What changed in SRx Health Solutions, Inc.'s 2024 10-K compared to 2023?

Across the narrative sections we track, SRx Health Solutions, Inc. (SRXH) added 170 paragraphs, removed 175, and edited 125 between the 2023 and 2024 10-K filings. The biggest movers are Item 7. Management's Discussion & Analysis (+90/−74), Item 1A. Risk Factors (+37/−43), Item 1. Business (+32/−34).

Did SRx Health Solutions, Inc. add new Risk Factors in the 2024 10-K?

Yes — Item 1A Risk Factors shows 37 new/edited paragraphs and 43 removed paragraphs versus the 2023 10-K.

What changed in SRx Health Solutions, Inc.'s MD&A (Item 7) in 2024?

Item 7 Management's Discussion & Analysis shows 90 new/edited paragraphs and 74 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 2023 and 2024 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 — 2023 vs 2024

Paragraph-level year-over-year comparison of SRx Health Solutions, Inc.'s 2023 and 2024 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 2024 report.

+170 added−175 removedSource: 10-K (2024-04-12) vs 10-K (2023-03-28)

Item 1. Business

Business — how the company describes what it does

26 edited+6 added−8 removed48 unchanged

2023 filing

2024 filing

Biggest changeWe 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.

Biggest changeSee 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. 7 Our Trademarks and Other Intellectual Property We believe that our intellectual property has substantial value and has contributed significantly to the success of our business.

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 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, including 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.

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 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.

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.

Only registered pet food manufacturers from AQSIQ approved countries (which includes the U.S.) can import pet food to China, and may do so only if they have first received an import registration certificate from the Ministry of Agriculture ("MOA").

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.

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.

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.

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.

We are required to navigate a complex regulatory framework in the locations in which we wish to manufacture, test, import, export, or sell our products. FDA Regulation of Animal Foods The FDA regulates foods, including foods intended for animals, under the Federal Food, Drug and Cosmetic Act ("FDCA") and its implementing regulations.

We are required to navigate a complex regulatory framework in the locations in which we wish to manufacture, test, import, export, or sell our products. 6 FDA Regulation of Animal Foods The FDA regulates foods, including foods intended for animals, under the Federal Food, Drug and Cosmetic Act (“FDCA”) and its implementing regulations.

Chinese Regulations General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China ("AQSIQ") is responsible for the unified inspection and quarantine of imported pet food (also referred to in the regulations as “Feed”).

Chinese Regulations General Administration of Quality Supervision, Inspection and Quarantine of the People’s Republic of China (“AQSIQ”) is responsible for the unified inspection and quarantine of imported pet food (also referred to in the regulations as “Feed”).

On February 2, 2019, Better Choice Company entered into a definitive agreement to acquire the remainder of TruPet and we closed the acquisition on May 6, 2019. On February 28, 2019, Better Choice Company entered into a definitive agreement to acquire all of the outstanding shares of Bona Vida, Inc.

On February 2, 2019, the Company entered into a definitive agreement to acquire the remainder of TruPet and closed the acquisition on May 6, 2019. On February 28, 2019, Better Choice entered into a definitive agreement to acquire all of the outstanding shares of Bona Vida, Inc. (“Bona Vida”) and closed the acquisition on May 6, 2019.

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.

The following chart provides a breakdown of our net sales by channel for the year ended December 31, 2023: In 2023, approximately 50% 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.

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.

We sourced approximately 64% of inventory purchases from two vendors for the year ended December 31, 2023 and approximately 69% from three vendors for the year ended December 31, 2022. 5 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.

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.

Foods”) for dry kibble which transitioned to Barrett Petfood Innovations during 2022, then back to Alphia during 2023; 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.

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.

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.

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.

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.

ITEM 1. BUSINESS Our History On December 17, 2018, Better Choice Company made a $2.2 million investment in TruPet LLC ("TruPet"), an online seller of pet foods, pet nutritional products and related pet supplies.

ITEM 1. BUSINESS Our History On December 17, 2018, Better Choice Company, Inc. (the “Company”, or “Better Choice”) made a $2.2 million investment in TruPet LLC (“TruPet”), an online seller of pet foods, pet nutritional products and related pet supplies.

("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.

On October 15, 2019, Better Choice 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.

Pursuant to the terms and subject to the conditions of the Halo Agreement, among other things, we agreed to purchase from the Sellers 100% of the issued and outstanding capital stock of Halo, Purely for Pets, Inc. ("Halo"). We closed this acquisition, which we refer to as the Halo Acquisition, on December 19, 2019.

Pursuant to the terms and subject to the conditions of the Halo Agreement, among other things, the Company agreed to purchase from the Sellers 100% of the issued and outstanding capital stock of Halo, Purely for Pets, Inc. (“Halo”) (the “Halo Acquisition”). The Company closed the Halo Acquisition on December 19, 2019.

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.

By channel in 2023, E-Commerce generated approximately $19.1 million of gross sales and $13.4 million of net sales, Direct-to-Consumer generated approximately $6.4 million of gross sales and $5.6 million of net sales, Brick & Mortar generated approximately $9.4 million of gross sales and $5.9 million of net sales and International generated approximately $13.7 million of gross sales and $13.7 million of net sales.

Smucker Company), and manufacturers of specialty and natural pet food such as Blue Buffalo (part of General Mills), Wellness, Fromm, Orijen, Merrick (part of Nestlé), Stella and Chewy, Open Farm and Freshpet. In addition, we compete with many regional niche brands in individual geographic markets.

We compete with manufacturers of conventional pet food such as Mars, Nestlé and Big Heart Pet Brands (part of the J.M. Smucker Company), and manufacturers of specialty and natural pet food such as Blue Buffalo (part of General Mills), Wellness, Fromm, Orijen, Merrick (part of Nestlé), Stella and Chewy, Open Farm and Freshpet.

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.

In addition, we compete with many regional niche brands in individual geographic markets. Employees and Human Capital Resources As of December 31, 2023, we had 31 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.

Competitive factors include product quality, ingredients, brand awareness and loyalty, product variety, product packaging and design, reputation, price, advertising, promotion, and nutritional claims. We believe that we compete effectively with respect to each of these factors. We compete with manufacturers of conventional pet food such as Mars, Nestlé and Big Heart Pet Brands (part of the J.M.

Competition The pet health and wellness industry is highly competitive. Competitive factors include product quality, ingredients, brand awareness and loyalty, product variety, product packaging and design, reputation, price, advertising, promotion, and nutritional claims. We believe that we compete effectively with respect to each of these factors.

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 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 expanded and engaged two new co-manufacturing partners in 2022. 4 Our Customers and Channels In 2023, we generated $48.6 million of gross sales and $38.6 million of net sales.

Our Trademarks and Other Intellectual Property We believe that our intellectual property has substantial value and has contributed significantly to the success of our business. Our trademarks are valuable assets that reinforce our brand, our sub-brands and our consumers’ perception of our products.

Our trademarks are valuable assets that reinforce our brand, our sub-brands and our consumers’ perception of our products.

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.

With increasing levels of economic financial status in the Asian markets and demand for premium and super-premium, western manufactured products, with China representing the largest market opportunity for growth and 80% of Better Choice’s $13.7 million of international sales in 2023. Supply Chain, Manufacturing and Logistics Halo partners with a number of co-manufacturing partners to produce its products.

We anticipate our ability to reach a growing base of diverse customers online will continue to improve as E-commerce penetration increases.

We anticipate our ability to reach a growing base of diverse customers online will continue to improve as E-commerce penetration increases. In addition to our domestic sales channels, the Halo brand’s international sales declined (37)% in 2023, resulting primarily in an effort to normalize inventory levels in our key Asian markets as well as macroeconomic factors impacting consumer behavior.

Removed

Our executive team has a proven history of success in both pet and consumer-packaged goods, and has over 50 years of combined experience in the pet industry and over 100 years of combined experience in the consumer-packaged goods industry.

Added

In December 2023, the Company made a strategic exit out of Petco stores (while remaining on Petco.com), and Pet Supplies Plus. As of Q1 2024, the Company has made plans to exit its DTC channel in Q2 2024, in an effort to improve profitability.

Removed

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.

Added

Our products are manufactured by an established network of co-manufacturers in partnership with Better Choice.

Removed

A majority of our online sales are driven by repeat purchases from existing customers. Although industry-wide E-commerce sales retreated somewhat following the March 2020 pantry stocking, the sale of pet food and supplies online had increased 35% year-over-year according to Packaged Facts, with subscription sales nearly equal to the March 2020 peak.

Added

A majority of our online sales are driven by repeat purchases from existing customers. In Packaged Facts’ Surveys of Pet Owners, pet products and services are at the bottom of the list of household spending cutbacks, second only to human medicine and healthcare.

Removed

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.

Added

Reflecting both the higher prices and Americans’ deep commitments to their pets, pet parents remain tenacious when it comes to pet care, with 68% spending more in February 2023 vs. January 2022 even as they looked for ways to economize.

Removed

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.

Added

In the fourth quarter of 2023, management shifted from a Brick & Mortar channel focus to a digital first strategy as a result of its annual operating plan process and has strategically reallocated marketing investments to work more effectively and efficiently in its larger e-commerce platforms to drive growth and brand awareness.

Removed

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.

Added

We monitor changes in these laws and believe that we are in material compliance with applicable laws.

Removed

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.

Removed

We believe that these in-store partnerships are complementary to the incentives that our E-Commerce partners offer to drive monthly subscriptions, and build upon the recurring revenue that we generate online. Competition The pet health and wellness industry is highly competitive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

35 edited+2 added−8 removed223 unchanged

2023 filing

2024 filing

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.

Biggest changeWe have experienced recurring operating losses, have a significant accumulated deficit and are required to maintain certain thresholds to comply with the financial covenants associated with the Alphia Term Loan, including minimum liquidity, minimum EBITDA, and maximum marketing spend ratio. We expect to continue to generate operating losses and consume cash resources in the near term.

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.

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

Our failure to meet the challenges involved in successfully integrating acquisitions, including the operations of Halo or TruPet, or to otherwise realize any of the anticipated benefits of the acquisitions could impair our financial condition and results of operations.

Our failure to meet the challenges involved in successfully integrating acquisitions, including the operations of Halo, or to otherwise realize any of the anticipated benefits of the acquisitions could impair our financial condition and results of operations.

Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock. 20 Table of Contents The public price of our common stock could also be subject to wide fluctuations in response to the risk factors described in this report and others beyond our control, including: the number of shares of our common stock publicly owned and available for trading; actual or anticipated quarterly variations in our results of operations or those of our competitors; our actual or anticipated operating performance and the operating performance of similar companies in our industry; our announcements or our competitors’ announcements regarding significant contracts, acquisitions, or strategic investments; general economic conditions and their impact on the pet food markets; the overall performance of the equity markets; threatened or actual litigation; changes in laws or regulations relating to our industry; any major change in our board of directors or management; publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; and sales or expected sales of shares of our common stock by us, and our officers, directors, and significant stockholders.

Our financial performance, government regulatory action, tax laws, interest rates and market conditions in general could have a significant impact on the future market price of our common stock. 19 The public price of our common stock could also be subject to wide fluctuations in response to the risk factors described in this report and others beyond our control, including: the number of shares of our common stock publicly owned and available for trading; actual or anticipated quarterly variations in our results of operations or those of our competitors; our actual or anticipated operating performance and the operating performance of similar companies in our industry; our announcements or our competitors’ announcements regarding significant contracts, acquisitions, or strategic investments; general economic conditions and their impact on the pet food markets; the overall performance of the equity markets; threatened or actual litigation; changes in laws or regulations relating to our industry; any major change in our board of directors or management; publication of research reports about us or our industry or changes in recommendations or withdrawal of research coverage by securities analysts; and sales or expected sales of shares of our common stock by us, and our officers, directors, and significant stockholders.

In the event of a de-listing, we may attempt to take actions to restore our compliance with the NYSE American listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NYSE American minimum listing requirements or prevent future non-compliance with the NYSE American listing requirements.

In the event of a delisting, we may attempt to take actions to restore our compliance with the NYSE American listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NYSE American minimum listing requirements or prevent future non-compliance with the NYSE American listing requirements.

As a result, our future growth and profitability will depend in part on: • the effectiveness and efficiency of our online experience for disparate worldwide audiences, including advertising and search optimization programs in generating consumer awareness and sales of our products; • our ability to prevent confusion among consumers that can result from search engines that allow competitors to use or bid on our trademarks to direct consumers to competitors’ websites; 12 Table of Contents • our ability to prevent Internet publication or television broadcast of false or misleading information regarding our products or our competitors’ products; • the nature and tone of consumer sentiment published on various social media sites; and • the stability of our website and other e-commerce platforms we sell our products on.

As a result, our future growth and profitability will depend in part on: ● the effectiveness and efficiency of our online experience for disparate worldwide audiences, including advertising and search optimization programs in generating consumer awareness and sales of our products; ● our ability to prevent confusion among consumers that can result from search engines that allow competitors to use or bid on our trademarks to direct consumers to competitors’ websites; ● our ability to prevent Internet publication or television broadcast of false or misleading information regarding our products or our competitors’ products; ● the nature and tone of consumer sentiment published on various social media sites; and ● the stability of our website and other e-commerce platforms we sell our products on.

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.

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 amortizable intangible assets were determined, negatively impacting our results of operations.

If our third-party suppliers cannot successfully manufacture products that conform to our specifications and the strict regulatory requirements, they may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products, could result in their inability to continue manufacturing for us or could result in a recall of our products that have already been distributed. 17 Table of Contents If the FDA or other regulatory authority determines that we or they have not complied with the applicable regulatory requirements, our business, financial condition and results of operations may be materially adversely impacted.

If our third-party suppliers cannot successfully manufacture products that conform to our specifications and the strict regulatory requirements, they may be subject to adverse inspectional findings or enforcement actions, which could materially impact our ability to market our products, could result in their inability to continue manufacturing for us or could result in a recall of our products that have already been distributed. 16 If the FDA or other regulatory authority determines that we or they have not complied with the applicable regulatory requirements, our business, financial condition and results of operations may be materially adversely impacted.

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.

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.

We may not always be able to respond quickly and effectively to changes in customer taste and demand due to the amount of time and financial resources that may be required to bring new products to market, which could result in our competitors taking advantage of changes in customer trends before we are able to and harm our brand and reputation. 11 Table of Contents Furthermore, developing and commercializing new products may divert management's attention from other aspects of our business and place a strain on management, operational and financial resources, as well as our information systems.

We may not always be able to respond quickly and effectively to changes in customer taste and demand due to the amount of time and financial resources that may be required to bring new products to market, which could result in our competitors taking advantage of changes in customer trends before we are able to and harm our brand and reputation. 10 Furthermore, developing and commercializing new products may divert management’s attention from other aspects of our business and place a strain on management, operational and financial resources, as well as our information systems.

Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. 22 Table of Contents Provisions in our certificate of incorporation and bylaws and Delaware law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.

Alternatively, if a court were to find these provisions of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition or results of operations. 21 Provisions in our certificate of incorporation and bylaws and Delaware law may discourage a takeover attempt even if a takeover might be beneficial to our stockholders.

In the event of an acceleration of such debt, we could be forced to apply all available cash flows to repay such debt, which could also force us into bankruptcy or liquidation. For information regarding our outstanding debt, refer to "Note 8 - Debt" in the Notes to Consolidated Financial Statements included in Item 8.

In the event of an acceleration of such debt, we could be forced to apply all available cash flows to repay such debt, which could also force us into bankruptcy or liquidation. For information regarding our outstanding debt, refer to “Note 8 - Debt” in the Notes to Consolidated Financial Statements included in Item 8.

In addition, a deterioration in trade relations between the U.S. and China or other countries, or the negative perception of U.S. brands by Chinese or other international consumers, could have a material adverse effect on our results of operations and financial condition. 15 Table of Contents If economic conditions result in decreased spending on pets and have a negative impact on our suppliers or distributors, our business, financial condition and results of operations may be materially adversely affected.

In addition, a deterioration in trade relations between the U.S. and China or other countries, or the negative perception of U.S. brands by Chinese or other international consumers, could have a material adverse effect on our results of operations and financial condition. 14 If economic conditions result in decreased spending on pets and have a negative impact on our suppliers or distributors, our business, financial condition and results of operations may be materially adversely affected.

Our failure to meet the continued listing requirements of NYSE American could result in a de-listing of our common stock and could make it more difficult to raise capital in the future.

Our failure to meet the continued listing requirements of NYSE American could result in a delisting of our common stock and could make it more difficult to raise capital in the future.

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.

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.

The costs of advertising through these platforms have increased significantly, which could in decreased efficiency in the use of our advertising expenditures, and we expect these costs may continue to increase in the future. Consumers are increasingly using digital tools as a part of their shopping experience.

The costs of advertising through these platforms have increased significantly, which could decrease efficiency in the use of our advertising expenditures, and we expect these costs may continue to increase in the future. 11 Consumers are increasingly using digital tools as a part of their shopping experience.

If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our reputation could be affected and our business, financial condition and results of operations could be materially adversely affected. 16 Table of Contents If third parties claim that we infringe upon their intellectual property rights, our business and results of operations could be adversely affected.

If any of these claims or proceedings were to be determined adversely to us, a judgment, a fine or a settlement involving a payment of a material sum of money were to occur, or injunctive relief were issued against us, our reputation could be affected and our business, financial condition and results of operations could be materially adversely affected. 15 If third parties claim that we infringe upon their intellectual property rights, our business and results of operations could be adversely affected.

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.

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

The failure of our information technology systems to perform as a result of any of these factors or our failure to effectively restore our systems or implement new systems could disrupt our entire operation and could result in decreased sales, increased overhead costs, excess inventory and product shortages and a loss of important information. 14 Table of Contents Further, it is critically important for us to maintain the confidentiality and integrity of our information technology systems.

The failure of our information technology systems to perform as a result of any of these factors or our failure to effectively restore our systems or implement new systems could disrupt our entire operation and could result in decreased sales, increased overhead costs, excess inventory and product shortages and a loss of important information. 13 Further, it is critically important for us to maintain the confidentiality and integrity of our information technology systems.

Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products, cause our sales to decline and adversely impact our ability to compete, which could materially and adversely impact our business, financial condition and results of operations. 18 Table of Contents There is significant uncertainty about the future relationship between the U.S. and China with respect to trade policies, treaties, government regulations and tariffs.

Changes in, and responses to, U.S. trade policy could reduce the competitiveness of our products, cause our sales to decline and adversely impact our ability to compete, which could materially and adversely impact our business, financial condition and results of operations. 17 There is significant uncertainty about the future relationship between the U.S. and China with respect to trade policies, treaties, government regulations and tariffs.

Therefore, we may not be able to source sufficient product on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner.

We may not be able to develop alternate sources in a timely manner. Therefore, we may not be able to source sufficient product on terms that are acceptable to us, or at all, which may undermine our ability to fill our orders in a timely manner.

While alternate sources of supply are generally available, the supply and price are subject to market conditions and are influenced by other factors beyond our control, including the continued impact of COVID-19. We do not have long-term contracts with many of our suppliers, and therefore they could increase prices or cease doing business with us.

While alternate sources of supply are generally available, the supply and price are subject to market conditions and are influenced by other factors beyond our control. We do not have long-term contracts with many of our suppliers, and therefore they could increase prices or cease doing business with us.

If we are unable to manage our supply chain effectively, our operating costs could increase and our profit margins could decrease. 13 Table of Contents If any of our independent shipping providers experience delays or disruptions, our business could be adversely affected.

If we are unable to manage our supply chain effectively, our operating costs could increase and our profit margins could decrease. 12 If any of our independent shipping providers experience delays or disruptions, our business could be adversely affected.

Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows. 19 Table of Contents Our level of indebtedness and related covenants could limit our operational and financial flexibility and could significantly adversely affect our business if we breach such covenants and default on such indebtedness.

Any of the foregoing could materially and adversely affect our business, financial condition, results of operations and cash flows. 18 Our level of indebtedness and related covenants could limit our operational and financial flexibility and could significantly adversely affect our business if we breach such covenants and default on such indebtedness.

As a result, the trading liquidity of our common stock may not necessarily improve. 21 Table of Contents We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

As a result, the trading liquidity of our common stock may not necessarily improve. 20 We may issue preferred stock whose terms could adversely affect the voting power or value of our common stock.

Accordingly, our indemnification obligations could divert needed financial resources and may adversely affect our business, financial condition, results of operations and cash flows, and adversely affect the value of our business. 23 Table of Contents

Our Wintrust Credit Facility, subordinated convertible notes, term loan and revolving line of credit place certain restrictions on the ability of us and our subsidiaries to pay cash dividends. We may amend our current credit facilities or enter into new debt arrangements that also prohibit or restrict our ability to pay cash dividends on our common stock.

Our Wintrust receivables credit facility and Alphia term loan place certain restrictions on the ability of us and our subsidiaries to pay cash dividends. We may amend our current credit facilities or enter into new debt arrangements that also prohibit or restrict our ability to pay cash dividends on our common stock.

If our inability to meet our debt service obligations results in an event of default as defined under our subordinated convertible promissory notes or our senior credit facility, the lenders thereunder may be able to take possession of substantially all of our assets. Prevailing economic conditions and global credit markets could adversely impact our ability to do so.

If our inability to meet our debt service obligations results in an event of default as defined under our Alphia term loan and Wintrust receivables credit facility, the lenders thereunder may be able to take possession of substantially all of our assets. Prevailing economic conditions and global credit markets could adversely impact our ability to do so.

There can be no assurance that we will be successful in maintaining the listing of NYSE American as it is possible we may fail to satisfy the continued listing requirements, such as the corporate governance requirements or the minimum stock price requirement.

Additionally, our anticipated growth will increase the demands placed on our suppliers, resulting in an increased need for us to manage our suppliers and monitor for quality assurance and comply with all applicable laws. Any failure by us to manage our growth effectively could impair our ability to achieve our business objectives.

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.

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

Any delay, interruption or increased cost in the proprietary value-branded products that might occur for any reason could affect our ability to meet customer demand, adversely affect our net sales, increase our cost of sales and hurt our results of operations, which in turn may injure our reputation and customer relationships, thereby harming our business. 8 Our ability to meet increases in demand may be impacted by our reliance on our suppliers and we are subject to the risk of shortages and long lead times.

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.

If we fail to satisfy the continued listing requirements, the NYSE American may take steps to de-list our common stock. Such a de-listing or the announcement of such de-listing will have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

Such a delisting or the announcement of such delisting will have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

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

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.

Removed

Our ability to meet increases in demand may be impacted by our reliance on our suppliers and we are subject to the risk of shortages and long lead times. We may not be able to develop alternate sources in a timely manner.

Added

Any failure by us to manage our growth effectively could impair our ability to achieve our business objectives. 9 Our recurring losses and significant accumulated deficit have raised substantial doubt regarding our ability to continue as a going concern.

Removed

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

Added

If we fail to satisfy the continued listing requirements before the end of the cure period, the NYSE American may take steps to delist our common stock.

Removed

The COVID-19 pandemic could have a material adverse impact on our business, results of operations and financial condition. The COVID-19 pandemic resulted in various governmental measures, including lockdowns, closures, quarantines and travel bans as well as individual measures taken by companies, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses and facilities.

Removed

The ongoing impacts of the COVID-19 pandemic, including global supply chain disruptions, could impair our third-party business partners' ability to meet their obligations to us, which may negatively affect our operations. These third parties include those who supply our ingredients, packaging, and other necessary operating materials, co-manufacturers, distributors, and logistics and transportation services providers.

Removed

The impact of COVID-19 on these third-party business partners may negatively affect the price and availability of our ingredients and/or packaging materials and impact our supply chain. If the disruptions caused by COVID-19 continue for an extended period of time, our ability to meet the demands of our customers may be materially impacted.

Removed

To date, we have not experienced any reduction in the available supply of our products. The pandemic has significantly impacted global economic conditions and may in the future have an adverse impact on consumer confidence and spending, which could materially adversely affect the supply of, as well as the demand for, our products.

Removed

The extent to which the COVID-19 pandemic will further impact our business will depend on future developments and we cannot reasonably estimate the potential continued impact to our business at this time.

Removed

However, if the pandemic or the global supply chain disruptions continue for a prolonged period it could have a material adverse effect on our business, results of operations, financial condition and cash flows and adversely impact the trading price of our common stock.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+3 added−16 removed5 unchanged

2023 filing

2024 filing

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.

Biggest changeHolders of Common Stock As of April 11, 2024, we had 893,601 shares of our common stock issued and outstanding. As of April 11, 2024, there were 154 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.

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.

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, 2022, the registrant made the following issuances and purchases of its unregistered securities as described below.

(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.

(2) On November 2, 2022, the registrant issued 927 shares of common stock to a member of its board of directors for service as interim CEO.

(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.

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.

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.

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.

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.

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 2022 First Quarter (1) $ 158.00 $ 84.40 Second Quarter (1) $ 121.60 $ 74.40 Third Quarter (1) $ 106.00 $ 31.20 Fourth Quarter (1) $ 49.60 $ 17.60 2023 First Quarter (1) $ 33.20 $ 13.00 Second Quarter (1) $ 22.60 $ 7.76 Third Quarter (1) $ 11.20 $ 4.44 Fourth Quarter (1) $ 23.20 $ 4.88 (1) The high and low bid prices for this quarter were reported by the NYSE American marketplace.

(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.

All share amounts have been retroactively adjusted to give effect to a reverse stock split of 1-for-44 effective March 20, 2024. (1) On February 1, 2022, the registrant issued 4,962 shares of common stock to five non-employee directors in return for services provided in their capacity as directors.

(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.

(3) On December 30, 2022, the registrant issued 562 shares of common stock to a member of its board of directors for service as interim CEO. 24 (4) On January 4, 2023, the registrant issued 20,292 shares of common stock to its board of directors in return for services provided in their capacity as directors.

Removed

(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.

Added

(5) On January 11, 2023, the registrant issued 4,545 shares of common stock to its key executives as part of their compensation packages. (6) On January 31, 2023, the registrant issued 409 shares of common stock to a member of its board of directors for service as interim CEO.

Removed

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.

Added

(7) On April 30, 2023, the registrant issued 909 shares of common stock to a member of its executive management as part of their compensation package. (8) On September 5, 2023, the registrant issued 34,090 shares of common stock to two members of its board of directors in return for services provided in their capacity as directors.

Removed

(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.

Added

Purchases of Equity Securities by the Issuer There were no repurchases of Better Choice Company common stock during the year ended December 31, 2023:

Removed

(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.

Removed

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.

Removed

(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.

Removed

(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.

Removed

(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.

Removed

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.

Removed

(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.

Removed

(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.

Removed

The common stock and related warrants were issued as units, with each (i) share of common stock having a par value of $.001 and (ii) related warrant being exercisable to acquire the same number of shares common stock issued, at an exercise price of $8.70 per share of common stock.

Removed

(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.

Removed

(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.

Removed

(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.

Removed

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 .

Item 7. Management's Discussion & Analysis

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

56 edited+34 added−18 removed52 unchanged

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2024 filing

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).

Biggest changeAs of Q1 2024, the Company has made plans to exit its DTC channel in Q2 2024, in an effort to improve profitability. 27 Results of Operations for the Years Ended December 31, 2023 and 2022 The following table sets forth our consolidated results for the periods presented (in thousands): Years Ended December 31, Change 2023 2022 $ % Net sales $ 38,592 $ 54,660 $ (16,068 ) (29 )% Cost of goods sold 26,795 39,399 (12,604 ) (32 )% Gross profit 11,797 15,261 (3,464 ) (23 )% Operating expenses: Selling, general and administrative 24,444 35,430 (10,986 ) (31 )% Impairment of goodwill — 18,614 (18,614 ) (100 )% Impairment of intangible assets 8,532 — — 100 % Total operating expenses 32,976 54,044 (21,068 ) (39 )% Loss from operations (21,179 ) (38,783 ) 17,604 45 % Other expense: Interest expense (1,353 ) (551 ) (802 ) (146 )% Change in fair value of warrant liabilities (236 ) — (236 ) (100 )% Total other expense (1,589 ) (551 ) (1,038 ) (188 )% Net loss before income taxes (22,768 ) (39,334 ) 16,566 (42 )% Income tax expense (benefit) 2 (18 ) 20 111 % Net loss available to common stockholders $ (22,770 ) $ (39,316 ) $ 16,546 (42 )% 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).

This demand has been supported by a rapidly growing middle class in China, where a recent McKinsey report estimated that in 2018 roughly 730 million people in urban areas fell into the income categories of “aspirants” and “affluents,” with the Brookings group estimating that approximately 60 million people are added to these income categories each year.

This demand has been supported by a rapidly growing middle class in China, where a McKinsey report estimated that in 2018 roughly 730 million people in urban areas fell into the income categories of “aspirants” and “affluents,” with the Brookings group estimating that approximately 60 million people are added to these income categories each year.

According to the American Pet Product Association, between 66% and 70% of all households in the U.S. own a pet, equating to a total pet population of more than 130 million companion animals and an average of 1.7 pets per household.

According to the American Pet Product Association, between 66% of all households in the U.S. own a pet, equating to a total pet population of more than 130 million companion animals and an average of 1.7 pets per household.

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.

Income taxes Our income tax expense (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.

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.

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.

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.

The decrease was driven by disposals of certain assets during 2023, 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.

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.

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.

Pet spending represents a significant portion of household spend on consumer products, as this translates to an average annual spend on pet care of more than $1,500 per pet owning household, with $460 of this spend attributed to pet food and treats. 28 Table of Contents Historically, consumer spending on pets grew at an approximately 3% CAGR in the decade leading up to the COVID-19 pandemic, driven by steady annual increases in household pet ownership of approximately 1%, the continued premiumization of the category and the humanization of pets.

Pet spending represents a significant portion of household spend on consumer products, as this translates to an average annual spend on pet care of more than $1,500 per pet owning household, with $460 of this spend attributed to pet food and treats. 26 Historically, consumer spending on pets grew at an approximately 3% CAGR in the decade leading up to the COVID-19 pandemic, driven by steady annual increases in household pet ownership of approximately 1%, the continued premiumization of the category and the humanization of pets.

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.

In connection with our IPO, we issued and sold 181,818 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.

Our ability to raise additional capital may be adversely impacted by the potential worsening of global economic conditions, including inflationary pressures, and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide resulting from the COVID-19 pandemic and geopolitical tensions.

The market approach includes determining appropriate comparable companies and applying an estimated multiple to apply to our operating results. The primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation and amortization. See "Note 1 - Nature of business and summary of significant accounting policies" for further information about our policy for fair value measurements.

The market approach includes determining appropriate comparable companies and applying an estimated multiple to apply to our operating results. The primary market multiples to which we compare are revenue and earnings before interest, taxes, depreciation and amortization. See “Note 1 - Nature of business and summary of significant accounting policies” for further information about our policy for fair value measurements.

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.

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.

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.

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.

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.

As of December 31, 2022, we have not experienced a significant adverse impact to our business, financial condition or cash flows resulting from the COVID-19 pandemic, geopolitical actions or threat of cyber-attacks. However, we have seen adverse impacts to our gross profit margin due to inflationary pressures in the current economic environment.

As of December 31, 2023, we have not experienced a significant adverse impact to our business, financial condition or cash flows resulting from geopolitical actions or threat of cyber-attacks. However, we have seen adverse impacts to our gross profit margin due to inflationary pressures in the current economic environment.

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.

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.

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.

Federal statutory rate of 21% due to permanent differences attributable to the impairment of goodwill in 2022 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, 2023 and 2022. 30 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.

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

The effective tax rate for the years ended December 31, 2023 and 2022 was 0%, which differs from the U.S.

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 liabilities.

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.

During the year ended December 31, 2023, we recorded income tax expense of less than $0.1 million, which relates to the change in valuation allowance. During the year ended December 31, 2022, we recorded income tax benefit of less than $0.1 million, which relates to indefinite-lived assets.

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.

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.

Freight costs are generally decreasing due to 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 (8)% to $1.7 million during the year ended December 31, 2023 from $1.8 million during the year ended December 31, 2022.

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.

These customers had $5.9 million and $7.1 million of net sales for the year ended December 31, 2023, respectively and $7.5 million and $6.6 million of net sales for the year ended December 31, 2022, 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.

On December 31, 2023 and December 31, 2022, we had cash and cash equivalents and restricted cash of $4.5 million and $9.5 million, respectively.

These conditions raise substantial doubt about our ability to continue as a going concern for a period of twelve months from the date these interim condensed consolidated financial statements are issued, meaning that we may be unable to generate sufficient operating cash flows to maintain compliance with our financial covenant giving the lender the right to call the debt.

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. On March 21, 2023, we announced that Sharla Cook was resigning from her role as Chief Financial Officer (“CFO”), effective April 3, 2023.

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.

A summary of our cash flows is as follows (in thousands): Year Ended December 31, 2023 2022 Cash flows (used in) provided by: Operating activities $ 97 $ (20,553 ) Investing activities (18 ) (198 ) Financing activities (5,097 ) 1,282 Net (decrease) increase in cash and cash equivalents $ (5,018 ) $ (19,469 ) Cash flows from operating activities Cash provided by operating activities increased $20.7 million, or 100%, during the year ended December 31, 2023 compared to the year ended December 31, 2022.

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.

Information about our revenue channels is as follows (in thousands): Twelve Months Ended December 31, 2023 2022 E-commerce (1) $ 13,405 35 % $ 14,565 27 % Brick & Mortar 5,870 15 % 11,624 21 % DTC 5,597 15 % 6,620 12 % International (2) 13,720 35 % 21,851 40 % Net Sales $ 38,592 100 % $ 54,660 100 % (1) Our E-commerce channel includes two customers that amounted to greater than 10% of total net sales.

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.

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, 2023.

(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.

(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, 2023 and December 31, 2022 and represented $11.0 million and $17.7 million of net sales, respectively. 28 Net sales decreased $(16.1) million, or (29)%, to $38.6 million for the year ended December 31, 2023 compared to $54.7 million for the year ended December 31, 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 in cash used in operating activities was primarily driven by significant fluctuations in our working capital, including a comparative decrease in our inventory balance of $3.6 million as we built inventory during 2022 to support the Halo Elevate® launch and the rebranding of TruDog and Halo Holistic™, and focused on improving working capital and cash conversion cycle in 2023 by bringing inventory levels down to a healthier level.

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.

Uncertainties regarding the continued economic impact of inflationary pressures, 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. We have historically incurred losses and expect to continue to generate operating losses and consume cash resources in the near term.

We have implemented and continue to implement plans to achieve operating profitability, including various margin improvement initiatives, the consolidation of and introduction of new co-manufacturers, the optimization of our pricing strategy and ingredient profiles, and new product innovation. As of December 31, 2022, we were in compliance with all debt covenant requirements and there were no events of default.

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.

During the year ended December 31, 2023, sales and marketing costs decreased approximately $(7.0) million or (48)%, to $7.6 million from $14.6 million during the year ended December 31, 2022.

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.

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.

If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, a quantitative impairment test is unnecessary. If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred.

Qualitative factors include macroeconomic conditions, industry and market conditions, and overall company financial performance. If, after assessing the totality of events and circumstances, we determine that it is more likely than not the fair value of the reporting unit is greater than its carrying amount, a quantitative impairment test is unnecessary.

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.

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 $58 billion, or 42% of the total U.S. pet care market in 2022.

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".

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”.

If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value of the goodwill. We consider fair value to be substantially in excess of carrying value at a 20% premium or greater.

If the fair value exceeds the carrying value, we conclude that no goodwill impairment has occurred. If the carrying value of the reporting unit exceeds its fair value, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying value of the goodwill.

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 the year ended December 31, 2023, gross profit decreased $(3.5) million, or (23)%, to $11.8 million compared to $15.3 million during the year ended December 31, 2022. Gross profit margin increased 3% to 31% for the year ended December 31, 2023 compared to 28% for the year ended December 31, 2022.

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.

The cash used in investing activities is related to capital expenditures. 31 Cash flows from financing activities Cash used in financing activities was $5.1 million, during the year ended December 31, 2023 and cash provided by financing activities was $1.3 million during the year ended December 31, 2022.

When performing a quantitative impairment test, determining the fair value of a reporting unit involves the use of significant estimates and assumptions to evaluate the impact of operational and macroeconomic changes. If a quantitative assessment is deemed necessary, we determine fair value using a weighted average of widely accepted valuation techniques, including the income approach and market approach.

If a quantitative assessment is deemed necessary, we determine fair value using a weighted average of widely accepted valuation techniques, including the income approach and market approach.

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.

Interest expense for the year ended December 31, 2022 is comprised of interest on our Wintrust Credit Facility, Wintrust term loan, and the amortization of debt issuance costs.

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 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. Impairment testing is based on our current business strategy in light of present industry and economic conditions, as well as future expectations.

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.

The warrant liabilities were subsequently reclassified to equity (See “Note 11 - Warrants” for more information). Warrants that are classified as equity or considered compensation are measured at fair value on a non-recurring basis on the date of issuance.

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.

Cash flows from investing activities Cash used in investing activities was less than $0.0 million during the year ended December 31, 2023 and $0.2 million during the year ended December 31, 2022.

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.

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. 33 Goodwill Impairment We evaluate goodwill for impairment at least annually at the reporting unit level.

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.

As of December 31, 2023, there was no outstanding balance related to 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.

The cash provided by financing activities for the year ended December 31, 2021 was related to net proceeds from the IPO of $36.1 million, proceeds from the January Private Placement of $4.1 million and cash received from warrant exercises of $1.7 million, partially offset by net payments on the term loans of $2.5 million, net payments on the revolving line of credit of $0.3 million, $0.1 million in debt issuance costs, and $1.6 million related to share repurchases.

The cash used in financing activities for the year ended December 31, 2023 was related to the pay down of the revolving line of credit of $(13.5) million and payments on the Wintrust Receivables Credit Facility of $(6.1) million, offset by proceeds from the Wintrust revolving line of credit of $1.9 million and $5.0 million from the Alphia facility and proceeds of $7.8 million from the Wintrust Receivables Credit Facility.

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.

During the year ended December 31, 2023, Share-based compensation decreased $(1.2) million or (40)% to $1.8 million compared to $3.0 million for the year ended December 31, 2022.

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.

The decrease is driven by reduction of senior management headcount resulting in cancellations of options during 2023, 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. 29 ● Freight , which is primarily related to the shipping of DTC orders to customers, decreased $(0.3) million or (16)% during the year ended December 31, 2023 to $1.3 million from $1.6 million during the year ended December 31, 2022.

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 decrease was driven primarily by lower marketing and advertising agency fees related to the Halo brand renovation and migration from the former TruDog brand, as well as increased marketing spend in our International sales channel during 2022. ● Employee compensation and benefits decreased approximately $(1.1) million or (15)% during the year ended December 31, 2023 to $6.4 million from $7.5 million during the year ended December 31, 2022.

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.

During the year ended December 31, 2023, other general and administrative costs decreased $(1.3) million, or (19)% to $5.6 million compared to $6.9 million in the year ended December 31, 2022. The decrease was driven by commission fees related to sales in our International channel, and lower professional fees related to investor relations.

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.

See “Note 11 - Warrants” to our audited consolidated financial statements included in this Annual Report on Form 10-K for more information.

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.

Interest expense for the year ended December 31, 2023 is comprised of interest on our Wintrust Receivables Credit Facility, Alphia Term Loan, the amortization of debt issuance costs, and interest accretion on the Alphia Term Loan.

Removed

Added

Removed

These industry tailwinds have been magnified in the post-COVID landscape, as stay-at-home orders have driven a more than tripling of annual pet ownership growth alongside fundamental changes in consumer purchasing behavior. This surge in pet acquisition has led to a dramatic increase in the forecasted growth of the pet care industry over the next ten years.

Added

This surge in pet acquisition has led to an increase in the forecasted growth of the pet care industry over the next ten years. The U.S. pet food industry is expected to grow at a 4.96% CAGR between 2021 and 2028 (Statistica).

Removed

Beyond the estimated $3.9 billion permanent increase to annual spend on pet food and treats, this “Pet Boom” was driven by the acceleration of pet ownership by millennial and Gen-Z households.

Added

Also on March 21, 2023, we announced that Carolina Martinez was appointed as Interim CFO, effective April 3, 2023. On May 11, 2023, we announced that Lionel F. Conacher was resigning from his role as Interim CEO of the Company, effective May 22, 2023. Mr. Conacher will still continue to serve on the Board as a Director.

Removed

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.

Added

On May 11, 2023, we announced that Kent Cunningham was appointed as Chief Executive Officer of the Company, effective May 22, 2023. On August 2, 2023, we announced that Carolina Martinez was appointed as Chief Financial Officer, Treasurer and Secretary of the Company, effective August 7, 2023.

Removed

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.

Added

On August 28, 2023, we announced that Donald Young, was resigning from his role as Chief Sales Officer of the Company, effective September 8, 2023. In December 2023, the Company made a strategic exit out of Petco stores (while remaining on Petco.com), and Pet Supplies Plus.

Removed

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.

Added

The decrease in net sales for the year ended December 31, 2023 is primarily attributable to supply chain constraints and the downstream impact it has on our business. We experienced significant production delays from our dry kibble co-manufacturing partner stemming from short-term shortages in raw materials, labor constraints, and capacity constraints.

Removed

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.

Added

The inconsistency in supply created material out-of-stocks which resulted in less-than-optimal fill rates of our Halo Elevate® product line, sold primarily in our Brick & Mortar channel.

Removed

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.

Added

Since closing the Alphia Term Loan, we have fully transitioned our dry kibble manufacturing to Alphia which, albeit a very positive change needed for stabilizing supply and for long-term sustainability, has had a short-term impact to our International channel as it created registration delays in certain foreign markets, in turn delaying ordering and product launches.

Removed

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.

Added

The decrease in gross profit is primarily attributable to selling excess inventory at a discount. As a result, revenue increased at a rate lower than the rate at which cost of goods sold (“COGS”) increased.

Removed

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.

Added

The increase in gross profit margin for the year ended December 31, 2023 is primarily attributable to a decrease in revenue at a rate lower than the rate at which cost of goods sold decreased. For the year ended December 31, 2023, the average price per pound cost $1.82, versus $1.88 for the year ended December 31, 2022.

Removed

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.

Added

We also implemented a 7% price increase across our Halo Holistic™ and Halo masterbrand wet product lines in August 2022, and a 12.5% sales price increase on our Halo Elevate® products in 2023. We continue to actively work with our co-manufacturing and freight partners to generate future cost savings and realize improved gross margins in future periods.

Removed

Gain on extinguishment of debt for the year ended December 31, 2021 relates to extinguishment accounting applied in connection with forgiveness of our PPP Loans, partially offset by the loss on termination of a term loan and ABL Facility.

Added

The decrease was primarily related to a reduction in employee headcount, partially offset by higher severance costs during the first half of 2022. ● Share-based compensation includes expenses related to equity awards issued to employees and non-employee directors.

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What changed in SRx Health Solutions, Inc.'s 10-K — 2023 vs 2024

Top changes in SRx Health Solutions, Inc.'s 2024 10-K

Item 1. Business

Item 1A. Risk Factors

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Other SRXH 10-K year-over-year comparisons