily related to the addition of several key members to our management team during the second half of 2021 that have significant operating experience in the pet and consumer-packaged good sectors which we believe will enable us to successfully execute our growth strategy, partially offset by higher severance costs during the first half of 2021. 31 Table of Contents • Freight , which is primarily related to the shipping of DTC orders to customers, decreased $0.2 million or 15% during the year ended December 31, 2022 to $1.6 million from $1.8 million during the year ended December 31, 2021.

Information about our revenue channels is as follows (in thousands): Twelve Months Ended December 31, 2021 2020 E-commerce (1) $ 15,091 33 % $ 14,218 34 % Brick & Mortar 6,766 15 % 8,982 21 % DTC 9,397 20 % 10,778 25 % International (2) 14,752 32 % 8,612 20 % Net Sales $ 46,006 100 % $ 42,590 100 % (1) The Company's E-Commerce channel includes two customers that each amount to greater than 10% of the Company's total net sales.

Information about our revenue channels is as follows (in thousands): Twelve Months Ended December 31, 2022 2021 E-commerce (1) $ 14,565 27 % $ 15,091 33 % Brick & Mortar 11,624 21 % 6,766 15 % DTC 6,620 12 % 9,397 20 % International (2) 21,851 40 % 14,752 32 % Net Sales $ 54,660 100 % $ 46,006 100 % (1) Our E-commerce channel includes two customers that amounted to greater than 10% of total net sales.

During the year ended December 31, 2021, Sales and marketing costs increased approximately $4.5 million or 73%, to $10.7 million from $6.2 million during the year ended December 31, 2020.

During the year ended December 31, 2022, sales and marketing costs increased approximately $3.9 million or 36%, to $14.6 million from $10.7 million during the year ended December 31, 2021.

The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model, which requires the development of input assumptions, as described in "Note 13 - Share-based compensation".

Forfeitures are accounted for as they occur, therefore there are no forfeiture related estimates required. The fair value of an option award is estimated on the date of grant using the Black–Scholes option valuation model, which requires the development of input assumptions, as described in "Note 12 - Share-based compensation".

Federal statutory rate of 21% due to permanent differences attributable to the change in the fair value of the warrant liabilities and because our losses have been fully offset by a valuation allowance due to uncertainty of realizing the tax benefit of NOLs for the years ended December 31, 2021 and 2020. 32 Table of Contents Liquidity and capital resources In connection with our IPO, we issued and sold 8,000,000 shares of common stock at a price of $5.00 per share.

Federal statutory rate of 21% due to permanent differences attributable to the impairment of goodwill in 2022 and change in the fair value of the warrant liabilities in 2021 and because our losses have been fully offset by a valuation allowance due to uncertainty of realizing the tax benefit of NOLs for the years ended December 31, 2022 and 2021. 32 Table of Contents Liquidity and capital resources Historically, we have financed our operations primarily through the sales of shares of our common stock, warrants, preferred stock, and loans.

On July 1, 2021 we received total net proceeds of approximately $36.1 million from the IPO, after deducting underwriting discounts and commissions of $2.8 million, and offering costs of approximately $1.1 million.

In connection with our IPO, we issued and sold 8,000,000 shares of common stock at a price of $5.00 per share. On July 1, 2021 we received total net proceeds of approximately $36.1 million from the IPO, after deducting underwriting discounts and commissions of $2.8 million, and offering costs of approximately $1.1 million.

During the year ended December 31, 2021, other general and administrative costs decreased $10.7 million, or 61% to $6.8 million compared to $17.5 million in the year ended December 31, 2020.

During the year ended December 31, 2022, other general and administrative costs increased $0.1 million, or 2% to $6.9 million compared to $6.8 million in the year ended December 31, 2021.

Cash provided by financing activities for the year ended December 31, 2020 was related to proceeds of $18.1 million associated with the Series F Private Placement, proceeds of $2.4 million from the issuance of the June 2020 Notes and the PPP loans, proceeds from warrant exercises of $1.0 million, and net proceeds from the revolving line of credit of $0.3 million, partially offset by a $12.5 million pay down on the term loan and debt issuance costs of $0.1 million.

The cash provided by financing activities for the year ended December 31, 2022 was related to net proceeds from the revolving line of credit of $6.7 million and net proceeds from a short term financing arrangement of $0.2 million, partially offset by payments on the term loan of $5.5 million and debt issuance costs of $0.1 million.

See "Note 1 - Nature of business and summary of significant accounting policies" to our audited consolidated financial statements included in this Annual Report on Form 10-K for a description of our significant accounting policies. Goodwill Impairment We evaluate goodwill for impairment at least annually.

Our actual results may differ from these estimates under different assumptions and 34 Table of Contents conditions. See "Note 1 - Nature of business and summary of significant accounting policies" to our audited consolidated financial statements included in this Annual Report on Form 10-K for a description of our significant accounting policies.

As of December 31, 2021, we have not experienced a significant adverse impact to our business, financial condition or cash flows resulting from the COVID-19 pandemic. However, uncertainties regarding the continued economic impact of COVID-19 are likely to result in sustained market turmoil, which could negatively impact our business, financial condition, and cash flows in the future.

Uncertainties regarding the continued economic impact of inflationary pressures, the COVID-19 pandemic, geopolitical actions and threat of cyber-attacks are likely to result in sustained market turmoil, which could negatively impact our business, financial condition, and cash flows in the future.

Our revenue growth has been negatively impacted throughout the year by the supply chain issues being felt globally as the COVID-19 pandemic continues to present challenges. We are navigating through short-term shortages in raw materials as well as production delays stemming from supply chain shortages and labor constraints.

Our revenue growth and the sales for certain products was negatively impacted in the first half of 2022 by the supply chain issues being felt globally as we navigate through short-term shortages in raw materials as well as production delays stemming from labor constraints.

During the year ended December 31, 2020, we did not record income tax expense due to the continued losses incurred by us. The effective tax rate for the years ended December 31, 2021 and 2020 was 1% and 0%, respectively, which differs from the U.S.

The effective tax rate for the years ended December 31, 2022 and 2021 was 0% and 1%, respectively, which differs from the U.S.

Income taxes Our income tax provision consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for any allowable credits, deductions and uncertain tax positions as the arise. During the year ended December 31, 2021, we recorded income tax expense of less than $0.1 million, which relates to indefinite-lived assets.

Income taxes Our income tax (benefit) provision consists of an estimate of federal and state income taxes based on enacted federal and state tax rates, as adjusted for any allowable credits, deductions and uncertain tax positions as they arise.

The majority of our software subscriptions are not under long-term contracts, and we do not have long-term contracts or commitments with any of our suppliers beyond active purchase orders. These purchase obligations were not material as of the date of this Annual Report on Form 10-K.

Our purchase obligations include certain ongoing marketing projects, software subscriptions as well as in-transit or in-production purchase orders with our suppliers, for which amounts vary depending on the purchasing cycle. The majority of our software subscriptions are not under long-term contracts, and we do not have long-term contracts or commitments with any of our suppliers beyond active purchase orders.

None of the Company's international customers represented greater than 10% of net sales during the year ended December 31, 2020. 30 Table of Contents Net sales increased $3.4 million, or 8%, to $46.0 million for the year ended December 31, 2021 compared to $42.6 million for the year ended December 31, 2020.

(2) One of our International customers that distributes products in China amounted to greater than 10% of total net sales during the years ended December 31, 2022 and December 31, 2021 and represented $17.7 million and $9.1 million of net sales, respectively. 30 Table of Contents Net sales increased $8.7 million, or 19%, to $54.7 million for the year ended December 31, 2022 compared to $46.0 million for the year ended December 31, 2021.

See "Note 1 - Nature of business and summary of significant accounting policies" for further information about our policy for fair value measurements. See "Note 7 - Goodwill and intangible assets" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.

See "Note 7 - Goodwill and intangible assets" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information. Share-Based Compensation Share-based compensation expense is measured based on the estimated fair value of awards granted to employees, directors, officers and consultants on the grant date.

During the year ended December 31, 2021, Share-based compensation decreased $4.8 million, or 54%, to $4.1 million, as compared to share-based compensation of $8.9 million during the year ended December 31, 2020.

Share-based compensation includes expenses related to equity awards issued to employees and non-employee directors. During the year ended December 31, 2022, Share-based compensation decreased $1.1 million, or 28%, to $3.0 million, as compared to share-based compensation of $4.1 million during the year ended December 31, 2021.

Interest expense, net During the year ended December 31, 2021, interest expense decreased $6.0 million, or 65% to $3.2 million from $9.2 million for the fiscal year ended December 31, 2020.

Interest expense, net During the year ended December 31, 2022, interest expense increased $2.6 million, or 83% to $0.6 million from $3.2 million for the fiscal year ended December 31, 2021. Interest expense for the year ended December 31, 2022 is comprised of interest on our Wintrust Credit Facility and the amortization of debt issuance costs.

Net loss from operations adjusted for non-cash expenses was $10.0 million for the year ended December 31, 2021 compared to $7.7 million for the comparable prior year period. The increase was driven by lower gross profit driven by inflationary cost increases, as well as increased marketing spend, both of which are discussed above.

Additionally, net (loss) income from operations adjusted for non-cash expenses was $(12.0) million for the year ended December 31, 2022 compared to $(10.0) million for the comparable prior year period.

See "Note 8 - Debt" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information regarding our outstanding debt.

During the year ended December 31, 2022, we used proceeds from the increased revolving line of credit to pay off and retire the outstanding term loan associated with the Wintrust Credit Facility. See "Note 8 - Debt" to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.

This was partially offset by a reduction in accounts payable and accrued liabilities of $3.2 million. Cash flows from Investing Activities Cash used in investing activities was $0.4 million during the year ended December 31, 2021 and $0.2 million during the year ended December 31, 2020.

Cash flows from financing activities Cash provided by financing activities was $1.3 million, during the year ended December 31, 2022 and $37.2 million during the year ended December 31, 2021.

Impairment testing is based on our current business strategy in light of present industry and economic conditions, as well as future expectations. 34 Table of Contents When performing a quantitative assessment, the fair value units is determined using widely accepted valuation techniques, including the discounted cash flow, guideline transaction and guideline company methods.

Impairment testing is based on our current business strategy in light of present industry and economic conditions, as well as future expectations. Fair value measurements used in the impairment review of goodwill are Level 3 measurements.

We have financed our operations primarily through the sales of shares of our common stock, warrants, preferred stock, and loans. On December 31, 2021 and December 31, 2020, we had cash and cash equivalents and restricted cash of $28.9 million and $4.0 million, respectively.

On December 31, 2022 and December 31, 2021, we had cash and cash equivalents and restricted cash of $9.5 million and $28.9 million, respectively.

The increase was driven by overall shipping industry inflation. • Non-cash charges including depreciation, amortization, disposal or sale of assets and bad debt expense remained flat at $2.0 million for the years ended December 31, 2021 and 2020. 31 Table of Contents • Other general and administrative costs for various general corporate expenses, including professional services, information technology, rent, travel, costs related to merchant credit card fees, insurance, product development costs, and warehousing costs.

The decrease was driven by disposals of certain assets during 2021, offset by additional capital expenditures throughout 2022. • Other general and administrative costs for various general corporate expenses, including professional services, information technology, insurance, travel, costs related to merchant credit card fees, product development costs, rent, and certain tax costs.

We will continue to refine and optimize our overall pricing strategy as we evaluate the future impact of inflation and align ourselves with the market. Although we expect to improve our gross profit margin in the future, if we fail to effectively optimize our pricing strategy, it could have a material negative impact on our future profitability.

We could see continued margin variability due to the current economic environment and pricing pressures due to inflationary costs for both transportation and raw materials. We will continue to refine and optimize our overall pricing strategy as we evaluate the future impact of inflation and align ourselves with the market.

The decrease was driven by non-recurring warrant expense of $10.0 million during 2020, contract termination costs of $1.1 million incurred in 2020, warehouse cost savings from outsourcing in 2020, higher audit fees during 2020, a reduction in rent expense as a result of prior lease terminations, other terminations in early 2021 and non-cash reductions of our sales tax liability during 2021.

The increase was driven by higher international consulting fees, additional travel fees and higher product development costs during the year ended December 31, 2022, partially offset by a non-cash reduction of our sales tax liability of $0.6 million during the year ended December 31, 2021 with no similar reduction of expense during the year ended December 31, 2022, as well as lower professional fees, lower franchise taxes and a reduction in rent expense as a result of prior lease terminations.

Interest expense is comprised of interest on our term loan, revolving credit facility, PPP loans, payable in-kind interest on our senior subordinated convertible notes, and the amortization of debt issuance costs and accretion of debt discounts.

Interest expense for the year ended December 31, 2021 is comprised of interest on our Wintrust Credit Facility, payable in-kind interest on our previous senior subordinated convertible notes, and the amortization of debt issuance costs and accretion of debt discounts, including $1.4 million associated with the remaining discount on the previous senior subordinated convertible notes, which was fully accreted to interest expense in connection with the conversion to common stock resulting from the commencement of the trading of our common stock on the NYSE.

When performing a qualitative assessment, qualitative factors are assessed to determine whether the existence of events or circumstances indicated that it was more likely than not that the fair value of the reporting unit was less than its carrying amount. Fair value measurements used in the impairment review of goodwill are Level 3 measurements.

When evaluating goodwill for impairment, we have the option to first assess qualitative factors to determine whether it is more likely than not the fair value of a reporting unit is less than its carrying amount. Qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance.

Additionally, the increase in cash used in operating activities was driven by a comparative increase in accounts receivable balances of $3.3 million due to the timing of sales and collections, as well as increased costs related to developing our new Halo Elevate® product line which also led to higher inventory spend of $2.1 million as we built inventory during Q4 2021 for the launch in 2022.

The increase in cash used in operating activities was primarily driven by significant fluctuations in our working capital, including a comparative increase in our inventory balance of $6.2 million as we built inventory to support the Halo Elevate® launch and the rebranding of TruDog and Halo Holistic™.

The increase was driven primarily by increased promotional spend in our E-commerce and International sales channels and higher advertising and market research costs related to developing our new Halo Elevate® product line. • Employee compensation and benefits decreased approximately $0.1 million or 1% during the year ended December 31, 2021 to $7.2 million from $7.3 million during the year ended December 31, 2020.

The increase was driven primarily by non-cash amortization related to the utilization of the remaining prepaid radio advertisement services with iHeart, marketing and advertising agency fees related to building and launching our new sales strategy as well as increased marketing spend in our International sales channel, partially offset by a temporary intentional decrease in customer acquisition and retention marketing spend as we shift the focus of our investments to our longer-term sales strategy. • Employee compensation and benefits increased approximately $0.3 million or 4% during the year ended December 31, 2022 to $7.5 million from $7.2 million during the year ended December 31, 2021.

The change was driven by cost increases from our primary suppliers as a result of broad-scale inflation in the industry, partially offset by $0.9 million of non-cash expense related to the amortization of a purchase accounting adjustment to inventory recorded in connection with the Halo acquisition in the first quarter of 2020.

The decrease in margin was driven primarily by several cost increases from our primary suppliers as a result of broad-scale inflation in the industry as well as an inventory write-off attributable to our Halo Holistic™ rebranding initiatives, partially offset by cost savings from transitioning some of our primary suppliers and price increases to customers as described below.

The increase was driven by growth in our International and E-commerce channels, partially offset by lower Brick & Mortar sales as we reshuffle our product lineup ahead of our new product launch in 2022 and lower DTC sales driven by an intentional decrease in marketing spend as we expect to shift the focus of these investments to our longer-term DTC strategy rather than chasing short-term revenue gains.

The increase was driven by growth in our Brick & Mortar channel driven by the launch of Halo Elevate® and growth in our International channel, partially offset by lower E-commerce and DTC sales driven by an intentional reduction in new customer acquisition and retention marketing spend in connection with our strategic rebranding of TruDog under the Halo umbrella which was successfully executed and implemented in July 2022 and the Halo Holistic™ relaunch.

We are actively working with our co-manufacturing and freight partners as well as transitioning some of our primary suppliers to generate future cost savings. Additionally, we have taken price increases to our customers starting late in the third quarter to help cover cost increases.

We expect these cost saving offsets will contribute to higher gross profit realization going forward. We continue to actively work with our co-manufacturing and freight partners to generate future cost savings and have successfully transitioned some of our primary suppliers to help realize improved gross profit margins in future periods.

The decrease is primarily driven by a lower monthly expense due to an overall decrease in the fair value of the outstanding options in 2021 as compared to 2020, as well as certain warrant and restricted stock grants for which compensation expense was recognized immediately during 2020 with no comparable grants in 2021; this was partially offset by accelerated vesting on certain stock option grants during 2021.

The decrease is driven by accelerated vesting on certain stock option grants during 2021, partially offset by common stock issued for board service and accelerated vesting of a certain stock option grant during 2022, interim CEO service compensation and additional option grants.

Removed

Added

Removed

The impact that the ongoing COVID-19 pandemic and related supply chain challenges will have on our consolidated results of operations is uncertain.

Added

In China, the number of households that own a pet has doubled in the last five years, with younger pet owners leading growth. Recent Corporate Developments On September 13, 2022, we announced that Scott Lerner was stepping down from his role as Chief Executive Officer ("CEO"), effective September 14, 2022. Also on September 13, 2022, we announced that Lionel F.

Removed

Although we have not observed a material reduction in demand as of December 2021 as a result of the COVID-19 pandemic, we have seen some impact to our revenue growth as a result of supply chain issues and a notable reduction in our safety stocks during the second half of 2021.

Added

Conacher was appointed as Interim CEO, effective September 14, 2022. On March 2, 2023, we announced that Robert Sauermann was resigning from his role as Chief Operating Officer ("COO"), effective March 17, 2023.

Removed

We will continue to evaluate the nature and extent of the pandemic's impact to our business, consolidated results of operations, financial condition, and liquidity, and our results presented herein are not necessarily indicative of the results to be expected for future periods in 2022.

Added

Additionally, we began implementing price increases to our customers to help cover these cost increases beginning late in the third quarter of 2021. We implemented additional price increases during 2022, which became effective in the second and third quarters of 2022.

Removed

Management cannot predict the full impact of the global supply chain challenges on the sourcing, manufacturing and distribution of our products or general economic conditions, including the effects on consumer spending.

Added

Freight costs are generally increasing, offset by our lower DTC sales as described above. • Non-cash charges including depreciation, amortization, disposal or sale of assets and bad debt expense decreased $0.2 million or 6% to $1.8 million during the year ended December 31, 2022 from $2.0 million during the year ended December 31, 2021.

Removed

The ultimate extent of the effects of the COVID-19 pandemic on us is highly uncertain and will depend on future developments, and such effects could exist for an extended period of time.

Added

Impairment of goodwill included an impairment charge of $18.6 million during the year ended December 31, 2022, while there was no corresponding activity for the year ended December 31, 2021. See "Note 7 - Goodwill and intangible assets" for additional information.

Removed

Although significantly lower than the nearly 50% of households that own a dog in the U.S., there are already more companion animals in China due to sheer population size.

Added

During the year ended December 31, 2022, we recorded income tax benefit of less than $0.1 million, which relates to indefinite-lived assets. During the year ended December 31, 2021, we recorded income tax expense of less than $0.1 million, which relates to indefinite-lived assets.

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What changed in SRx Health Solutions, Inc.'s 10-K — 2022 vs 2023

Top changes in SRx Health Solutions, Inc.'s 2023 10-K

Item 1. Business

Item 1A. Risk Factors

Item 2. Properties

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Other SRXH 10-K year-over-year comparisons