UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-40477

Better Choice Company Inc.

(Exact name of registrant as specified in its charter)

Delaware		83-4284557
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

12400 Race Track Road

Tampa, Florida 33626

(212) 896-1254

(Address of Principal Executive Offices) (Zip Code)

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class		Trading Symbol(s)		Name of Each Exchange on which Registered
Common Stock, $0.001 par value share		BTTR		NYSE American

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files.) Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐

If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by a check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares outstanding of each of the registrant’s classes of common stock as of the latest practicable date was: 893,602 shares of $0.001 par value common stock outstanding as of May 17, 2024.

Better Choice Company Inc.

TABLE OF CONTENTS

	Part I
1.	Condensed Consolidated Unaudited Financial Statements	5
2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
3.	Quantitative and Qualitative Disclosures About Market Risk	28
4.	Controls and Procedures	28
	Part II
1.	Legal Proceedings	29
1A.	Risk Factors	29
2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
3.	Defaults Upon Senior Securities	29
4.	Mine Safety Disclosures	29
5.	Other Information	29
6.	Exhibits	29
	Signatures	31

●	our ability to continue as a going concern;
●	the impact of damage to or interruption of our information technology systems due to cyber-attacks or other circumstances beyond our control;
●	business interruptions resulting from geopolitical actions, including war and terrorism;
●	our ability to successfully implement our growth strategy;
●	failure to achieve growth or manage anticipated growth;
●	our ability to achieve or maintain profitability;
●	the loss of key members of our senior management team;
●	our ability to generate sufficient cash flow or raise capital on acceptable terms to run our operations, service our debt and make necessary capital expenditures;
●	our dependence on our subsidiaries for payments, advances and transfers of funds due to our holding company status;
●	our ability to successfully develop additional products and services or successfully market and commercialize such products and services;
●	competition in our market;
●	our ability to attract new and retain existing customers, suppliers, distributors or retail partners;
●	allegations that our products cause injury or illness or fail to comply with government regulations;
●	our ability to manage our supply chain effectively;
●	our or our co-manufacturers’ and suppliers’ ability to comply with legal and regulatory requirements;

●	the effect of potential price increases and shortages on the inputs, commodities and ingredients that we require, whether as a result of the continued actual or perceived effects of broader geopolitical and macroeconomic conditions, including the military conflict between Russia and Ukraine;
●	our ability to develop and maintain our brand and brand reputation;
●	compliance with data privacy rules;
●	our compliance with applicable regulations issued by the U.S. Food and Drug Administration (“FDA”), the U.S. Federal Trade Commission (“FTC”), the U.S. Department of Agriculture (“USDA”), and other federal, state and local regulatory authorities, including those regarding marketing pet food, products and supplements;
●	risk of our products being recalled for a variety of reasons, including product defects, packaging safety and inadequate or inaccurate labeling disclosure;
●	risk of shifting customer demand in relation to raw pet foods, premium kibble and canned pet food products, and failure to respond to such changes in customer taste quickly and effectively; and
●	the other risks identified in this Quarterly Report including, without limitation, Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and Part II, Item 1A “Risk Factors” as such factors may updated from time to time in our other public filings

	2024			2023
	Three Months Ended March 31,
	2024			2023
Net sales	$	7,903		$	9,237
Cost of goods sold		5,289			5,996
Gross profit		2,614			3,241
Operating expenses:
Selling, general and administrative		5,080			6,496
Total operating expenses		5,080			6,496
Loss from operations		(2,466	)		(3,255	)
Other expenses:
Interest expense, net		(362	)		(229	)
Total other expense, net		(362	)		(229	)
Net loss before income taxes		(2,828	)		(3,484	)
Income tax expense		2			—
Net loss attributable to common stockholders	$	(2,830	)	$	(3,484	)
Weighted average number of shares outstanding, basic		786,745			692,615
Weighted average number of shares outstanding, diluted		786,745			692,615
Net loss per share attributable to common stockholders, basic	$	(3.60	)	$	(5.03	)
Net loss per share attributable to common stockholders, diluted	$	(3.60	)	$	(5.03	)

	March 31, 2024			December 31, 2023
Assets
Cash and cash equivalents	$	3,876		$	4,455
Accounts receivable, net		4,340			4,354
Inventories, net		5,201			6,611
Prepaid expenses and other current assets		1,169			812
Total Current Assets		14,586			16,232
Fixed assets, net		198			230
Right-of-use assets, operating leases		106			120
Goodwill		405			—
Other assets		149			155
Total Assets	$	15,444		$	16,737
Liabilities & Stockholders’ Equity
Current Liabilities
Accounts payable	$	7,478		$	6,928
Accrued and other liabilities		1,505			2,085
Line of credit		2,171			1,741
Term loan, net		3,054			2,881
Operating lease liability		58			57
Total Current Liabilities		14,266			13,692
Non-current Liabilities
Operating lease liability		52			67
Total Non-current Liabilities		52			67
Total Liabilities		14,318			13,759
Stockholders’ Equity
Common Stock, $0.001 par value, 200,000,000 shares authorized, 823,650 & 729,026 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively		34			32
Additional paid-in capital		325,264			324,288
Accumulated deficit		(324,172	)		(321,342	)
Total Stockholders’ Equity		1,126			2,978
Total Liabilities and Stockholders’ Equity	$	15,444		$	16,737

	Shares		Amount		Capital		Deficit			Equity
	Common Stock				Additional Paid-In		Accumulated			Total Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balance as of December 31, 2023		729,026	$	32	$	324,288	$	(321,342	)	$	2,978
Share-based compensation		42,088		—		518		—			518
Share issuance		6,818		2		58		—			60
Equity issued in business combinations		45,629		—		400		—			400
Shares issued in lieu of fractional shares		89		—		—		—			—
Net loss attributable to common stockholders		—		—		—		(2,830	)		(2,830	)
Balance as of March 31, 2024		823,650	$	34	$	325,264	$	(324,172	)	$	1,126

	2024			2023
	Three Months Ended
	March 31,
	2024			2023
Cash Flow from Operating Activities:
Net loss attributable to common stockholders	$	(2,830	)	$	(3,484	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		35			424
Amortization of debt issuance costs		20			19
Share-based compensation expense		518			861
Accreted interest expense on term loan		153			—
Inventory reserve		(123	)		(682	)
Loss on disposal of assets		—			11
PIK interest expense on term loan		125			—
Other		49			—
Changes in operating assets and liabilities:
Accounts receivable		24			427
Inventories		1,533			2,056
Prepaid expenses and other assets		(355	)		(230	)
Accounts payable		550			196
Accrued and other liabilities		(705	)		(1,071	)
Cash Used in Operating Activities	$	(1,006	)	$	(1,473	)
Cash Flow from Investing Activities:
Capital expenditures	$	(3	)	$	(10	)
Cash Used in Investing Activities	$	(3	)	$	(10	)
Cash Flow from Financing Activities:
Proceeds from Wintrust Facility		3,010			—
Payments on Wintrust Facility		(2,580	)		—
Payments on short-term financing arrangement		—			(41	)
Cash Provided by (Used in) Financing Activities	$	430		$	(41	)
Net decrease in cash and cash equivalents and restricted cash	$	(579	)	$	(1,524	)
Total cash and cash equivalents and restricted cash, beginning of period		4,455			9,473
Total cash and cash equivalents and restricted cash, end of period	$	3,876		$	7,949
Supplemental cash flow information
Cash paid during the quarter for:
Interest	$	64		$	237
Non-cash investing activities:
Aimia acquisition	$	400		$	—

(1)	The Company’s E-commerce channel includes two customers that amounted to greater than 10% of the Company’s total net sales for the three months ended March 31, 2024, and 2023, respectively. These customers had $3.2 million and $3.8 million of net sales during the three months ended March 31, 2024 and March 31, 2023, respectively.
(2)	One of the Company’s International customers that distributes products in China amounted to greater than 10% of the Company’s total net sales during the three months ended March 31, 2024 and March 31, 2023, representing $2.2 million and $2.1 million of net sales, respectively.
(3)	None of the Company’s Brick & Mortar customers represented greater than 10% of net sales during the three months ended March 31, 2024 or March 31, 2023. For the three months ended March 31, 2023, Petco is included within the Brick & Mortar channel. In Q1 2024, Petco is presented within E-commerce as a result of the strategic exit out of Petco stores, while remaining on Petco.com.

	March 31, 2024			December 31, 2023
Food, treats and supplements	$	5,056		$	6,296
Inventory packaging and supplies		1,113			1,166
Total Inventories		6,169			7,462
Inventory reserve		(968	)		(851	)
Inventories, net	$	5,201		$	6,611

	March 31, 2024		December 31, 2023
Prepaid marketing expenses	$	451	$	451
Other prepaid expenses and other current assets		718		361
Total Prepaid expenses and other current assets	$	1,169	$	812

	Estimated Useful Life	March 31, 2024			December 31, 2023
Equipment	2 - 5 years	$	18		$	18
Furniture and fixtures	2 - 5 years		221			221
Computer software, including website development	2 - 3 years		187			187
Computer equipment	1 - 2 years		111			108
Total fixed assets			537			534
Accumulated depreciation			(339	)		(304	)
Fixed assets, net		$	198		$	230

	Three Months Ended March 31,
	2024				2023
E-commerce ⁽¹⁾	$	3,265	41	%	$	3,895	42	%
International ⁽²⁾		2,874	37	%		2,311	25	%
DTC		1,209	15	%		1,322	14	%
Brick & mortar ⁽³⁾		555	7	%		1,709	19	%
Net Sales	$	7,903	100	%	$	9,237	100	%

				December 31, 2023
	Estimated useful life	Gross carrying amount		Accumulated amortization			Impairment loss			Net carrying amount
Customer relationships	7	$	7,190	$	(4,142	)	$	(3,048	)	$	—
Trade name	15		7,500		(2,016	)		(5,484	)		—
Total intangible assets		$	14,690	$	(6,158	)	$	(8,532	)	$	—

	March 31, 2024		December 31, 2023
Accrued taxes	$	94	$	105
Accrued payroll and benefits		479		487
Accrued trade promotions and advertising		203		90
Accrued interest		379		254
Accrued commissions		—		686
Deferred revenue		15		7
Short-term financing		40		162
Other		295		294
Total accrued and other liabilities	$	1,505	$	2,085

(1)	Interest at a fixed rate of 10.00% per annum.
(2)	Interest at a variable rate of the daily U.S. Federal Funds Rate plus 250 basis points with an interest rate floor of 5.50% per annum.

	Aimia
Common stock	$	399,713
Total consideration	$	399,713

Subscription receipts receivable	$	1,100
HST Receivable		856
Goodwill		405,194
Total assets acquired	$	407,150

AP and accruals	$	7,437
Total liabilities acquired	$	7,437

Net assets acquired	$	399,713

			March 31, 2024				December 31, 2023
	Fair Value Hierarchy		Carrying Amount		Fair Value		Carrying Amount		Fair Value
Term loan	Level 3	(2)	$	3,054	$	3,565	$	2,881	$	3,314
Line of credit	Level 2	(1)	$	2,171	$	2,171	$	1,741	$	1,741

	Warrants		Weighted Average Exercise Price
Warrants outstanding as of December 31, 2023		550,039	$	2.47
Issued		—	$	—
Exercised		—	$	—
Terminated/Expired		—	$	—
Warrants outstanding as of March 31, 2024		550,039	$	2.47

	Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Options outstanding as of December 31, 2023		54		$	5.03		5.7	$	—
Granted		—			—
Forfeited/Expired		(3	)	$	6.78
Options outstanding as of March 31, 2024		51		$	4.95		5.7	$	—

Options exercisable as of March 31, 2024		45		$	5.42		5.4	$	—

(1)	Expected volatility was determined using a combination of historical volatility and implied volatility.
(2)	For certain options, the simplified method is utilized to determine the expected life due to the lack of historical data.

	2024			2023
	Three Months Ended March 31,
	2024			2023
Numerator:
Net loss	$	(2,830	)	$	(3,484	)
Adjusted net loss attributable to common stockholders	$	(2,830	)	$	(3,484	)
Denominator:
Basic WASO		786,745			692,615
Dilutive common stock equivalents		—			—
Diluted WASO		786,745			692,615

Net loss per share attributable to common stockholders, basic	$	(3.60	)	$	(5.03	)
Net loss per share attributable to common stockholders, diluted	$	(3.60	)	$	(5.03	)

●	Strong Innovation Pipeline. We have a robust and growing pipeline of new products, and believe our size is an advantage as we are nimble enough to quickly bring new products to market, but large enough to benefit from strong existing customer relationships and established economies of scale with our co-manufacturers.

●	Ability to Leverage Differentiated Omni-Channel Strategy for Growth. We believe that we can leverage our differentiated omni-channel strategy to design and sell products purpose-built for success in specific channels while maintaining our ability to leverage marketing and sales resources cross-channel. We believe that this strategy will allow us to deliver on core consumer needs, maximize gross margin and respond to changing channel dynamics that have accelerated in recent years.

●	Capitalize on Continuing Trends of Humanization of Pets. We believe our combination of innovative products designed specifically for certain channels can assist our growth to become a leader in the premium and super-premium categories across dog and cat food.

●	Well Positioned to Capitalize on a Once-in-a-Generation Demographic Shift in Asia. We believe that Asia represents the largest macro-growth opportunity in the global pet food industry. In China, the number of households that own a pet has doubled in the last five years, with younger pet owners leading growth.

	Three Months Ended March 31,						Change
	2024			2023			$			%
Net sales	$	7,903		$	9,237		$	(1,334	)		(14	)%
Cost of goods sold		5,289			5,996			(707	)		(12	)%
Gross profit		2,614			3,241			(627	)		(19	)%
Operating expenses:
Selling, general and administrative		5,080			6,496			(1,416	)		(22	)%
Total operating expenses		5,080			6,496			(1,416	)		(22	)%
Loss from operations		(2,466	)		(3,255	)		789			24	%
Other expenses:
Interest expense, net		(362	)		(229	)		(133	)		(58	)%
Change in fair value of warrants liabilities		—			—			—			—	%
Total other expense, net		(362	)		(229	)		(133	)		(58	)%
Net loss before income taxes		(2,828	)		(3,484	)		656			19	%
Income tax expense		2			—			2			100	%
Net loss		(2,830	)		(3,484	)		654			19	%
Net loss attributable to common stockholders	$	(2,830	)	$	(3,484	)	$	654			19	%

●	Sales and marketing costs, for specific customer promotional programs, paid media, content creation expenses and our DTC selling platform. Marketing costs are geared towards customer acquisition and retention and building brand awareness. During the three months ended March 31, 2024, sales and marketing costs decreased approximately $(0.6) million or (33)%, to $1.2 million from $1.8 million during the three months ended March 31, 2023. The decrease was driven primarily by lower marketing and advertising agency fees related to the Halo brand renovation and migration from the former TruDog brand, as well as increased marketing spend in our International sales channel.

●	Employee compensation and benefits decreased approximately $(0.2) million or (10)% during the three months ended March 31, 2024 to $1.5 million from $1.7 million during the three months ended March 31, 2023. The decrease was primarily related to a reduction in employee headcount, partially offset by higher severance costs during the first half of 2024.

●	Share-based compensation includes expenses related to equity awards issued to employees and non-employee directors. During the three months ended March 31, 2024, Share-based compensation decreased $(0.4) million or (40)% to $0.5 million compared to $0.9 million for the three months ended March 31, 2023. January 2023 grants became fully vested during the three months ended March 31, 2023, resulting in a decrease to share-based compensation, partially offset by common stock issued for board service.

●	Freight, which is primarily related to the shipping of DTC orders to customers, remained consistent at $0.3 million during the three months ended March 31, 2024 and March 31, 2023. DTC sales remained consistent as outlined above.

●	Non-cash charges including depreciation, amortization, disposal or sale of assets and bad debt expense decreased by $(0.4) million or (94)% to less than $0.1 million during the three months ended March 31, 2024 from $0.4 million during the three months ended March 31, 2023. The decrease was driven by disposals of certain assets during 2023.

●	Other general and administrative costs for various general corporate expenses, including professional services, information technology, insurance, travel, costs related to merchant credit card fees, product development costs, rent, and certain tax costs. During the three months ended March 31, 2024, other general and administrative costs increased $0.2 million, or 14% to $1.6 million compared to $1.4 million during the three months ended March 31, 2023. The increase was driven by commission fees related to sales in our International channel.

	Three Months Ended March 31,
	2024			2023
Cash flows (used in) provided by:
Operating activities	$	(1,006	)	$	(1,473	)
Investing activities		(3	)		(10	)
Financing activities		430			(41	)
Net decrease in cash and cash equivalents	$	(579	)	$	(1,524	)

Exhibit	Exhibit Description	Form	File No.	Exhibit	Filing date
10.20 ^†	Engagement Agreement, dated as of March 13, 2023, by and between ONE10 Advisors, LLC and Better Choice Company Inc.	8-K	001-40477	10.1	03/21/2023
10.21 ^†	Interim Officer Agreement, dated as of March 20, 2023, by and between Carolina Martinez and Better Choice Company, Inc.	8-K	001-40477	10.2	03/21/2023
10.22 ^†	Employment Agreement, dated as of May 22, 2023, by and between Kent Cunningham and Better Choice Company, Inc.	8-K	001-40477	10.2	05/16/2023
10.23 ^†	Term Loan Credit Agreement, dated as of June 21, 2023, by and between Better Choice Company Inc. and Alphia Inc.	8-K	001-40477	10.1	06/21/2023
10.24 ^†	Account Purchase Agreement, dated as of June 21, 2023, by and between Wintrust Receivables Finance, a division of Wintrust Bank N.A., and Halo, Purely for Pets, Inc.	8-K	001-40477	10.9	06/21/2023
10.25	Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing	8-K	001-40477	99.1	09/27/2023
10.26	Better Choice Acquires Aimia Pet Healthco to Enter the GLP1 Pet Market	8-K	001-40477	99.1	02/12/2024
10.27	Better Choice Company to Effectuate a 1 for 44 Reverse Stock Split	8-K	001-40477	99.1	03/14/2024
10.28	Better Choice Company Board of Directors Authorize Stock Repurchase Program	8-K	001-40477	3.1	03/25/2024
10.29	Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers	8-K	001-40477		04/04/2024
10.30	Better Choice Company Board of Directors Authorize Stock Repurchase Program	8-K	001-40477	99.1	04/16/2024
10.32	Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing	8-K	001-40477	99.1	04/30/2024
10.33	Complaint in Re: Better Choice Company, Inc., as Plaintiff, v. Alphia, Inc., as Defendant	8-K	001-40477	99.1	05/13/2024
21.1	Subsidiaries of the Company	10-K	001-40477	21.1	03/28/2023
31.1 *	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 *	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 *	Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101 *	The following materials from the Company’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023 formatted in Inline Extensible Business Reporting Language (“iXBRL”): (i) the Condensed Consolidated Statements of Operations, (ii) the Condensed Consolidated Balance Sheets, (iii) the Condensed Consolidated Statements of Stockholders’ Equity, (iv) the Condensed Consolidated Statements of Cash Flows and (v) related notes, tagged as blocks of text and including detailed tags.
104 *	Cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023, formatted in iXBRL (included as Exhibit 101).

†	Indicates a management contract or any compensatory plan, contract or arrangement.
*	Filed or furnished herewith.
#	Certain schedules and similar attachments to this agreement have been omitted in accordance with Item 601(b)(5) of Regulation S-K. The Company will furnish copies of any schedules or similar attachments to the SEC upon request.
***	Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

	BETTER CHOICE COMPANY INC.

Date: May 17, 2024	By:	/S/ KENT CUNNINGHAM
		Kent Cunningham
		Chief Executive Officer (Principal Executive Officer)

Date: May 17, 2024	By:	/S/ CAROLINA MARTINEZ
		Carolina Martinez
		Chief Financial Officer (Principal Financial and Accounting Officer)

SEC Form 10-Q filed by Better Choice Company Inc.