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TRUBAR Inc. — Management Reports 2025
Apr 22, 2025
47671_rns_2025-04-22_7ca43471-80a3-4913-b47a-b3b18a73de59.pdf
Management Reports
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SIMPLY BETTER BRANDS CORP.
Management's Discussion and Analysis
December 31, 2024
(Expressed in United States dollars unless otherwise specified)
Table of Contents
INTRODUCTION ... 3
FORWARD LOOKING STATEMENTS ... 3
COMPANY OVERVIEW ... 4
FACTORS AFFECTING THE COMPANY'S PERFORMANCE ... 5
CORPORATE DEVELOPMENTS ... 7
RESULTS OF OPERATIONS ... 11
LIQUIDITY AND CAPITAL RESOURCES ... 16
OUTSTANDING SHARE DATA ... 18
OFF-BALANCE SHEET ARRANGEMENTS ... 20
TRANSACTIONS BETWEEN RELATED PARTIES ... 20
CRITICAL ACCOUNTING ESTIMATES ... 22
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION ... 22
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS ... 22
REVIEWED BY MANAGEMENT ... 23
RISKS AND UNCERTAINTIES ... 23
ADDITIONAL INFORMATION ... 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
INTRODUCTION
This Management's Discussion and Analysis ("MD&A") is intended to help the reader understand Simply Better Brands Corp. ("SBBC", "we", "our" or the "Company"), our operations, financial performance, current and future business environment. This MD&A is intended to supplement and complement the consolidated financial statements and notes thereto prepared in accordance with International Financial Reporting Accounting Standards ("IFRS") for the year ended December 31, 2024. This MD&A should be read in conjunction with the audited consolidated financial statements of the Company and the notes relating thereto, for the year ended December 31, 2024, which are prepared in accordance with IFRS which are available on the SEDAR+ website at www.sedarplus.com.
This MD&A is prepared as of April 22, 2025. All dollar amounts in this MD&A are expressed in thousands of United States dollars ("$", "US$" or "US dollar"), unless otherwise specified. Canadian dollars are referred to as "CA$".
Additional information relating to the Company is available on SEDAR+ at www.sedarplus.com.
FORWARD LOOKING STATEMENTS
Certain information provided in this MD&A constitutes forward-looking statements or information (collectively, "forward-looking statements"). Forward-looking statements are typically identified by words such as "may", "will", "should", "could", "anticipate", "expect", "project", "estimate", "forecast", "plan", "intend", "target", "believe" and similar words suggesting future outcomes or statements regarding an outlook. Although these forward-looking statements are based on assumptions the Company considers to be reasonable based on the information available on the date such statements are made, such statements are not guarantees of future performance and readers are cautioned against placing undue reliance on forward-looking statements. By their nature, these statements involve a variety of assumptions, known and unknown risks and uncertainties, and other factors which may cause actual results, levels of activity, and achievements to differ materially from those expressed or implied by such statements. The forward-looking statements contained in this MD&A are based on certain assumptions and analysis by management of the Company ("Management") in light of its experience and perception of historical trends, current conditions and expected future development and other factors that it believes are appropriate. The material factors and assumptions used to develop the forward-looking statements herein include, but are not limited to, the following: (i) the regulatory climate in which the Company operates; (ii) the continued sales success of the Company's products; (iii) the continued success of sales and marketing activities; (iv) there will be no significant delays in the development and commercialization of the Company's products; (v) there will be no significant reduction in the availability of qualified and cost-effective human resources; (vi) new products will continue to be added to the Company's portfolio; (vii) demand for holistic wellness products will continue to grow in the foreseeable future; (viii) there will be no significant barriers to the acceptance of the Company's products in the market; (ix) the Company will be able to maintain compliance with applicable contractual and regulatory obligations and requirements; (x) there will be adequate liquidity available to the Company to carry out its operations; and (xi) products do not develop that would render the Company's current and future product offerings undesirable and the Company is otherwise able to minimize the impact of competition and keep pace with changing consumer preferences; and (xii) the Company will be able to successfully manage and integrate acquisitions, if any.
The Company's forward-looking statements are subject to risks and uncertainties pertaining to, among other things, the adverse impact of the ongoing tariff uncertainty to our operations, our supply chain, our distribution chain, and to the broader market for our products, revenue fluctuations, nature of government regulations (both domestic and foreign), economic conditions, loss of key customers, retention and availability of executive talent, competing products, the effectiveness of e-commerce marketing strategies, loss of proprietary information, product acceptance, internet and system infrastructure functionality, information technology security, cash available to fund operations, availability of capital and, international and political considerations, the successful integration of acquired businesses, if any, as well as the risks and uncertainties discussed under the heading "Risks and Uncertainties" in this MD&A. The impact of any one risk, uncertainty, or factor on a particular forward-looking
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
statement is not determinable with certainty as these are interdependent, and the Company's future course of action depends on Management's assessment of all information available at the relevant time. Except to the extent required by law, the Company assumes no obligation to publicly update or revise any forward-looking statements made in this MD&A, whether as a result of new information, future events, or otherwise. All subsequent forward-looking statements, whether written or oral, attributable to the Company or persons acting on the Company's behalf, are expressly qualified in their entirety by these cautionary statements.
NON-IFRS FINANCIAL MEASURES
This MD&A makes reference to certain non-IFRS measures and ratios, hereafter, referred to as "non-IFRS measures". These measures are not recognized measures under IFRS, and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of the results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of the financial information reported under IFRS.
The Company uses non-IFRS measures including "EBITDA" and "Adjusted EBITDA". Management uses these non-IFRS measures to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. As required by Canadian securities laws, the Company reconciles these non-IFRS measures to the most comparable IFRS measures in this MD&A. For definitions and reconciliation of these non-IFRS measures to the relevant reported measures, see "Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA") and Adjusted EBITDA (Non-IFRS Measures)".
COMPANY OVERVIEW
SBBC was incorporated under the Business Corporations Act (British Columbia) on March 19, 2018 and changed its name from AF1 Capital Corp. to PureK Holdings Corp. on December 8, 2020 and from PureK Holdings Corp. to Simply Better Brands Corp. on May 3, 2021.
The Company's common shares (the "Common Shares") are listed on the TSX Venture Exchange (the "Exchange" or "TSXV").
In connection with the name changes, on May 3, 2021, the Company's Common Shares commenced trading on the TSXV under the symbol "SBBC". Prior to May 3, 2021, the Company's Common Shares traded on the TSXV under the symbol "PKAN".
The Company is an international consumer products company with diversified assets in the emerging plant-based and holistic wellness consumer product categories. The Company focuses on high-growth consumer product categories including protein bars and skin care. The head office of the Company is 95 Wellington St. West, Suite 1400, Toronto, Ontario, M5J 2N7 and the registered office of the Company is 1800 - 510 West Georgia Street, Vancouver, BC, V6B 0M3 Canada.
The Company offers a selection of plant-based TRUBAR protein bars for health-conscious consumers under its Tru Brands, Inc. subsidiary. The TRUBAR™ line of nutritious, dairy-free, soy-free, non-GMO, gluten-free bars are sold across North America by a growing list of major retailers in the club, convenience and grocery channels including Costco, BJ's Wholesale and Whole Foods as well as Loblaws, Sobey's and Shoppers Drug Mart in Canada. TRUBAR products are also offered through Amazon and other online sites.
The Company offers high quality skin care products to consumers through its No B.S. brand. No B.S. Life, LLC ("No B.S.") was founded to provide consumers a clean and environmentally friendly alternative to the excesses of the beauty industry.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Throughout 2024, the Company engaged in a number of activities to exit the CBD and Hemp business in order to shift its strategic focus and streamline its product portfolio with a renewed focus on TRUBAR in North America and international markets.
The Company has followed an operating model that efficiently generates sales while maintaining tight control over its expenses. The Company has focused on developing key strategic relationships with its vendors to produce its products. The Company has strategic partners in fulfillment, marketing, and customer service that enable the Company to scale its business without significant need for capital investment.
As the Company acquires other brands into its portfolio, it will focus on integrating the operations of the acquired companies with a goal to reduce operating costs and market its product offerings through multiple physical retail and e-commerce channels.
FACTORS AFFECTING THE COMPANY'S PERFORMANCE
The Company's performance and future success depends on a number of factors. These factors are subject to several inherent risks and challenges, some of which are discussed below under Risk and Uncertainties.
Financial Reporting and Disclosure during Economic Uncertainty
The global financial climate and geopolitical instability are affecting current economic conditions and increasing economic uncertainty, which may impact the Company's operating performance, financial position and the Company's ability to raise funds at this time.
Branding
The Company believes that its brand image and awareness is built around consumer trust with a focus on quality. Maintaining and enhancing its brand image and increasing brand awareness in its current markets and in new markets where the Company has limited brand recognition is critical to its continued success.
Maintaining and enhancing the Company's brand image and increasing brand awareness may require the Company to make investments in areas such as marketing, product development, brand development, employee training and public relations, and may require the Company to incur other costs associated with continuing to expand e-commerce sales. These investments may be substantial, and the Company's efforts may not always fully achieve the desired result. The maintenance and enhancement of the Company's brand in any of its key markets is the Company's ongoing focus as lack of branding might materially and adversely affect the Company's business, results of operations or financial condition.
Product Innovation and Planning
The Company believes that product innovation is integral to its success. It continues to focus on innovation as it is a key pillar of growth. The Company's business is subject to changing consumer trends and preferences. The success of new product offerings depends upon a number of factors, including the Company's ability to: (i) accurately anticipate customer needs; (ii) develop new products that meet these needs; (iii) successfully commercialize new products in a timely manner; (iv) price products competitively; (v) deliver products in sufficient volumes within reasonable time; and (vi) differentiate product offerings from competitors.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Management and Growth of E-Commerce Sales
Management and growth of the Company's e-commerce sales are an essential pillar to growth. The usability of and client experience is critical to the success and growth of its e-commerce sales. Any extended software disruption or failure to provide an attractive, effective, reliable, user friendly e-commerce platform that offers a wide assortment of merchandise with rapid delivery options and that continually meets the changing expectations of online customers could place the Company at a competitive disadvantage. It could result in the loss of revenue or harm the Company's reputation with customers and have a material adverse effect on business. The Company also depends on third-party service providers for its e-commerce platform and any service disruption on their part could affect customers' ability to access the Company's website resulting in loss of revenue or harm to reputation.
The success of the Company's e-commerce sales depends on the Company's ability to successfully manage the costs, difficulties, and competitive pressures associated with shipping, inventory management, distribution, banking, credit card processing, and compliance with governing statutes, laws, regulations and regulatory policies in the jurisdictions to which products are shipped, including laws governing the operating and marketing of e-commerce websites, as well as the collection, storage and use of information on consumers interacting with these websites. The Company's IT efforts are directed towards expanding and updating its e-commerce site commensurately with competitors, managing shipping and successfully responding to the risks inherent to e-commerce. Without these activities the Company's financial position and results of operations may be negatively impacted.
Furthermore, if the Company is unable to successfully capitalize on digital marketing channels to drive client acquisition and retention, including search engine optimization, email marketing, improved product descriptions, data driven category naming, and the leveraging of social media, the Company's financial position and results of operations may be negatively impacted. Periodic changes to search engine algorithms, which retrieve data from search indices and deliver ranked search results, produce changes in search engine results pages (SERPs). Any changes to these algorithms and therefore search engine results pages could reduce visibility of, and traffic on, the Company's e-commerce website and negatively impact the Company's financial position and results of operations. Company continues to improve its IT systems and digital marketing capabilities in order to minimize these risks.
Competition
The market for its consumer wellness products is highly competitive. The competition consists of publicly and privately-owned companies, which tend to be highly fragmented in terms of geographic market coverage, vertical integration and products offered. With the Company's brand status and innovative products, Management believes the Company is well-positioned to capitalize on favorable long-term trends in the consumer wellness products segment.
Growth Strategies
The Company has a successful history of growing revenue. It has a growth strategy aimed at meeting or exceeding industry growth rates. The Company's future depends, in part, on Management's ability to implement its growth strategy including (i) product innovations; (ii) management and growth of e-commerce sales; and (iii) growth in retail, wholesale and distributor partnerships and (iv) acquisitions of other brands related to its growth strategy. The ability of the Company to implement this growth strategy depends on, among other things, its ability to develop new products that appeal to consumers, maintain and expand brand loyalty, brand recognition, improve competitive position, successfully enter new geographic areas and segments as well the ability to successfully navigate legislative and regulatory uncertainties. See "Risks and Uncertainties".
Regulation
The Company is subject to the local, provincial, state, and federal laws in the jurisdictions in which it operates. Outside of the United States, the Company's products may be subject to tariffs, treaties, and various trade agreements as well as laws affecting the importation of consumer goods.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
CORPORATE DEVELOPMENTS
Financing
On April 17, 2024, the Company announced a non-brokered private placement financing of CA$2 million. On April 29, 2024, the Company announced that it had upsized the non-brokered private placement financing from CA$2 million to CA$4 million (the "Private Placement"). On May 9th, 2024, the Company announced the successful closing of the Private Placement. Specifically, the Company completed the issuance of 11,428,568 units of the Company (each, a "Unit") at a price of $0.35 per Unit for gross proceeds of CA$4 million. Each Unit is comprised of one Common Share and one-half of one transferable Common Share purchase warrant (each whole warrant, a "Warrant"). Each Warrant entitles the holder to purchase one additional Common Share (a "Warrant Share") for a period of 24 months from the date of issue at an exercise price of $0.45 per Warrant Share. The Company paid aggregate finders fees of CA$51,450 in cash, being 7% of the total capital raised under the Private Placement from subscribers introduced to the Company by the finder and issued 147,000 finders warrants (the "Finders Warrants"). Each Finders Warrant entitles the holder to purchase one Common Share for a period of 24 months from the date of issue at an exercise price of $0.35 per share.
Business Developments
On February 1, 2024, the Company announced that Kathy Casey had resigned as Chief Executive Officer and as a member of the Board of Directors of the Company (the "Board") to pursue new opportunities. The Company also announced that Paul Norman will step down from the post of Chairman of the Board while remaining an integral part of the Board as a Director. Concurrent with these changes, the Company announced the elevation of J.R. Kingsley Ward to Chairman of the Board as well as his appointment as Interim Chief Executive Officer of the Company until a permanent successor is named.
On February 29, 2024, the Company announced the further expansion of the TRUBAR relationship with Costco in a new national distribution launching on March 5, 2024. The selection of TRUBAR for inclusion in the latest Costco MVM promotion program marks the second national distribution for the brand following the introduction of TRUBAR in Costco warehouses in 2023 as part of the brand's strategy for continued multi-channel distribution growth. The promotion featured TRUBAR "Oh oh cookie dough" and "Daydreaming about donuts" bars.
On March 8, 2024, the Company announced the further expansion of TRUBAR in the convenience channel with the addition of Sheetz, a major mid-Atlantic convenience chain, as its newest retail brand partner. TRUBAR will be distributed chainwide across the +700 Sheetz outlets in Pennsylvania, West Virginia, Virginia, Maryland, Ohio, and North Carolina.
On April 2, 2024, the Company announced that operations of its 50.1% owned subsidiary, PureKana, LLC ("PureKana") were being suspended. Following the announcement, PureKana commenced bankruptcy proceedings under Chapter 7 of the Bankruptcy Code of the United States (the "Proceedings"). PureKana has been presented as discontinued operations in the interim financial statements for the period ended March 31, 2024 and herein. The impact of the discontinued operations on the Company is lower revenues in 2024, however, the Company will significantly reduce operating expenses and eliminate 10M debt held by PureKana (the "Mainstreet Loan").
On May 10, 2024, the Company announced its nomination of and support for the election of Erica Groussman as an additional director of the Company. Mrs. Groussman is the co-founder and Chief Executive Officer of Tru Brands, Inc., a leading health and wellness brand specializing in nutritious food products which the Company acquired in March 2021. Since 2018, Mrs. Groussman has led the expansion of Tru Brands, Inc. throughout retail stores in Canada and direct-to-consumer channels in the United States. Mrs. Groussman's appointment as a director of the Company was approved by shareholders on May 24, 2024.
On June 14, 2024, the Company announced the addition of accomplished global executive St. John Walshe to the Board. Walshe brings a wealth of experience building brands and driving the growth of leading consumer packaged
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
goods (CPG) and technology companies over a three-decade career with Omnicom Group Inc., one of the world's largest marketing services firms.
On June 17, 2024, the Company announced continued progress and growing momentum building out its North American distribution footprint for TRUBAR™ with the addition of several new regional retail partners among the 5,000 new store locations where the brand is rolling out over the next two quarters. The new retail partners extend the geographic reach of TRUBAR™ throughout the Midwest and Western regions of the U.S. across 16 states including a large presence in California. The retail chains include:
- Loop Neighborhood Markets
- Hy-Vee grocery chain
- Stinker convenience chain
- Super 1 Foods grocery chain
- Mother's Market & Kitchen grocery
- New Seasons Market grocery
- Erewhon supermarket
On June 21, 2024, the Company announced a new national rollout of TRUBAR™. The first stage of the rollout is taking place in four Costco regions – Los Angeles, Northeast, Texas and Northwest – with the additional Costco regions to follow. The new flavor pack features a 16-count dual pack of "Oh oh cookie dough" and "Get in my belly, PB and jelly."
On July 4, 2024, the Company announced the expansion of its North American distribution footprint for TRUBAR™ with the addition of GNC, a global leader in health and wellness. The launch of TRUBAR™ was underway in more than 1,000 GNC retail locations across the U.S. and is available online at gnc.com
On July 11, 2024, the Company announced an increase of its full-year 2024 revenue guidance for TRUBAR to US$45-$50 million from a previous range of US$40-45 million, based on the continued expansion of its North American distribution footprint, growth in its ecommerce business and an anticipated increase in new distribution from 5,000 to 9,500 additional retail stores by the end of the third quarter. This new distribution will bring TRUBAR's store count to over 12,000 retail stores.
Holders of the Company's CA$850,000 principal amount of convertible debentures due on August 10, 2024 converted their debentures into equity.
After successfully leading the Company through a period of transition and growth since February 2024, on July 11, 2024, Interim Chief Executive Officer J.R. Kingsley Ward became SBBC's permanent Chief Executive Officer in addition to remaining as Chairman of the Board.
On July 18, 2024, the Company announced the expansion of its lineup of key retailers across the U.S. Beginning in July 2024, TRUBAR™ became available in select Whole Foods Market locations around the U.S. building on a successful initial rollout of the brand in the Denver Metro area.
On August 8, 2024, the Company closed an additional US$5 million in credit facilities with a Tier One Canadian bank for its subsidiary TRU Brands, Inc. Under the terms of the credit facility, up to US$5 million (CA$6.8 million) will be made available to Tru Brands, Inc. and its Canadian subsidiary Trubrands Snack Company Inc. in the form of an asset-based lending facility secured against TRUBAR's accounts receivable. These credit offerings are expected to substantially lower the cost of capital to 8.85-9.00% per annum compared to its current line of receivable factoring arrangement that averages 15%+ per annum. The Company intends to use these additional credit facilities to support the expansion of TRUBAR sales in the U.S., Canada, and other international markets.
Additionally, the Company received an investment of CA$ 3.0 million to facilitate the repayment of an existing lender who held a first priority charge against certain assets of the Company at an interest rate of 15% per annum. This
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
investment allowed the Company to repay an existing lender and to remove the prior security granted in order to facilitate the credit facility all of which resulted in the availability of more favourable terms under the credit facility with the Tier One Canadian bank and an overall reduction in the Company's cost of capital. The loan was made pursuant to three secured promissory notes of the Company each representing a principal amount of CA$1 million (the "Promissory Notes"). The Promissory Notes will mature on July 31, 2025, and will bear interest at a rate of 15% per annum payable monthly in arrears. The Company later issued an additional Promissory note for $200,000.
On September 5, 2024, the Company announced continued progress building out its North American distribution footprint of TRUBAR™ with the addition of 4 new regional retail partners. The new retail partners extend the geographic reach of TRUBAR™ across 6 states including a large presence in the greater Washington D.C. area. The new retail partners included:
- Giant Food Stores chainwide distribution in 150 stores
- Lowes Foods 100 stores
- Kroger subsidiary Roundy's Supermarket under its Mariano's Fresh Market banner 69 stores
- Jungle Jim's International Market
On September 9, 2024, the Company announced a nationwide rollout of TRUBAR™ is now underway in CVS Pharmacy locations across the U.S., marking further progress in expanding the brand's with North American distribution footprint with key retailer partners. TRUBAR™ is now available in 6,600 CVS stores nationwide and on cvs.com.
On September 16, 2024, the Company announced it initiated a nationwide rollout of TRUBAR™ in select Walmart stores across the U.S., a key strategic addition in expanding the brand's North American distribution footprint with key retailer partners. TRUBAR™ is now available in more than 700 Walmart store locations, building on a successful initial launch of the brand online at walmart.com.
On October 9th, 2024, the Company announced it has initiated select nationwide rollout of TRUBAR™ in Walmart stores across Canada, a key strategic addition in expanding the brand's North American distribution footprint. TRUBAR™ will soon be available in more than 1,000 locations between US and Canadian Walmart store locations, building on a successful initial launch of the brand online at walmart.com.
On October 17, 2024, the Company announced further distribution expansion of TRUBAR™ in the convenience channel with the addition of more than 25 regional store brands operating under GPM Investments, LLC, one of the largest convenience store chains in the U.S. TRUBAR™ will soon be available across more than 1,400 GPM locations in more than 33 states in a wide range of well-known regional convenience chains including Fas Mart, E-Z Mart, Roadrunner Markets, Village Pantry and Jiffi Shop.
On October 24, 2024, the Company announced that it is launching TRUBAR™ in Love's Travel Stops, a large network of travel stops and convenience stores across the U.S.
On November 11, 2024, the Company announced the launch of TRUBAR™ in Albertsons Companies locations, the second-largest supermarket chain in North America.
Subsequent to December 31, 2024
On April 22, 2025 the Company entered into a USD 10M Revolving credit facility with a related party of the Company. The facility is payable upon demand and bears interest at prime +5% per annum on any drawn amounts.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
SELECTED FINANCIAL INFORMATION
| For the year ended | |||
|---|---|---|---|
| expressed in millions except for earnings (loss) per share | December 31, 2024 $ | December 31, 2023 $ | December 31, 2022 $ |
| Revenue | 45.30 | 26.80 | 12.80 |
| Gross margin ($) | 13.30 | 7.50 | 5.3 |
| Gross margin (in %) | 29% | 28% | 41% |
| Net income (loss) | (0.40) | (24.30) | (12.30) |
| - Basic | (0.07) | (0.32) | (0.36) |
| - Diluted | (0.07) | (0.32) | (0.36) |
| As at | |||
| --- | --- | --- | --- |
| expressed in millions except for dividend per share | December 31, 2024 $ | December 31, 2023 $ | December 31, 2022 $ |
| Total assets | 25.70 | 19.50 | 36.60 |
| Total non-current financial liabilities | 0.30 | 0.60 | 1.00 |
Revenue increased in 2024 by $18.6 million (69%), driven by a $19 million increase in sales from Tru Brands Inc. Revenue increased in 2023 by $14.0 million or 109% driven by an increase in sales with Tru Brands Inc.
Operating expenses increased in 2024 compared to 2023, and in 2023 compared to 2022, in alignment with the sales increases realized in 2024 and 2023, respectively.
The net loss decreased to $0.4 million in comparison to $24.3 million, primarily due to a profit arising from discontinued operations, which was mainly related to the derecognition of the loan from PureKana. The net loss in 2023 increased by $12.0 million driven by impairment of goodwill ($10.9 million).
Total assets increased by $6.2 million in 2024 compared to 2023, driven by the increase in cash and accounts receivable. Total assets decreased by 17.1 million in 2023 from 2022 driven by the impairment of goodwill and amortization of the intangible assets ($15.7 million reduction in 2023).
Total non-current liabilities decreased in 2024 and 2023 compared to 2023 and 2022 by $0.3 million and $0.4 million, respectively. This reduction was primarily due to decreases in promissory notes in both years and convertible notes in 2023.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
RESULTS OF OPERATIONS
| For the years ended | |||||
|---|---|---|---|---|---|
| December 31, 2024 | December 31, 2023 | Change | |||
| % (in terms of net revenue) | % (in terms of net revenue) | ||||
| expressed in millions * | $ | $ | $ % | ||
| Gross Revenue | 55.94 | 123% | 29.66 | 111% | 26.28 89% |
| Less: Discount and promotional expenditures | (10.64) | (23%) | (2.86) | (11%) | (7.78) 272% |
| Net revenue | 45.30 | 100% | 26.80 | 100% | 18.50 69% |
| Cost of goods sold | (32.00) | (71%) | (19.29) | (72%) | (12.71) 66% |
| Gross profit | 13.30 | 29% | 7.50 | 28% | 5.80 77% |
- The Net revenue for the prior year was restated to account for the discounts associated with the marketing program.
Revenue
The Company, through its subsidiaries, Tru Brands and No B.S. Skincare, implemented marketing initiatives in collaboration with its vendors. In accordance with IFRS 15, Revenue from Contracts with Customers, discounts and specific promotional expenditures associated with these programs were accounted for as a reduction in revenue. For the fiscal year ended December 31, 2024, the Company reported total gross revenue of $55.94 million and net revenue of $45.30 million, reflecting substantial year-over-year growth of 89% and 69%, respectively. This translates to increases of $26.28 million and $18.50 million compared to $29.66 million and $26.80 million in 2023. The primary driver of this robust expansion was the Protein Bars segment, TRUBAR™, which contributed significantly to overall revenue. The strong performance of TRUBAR™ underscores its solid market position and the effectiveness of the Company's growth strategy.
Direct-to-Consumer (DTC) revenue played a vital role in the Company's revenue growth, representing 11% of total revenue. DTC sales grew impressively year-over-year, driven by a robust e-commerce strategy that specifically boosted TRUBAR™ sales. The Company continues to focus on leveraging digital channels to further expand its reach and strengthen customer engagement.
Cost of goods sold
Cost of goods sold includes the product cost from co-manufacturers, merchant processing fees, fulfillment and delivery costs. Product costs for No B.S. and TRUBAR products can also be impacted by price of raw materials. Fulfillment costs are mainly driven by the delivery costs with the main courier companies. Cost of goods sold increased to $32.00 million in 2024, an increase of $12.71 million (66%) compared to $19.29 million in 2023. Despite this increase, COGS as a percentage of revenue improved slightly, declining from 72% in 2023 to 71% in 2024. The reduction in production costs for TRUBAR™, enabled by higher order volumes and optimized co-manufacturer agreements, was a key factor in this improvement.
The Company managed fulfillment costs efficiently while maintaining competitiveness in DTC sales, which typically had higher COGS percentages in the low to mid-70s range. Gross margins for Business-to-Business (B2B) sales were more favorable, ranging from the mid-30s to low-50s, contributing to the overall profitability.
Gross profit
Gross profit increased to $13.30 million, reflecting a 77% increase of $5.80 million from $7.50 million in 2023. Gross profit margin improved to 29%, compared to 28% in the prior year. The margin gains were largely attributed to lower production costs for TRUBAR™, driven by operational efficiencies and economies of scale.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Operating Expenses
The following is the breakdown of the major operating expenses in the presented period:
| expressed in millions * | For the years ended | Change | ||||
|---|---|---|---|---|---|---|
| December 31, 2024 | December 31, 2023 | |||||
| $ | $ | $ | % | |||
| Expenses | ||||||
| Amortization | 1.50 | 9% | 2.80 | 22% | (1.30) | (46%) |
| Consulting fees | 0.10 | 1% | - | - | 0.10 | 100% |
| General and administrative expenses | 3.50 | 22% | 1.20 | 9% | 2.30 | 192% |
| Marketing expenses | 4.10 | 25% | 3.20 | 25% | 0.90 | 28% |
| Professional fees | 2.30 | 14% | 1.10 | 8% | 1.20 | 109% |
| Regulatory and filing fees | 0.10 | 1% | 0.10 | 1% | - | - |
| Salaries and wages | 3.30 | 20% | 2.50 | 19% | 0.80 | 32% |
| Share-based payments | 1.30 | 8% | 2.00 | 15% | (0.70) | (35%) |
| Miscellaneous | - | - | 0.10 | 1% | (0.10) | (100%) |
| Total expenses | 16.20 | 100% | 13.00 | 100% | 3.20 | 25% |
Operating costs for the year ended December 31, 2024, totaled $16.2 million, an increase of $3.2 million (or 25%) compared to $13.0 million in the year ended December 31, 2023. This increase reflects the Company's strategic investments and operational growth initiatives.
- Marketing Expenses: Represented 25% of operating costs in 2024, totaling $4.1 million, up $0.9 million (or 28%) from 2023. Key drivers included enhancements in online advertising and promotional allowances supporting direct-to-consumer (DTC) and business-to-business (B2B) revenue growth.
- General and Administrative Expenses: Increased to $3.5 million (or 22% of total expenses) from $1.2 million (or 9%) in 2023. The increase reflects higher e-commerce platform fees, broker fees, and travel expenses.
- Professional Fees: Reached $2.3 million, an increase of $1.2 million (or 109%) compared to 2023. This was driven by incremental consulting expenses ($0.5 million) and the implementation of Board fees ($0.2 million) in 2024.
- Salaries and Wages: Totaled $3.3 million (or 20%) in 2024, reflecting a $0.8 million increase (or 32%) due to additional headcount to support business expansion.
- Non-Cash Items: Amortization expenses were $1.5 million (or 9%) in 2024, a $1.3 million decrease (or 46%) from 2023. Share-based payments totaled $1.3 million in 2024, down $0.7 million (or 35%) from 2023.
- Consulting Fees: Increased by $0.1 million in 2024, as the Company expanded external support to align with strategic priorities.
Overall, the cost increases were aligned with the Company's commitment to scaling operations and driving revenue growth.
Page 12 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Other income (expenses)
| For the years ended | Change | |||||
|---|---|---|---|---|---|---|
| December 31, 2024 | December 31, 2023 | |||||
| expressed in millions * | $ | $ | $ | % | ||
| Expenses | ||||||
| Fair value adjustment of derivative liability | (0.70) | 8% | 0.20 | (10%) | (0.90) | (450%) |
| Finance costs | (1.10) | 13% | (1.40) | 70% | 0.30 | (21%) |
| Foreign exchange gain (loss) | 0.10 | (1%) | (0.20) | 10% | 0.30 | (150%) |
| Gain on disposition of subsidiary | 0.20 | (2%) | - | - | 0.20 | 100% |
| Gain (loss) on remeasurement of warrant liabilities | (7.10) | 83% | 1.00 | (50%) | (8.10) | (810%) |
| Impairment of goodwill | - | - | (1.30) | 65% | 1.30 | (100%) |
| Impairment of intangible assets | - | - | (0.20) | 10% | 0.20 | (100%) |
| Miscellaneous | - | (1%) | (0.10) | 5% | 0.10 | (100%) |
| Total other income (expenses) | (8.60) | 100% | (2.00) | 100% | (6.60) | 330% |
For the year ended December 31, 2024, the Company reported a total of $(8.60) million in other expenses, reflecting a significant increase of $(6.60) million compared to $(2.00) million in the prior year. Key drivers of this increase are detailed as follows:
- Fair Value Adjustment of Derivative Liability: The Company recognized a loss of fair value adjustment of $(0.70) million in 2024, a decline of $(0.90) million from a gain of $0.20 million in 2023. This was due to adjustments in the fair value of outstanding derivative liabilities.
- Finance Costs: Finance costs decreased by $0.30 million (21%), from $(1.40) million in 2023 to $(1.10) million in 2024. The reduction was primarily attributed to improved financial structuring and lower borrowing costs.
- Foreign Exchange Gain: The company recorded a foreign exchange gain of $0.10 million in 2024, representing a favorable change of $0.30 million from a foreign exchange loss of $(0.20) million in 2023. This was a result of favorable currency fluctuations foreign exchange rate between US$ and CA$.
- Gain on Disposition of Subsidiary: A gain of $0.20 million was realized in 2024, compared to no comparable transaction in 2023. This was attributable to the successful divestment of a subsidiary during the year.
- Gain (Loss) on Remeasurement of Warrant Liabilities: The Company recognized a loss of fair value adjustment of $(7.10) million in 2024, compared to a gain of $1 million in 2023. This $(8.10) million change reflects adjustments to the remeasurement of warrant liabilities, influenced by market volatility and the Company's performance.
Earnings before Interest, Taxes, Depreciation, and Amortization ("EBITDA") and Adjusted EBITDA (Non-IFRS Measures)
EBITDA and Adjusted EBITDA are non-IFRS measures used by management that are not defined by IFRS. EBITDA and Adjusted EBITDA do not have a standardized meaning prescribed by IFRS and therefore may not be comparable to similar measures presented by other issuers. Management believes that EBITDA and Adjusted EBITDA provide meaningful and useful financial information as these measures demonstrate the operating performance of a business excluding non-cash charges.
Page 13 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
"EBITDA" is calculated as earnings before interest, taxes, depreciation, depletion and amortization. "Adjusted EBITDA" is calculated as EBITDA adjusted for non-cash, extraordinary, non-recurring and other items unrelated to the Company's core operating activities.
| For the years ended | Change in | |||
|---|---|---|---|---|
| December 31, 2024 | December 31, 2023 | |||
| $ | $ | $ | % | |
| Loss for the year from continuing operations | (11.53) | (7.54) | (3.99) | 53% |
| Amortization | 1.53 | 2.82 | (1.29) | (46%) |
| Finance costs | 1.06 | 1.35 | (0.29) | (21%) |
| Loss before interest, taxes, depreciation, and amortization | (8.94) | (3.37) | (5.57) | 165% |
| Fair value adjustment of derivative liability | 0.71 | (0.17) | 0.88 | (518%) |
| Impairment of intangible assets | - | 0.25 | (0.25) | (100%) |
| Impairment of goodwill | - | 1.33 | (1.33) | (100%) |
| Loss (gain) on remeasurement of warrant liabilities | 7.10 | (0.97) | 8.07 | (832%) |
| Share-based payments | 1.29 | 1.99 | (0.70) | (35%) |
| Warrants issued for services | 0.02 | - | 0.02 | 100% |
| Non-recurring expenses | 0.30 | - | 0.30 | 100% |
| Adjusted EBITDA | 0.48 | (0.94) | 1.42 | (151%) |
The Company reported Adjusted EBITDA of $0.48 million for the year ended December 31, 2024. This represents a improvement of $1.42 million (151%) compared to the Adjusted EBITDA of $(0.94) million recorded for the year ended December 31, 2023. The improvement in Adjusted EBITDA is attributable to higher gross profit of $5.8 million, partially offset by increased cash operating expenses (excluding non-recurring expenses) of $5.2 million. This reflects the Company's continued operational enhancements and financial discipline over the year.
SUMMARY OF QUARTERLY RESULTS
| expressed in millions except for earnings (loss) per share | December 31, 2024 $ | September 30, 2024 $ | June 30, 2024* $ | March 31, 2024* $ |
|---|---|---|---|---|
| Revenue from continuing operations | 12.73 | 12.13 | 6.76 | 13.67 |
| Income (loss) from continuing operations | (8.26) | 4.14 | (7.19) | (0.22) |
| Net income (loss) | (8.29) | 4.19 | 4.68 | (0.96) |
| Earnings (loss) per share | ||||
| - Continuing operations | ||||
| - Basic | (0.09) | 0.04 | (0.09) | (0.00) |
| - Diluted | (0.09) | 0.04 | (0.09) | (0.00) |
| - Total | ||||
| - Basic | (0.10) | 0.05 | (0.01) | (0.01) |
| - Diluted | (0.10) | 0.05 | (0.01) | (0.01) |
- The information had been adjusted to reflect the result of the discontinued operations. This information is consistent with our consolidated financial statements for the year ended December 31, 2024.
Page 14 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
| expressed in millions except for earnings (loss) per share | December 31, 2023* $ | September 30, 2023* $ | June 30, 2023* $ | March 31, 2023* $ |
|---|---|---|---|---|
| Revenue from continuing operations | 4.52 | 5.38 | 6.36 | 10.51 |
| Income (loss) from continuing operations | (2.75) | 0.38 | (2.59) | (2.58) |
| Net income (loss) | (14.66) | (0.57) | (6.34) | (2.68) |
| - Continuing operations | ||||
| - Basic | (0.04) | 0.01 | (0.03) | (0.05) |
| - Diluted | (0.04) | 0.01 | (0.03) | (0.05) |
| - Total | ||||
| - Basic | (0.17) | (0.01) | (0.09) | (0.05) |
| - Diluted | (0.17) | (0.01) | (0.09) | (0.05) |
- The information had been adjusted to reflect the result of the discontinued operations. This information is consistent with our consolidated financial statements for the year ended December 31, 2024.
The Company demonstrated significant revenue growth throughout 2024, reflecting strong performance across its product portfolio. This growth was primarily driven by robust distribution expansion, particularly with its flagship TRUBAR™ brand, which continued to experience heightened demand across major retail partnerships.
The fluctuation in the Company's net income (loss) from continuing operations across the presented quarters was primarily attributed to variations in operating expenses, including general and administrative costs, marketing expenditures, professional fees, salaries and wages. Changes in marketing expenses were directly correlated with quarterly revenue fluctuations, as the Company strategically invested in brand awareness and customer acquisition initiatives. Similarly, variations in general and administrative expenses, professional fees, and salaries and wages were driven by the Company's evolving business activities. As the Company continues to expand its operations, these costs have increased accordingly, particularly in areas such as administrative infrastructure development and workforce expansion. These operational investments have contributed to the financial results observed during the reporting periods, underscoring the Company's commitment to growth and scalability.
The variation in net income (loss) across the presented quarters was also influenced by gains and losses from the remeasurement of the Company's derivative instruments. These remeasurements are subject to various external and internal factors, including the Company share price fluctuations, changes in interest rates, exchange rate volatility, market uncertainty and performance trends. Given the significant increase in the Company's share price during the presented quarters, the remeasurement of derivative instruments resulted in a reported loss for fiscal year 2024. These valuation adjustments reflect market-driven financial dynamics that impact non-operational income and loss.
Page 15 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
LIQUIDITY AND CAPITAL RESOURCES
| As at | December 31, 2024 | December 31, 2023 | |
|---|---|---|---|
| expressed in millions * | $ | $ | |
| ASSETS | |||
| Current assets | |||
| Cash and cash equivalents | 7.10 | 2.30 | |
| Restricted cash | - | 0.30 | |
| Accounts receivable | 10.30 | 2.40 | |
| Other receivable | 0.20 | 0.10 | |
| Prepaid expenses | 0.40 | 2.80 | |
| Inventory | 3.90 | 6.20 | |
| Total current assets | 21.90 | 14.10 | |
| Non-current assets | 3.90 | 5.40 | |
| TOTAL ASSETS | 25.80 | 19.50 | |
| LIABILITIES | |||
| --- | --- | --- | |
| Current liabilities | |||
| Accounts payable and accrued liabilities | 10.40 | 6.80 | |
| Bank overdraft | 4.10 | - | |
| Deferred revenue | 0.10 | 0.60 | |
| Amount due to the revolving credit facilities | - | 7.00 | |
| Current portion of loan payable | - | 10.40 | |
| Current portion of promissory note | 3.10 | 0.90 | |
| Current portion of convertible notes | - | 0.50 | |
| Warrant liabilities | 6.40 | 0.30 | |
| Total current liabilities | 24.10 | 26.50 | |
| Non-current liabilities | 0.30 | 0.60 | |
| TOTAL LIABILITIES | 24.40 | 27.10 |
WORKING CAPITAL (DEFICIENCY)
(2.20) (12.40)
The Company's working capital requirements fluctuate from period to period depending on, among other factors, key consumer holidays (third, second and first quarter each year), new product introductions and vendor lead times. The Company's principal working capital needs include accounts receivable, inventory, prepaid expenses, short-term loans and accounts payable.
As of December 31, 2024, the Company had a cash balance of $7.1 million, an improvement compared to $2.3 million as of December 31, 2023. This improved cash position provides critical support for planned business growth and general corporate working capital purposes.
The working capital deficiency reduced from $12.4 million as of December 31, 2023, to $2.2 million as of December 31, 2024, demonstrating a $10.2 million improvement. Excluding warrant liabilities, the working capital as of December 31, 2024 was $4.1 million. Notably, warrant liabilities do not require cash settlement and are instead settled through the issuance of Common Shares.
The Company continues its efforts to improve its working capital position through a variety of initiatives, including equity and convertible debt private placements, the issuance of promissory notes, and the establishment of lines of credit for its subsidiaries. The PureKana Mainstreet Loan and its associated accounts payable liabilities, which materially impacted the working capital deficiency as of December 31, 2023, were removed from the Company's consolidated working capital position following PureKana's Proceeding on April 3, 2024.
Page 16 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Private Placements
On May 9, 2024, the Company completed the Private Placement of Units, intended for working capital and growth initiatives. Additionally, as of the date of this MD&A, the Company generated CA$4 million from warrant exercises (including warrants issued in the Private Placement and from financings prior to the Private Placement), further strengthening liquidity.
Line of Credit Facilities
The Company has successfully secured multiple credit facilities to finance purchase orders for three of its subsidiaries. These facilities have been instrumental in supporting the large retail purchase orders generated by the subsidiaries during the year ended December 31, 2024.
On November 8, 2024, the Company, through its subsidiary, Tru Brands Snack, entered into a credit agreement referred to as the "TBS Overdraft Facility" with a banking institution. This facility provides the Company with overdraft protection of $10,000,000 for operational purposes and is repayable on demand. The facility bears an interest rate equivalent to the bank's prime rate plus 3.5%, or the US base rate plus 3.5% per annum. Interest accrues monthly in arrears and is payable on the last day of each month.
As a result of securing the TBS Overdraft Facility, the Company settled and terminated the previously established lines of credit.
Convertible Notes, Promissory Notes and Loans Payable
The Company has been working to optimize its financial obligations by consolidating two loan agreements from 2023 into a single unified agreement. Under the revised terms, the Company is obligated to pay $114,587 in restructuring fees over 11 equal installments. The agreement also requires the Company to make monthly interest payments. Regarding the principal balance of $1,444,128, the repayment schedule is as follows: four payments of $100,000 due in August and November 2024, as well as February and May 2025, followed by $100,000 monthly from August 2025 through April 2026, and concluding with a final payment of $144,128 in May 2026.
Additionally, during the fiscal year ended December 31, 2024, the Company issued four Promissory Notes totaling $2,313,847 (CA$3,200,000). Of this amount, $1,591,617 (CA$2,200,000) was allocated to directors, with the balance issued to a shareholder. The Promissory Notes bear an annual interest rate of 15%, compounded monthly, and are secured by a general securities agreement.
During the same period, the Company repaid $147,156 (US$200,000) of the principal amount of a separate promissory note. An amended promissory note with a remaining balance of $180,164 carries an interest rate of 6% and requires monthly payments of $15,000 commencing on October 1, 2024, until fully repaid on September 2025.
Furthermore, convertible notes amounting to CA$850,000 were converted into 2,179,488 units during the fiscal year ended December 31, 2024.
Lastly, following Proceedings involving PureKana, the Company derecognized the loan payable to PureKana as of April 3, 2024.
The Company's ability to fund operating expenses will depend on its future operating performance which will be affected by general economic, financial, regulatory, and other factors including factors beyond the Company's control (See "Risk and Uncertainties").
Management continually assesses liquidity in terms of the ability to generate sufficient cash flow to fund the business. Net cash flow is affected by the following items: (i) operating activities, including the level of accounts
Page 17 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
receivable, other receivable, accounts payable, accrued liabilities and unearned revenue and deposits; (ii) investing activities; and (iii) financing activities.
Cash flow
The following is the breakdown of the cash flow from operating activities:
| expressed in millions | For the years ended | Change | |
|---|---|---|---|
| December 31, 2024 | December 31, 2023 | ||
| $ | $ | $ | |
| Cash flow provided by (used in) operating activities | 1.20 | (3.40) | 4.60 |
| Cash flow used in investing activities | (0.10) | - | (0.10) |
| Cash flow provided by financing activities | 3.40 | 3.30 | 0.10 |
| Effects of exchange rate changes on cash | 0.30 | - | 0.30 |
| Increase (decrease) in cash | 4.80 | (0.10) | 4.90 |
Cash Flow from Operating Activities
For the year ended December 31, 2024, the Company reported cash provided by operating activities of $1.2 million, compared to a cash outflow of $3.4 million in the prior year. The changes are primarily driven by a reduction in net loss from continuing operations after adjustments for non-cash items, an increase in accounts payable and accrued liabilities of $6.8 million, an increase in inventory of $1.8 million, an increase in warrant liability of $7 million. These factors were partially offset by an increase in accounts receivable of $8.7 million.
Cash Flow from Investing Activities
For the year ended December 31, 2024, the Company reported a cash outflow of $0.1 million from investing activities, compared to $nil in the prior year. This was primarily due to the disposal of subsidiaries and the acquisition of intangible assets.
Cash Flow from Financing Activities
For the year ended December 31, 2024, the Company reported cash inflow from financing activities of $3.4 million, compared to $3.3 million in the prior year. During 2024 and 2023, the Company raised $5.5 million and $5 million, respectively, through equity transactions. Additionally, net cash outflows from debt financing totaled $2.1 million in 2024 and $1.67 million in 2023.
The Company demonstrated an improvement in cash flows from operating activities and continued reliance on financing activities to meet liquidity needs.
OUTSTANDING SHARE DATA
As of December 31, 2024, the Company had 97,750,165 Common Shares (December 31, 2023 – 72,391,957) issued and outstanding.
In addition, as of December 31, 2024, the Company had 15,025,082 warrants, 5,512,500 stock options and 2,685,408 restricted share units ("RSUs") issued and outstanding.
During the year ended December 31, 2024
Common Shares
- On May 9, 2024, the Company completed the Private Placement and issued 11,428,568 Units at a price of CA$0.35 for gross proceeds of $2,918,288 (CA$4,000,000). Each 2024 Unit consists of one Common Share with an allocated fair value of $0.19 and one-half of one Warrant with an allocated fair value of $0.13 per whole
Page 18 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
warrant. Each whole Warrant entitles its holder to purchase one additional Warrant Share at an exercise price of CA$0.45 for a period of two years following the closing of the Private Placement.
In connection with the private placement, the Company paid a finders' fee of $37,536 (CA$51,450), an advisor fee of $131,262 (CA$178,571) of which $18,330 (CA$25,000) was paid by issuing warrants and incurred other shares issuance costs of $101,492.
- Convertible notes with a principal value of CA$850,000 were converted into 2,179,488 units. Each unit consists of one Common Share and one-half of a Common Share purchase warrant. Each whole warrant entitled the holder to purchase one additional Common Share at an exercise price of CA$0.59 until August 10, 2024.
- In February 2023, the Company granted 1,797,600 brokers' warrants in connection with a private placement. These warrants were exercised during the nine months ended September 30, 2024, resulting in proceeds of $329,035 (CA$449,400) and the issuance of 1,797,600 units.
- The Company issued 306,841 Common Shares with a fair value of $119,249 pursuant to the earnout agreement.
- 301,665 stock options were exercised for proceeds of $59,706.
- 520,000 warrants, initially classified as equity, were exercised for proceeds of $203,962.
- 6,632,421 warrants, initially classified as a warrant liability, were exercised for proceeds of $2,224,851
- The Company issued 2,191,625 Common Shares with a fair value of $1,427,843 for the restricted share unit.
- The Company issued 2,191,625 Common Shares upon the settlement of outstanding RSUs.
Warrants
- The Company issued 122,550 warrants with an exercise price of CA$0.51. These warrants are exercisable for one year and were granted to a financial advisor in exchange for consulting services related to the private placement completed in May 2024 and the bankruptcy proceeding of PureKana.
Options
- On May 9, 2024, the Company granted an aggregate of 2,000,000 stock options to its directors with an exercise price of CA$0.40 per share. These options are exercisable for a period of five years, with one-fourth vesting on each anniversary of the grant date.
- On May 9, 2024, the Company granted an aggregate of 1,560,000 stock options to its directors, officers, employees, and consultants with an exercise price of CA$0.40 per share. These options are exercisable for a period of five years, with one-half vesting on each anniversary of the grant date.
- On June 13, 2024, the Company granted an aggregate of 200,000 stock options to its directors with an exercise price of CA$0.71 per share. These options are exercisable for a period of five years, with one-half vesting on each anniversary of the grant date.
- On October 24, 2024, the Company granted 290,000 stock options to its employees and consultants with an exercise price of CA$0.62 per share. These options are exercisable for a period of five years, with one-half vesting on each anniversary of the grant date.
Page 19 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
- On November 15, 2024, the Company granted 1,000,000 stock options to its consultants with an exercise price of CA$0.63 per share. These options are exercisable for a period of five years, with one-third vesting on each anniversary of the grant date.
RSUs
- On May 9, 2024, the Company issued 2,000,000 RSUs with a fair value of $570,000 to the Company's CEO and directors. All RSUs will fully vest one year from the grant date.
- On October 9, 2024, the Company issued 44,540 RSUs with a fair value of $19,197 to the Company's directors. All RSUs will fully vest one year from the grant date.
- On October 29, 2024, the Company issued 82,476 RSUs with a fair value of $36,784 to the Company's directors. All RSUs will fully vest one year from the grant date.
- 1,296,446 RSUs were forfeited.
Subsequent to December 31, 2024
- 9,281,108 warrants were exercised for proceeds of CA$4,163,799.
- 125,000 stock options were exercised for proceeds of CA$33,750.
- The Company issued 23,980 Common Shares pursuant to an earnout agreement.
- The Company granted 280,000 options to its employees, with exercise price of CA$0.97. The options are exercisable for a period of five years, with one-third of the options vesting on the grant date and an additional one-third vesting on each anniversary thereafter.
- The Company granted 149,381 RSUs to the Company's CEO, certain directors, and consultants of the Company.
OFF-BALANCE SHEET ARRANGEMENTS
As of December 31, 2024 and the date of this MD&A, the Company did not have any off-balance sheet financing arrangements.
TRANSACTIONS BETWEEN RELATED PARTIES
Key management personnel include those persons having the authority and responsibility of planning, directing, and executing the activities of the Company. The Company has determined that its key management personnel consist of the Company's officers and directors.
During the years ended December 31, 2024, and 2023, the key management compensation was:
| For the year ended | ||
|---|---|---|
| December 31, 2024 | December 31, 2023 | |
| $ | $ | |
| Salaries and benefits | 2,045,208 | 887,148 |
| Consulting fees | 32,171 | 25,933 |
| Share-based payments | 422,670 | 1,596,705 |
| 2,500,049 | 2,509,786 |
Page 20 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
In addition to the compensation above, the Company granted the following options and RSUs to the Company's officers and directors during the years ended December 31, 2024, and 2023:
During the year ended December 31, 2024
- On May 9, 2024, the Company issued 2,000,000 RSUs with a fair value of $570,000 to the Company's CEO and directors. All RSUs will fully vest one year from the grant date.
- On May 9, 2024, the Company granted 2,000,000 stock options to its directors with an exercise price of CA$0.40 per share. These options are exercisable for a period of five years, with one-fourth vesting on each anniversary of the grant date.
- On May 9, 2024, the Company granted 900,000 stock options to its directors and officers with an exercise price of CA$0.40 per share. These options are exercisable for a period of five years, with one-half vesting on each anniversary of the grant date.
- On June 13, 2024, the Company granted 200,000 stock options to its directors with an exercise price of CA$0.71 per share. These options are exercisable for a period of five years, with one-half vesting on each anniversary of the grant date.
- On October 9, 2024, the Company issued 44,540 RSUs with a fair value of $19,197 to the Company's directors. All RSUs will fully vest one year from the grant date.
- On October 29, 2024, the Company issued 82,476 RSUs with a fair value of $36,784 to the Company's directors. All RSUs will fully vest one year from the grant date.
- As discussed in Note 13, the Company issued three Promissory Notes totaling $1,459,448 (CAD $2,200,000) to the Company's directors, of which $73,578 (CA$100,000) was repaid.
During the year ended December 31, 2023
- 425,000 options with an exercise price of CA$0.27 to the Company's CFO. The options are exercisable for a period of five years. One-fourth vest will vest every six months thereafter.
- 3,145,000 RSUs with a fair value of $878,564 to the Company's CEO and directors. One-fourth vest on date of grant and one-fourth will vest every six months thereafter.
As of December 31, 2024, the balances due to the Company's directors and officer are as follows:
| December 31, 2024 | December 31, 2023 | |
|---|---|---|
| $ | $ | |
| Accounts payables and accrued liabilities* | 806,992 | 223,993 |
| Promissory notes ** | 1,459,448 | - |
| 2,266,440 | 223,993 |
- These amounts are unsecured, non-interest bearing, and payable on demand.
** The balance as of December 31, 2024 is denominated in Canadian dollars of CA$2,100,000.
Page 21 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
CRITICAL ACCOUNTING ESTIMATES
The preparation of our consolidated financial statements requires management to use judgment and make estimates and assumptions that affect the reported amounts assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amount of expenses during the period. Actual results could materially differ from these estimates. Refer to note 2 of our annual audited consolidated financial statements for the year ended December 31, 2024 for a more detailed discussion of the critical accounting estimates and judgments.
CHANGES IN ACCOUNTING POLICIES INCLUDING INITIAL ADOPTION
The following amendments have been effective for annual reporting periods beginning on or after January 1, 2024:
Classification of Liabilities as Current or Non-Current – The IASB issued amendments to IAS 1 - Classification of Liabilities as Current or Non-current in January 2020, which have been further amended partially by amendments Non-current Liabilities with Covenants issued in October 2022. The amendments require that an entity's right to defer settlement of a liability for at least twelve months after the reporting period must have substance and must exist at the end of the reporting period. Classification of a liability is unaffected by the likelihood that the entity will exercise its right to defer settlement for at least twelve months after the reporting period. Subsequent to the release of amendments to IAS 1 Classification of Liabilities as Current or Non-Current, the IASB amended IAS 1 further in October 2022. If an entity's right to defer is subject to the entity complying with specified conditions, such conditions affect whether that right exists at the end of the reporting period, if the entity is required to comply with the condition on or before the end of the reporting period and not if the entity is required to comply with the conditions after the reporting period. The amendments also provide clarification on the meaning of 'settlement' for the purpose of classifying a liability as current or non-current.
The Company concludes that the effect of such amendments did not have a material impact and therefore did not record any adjustments to the financial statements.
New accounting standards issued and not yet effective
Certain IFRS pronouncements that are mandatory for accounting years beginning on or after January 1, 2025 have been issued. The Company anticipates that the application of these new and revised standards, amendments and interpretations will have no material impact on its results and financial position.
FINANCIAL INSTRUMENTS AND OTHER INSTRUMENTS
In the normal course of business, the Company is inherently exposed to certain financial risks, including market risk, credit risk and liquidity risk, through the use of financial instruments. The timeframe and manner in which the Company manages these risks varies based upon management's assessment of the risk and available alternatives for mitigating risk. The Company does not acquire or issue derivative financial instruments for trading or speculative purposes. All transactions undertaken are to support the Company's operations. These financial risks and the Company's exposure to these risks are provided in various tables in note 26 of our audited consolidated financial statements for the year ended December 31, 2024. For a discussion on the significant assumptions made in determining the fair value of financial instruments, refer also to note 2 of the financial statements for the year ended December 31, 2024.
DISCLOSURE CONTROLS AND PROCEDURES
Management of the Corporation has established processes to provide them sufficient knowledge to support representations that they have exercised reasonable diligence that (i) the consolidated financial statements do not contain any untrue statement of material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it is made, as of the date of and for the periods presented by the consolidated financial statements; and (ii) the consolidated financial
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
statements fairly present in all material respects the financial condition, financial performance and cash flows of the Corporation, as of the date of and for the periods presented.
Pursuant to National Instrument 52-109 - Certification of Disclosure in Issuers' Annual and Interim Filings ("NI 52-109"), the Chief Executive Officer and Chief Financial Officer of the Company have filed Venture Issuer Basic Certificates with respect to the financial information contained in the interim consolidated financial statements for the year ended December 31, 2024, and this accompanying MD&A (together, the "Filings"). In contrast to the full certificate under NI 52-109, the Venture Issuer Basic Certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting, as defined in NI 52-109. For further information, the reader should refer to the Venture Issuer Basic Certificates filed by the Company with the Interim Filings on SEDAR+ at www.sedarplus.com.
The Company's certifying officers are responsible for ensuring that processes are in place to provide them with sufficient knowledge to support the representations they are making in the Venture Issuer Basic Certificates. Investors should be aware that inherent limitations on the ability of certifying officers of a venture issuer to design and implement on a cost-effective basis disclosure controls and procedures and internal control over financial reporting, as such terms are defined in NI 52-109, may result in additional risks to the quality, reliability, transparency and timeliness of interim and annual filings and other reports provided under securities legislation.
REVIEWED BY MANAGEMENT
This MD&A and the audited consolidated financial statements for the year ended December 31, 2024 (the "Filings") had been reviewed by the Company Executive Officer ("CEO") and Chief Financial Officer ("CFO") and certified the followings:
No misrepresentations: Based on CEO's and CFO's knowledge, having exercised reasonable diligence, the Filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, with respect to the period covered by the Filings.
Fair presentation: Based on CEO's and CFO's knowledge, having exercised reasonable diligence, the financial report together with the other financial information included in Filings fairly presented in all material respects the financial condition, financial performance and cash flows of the issuer, as of the date of and for the periods presented in the Filings.
RISKS AND UNCERTAINTIES
An investment in the Company is subject to various risks and should be considered highly speculative. Investors should consider the following risk factors together with those set out in the Company's Annual Information Form for the fiscal year ended December 31, 2024 dated April 22, 2025, a copy of which is available on SEDAR+ at www.sedarplus.com. The risks and uncertainties described below are not exhaustive. Additional risks not presently known or currently deemed immaterial may also impair the Company and its subsidiaries business operation. If any of the events described in the following business risks occur, overall business, operating results and the financial condition of Company and its subsidiaries could be materially adversely affected.
Risks Associated with Numerous Laws and Regulations
The production, labeling and distribution of the products that the Company distributes are regulated by various federal, state and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrict the permissible scope of the Company's product claims or the ability to sell its products in the future. The United States Food and Drug Administration (the "FDA") and various other regulatory agencies regulate consumable products. The Company is subject to regulation by various agencies. The shifting compliance environment and the need to build and maintain robust systems to comply with different regulations in multiple
Page 23 of 38
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
jurisdictions increases the possibility that the Company may violate one or more of the requirements. If the Company's operations relating to particular products are found to be in violation of any of such laws or any other governmental regulations, or perceived to be in violation, the Company may be subject to penalties or other negative effects, including, without limitation, civil and criminal penalties, damages, fines, the curtailment or restructuring of the Company's operations or asset seizures and the denial of regulatory applications (including those regulatory regimes outside of the scope of FDA jurisdiction, but which may rely on the positions of the FDA in the application of its regulatory regime), any of which could adversely affect Company's business and financial results. Failure to comply with state and federal requirements, may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. To the extent FDA regulations apply and products are classified as dietary supplements, such products are subject to regulation by the FDA. The Company's advertising is also subject to regulation by the Federal Trade Commission ("FTC") under the Federal Trade Commission Act. In recent years, the FTC has initiated numerous investigations of dietary and nutritional supplement products and companies based on allegedly deceptive or misleading claims. At any point, enforcement strategies of a given agency can change as a result of other litigation in the space or changes in political landscapes, and could result in increased enforcement efforts, which would materially impact the Company's business. Additionally, some states also permit consumer protection laws to be enforced by state attorney generals, who may seek relief for consumers, class action certifications, and class wide damages for products sold by the Company. Private litigants may also seek relief for consumers, class action certifications, and class wide damages for products sold by the Company. Any actions against the Company by governmental authorities or private litigants could have a material adverse effect on the Company's business, financial condition and results of operations.
Compliance with Changes in Legal, Regulatory and Industry Standards
The formulation, manufacturing, packaging, labelling, handling, distribution, importation, exportation, licensing, sale and storage of the Company's products are affected by extensive laws, governmental regulations, administrative determinations, court decisions and similar constraints. Such laws, regulations and other constraints may exist at the federal, provincial or local levels. There can be no assurance that the Company is in compliance with all of these laws, regulations and other constraints, and changes to such laws, regulations and other constraints may have a material adverse effect on operations.
International Regulatory Risks
The Company has conducted sales in various international jurisdictions and the Company intends to expand internationally. As a result, it is and will become further subject to the laws and regulations of (as well as international treaties among) the foreign jurisdictions in which it operates or imports or exports products or materials. In addition, the Company may avail itself of proposed legislative changes in certain jurisdictions to expand its product portfolio, which expansion may include business and regulatory compliance risks as yet undetermined. Failure by the Company to comply with the current or evolving regulatory framework in any jurisdiction could have a material adverse effect on the Company's business, financial condition and results of operations. There is the possibility that any such international jurisdiction could determine that the Company was not or is not compliant with applicable local regulations. If the Company's historical or current sales or operations were found to be in violation of such international regulations, the Company may be subject to enforcement actions in such jurisdictions including, but not limited to, civil and criminal penalties, damages, fines, the curtailment or restructuring of the Company's operations or asset seizures and the denial of regulatory applications. While the interpretations of these laws are unclear, in some jurisdictions, financial benefit, directly or indirectly, arising from conduct that would be considered unlawful in such jurisdiction may be viewed to be within the purview of such laws, and persons receiving any such benefit, including investors in an applicable jurisdiction, may be subject to liability. Each prospective investor should contact his, her or its own legal advisor. There has been an increasing movement in certain foreign markets to increase the regulation of natural health products, which will impose additional restrictions or requirements. In addition, there has been increased regulatory scrutiny of nutritional supplements and marketing claims under existing and new regulations. Such anticipated regulatory changes may introduce some risk and may harm the Company's operations if its products or advertising activities are found to violate existing or new regulations, or if
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
the Company is not able to affect necessary changes to its products in a timely and efficient manner to respond to new regulations.
Impact of U.S. Legislative and Regulatory Policies.
The recent elections in the United States may result in legislative and regulatory changes that could have an adverse effect on the Company and its financial condition. In particular, there is uncertainty regarding U.S. tariffs and support for existing treaty and trade relationships, including with Canada. Implementation by the U.S. government of new legislative or regulatory policies could impose additional costs on the Company, decrease U.S. demand for the Company's products, or otherwise negatively impact the Company, which may have a material adverse effect on the Company's business, financial condition and operations. In addition, this uncertainty may adversely impact: (i) the ability of companies to transact business with companies such as the Company; (ii) the Company's profitability; (iii) regulation affecting the health and wellness industry; (iv) global stock markets (including the TSXV); and (v) general global economic conditions. All of these factors are outside of our control, but may nonetheless lead the Company to adjust its strategy in order to compete effectively in global markets.
Entry into International Markets
The Company's entry into new international markets would require management attention and financial resources that would otherwise be spent on other parts of its business. The Company's international sales could expose it to risks and expenses inherent in operating or selling products in foreign jurisdictions, and developing and emerging markets in particular where the risks may be heightened. These risks and expenses include:
- adverse currency exchange rate fluctuations;
- risks associated with complying with laws and regulations in the countries in which the Company's products are sold, such as requirements to apply for and obtain licenses, permits or other approvals for products, and the delays associated with obtaining such licenses, permits or other approvals;
- the costs of adapting products for sale in foreign countries, including to changes to formulations, formats, labelling or packaging;
- multiple, changing, and often inconsistent enforcement of laws, rules and regulations, including regulations and standards relating to consumer health products;
- risks associated with the reliance on international distributors, including the possible failure of international distributors to appropriately understand, represent and effectively market and sell the Company's products; damage to the Company's reputation or brand if counterfeit versions of the Company's products are introduced into international markets;
- the imposition of additional foreign governmental controls or regulations, new or enhanced trade restrictions or non-tariff barriers to trade, or restrictions on the activities of foreign agents, representatives, employees and distributors;
- increases in taxes, tariffs, customs and duties, or costs associated with compliance with import and export licensing and other compliance requirements;
- downward pricing pressure on the Company's products in international markets, due to competitive factors or otherwise;
- laws and business practices favouring local companies;
- political, social or economic unrest or instability;
- greater risk on credit terms, longer payment cycles and difficulties in enforcing agreements and collecting receivables through certain foreign legal systems;
- difficulties in enforcing or defending intellectual property rights; and
- the effect of disruptions caused by severe weather, natural disasters, outbreak of disease or other events that make travel to a particular region less attractive or more difficult.
The Company's international efforts may not produce desired levels of sales. Furthermore, its experience with selling products in its current international markets may not be relevant or may not necessarily translate into favourable results if the Company sells in other international markets. If and when the Company enters into new markets in the
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
future, it may experience different competitive conditions, less familiarity with the Company's brands and/or different consumer tastes and discretionary spending patterns. As a result, it may be less successful than expected in expanding the Company's sales in current and targeted international markets. Sales into new international markets may take longer to ramp up and reach expected sales and profit levels, or may never do so, thereby affecting its overall growth and profitability. To build brand awareness in new markets, the Company may need to make greater investments in advertising and promotional activity than originally planned, which could negatively impact the profitability of its sales in those markets. These or one or more of the factors listed above may harm the Company's business, results of operations or financial condition. Any material decrease in the Company's international sales or profitability could also adversely impact the Company's business, results of operations or financial condition.
Uncertainty and Evolving Regulatory Authority Caused by Potential Changes to Regulatory Framework
FDA leadership has been in flux and will continue to be uncertain with upcoming US elections. If any FDA Commissioner, were to halt current initiatives of the FDA, such as the recently announced public meeting process, this could delay the development of such a regulatory regime and have an adverse effect on the business of the Company.
Regulatory Approval and Permits
The Company may be required to obtain and maintain certain permits, licenses and approvals in the jurisdictions where its products are sold. There can be no assurance that the Company will be able to obtain or maintain any necessary licenses, permits or approvals. Any material delay or inability to receive these items is likely to delay and/or inhibit the Company's ability to conduct its business, and would have an adverse effect on its business, financial condition and results of operations.
Environmental, Health and Safety Laws
The Company is subject to environmental, health and safety laws and regulations in each jurisdiction in which the Company operates. The Company's costs of complying with current and future environmental and health and safety laws, liabilities arising from past or future actions, or more vigorous enforcement of environmental and employee health and safety laws, may have a material adverse effect on the Company's business, financial condition and results of operations.
Debt
From time to time, the Company may rely on debt financing for a portion of its business activities, including capital and operating expenditures. There are no assurances that the Company will be able to comply at all times with the covenants applicable under its debt arrangements; nor are there assurances that the Company will be able to secure new financing that may be necessary to finance its operations and capital growth program. Any failure of the Company to secure financing or refinancing, to obtain new financing or to comply with applicable covenants under its borrowings could have a material adverse effect on the Company's financial results. Further, any inability of the Company to obtain new financing may limit its ability to support future growth.
Liability for Actions of Employees, Contractors and Consultants
The Company could be liable for fraudulent or illegal activity by its employees, contractors and consultants resulting in significant financial losses to claims against the Company. The Company is exposed to the risk that its employees, independent contractors and consultants may engage in fraudulent or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to the Company that violates: (i) government regulations; (ii) manufacturing standards; (iii) U.S. federal fraud and abuse laws and regulations; or (iv) laws that require the true, complete and accurate reporting of financial information or data. It is not always possible for the Company to identify and deter misconduct by its employees and other third
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
parties, and the precautions taken by the Company to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting the Company from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against the Company, and it is not successful in defending itself or asserting its rights, those actions could have a significant impact on its business, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, contractual damages, reputational harm, diminished profits and future earnings, the curtailment of the Company's operations or asset seizures, any of which could have a material adverse effect on the Company's business, financial condition and results of operations.
Risks Related to SBBC brands' Business and Industry
Chapter 7 Proceedings
PureKana filed Proceedings on April 3, 2024. The financial results of the Proceedings are beyond the Company's control and are inherently uncertain. Chapter 7 proceedings can be time consuming and management's attention may be diverted from the day to day operations or from pursuing its growth strategy and we may incur significant expenses that cannot be received. Additionally, there can be no assurance that the proceeds, if any, from the Proceedings will be sufficient to satisfy PureKana's loan obligations or that sufficient assets will remain after priority creditors have been repaid.
Product Viability
If the products the Company sells are not perceived to have the effects intended by the end user, its business may suffer. Many of the Company's products contain innovative ingredients or combinations of ingredients. There is little long-term data with respect to efficacy, unknown side effects and/or interaction with individual human biochemistry. Moreover, there is little long-term data with respect to efficacy, unknown side effects and/or its interaction with individual animal biochemistry. As a result, the Company's products could have certain side effects if not taken as directed or if taken by an end user that has certain known or unknown medical conditions
Products have Limited Shelf Life
The Company holds goods in inventory and its products have a limited shelf life. Its inventory may reach its expiration date and not be sold. Although the Company manages its inventory, it may be required to write-down the value of any inventory that has reached its expiration date, which could have a material adverse effect on the Company's business, financial condition, and results of operations.
Success of Quality Control Systems
The quality and safety of the Company's products are critical to the success of its business and operations. As such, it is imperative that the Company's (and its service provider's) quality control systems operate effectively and successfully. Quality control systems can be negatively impacted by the design of the quality control systems, the quality training program, and adherence by employees to quality control guidelines. Although the Company strives to ensure that all of its service providers have implemented and adhere to high caliber quality control systems, any significant failure or deterioration of such quality control systems could have a material adverse effect on the Company's business and operating results.
Product Recalls
Products are sometimes subject to the recall or return of their products for a variety of reasons, including product defects, such as contamination, unintended harmful side effects or interactions with other substances, packaging safety and inadequate or inaccurate labeling statements. If any of the Company's products are recalled due to an alleged product defect or for any other reason, the Company could be required to incur the unexpected expense of the recall and any legal proceedings that might arise in connection with the recall. The Company may lose a
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
significant amount of sales and may not be able to replace those sales at an acceptable margin or at all. In addition, a product recall may require significant management attention. Recall of products could lead to adverse publicity, decreased demand for the Company's products and could have significant reputational and brand damage. Although the Company has detailed procedures in place for testing its products, there can be no assurance that any quality, potency or contamination problems will be detected in time to avoid unforeseen product recalls, regulatory action or lawsuits. A recall for any of the foregoing reasons could lead to decreased demand for the Company's products and could have a material adverse effect on the results of operations and financial condition of the Company. Additionally, product recalls may lead to increased scrutiny of the Company's operations by regulatory agencies, requiring further management attention and potential legal fees and other expenses.
Product Liability
The Company's products will be produced for sale to end consumers, and therefore there is an inherent risk of exposure to product liability claims, regulatory action and litigation if the products are alleged to have caused loss or injury. In addition, the production and sale of the Company's products involves the risk of injury to end users due to tampering by unauthorized third parties or product contamination. Previously unknown adverse reactions resulting from human or animal consumption of the Company's products alone or in combination with other medications or substances could occur. The Company may be subject to various product liability claims, including, among others, that its products caused injury or illness, include inadequate instructions for use or include inadequate warnings concerning possible side effects or interactions with other substances. A product liability claim or regulatory action against the Company could result in increased costs, could adversely affect the Company's reputation, and could have a material adverse effect on its business and operational results.
Product Returns
Product returns are a customary part of the Company's business. Products may be returned for various reasons, including expiration dates or lack of sufficient sales volume. Any increase in product returns could reduce the Company's results of operations.
Natural Disasters, Unusually Adverse Weather, Pandemic Outbreaks, Boycotts and Geo-Political Events
The occurrence of one or more natural disasters, such as hurricanes and earthquakes, unusually adverse weather, pandemic outbreaks, boycotts and geo-political events, such as civil unrest and acts of terrorism, or similar disruptions could materially adversely affect the Company's business, results of operations or financial condition. These events could result in physical damage to the Company's properties, increases in fuel or other energy prices, temporary or permanent closure of the Company's facilities, labour shortages, temporary or long-term disruption in the supply of raw materials and other inputs, temporary disruption in transport to and from markets, disruption in the Company's distribution network or disruption to the Company's information systems, any of which could have a material adverse effect on the Company's business, results of operations or financial results.
Climate Change and Weather-Related Risks
Climate change could result in increasing frequency and severity of weather-related events, resource shortages, changes in rainfall and storm patterns and intensities, water shortages and changing temperatures, any of which can damage or destroy crops, disrupting the Company's operations by impacting the availability and costs of materials and input products needed for its products. In addition, the availability and prices of products we source may be affected by, among other things, the introduction of regulatory changes in response to concerns about the potential impact of climate change and unusual weather patterns.
Transportation Risk
In order for customers of the Company to receive their product, the Company relies on third party transportation services. This can cause logistical problems with, and delays in, end users obtaining their orders which the Company
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
cannot control. Any delay by third party transportation services may adversely affect the Company's financial performance. Moreover, transportation to and from the Company's facilities is critical. A breach of security during transport could have material adverse effects on the Company's business, financials and prospects. Any such breach could impact the Company's operations and financial performance.
Domestic Supply Risk
The regulation of third-party suppliers or distributors may have a significant impact upon the Company's business. Any enforcement activity or any additional uncertainties which may arise in the future could cause substantial interruption or cessation of the Company's business, including adverse impacts to the Company's supply chain and distribution channels, and other civil and/or criminal penalties at the federal level.
Reliance on Third Party Suppliers, Service Providers, Manufacturers and Distributors
The Company's suppliers, service providers, contract manufacturers and distributors may elect, at any time, to breach or otherwise cease to participate in supply, service or distribution agreements, or other relationships, on which the Company's operations rely. Loss of its suppliers, service providers, contract manufacturers or distributors would have a material adverse effect on the Company's business and operational results. The Company currently relies on third-party contract manufacturers to manufacture the Company products. Disruption of operations of its third-party contract manufacturers could adversely affect inventory supplies and the Company's ability to meet product delivery deadlines.
Third Party Risks
The Company is party to business relationships, transactions and contracts with various third parties, pursuant to which such third parties have performance, supply, payment and other obligations to the Company. If any of these third parties were to become subject to business interruption, bankruptcy, receivership or similar proceedings, the Company's rights and benefits in relation to its business relationships, contracts and transactions with such third parties could be terminated, modified in a manner adverse to the Company, or otherwise impaired. The Company cannot make any assurances that it would be able to arrange for alternate or replacement business relationships, transactions or contracts on terms as favorable as existing business relationships, transactions or contracts if at all. Any inability on the Company's part to do so could have a material adverse effect on its business and results of operations.
Industry Competition
The Company's competitors may be better capitalized and have more attractive product offerings than the Company does. The Company competes with both large and small companies offering emerging plant-based, holistic wellness and lifestyle consumer products. Such companies offer products that compete with the Company's and could be found preferable by customers due to their technical merits, by way of superior marketing resources or skills, or for other reasons. In addition, competitors may be better capitalized than the Company. The Company cannot assure shareholders that it will succeed in the face of such competition and its financial condition and results of operations will be significantly negatively impacted.
Other Conflicts of Interest
Certain of the officers and managers of the Company may also be directors, managers, officers, consultants or stakeholders of other companies or enterprises, some of which may be in similar sectors, and conflicts of interest may arise between their duties to the Company and their duties to or interests in such other companies or enterprises. Certain of such conflicts may be required to be disclosed in accordance with, and subject to, such procedures and remedies as applicable under applicable corporate and securities laws, however, such procedures and remedies may not fully protect the Company.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Changing Consumer Preferences and Customer Retention
As a result of changing consumer preferences, many innovative products attain financial success for a limited period of time. Even if the Company's products find retail success, there can be no assurance that any of its products will continue to see extended financial success. The Company's success will be significantly dependent upon its ability to introduce new product lines. Even if it is successful in introducing new products or relying on its current products, a failure to gain consumer acceptance or to update products with compelling content could cause a decline in its products' popularity that could reduce revenues and harm the Company's business, operating results and financial condition. Failure to introduce new features and product lines and to achieve and sustain market acceptance could result in the Company being unable to meet consumer preferences and generate revenue which would have a material adverse effect on its profitability and financial results from operations.
The Company's success depends on its ability to attract and retain customers. There are many factors which could impact the Company's ability to attract and retain customers, including but not limited to the Company's ability to continually produce desirable and effective product, and the successful implementation of the Company's customer acquisition plan. The Company's failure to acquire and retain customers could have a material adverse effect on the Company's business, operating results and financial position.
The Company's Relationships with Retailers may Deteriorate
In addition to sales through the Company's own e-commerce platforms, the Company also relies on retailers to display, present and sell its products to consumers in their brick and mortar stores and through their online ecommerce sites. The Company's retailers stock and display its products. The Company's relationships with these retailers are important for maintaining and building consumer trust in its brands and for executing the advertising and educational programs the Company continues to deploy. The Company's failure to maintain these relationships with its retailers or difficulties experienced by these retailers could harm the Company's business.
The Company does not receive long-term purchase commitments from its retailers, and confirmed orders received from retail partners may be difficult to enforce. Furthermore, there can be no assurance that the Company will be able, in the future, to continue to sell its products to its retail customers on favourable trading terms or at all. The Company may be obligated to stop shipments to its retail customers or such customers may refuse shipments from the Company in the course of negotiating the resolution of trading issues with such customers. Factors that could affect the Company's ability to maintain or expand its sales to these retailers include: (i) failure to accurately identify the needs of the Company's customers; (ii) lack of customer acceptance of new products or product expansions; (iii) unwillingness of the Company's retailers to attribute value to the Company's existing and new products relative to competing products; (iv) failure to obtain shelf space from retailers; and (v) new, well-received product introductions by competitors. The Company's sales depend, in part, on retailers effectively displaying its products, including providing attractive space in their stores, including online e-commerce platforms, and, in certain channels, having knowledgeable employees that can explain the Company's products and their attributes. If the Company loses any of its key retailers, or if any key retailer reduces their purchases of the Company's existing or new products, reduces their number of stores or operations, promotes products of competitors over the Company, or suffers financial difficulty or insolvency, the Company may experience reduced sales of its products, resulting in lower revenue and gross profit margin, which would harm the Company's profitability and financial condition.
Maintaining and Promoting the Company's Brand
Management believes that maintaining and promoting the Company's brand is critical to expanding its customer base. Maintaining and promoting the Company's brand will depend largely on its ability to continue to provide quality, reliable and innovative products, which it may not do successfully. The Company may introduce new products or services that its customers do not like, which may negatively affect its brand and reputation. Maintaining and enhancing the Company's brand may require it to make substantial investments, and these investments may not achieve the desired goals. If the Company fails to successfully promote and maintain its brand or if it incurs
Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
excessive expenses in this effort, its business and financial results from operations could be materially adversely affected.
Inability to Sustain Pricing Models
Significant price fluctuations or shortages in the cost of materials and input products may increase the Company's cost of goods sold and cause its results of operations and financial condition to suffer. If the Company is unable to secure materials and input products at a reasonable price, it may have to alter or discontinue selling some of its products or attempt to pass along the cost to its customers, any of which could adversely affect its results of operations and financial condition. Additionally, any significant interruption in, or increasing costs of, labour, freight and energy could increase the Company's and its suppliers' cost of goods and have a material impact on the Company's financial condition and results from operations. If the Company's suppliers are affected by increases in their costs of labour, freight and energy, they may attempt to pass these cost increases on to the Company. If the Company pays such increases, it may not be able to offset them through increases in its pricing, which could adversely affect its results of operations and financial condition.
Reliance on Key Inputs
The Company's business is dependent on a number of key inputs and their related costs, including raw materials, products and supplies. Any significant interruption or negative change in the availability or economics of the supply chain for key inputs could materially impact the business, financial condition and operating results of the Company. Any inability to secure required supplies and services or to do so on appropriate terms could have a materially adverse impact on the business, financial condition and operating results of the Company.
The ability of the Company to compete and grow will be dependent on having access, at a reasonable cost and in a timely manner, to skilled labour, materials, input products, and components. No assurances can be given that the Company will be successful in maintaining the required supply of such items.
Any inability to establish such supply inputs, or significant interruption or negative change in the availability or economics of the supply chain for key inputs, could materially impact the financial results and operations of the Company.
Effectiveness and Efficiency of Advertising and Promotional Expenditures; Search Engine Algorithms
The Company's future growth and profitability will depend on the effectiveness and efficiency of advertising and promotional expenditures, including its ability to: (i) create greater awareness of its products; (ii) determine the appropriate creative message and media mix for future advertising expenditures; and (iii) effectively manage advertising and promotional costs in order to maintain acceptable operating margins. There can be no assurance that advertising and promotional expenditures will result in revenues in the future or will generate awareness of the Company's products. In addition, no assurance can be given that the Company will be able to manage its advertising and promotional expenditures on a cost-effective basis.
In addition, periodic changes to search engine algorithms, which retrieve data from search indices and deliver ranked search results, produce changes in search engine results pages. Any changes to these algorithms and therefore search engine results pages could reduce visibility of, and traffic on, the Company's e-commerce website and negatively impact the Company's financial position and results of operations.
Successfully Management and Growth of E-commerce Business
Management and growth of the Company's e-commerce sales are essential to the Company's growth. The usability of and client experience provided by the Company's e-commerce platform is critical to the success and growth of its e-commerce sales. Any extended software disruption of the Company's e-commerce platform or the failure on the part of the Company to provide an attractive, effective, reliable, user-friendly e-commerce platform that offers a
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
wide assortment of merchandise with rapid delivery options and that continually meets the changing expectations of online customers could place the Company at a competitive disadvantage, result in the loss of revenue or harm the Company's reputation with customers and could have a material adverse effect on business and results of operations. The Company also depends on third-party service providers for its e-commerce platform and any service disruption on their part could affect the customers' ability to access the Company's website resulting in loss of revenue or harm to reputation.
The success of the Company's e-commerce business is also dependent on the Company's ability to successfully manage the costs, difficulties and competitive pressures associated with shipping, including inventory management and distribution, and compliance with governing statutes, laws, regulations and regulatory policies in the jurisdictions to which products are shipped, including laws governing the operating and marketing of e-commerce websites, as well as the collection, storage and use of information on consumers interacting with these websites. If the Company is unable to expand or update its e-commerce site commensurately with competitors, manage shipping and successfully respond to the risks inherent to e-commerce, the Company's financial position and results of operations may be negatively impacted.
Furthermore, if the Company is unable to successfully capitalize on digital marketing channels to drive client acquisition and retention, including search engine optimization, email marketing, improved product descriptions, data driven category naming, and the leveraging of social media, the Company's financial position and results of operations may be negatively impacted.
Inability to Implement Growth Strategy
The Company's future success depends, in part, on its ability to implement its growth strategy, including (i) product innovations within existing categories and growth into adjacent categories and continued growth of existing products in existing categories; (ii) further penetration into new markets and geographies; and (iii) in support of its profitability targets, improvements in the Company's operating income, gross profit and Adjusted EBITDA margins. the Company's ability to implement this growth strategy depends, among other things, on its ability to:
- develop new products and product line extensions that appeal to consumers and will be supported by retailers and distributors;
- maintain and expand brand loyalty and brand recognition by effectively implementing its marketing strategy and advertising initiatives;
- maintain and improve its competitive position with existing and newly acquired brands, if any, in the channels in which it competes;
- identify and successfully enter and market its products in new geographic markets and market segments and categories;
- enter into successful arrangements with new retailers of its products;
- maintain and, to the extent necessary, improve the Company's high standards for product quality, safety and integrity; and
- maintain sources for the required supply of quality raw ingredients and input products to meet growing demand.
The Company may not be able to successfully implement its growth strategy and reach its revenue and profitability improvement targets.
Difficulty to Forecast
The Company relies largely on its own market research to forecast industry trends and statistics as detailed forecasts are, with certain exceptions, not generally available from other sources. A failure in the anticipated demand for the Company's products to materialize as a result of competition, technological change, change in the regulatory or legal landscape or other factors could have a material adverse effect the Company's business, financial condition and results of operations.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
Key Officers and Employees
The Company's success and future will depend, to a significant degree, on the continued efforts of its managers, officers and key employees, including certain technical individuals and sales and marketing personnel, the retention of which cannot be guaranteed. The loss of key personnel could materially adversely affect the Company's business. The loss of any such personnel could harm or delay the plans of the Company's business either while management time is directed to finding suitable replacements (who, in any event, may not be available), or, if not, covering such vacancy until suitable replacements can be found. In either case, this may have a material adverse effect on the future of the Company's business. Competition for such personnel can be intense, and the Company cannot provide assurance that it will be able to attract or retain highly qualified technical, sales, marketing and management personnel in the future. From time to time, share-based compensation may comprise a significant component of the Company's compensation for key personnel, and if the price of the shares declines, it may be difficult to recruit and retain such individuals. Any of the foregoing risks or actions could disrupt the Company's operations and have a material adverse effect on the Company's results from operations and financial condition.
Additional Financings
If SBBC is not able to sustain profitability or if it requires additional capital to fund growth or other initiatives, it may seek additional equity or debt financing. There can be no assurances that SBBC will be able to obtain additional financial resources on favorable commercial terms or at all. Failure to obtain such financial resources could affect SBBC's plan for growth or result in SBBC being unable to satisfy its obligations as they become due, either of which could have a material adverse effect on the business, results of operations and the financial condition of SBBC.
Commitment of substantial resources for growth
Growing the Company's business over the long-term requires commitment of continued investments. The Company's future capital requirements depends on many factors, including many of those herein, such as: (i) the results of the Company's operations and the rate of its revenues growth; (ii) the development of new product offerings; (iii) the successful integration of acquisitions; (iv) hiring and retaining key personnel; (v) maintaining customer relationships; and (vi) the identification of suitable future acquisition opportunities. The Company's cash on hand and available financing may not be sufficient to fund these activities if opportunities arise, and the Company may be unable to expand its business if it does not have sufficient capital or cannot borrow or raise additional capital on attractive terms.
Management of Growth
The Company may be subject to growth-related risks, including capacity constraints and pressure on its internal systems and controls. The ability of the Company to manage growth effectively will require it to continue to implement and improve its operational and financial systems and to expand, train and manage its employee base. The inability of the Company to deal with this growth may have a material adverse effect on the Company's business, financial condition, results of operations and prospects. In addition, there are specific risks inherent in growth of the Company's business-to-business and direct-to-consumer sales, including, among others, increased competition and risks related to the use of information systems.
Risks Related to Acquisitions and Partnerships
SBBC may acquire, partner or otherwise transact with other companies in the future and there are risks inherent in any such activities. Specifically, there could be unknown or undisclosed risks or liabilities of such companies for which SBBC or its affiliates is not sufficiently indemnified. Any such unknown or undisclosed risks or liabilities could materially and adversely affect SBBC's financial performance and results of operations. SBBC could encounter additional transaction and integration related costs or experience an impact to its operations or results of operation
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
as a result of the failure to realize all of the anticipated benefits from such acquisitions or partnerships, or an inability to successfully integrate an acquisition as anticipated. All of these factors could cause dilution to SBBC's earnings per share or decrease or delay the anticipated accretive effect of the acquisition or partnership and cause a decrease in the market price of SBBC's securities, or have a material adverse effect on SBBC's operations or results from operations. SBBC may not be able to successfully integrate and combine the operations, personnel and technology infrastructure of any such acquired company with its existing operations. As a result of integration efforts, SBBC may experience interruptions in its business activities, deterioration in its employee and customer relationships, increased costs of integration and harm to its reputation, all of which could have a material adverse effect on SBBC's business, financial condition and results of operations. SBBC may experience difficulties in combining corporate cultures, maintaining employee morale and retaining key employees. The integration of any such acquired companies may also impose substantial demands on management of SBBC. There is no assurance that these acquisitions will be successfully integrated in a timely manner or without additional expenses incurred.
In respect of potential future acquisitions or partnerships, there can be no assurance that SBBC will be able to identify acquisition or partnership opportunities that meet its strategic objectives, or to the extent such opportunities are identified, that it will be able to negotiate acceptable terms.
Breach of Confidentiality
While discussing potential business relationships or other transactions with third parties, SBBC may disclose confidential information relating to the business, operations or affairs of SBBC. Although confidentiality agreements are to be signed by third parties prior to the disclosure of any confidential information, a breach of such confidentiality agreement could put SBBC at competitive risk and may cause significant damage to its business. The harm to SBBC's business from a breach of confidentiality cannot presently be quantified but may be material and may not be compensable in damages. There can be no assurance that, in the event of a breach of confidentiality, SBBC will be able to obtain equitable remedies, such as injunctive relief from a court of competent jurisdiction in a timely manner, if at all, in order to prevent or mitigate any damage to its business that such a breach of confidentiality may cause.
Inability to Protect Intellectual Property
SBBC's success is dependent upon its intangible property and technology. SBBC relies upon copyrights, patents, trade secrets, unpatented proprietary know-how and continuing innovation to protect the intangible property, technology and information that is considered important to the development of the business. SBBC relies on various methods to protect its proprietary rights, including confidentiality agreements with consultants, service providers and management that contain terms and conditions prohibiting unauthorized use and disclosure of confidential information. However, despite efforts to protect intangible property rights, unauthorized parties may attempt to copy or replicate intangible property, technology or processes. There can be no assurances that the steps taken by SBBC to protect its intangible property, technology and information will be adequate to prevent misappropriation or independent third-party development of SBBC's intangible property, technology or processes. It is likely that other companies can duplicate a production process similar to SBBC's. To the extent that any of the above would occur, revenue could be negatively affected, and in the future, SBBC may have to litigate to enforce its intangible property rights, which could result in substantial costs and divert management's attention and other resources.
SBBC's ability to successfully implement its business plan depends in part on its ability to obtain, maintain and build brand recognition using its trademarks, service marks, trade dress, domain names and other intellectual property rights, including SBBC's names and logos. If SBBC's efforts to protect its intellectual property are unsuccessful or inadequate, or if any third party misappropriates or infringes on its intellectual property, the value of its brands may be harmed, which could have a material adverse effect on SBBC's business and might prevent its brands from achieving or maintaining market acceptance.
SBBC may be unable to obtain registrations for its intellectual property rights for various reasons, including refusal by regulatory authorities to register trademarks or other intellectual property protections, prior registrations of
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
which it is not aware, or it may encounter claims from prior users of similar intellectual property in areas where it operates or intends to conduct operations. This could harm its image, brand or competitive position and cause SBBC to incur significant penalties and costs.
Intellectual Property Claims
Companies in the retail and wholesale consumer packaged goods industries frequently own trademarks and trade secrets and often enter into litigation based on allegations of infringement or other violations of intangible property rights. SBBC may be subject to intangible property rights claims in the future and its products may not be able to withstand any third-party claims or rights against their use. Any intangible property claims, with or without merit, could be time consuming, expensive to litigate or settle and could divert management resources and attention. An adverse determination also could prevent SBBC from offering its products to others and may require that SBBC procure substitute products or services.
With respect to any intangible property rights claim, SBBC may have to pay damages or stop using intangible property found to be in violation of a third party's rights. SBBC may have to seek a license for the intangible property, which may not be available on reasonable terms and may significantly increase operating expenses. The technology also may not be available for license at all. As a result, SBBC may also be required to pursue alternative options, which could require significant effort and expense. If SBBC cannot license or obtain an alternative for the infringing aspects of its business, it may be forced to limit product offerings and may be unable to compete effectively. Any of these results could harm SBBC's brand and prevent it from generating sufficient revenue or achieving profitability.
Litigation
SBBC may from time to time become party to litigation in the ordinary course of business which could adversely affect its business. Should any litigation in which SBBC is, or becomes, involved be determined against SBBC, such a decision could adversely affect SBBC's ability to continue operating and could use significant resources. Even if SBBC is involved in litigation and wins, such litigation could redirect significant SBBC resources. Litigation may also create a negative perception of SBBC's brands.
Trade Secrets may be Difficult to Protect
SBBC's success depends upon the skills, knowledge and experience of its scientific and technical personnel, consultants and advisors, as well as contractors. Because SBBC operates in a highly competitive industry, it relies in part on trade secrets to protect its proprietary products and processes. However, trade secrets are difficult to protect. Where SBBC considers it necessary, SBBC enters into confidentiality or non-disclosure agreements with its corporate partners, employees, consultants, outside scientific collaborators, developers and other advisors. These agreements generally require that the receiving party keep confidential, and not disclose to third parties, confidential information developed by the receiving party or made known to the receiving party by SBBC during the course of the receiving party's relationship with SBBC. These agreements also generally provide that inventions conceived by the receiving party in the course of rendering services to SBBC will be its exclusive property, and SBBC enters into assignment agreements to perfect its rights.
These confidentiality, inventions and assignment agreements, where in place, may be breached and may not effectively assign intellectual property rights to SBBC. SBBC's trade secrets also could be independently discovered by competitors, in which case SBBC would not be able to prevent the use of such trade secrets by its competitors. The enforcement of a claim alleging that a party illegally obtained and was using SBBC's trade secrets could be difficult, expensive and time consuming and the outcome could be unpredictable. Failure to obtain or maintain effective trade secret protection could adversely affect SBBC's competitive position.
Use of Customer Information and Other Personal and Confidential Information
SBBC collects, processes, maintains and uses data, including sensitive information on individuals, available to SBBC through online activities and other customer interactions with its business. SBBC's current and future marketing
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
programs may depend on its ability to collect, maintain and use this information, and its ability to do so is subject to evolving international, U.S. and Canadian laws and enforcement trends. SBBC strives to comply with all applicable laws and other legal obligations relating to privacy, data protection and customer protection, including those relating to the use of data for marketing purposes. It is possible, however, that these requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another, conflict with other rules, conflict with SBBC's practices or fail to be observed by its employees or business partners. If so, SBBC may suffer damage to its reputation and be subject to proceedings or actions against it by governmental entities or others. Any such proceeding or action could hurt SBBC's reputation, force it to spend significant amounts to defend its practices, distract its management or otherwise have an adverse effect on its business.
Certain of SBBC's marketing practices rely upon e-mail, social media and other means of digital communication to communicate with consumers on its behalf. SBBC may face risk if its use of e-mail, social media or other means of digital communication is found to violate applicable laws. SBBC posts its privacy policy and practices concerning the use and disclosure of user data on its websites. Any failure by SBBC to comply with its posted privacy policy or other privacy-related laws and regulations could result in proceedings which could potentially harm its business. In addition, as data privacy and marketing laws change, SBBC may incur additional costs to ensure it remains in compliance. If applicable data privacy and marketing laws become more restrictive at the international, federal, provincial or state levels, SBBC's compliance costs may increase, its ability to effectively engage customers via personalized marketing may decrease, its investment in its e-commerce platform may not be fully realized, its opportunities for growth may be curtailed by its compliance burden and its potential reputational harm or liability for security breaches may increase.
Information Technology Systems and Data Security Breaches
SBBC's operations depend, in part, on how well it and its third party service providers protect networks, equipment, information technology ("IT") systems and software against damage from a number of threats, including, but not limited to, cable cuts, natural disasters, intentional damage and destruction, fire, power loss, hacking, phishing, computer viruses, vandalism and theft. SBBC's operations also depend on the timely maintenance, upgrade and replacement of networks, equipment, IT systems and software, as well as pre-emptive expenses to mitigate the risks of failures. Any of these and other events could result in information system failures, delays and/or increase in capital expenses. The failure of information systems or a component of information systems could, depending on the nature of any such failure, adversely impact SBBC's reputation and results of operations.
SBBC or its third-party service providers collect, process, maintain and use sensitive personal information relating to its customers and employees, including customer financial data (e.g. credit card information) and their personally identifiable information, and rely on third parties for the operation of its ecommerce site and for the various social media tools and websites it uses as part of its marketing strategy. Any perceived, attempted or actual unauthorized disclosure of customer financial data (e.g. credit card information) or personally identifiable information regarding SBBC's employees, customers or website visitors could harm its reputation and credibility, reduce its e-commerce sales, impair its ability to attract website visitors, reduce its ability to attract and retain customers and could result in litigation against SBBC or the imposition of significant fines or penalties.
Recently, data security breaches suffered by well-known companies and institutions have attracted a substantial amount of media attention, prompting new foreign, federal, provincial and state laws and legislative proposals addressing data privacy and security. As a result, SBBC may become subject to more extensive requirements to protect the customer information that it processes in connection with the purchase of its products, resulting in increased compliance costs.
SBBC's online activities, including its e-commerce websites, also may be subject to denial of service or other forms of cyber-attacks. While SBBC has taken measures to protect against those types of attacks, those measures may not adequately protect its online activities from such attacks. If a denial of service attack or other cyber event were to affect its e-commerce sites or other information technology systems, its business could be disrupted, it may lose sales or valuable data, and its reputation may be adversely affected. SBBC's risk and exposure to these matters
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
cannot be fully mitigated because of, among other things, the evolving nature of these threats. As a result, cyber security and the continued development and enhancement of controls, processes and practices designed to protect systems, computers, software, data and networks from attack, damage or unauthorized access is a priority. As cyber threats continue to evolve, SBBC may be required to expend additional resources to continue to modify or enhance protective measures or to investigate and remediate any security vulnerabilities.
Global Economic Uncertainty
Demand for SBBC's products and services are influenced by general economic and consumer trends beyond SBBC's control. There can be no assurance that SBBC's business and corresponding financial performance will not be adversely affected by general economic or consumer trends. In particular, global economic conditions remain constrained, and if such conditions continue, recur or worsen, this may have a material adverse effect on SBBC's business, financial condition and results of operations.
Furthermore, such economic conditions have produced downward pressure on the availability of credit for financial institutions and corporations. If current levels of market disruption and volatility continue, SBBC might experience reductions in business activity, increased funding costs and funding pressures, as applicable, a decrease in asset values, write-downs or impairment charges and lower profitability.
Risks Relating to the Company's Securities United States Tax Classification of the Company
United States Tax Classification of the Company
Although the Company is and will continue to be a Canadian corporation, the Company is expected to be treated as a United States corporation for United States federal income tax purposes under section 7874 of the Code, and is expected to be subject to United States federal income tax on its worldwide income. However, for Canadian tax purposes, the Company is expected, regardless of any application of section 7874 of the Code to be treated as being resident of Canada under the Income Tax Act (Canada).
As a result, the Company will be subject to taxation both in Canada and the United States which could have a material adverse effect on the business, financial condition or results of operations of the Company.
It is unlikely that the Company will pay any dividends in the foreseeable future on the Company Shares. However, dividends received by shareholders who are residents of Canada for purpose of the Income Tax Act (Canada) will be subject to U.S. withholding tax. Any such dividends may not qualify for a reduced rate of withholding tax under the Canada-United States Tax Treaty. In addition, a foreign tax credit or a deduction in respect of foreign taxes may not be available.
Dividends received by U.S. shareholders will not be subject to U.S. withholding tax but will be subject to Canadian withholding tax. Dividends paid by the Company will be characterized as U.S. source income for purposes of the foreign tax credit rules under the Code. Accordingly, U.S. shareholders generally will not be able to claim a credit for any Canadian tax withheld unless, depending on the circumstances, they have an excess foreign tax credit limitation due to other foreign source income that is subject to a low or zero rate of foreign tax.
The Company May Issue Additional Equity Securities
The Company may, from time to time, issue equity securities to finance its activities, including in order to finance acquisitions. If the Company were to issue additional equity securities, the ownership interest of existing shareholders may be diluted and some or all of the Company's financial measures on a per share basis could be reduced. Moreover, as the Company's intention to issue additional equity securities becomes publicly known, the Company's share price may be materially adversely affected.
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Simply Better Brands Corp.
Management's Discussion and Analysis
For the year ended December 31, 2024
(Expressed in United States Dollars unless otherwise specified)
No Assurance of Active Trading Market
There is no assurance that an active trading market in the Common Shares will be sustained. The Common Shares are listed for trading on the TSX Venture Exchange. The Company cannot assure shareholders that an active trading market in its Common Shares on the stock exchange will be sustained or that the Common Shares will be able to maintain its listing.
Common Share Price Volatility
A potential investor should consider an investment in the Common Shares as risky. A potential investor should invest only if he or she can withstand a significant loss and wide fluctuations in the market value of the investment. The market price of the Common Shares has been highly volatile and may continue to be volatile. This leads to a heightened risk of securities litigation pertaining to such volatility. Among the factors that could affect the Company Share price are:
- actual or anticipated fluctuations in the Company's quarterly financial and operating results that vary from the expectations of management or of securities analysts and investors;
- failure to meet the expectations of the investment community and changes in the investment community;
- recommendations or estimates of future operating results;
- announcements of strategic developments, acquisitions, dispositions, financings, product developments and other material events by the Company or competitors;
- regulatory and legislative developments;
- litigation;
- general market conditions;
- other domestic and international macroeconomic factors unrelated to the Company's performance;
- additions or departures of key personnel;
- operating and share price performance of other companies that investors deem comparable to the Company or from a lack of market comparable companies; and
- news reports relating to trends, concerns, technological or competitive developments, regulatory changes and other related issues in the Company's industry or target markets.
ADDITIONAL INFORMATION
Additional information relating to the Company's operations and activities can be found under the Company's profile on SEDAR+ at www.sedarplus.com.
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