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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 20-F

REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934

OR

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

For the Fiscal Period Ended December 31, 2021

OR

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

For the transition period from __________ to __________

OR

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

Date of event requiring this shell company report __________

Commission file number 001-39251

BETTERWARE DE MÉXICO, S.A.P.I. DE C.V.

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

MEXICO

(Jurisdiction of incorporation or organization)

Luis Campos, Board Chairman

+52 (33) 3836-0500

Luis Enrique Williams 549

Colonia Belenes Norte

Zapopan, Jalisco, 45145, México

(Name, Telephone, E-mail and or Facsimile number and Address Company Contact Person)

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

Title of each class

 

Trading Symbol

 

Name of each exchange in which registered

Ordinary Shares, no par value per share

 

BWMX

 

The Nasdaq Stock Market LLC

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

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report: 37,316,546 Ordinary Shares, as of December 31, 2021.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes   No

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes   No

Table of Contents

Note — Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

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, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer ☐

Non-accelerated filer ☐

 

 

Emerging growth company

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by 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. ☐

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

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.

Yes  ☐ No

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

U.S. GAAP ☐

International Financial Reporting Standards as issued
by the International Accounting Standards Board ☒

Other ☐

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow.

Item 17   Item 18

If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☒ No

Table of Contents

TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

ii

CERTAIN CONVENTIONS

iii

CURRENCY PRESENTATION

iii

PRESENTATION OF FINANCIAL INFORMATION

iii

PRESENTATION OF INDUSTRY AND MARKET DATA

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PART I

1

ITEM 1.

IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

ITEM 2.

OFFER STATISTICS AND EXPECTED TIMETABLE

1

ITEM 3.

KEY INFORMATION

1

ITEM 4.

COMPANY INFORMATION

15

ITEM 4A.

UNRESOLVED SEC STAFF COMMENTS

23

ITEM 5.

OPERATING AND FINANCIAL REVIEW AND PROSPECTS

23

ITEM 6.

DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

32

ITEM 7.

MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

38

ITEM 8.

FINANCIAL INFORMATION

39

ITEM 9.

THE OFFER AND LISTING

40

ITEM 10.

ADDITIONAL INFORMATION

40

ITEM 11.

QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

48

ITEM 12.

DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

51

PART II

CONTROLS AND PROCEDURES

53

ITEM 13.

DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

53

ITEM 14.

MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

53

ITEM 15.

CONTROLS AND PROCEDURES

53

ITEM 16.

Reserved

56

ITEM 16A.

AUDIT COMMITTEE FINANCIAL EXPERT

56

ITEM 16B.

CODE OF ETHICS

56

ITEM 16C.

PRINCIPAL ACCOUNTANT FEES AND SERVICES

57

ITEM 16D.

EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

57

ITEM 16E.

PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

57

ITEM 16F.

CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT

58

ITEM 16G.

CORPORATE GOVERNANCE

58

ITEM 16H.

MINE SAFETY DISCLOSURE

58

ITEM 16I.

DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

58

PART III

59

ITEM 17.

FINANCIAL STATEMENTS

59

ITEM 18.

FINANCIAL STATEMENTS

59

ITEM 19.

EXHIBITS

60

SIGNATURES

61

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains a number of forward-looking statements, including statements about the financial conditions, results of operations, earnings outlook and prospects and may include statements for the period following the date of this annual report. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, including any underlying assumptions, are forward-looking statements. Forward-looking statements are typically identified by words such as “plan,” “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project,” “continue,” “could,” “may,” “might,” “possible,” “potential,” “predict,” “should,” “would” and other similar words and expressions, but the absence of these words does not mean that a statement is not forward-looking.

The forward-looking statements are based on the current expectations of the management of Betterware, as applicable, and are inherently subject to uncertainties and changes in circumstance and their potential effects and speak only as of the date of such statement. There can be no assurance that future developments will be those that have been anticipated. These forward-looking statements involve a number of risks, uncertainties or other assumptions that may cause actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Given these uncertainties, you should not rely upon forward looking statements as predictions of future events. These risks and uncertainties include, but are not limited to, those factors described in “Risk Factors,” those discussed and identified in public filings made with the Securities and Exchange Commission (“SEC”) by Betterware and the following:

the inability to profitably expand into new markets;
the possibility that Betterware may be adversely affected by other economic, business and/ or competitive factors;
operational risk;
financial performance;
litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Betterware’s resources;
changes in our investment commitments or our ability to meet our obligations thereunder;
natural disaster-related losses which may not be fully insurable;
epidemics, pandemics and other public health crises, particularly the COVID-19 virus;
geopolitical risk and changes in applicable laws or regulations;
fluctuations in exchange rates between the Mexican peso and the United States dollar; and
changes in interest rates or foreign exchange rates.

Should one or more of these risks or uncertainties materialize or should any of the assumptions made by the management of Betterware prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements. Except to the extent required by applicable law or regulation, Betterware undertakes no obligation to update these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.

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CERTAIN CONVENTIONS

Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) was incorporated under the laws of Mexico in 1995. Unless otherwise stated or unless the context otherwise requires, the terms “we,” “us,” “our,” “Company,” the “Group” “Betterware,” “BTW,” “BWM” and “BW” refer to Betterware de México, S.A.P.I. de C.V. and subsidiaries., a Mexican sociedad anónima promotora de inversión de capital variable.

CURRENCY PRESENTATION

In this annual report, unless otherwise specified or the context otherwise requires:

“$,” “US$” and “U.S. dollar” each refer to the United States dollar; and
“MX$,” “Ps.” and “peso” each refer to the Mexican peso.

Certain numbers and percentages included in this annual report have been subject to rounding adjustments. Accordingly, figures shown for the same category presented in various tables or other sections of this annual report may vary slightly, and figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them.

PRESENTATION OF FINANCIAL INFORMATION

This annual report contains our Audited Consolidated and Combined Financial Statements as of December 31, 2021, January 3, 2021, and December 31, 2019, and for the year ended December 31, 2021 (referred to as the “2021 period”), the 53 weeks ended January 3, 2021 (referred to as the “2020 period”) and the year ended December 31, 2019 (referred to as the “2019 period”) (our “Audited Consolidated and Combined Financial Statements”).

Until and including the 2020 period, Betterware’s financial year was a 52- or 53-weeks period ending on the Sunday nearest to December 31. However, due to the fact that in 2021 Betterware issued debt on the Mexican Stock Exchange, our financial period is required to coincide with the calendar year in order to comply with the Mexican General Corporate Law. Therefore, the financial information for the 2021 period is presented as of December 31, 2021, and for the year then ended. The comparative financial year of the 2020 period and the 2019 period consisted of 53 and 52 weeks ended on January 3, 2021, and December 31, 2019, respectively, but were not adjusted to calendar year because the effects of the change are not significant.

For purposes of this annual report, the term fiscal year is synonymous with financial year and refers to the periods covered by our Audited Consolidated and Combined Financial Statements.

We prepare our Audited Consolidated and Combined Financial Statements in accordance with International Financial Reporting Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). We have applied IFRS issued by the IASB effective at the time of preparing our Audited Consolidated and Combined Financial Statements. Our Audited Consolidated and Combined Financial Statements as of December 31, 2021, January 3, 2021, and December 31, 2019, and for the 2021, 2020, 2019 periods, have been audited by Galaz, Yamazaki, Ruiz Urquiza, S.C. member of Deloitte Touche Tohmatsu Limited (“Deloitte”), an independent registered public accounting firm, whose report dated April 28, 2022, is also included in this annual report.

Prior to BLSM Latino América Servicios, S.A. de C.V., a Mexican sociedad anónima de capital variable (“BLSM”), becoming a subsidiary of Betterware, we prepared combined financial statements because it provided more meaningful information to the reader as Betterware and BLSM were subsidiaries under the common control of Campalier, operating under common management; Thus, combined financial statements of these entities were prepared as of December 31, 2019. On March 10, 2020, BLSM became a subsidiary of Betterware and thus included in our consolidated financial statements as of December 31,2020. As a result, the combined statement of changes in stockholders’ equity for the 2019 period present the net parent investment gross by including contributed capital and retained earnings (rather than net as presented in prior years), as management believes it is a preferable presentation for comparability purposes with the share structure and presentation for the 2021 and 2020 periods.

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BLSM, provided administrative, technical, and operational services to Betterware until June 30, 2021 (formerly a related party of Betterware). On July 1, 2021, all employees from BLSM where transferred to Betterware, without having any implications on a consolidated basis.

On December 3, 2020, we acquired 70% of the shares of Betterware de Guatemala, S.A., a company focused on the distribution of our line of products and providing home solutions in Guatemala. Later, On December 16, 2020, in conjunction with Finvek Advisors, S.A. de C.V., we incorporated “Programa Lazos, S.A. de C.V.,” focused on granting loans of any kind and financial leasing or financial factoring operations. We own 70% of the voting shares of Programa Lazos.

On March 12, 2021, Betterware entered into an agreement to acquire 60% of GurúComm, S.A.P.I. de C.V. (“GurúComm”), a Mobile Virtual Network Operator and communications software developer.  Additionally, on July 22, 2021, Betterware entered into an agreement to acquire 70% of Innova Catálogos, S.A. de C.V. (“Innova Catálogos”), a clothing, footwear and accessories producer and developer.

The Audited Consolidated and Combined Financial Statements include the position and results of operations of Betterware, BLSM, GurúComm, Innova Catálogos, Programa Lazos and Betterware de Guatemala. The transactions among Betterware and its subsidiaries: BLSM GurúComm, Innova Catálogos, Programa Lazos and Betterware de Guatemala, and the balances and unrealized gains or losses arising from intra-group transactions have not been considered for the preparation of the Audited Consolidated and Combined Financial Statements.

Our Audited Consolidated and Combined Financial Statements are presented in thousands of Mexican Pesos (Ps).

Non-IFRS Measures

We define “EBITDA” as profit for the year adding back the depreciation of property, plant and equipment and right-of-use assets, amortization of intangible assets, financing cost, net and total income taxes. EBITDA is not measure required by or presented in accordance with IFRS. The use of EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for analysis of, our results of operations or financial condition as reported under IFRS.

Betterware believes that these non-IFRS financial measures are useful to investors because (i) Betterware uses these measures to analyze its financial results internally and believes they represent a measure of operating profitability and (ii) these measures will serve investors to understand and evaluate Betterware’s EBITDA and provide more tools for their analysis as it makes Betterware’s results comparable to industry peers that also prepare these measures.

The Business Combination

The Initial Public Offering

On October 16, 2018, DD3 Acquisition Corp., a British Virgin Islands company (“DD3”), consummated its initial public offering of 5,000,000 units and on October 23, 2018, the underwriters for DD3’s initial public offering purchased an additional 565,000 units pursuant to the partial exercise of their over-allotment option. The units in DD3’s initial public offering were sold at an offering price of U.S.$10.00 per unit, generating total gross proceeds of U.S.$55,650,000.

The Merger

On August 2, 2019, DD3 entered into a Combination and Stock Purchase Agreement (as amended, the “Combination and Stock Purchase Agreement”) with Campalier, S.A. de C.V., a Mexican sociedad anónima de capital variable (“Campalier”), Promotora Forteza, S.A. de C.V., a Mexican sociedad anónima de capital variable (“Forteza”), Strevo, S.A. de C.V., a Mexican sociedad anónima de capital variable (“Strevo”, and together with Campalier and Forteza, “Sellers”), Betterware, BLSM, and, solely for the purposes of Article XI therein, DD3 Mex Acquisition Corp, S.A. de C.V., pursuant to which DD3 agreed to merge with and into Betterware (the “Merger”) in a Business Combination that resulted in Betterware surviving the Merger and BLSM becoming a wholly-owned subsidiary of Betterware.

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As part of the Combination and Stock Purchase Agreement, and prior to the closing of the Merger, DD3 was redomiciled out of the British Virgin Islands and continued as a Mexican corporation pursuant to Section 184 of the Companies Act and Article 2 of the Mexican General Corporations Law.

The Company Restructure

Following the execution of the Combination and Stock Purchase Agreement, on February 21, 2020, the Company’s shareholders approved, a corporate restructure in the Company (the “Company Restructure”) which implied, among other things (i) the Company’s by-laws amendment in order to issue Series C and Series D non-voting shares, and (ii) a redistribution of the Company’s capital stock as follows: (a) fixed portion of the Company’s capital stock represented by 3,075,946, Series A, ordinary voting shares, and (b) the variable portion of the Company’s capital stock represented by (x) 1,961,993, Series B, ordinary voting shares, (y) 897,261, Series C, ordinary non-voting shares (“Series C Shares”), and (z) 168,734, Series D, ordinary non-voting shares (“Series D Shares”). In addition, Strevo transferred one, Series A, ordinary voting share of Betterware to Campalier (the “Campalier Share”), which remained under certain Share Pledge Agreement, dated July 28, 2017, entered between Strevo, as pledgor, MCRF P, S.A. de C.V. SOFOM, E.N.R. (“CS”), as pledgee, and Betterware.

Immediately after the Company’s Restructure and the transfer of the Campalier Share to Campalier, Forteza indirectly owned, through Banco Invex, S.A., Invex Grupo Financiero (“Invex”), as trustee of the irrevocable management and security trust No. 2397 (the “Invex Security Trust”), executed on March 26, 2016, as amended, with CS, as beneficiary, approximately 38.94% of the outstanding common stock of Betterware, and Campalier indirectly owned, through the Invex Security Trust, approximately 61.06% of the outstanding common stock of Betterware.

On March 9, 2020, the Invex Security Trust released the Series C Shares and the Series D Shares to Campalier and Forteza, respectively, that were held under the Invex Security Trust.

On March 10, 2020, CS, as pledgee, entered into a Termination of the Share Pledge Agreement over the Campalier Share with Campalier, as pledgor, and Betterware. In addition, CS, as beneficiary, Invex, as trustee, and Campalier, as settlor, entered into a Transfer Agreement, where Campalier transferred the Campalier Share to the Invex Security Trust.

Upon such transfer to the Invex Security Trust, the Company’s shareholders approved (i) the sale of all or a portion of such Company’s Series C and Series D shares to DD3 Acquisition Corp., S.A. de C.V. (the “DD3 Acquisition”), (ii) the Merger, (iii) the amendment of the Company’s by-laws to become a sociedad anónima promotora de inversion de capital variable, (iv) the increase of the Company’s capital stock by MX$94,311,438.00, through the issuance of 2,211,075 ordinary shares, without nominal value, subscribed by the shareholders of DD3 Acquisition Corp., S.A. de C.V., and (v) the increase of the Company’s capital stock by MX$872,878,500.00 through the issuance of 4,500,000 ordinary treasury shares without nominal value, offered for subscription and payment under the Company’s public offering in the U.S. completed and filed with the SEC under our Registration Statement on Form F-1, which became effective on January 22, 2020.

On March 10, 2020, Betterware’s corporate name changed from Betterware de México, S.A. de C.V. to Betterware de México, S.A.P.I. de C.V.

The DD3 Acquisition was closed on March 13, 2020, and as a result, all of Betterware shares that were issued and outstanding immediately prior to the closing date were canceled and new shares were issued. The DD3 Acquisition was accounted as a capital reorganization, whereby Betterware issued shares to the DD3 shareholders and obtained US$22,767 (Ps.498,445) in cash through the acquisition of DD3 and, simultaneously settled liabilities and related transaction costs on that date, for net cash earnings of US$7,519 (Ps.181,734) on such date. In addition, Betterware assumed the obligation of the warrants issued by DD3, a liability inherent to the transaction, equivalent to the fair value of Ps.55,810 of the warrants. No other assets or liabilities were transferred as part of the transaction that required adjustment to fair value as a result of the acquisition.

On the same date, a total of 2,040,000 of Betterware shares, that were offered for subscription and payment under its public offering on Nasdaq Capital Market (“Nasdaq”), were subscribed and paid for by various investors.

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On July 14, 2020, Betterware’s corporate name changed from Betterware de México, S.A.P.I. de C.V. to Betterware de México, S.A.B. de C.V. For purposes of this annual report, the Merger, the Company Restructure and all related actions undertaken in connection thereto are referred to as the “Business Combination.”

Closing of the Business Combination

Upon satisfaction of certain conditions and covenants as set forth under the Combination and Stock Purchase Agreement, the Business Combination was consummated and closed on March 13, 2020 (the “Closing”). At Closing, the following actions occurred:

(i)DD3 issued to the Sellers as consideration for the purchase of a portion of the Series C and Series D shares and the BLSM shares outstanding as of January 3, 2021, a debt acknowledgement in an amount equal to $15,000,546.
(ii)all of Betterware shares issued and outstanding immediately prior to the Closing were canceled and, Campalier and Forteza received, directly and indirectly (through the Invex Security Trust), 18,438,770 and 11,761,175, respectively, of Betterware’s shares; and
(iii)all of DD3’s ordinary shares issued and outstanding immediately prior to the Closing were canceled and exchanged for Betterware shares on a one-for-one basis.

On the Closing date, 2,040,000 shares of the Company offered for subscription and payment under the Company’s public offering in the U.S. on the Nasdaq were subscribed and paid for by various investors.

As a result of the Business Combination and the additional shares issued in the public offering, Betterware had 34,451,020 issued and outstanding shares, distributed as follows:

(i)25,669,956 shares, representing 74.5% of the total capital stock, are held by Invex Security Trust, as trustee and for the benefit of CS, as first place beneficiary thereunder;
(ii)1,764,175 shares, representing 5.1% of the total capital stock, are owned by Forteza;
(iii)2,765,814 shares, representing 8.0% of the total capital stock, are owned by Campalier;
(iv)2,211,075 shares, representing 6.4% of the total capital stock, are owned by former DD3 Shareholders as a result of the cancellation of DD3’s ordinary shares and exchange for Betterware shares on a one-for-one basis; and
(v)2,040,000 shares, representing 5.9% of the total capital stock, are owned by the F-1 Investors.

As part of the Merger, Betterware assumed an obligation that granted existing warrant holders the option to purchase (i) a total of 5,804,125 Betterware shares at a price of US$11.50 per share that would expire on or before March 25, 2025, and (ii) a total of 250,000 units that automatically became an option to issue 250,000 Betterware shares and warrants to buy 250,000 additional Betterware shares. The Company registered the warrants to be traded on OTC Markets, which had an observable fair value. The following events occurred in 2020 as part of the warrants agreement:

(i)During July and August 2020, the Group repurchased 1,573,888 warrants. During August and October, 2020, 895,597 warrants were exchanged for 621,098 shares, of which, 462,130 warrants were settled on a cash basis by exchanging 1 warrant for 1 share at a price of US$11.44 for share, which resulted in receiving cash by an amount of Ps.116,419. The remaining 433,467 warrants were exchanged on a cashless basis by exchanging 1 warrant for 0.37 shares.
(ii)in September 2020, the purchase option of units was exercised by their holders on a cashless basis, which resulted in the issuance of 214,020 Betterware shares.
(iii)Additionally, in October, 2020, and as part of the terms of the warrant agreement, the Company exercised the redemption of the warrants on a cashless basis by exchanging 3,087,022 warrants for 1,142,325 of the Company’s

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shares. A total of 8,493 public warrants were not exercised by their holders during the redemption period that expired on November 9, 2020, therefore, they were paid by the Company for a price of US$0.01 per warrant.
(iv)In December, 2020, holders exercised a total of 239,125 private warrants on a cashless basis and exchanged for 156,505 of the Company’s shares.
(v)As of the January 3, 2021, the warrant holders redeemed all of the outstanding warrants and purchase option of units and the Company recognized a loss for the increase in the fair value of the warrants of Ps.851,520, which was recognized under the heading “Loss in valuation of warrants” in the consolidated and combined statement of profit or loss. As of the date of this annual report, all of the warrants have been redeemed.

On August 2, 2021, Betterware’s corporate name changed from Betterware de México, S.A.B. de C.V. to Betterware de México, S.A.P.I. de C.V.

As of the date of this annual report and as consequence of the transactions described before, the total number of outstanding shares of the Company is 37,316,546.

The Forteza Merger

On December 14, 2020, Betterware and Forteza (Betterware’s shareholder), entered into a merger agreement pursuant to which Forteza agreed to merge with and into Betterware, surviving Betterware as the acquiror (the “Forteza Merger”). On December 16, 2020, the merger was completed. Consequently, shares in Betterware were delivered to Forteza’s shareholders in proportion to their shareholding in Betterware, without implying an increase in Betterware’s share capital or in the total number of outstanding shares of the Company

Other Transactions during 2021

On March 12, 2021, Betterware entered into an agreement to acquire 60% of GurúComm for Ps.45 million. GurúComm is a Mobile Virtual Network Operator and communications software developer, with an enterprise value of Ps.75 million (approximately US$3.5 million).

On March 28, 2022, the shareholders of GurúComm approved, and Betterware agreed, the redemption of the shares owned by Betterware. Therefore, the 55,514 shares that were fully subscribed and paid until such date by was reimbursed. The additional 37,693 shares that were subscribed but not yet paid, were canceled. GurúComm’s redemption and Betterware’s investment withdrawal was mainly due to the fact that the business was not growing according to shareholders expectations, and consequently, Betterware’s investment return would take longer than anticipated. The financial impact that the redemption transaction had at a consolidated level was a loss in sale of shares of Ps. 15 million.

On July 22, 2021, Betterware entered into an agreement to acquire 70% of Innova Catálogos, S.A. de C.V., for Ps.5,000. Innova Catálogos is dedicated to the purchase and sale of clothing, footwear and accessories.

The JAFRA Acquisition

On January 18, 2022, Betterware entered into an agreement to acquire 100% of JAFRA’s (“JAFRA”) operations in Mexico and the United States from the Vorwerk Group based in Germany for a total cash consideration of US$255 million, equivalent to Ps. 5,355 million, on a debt-free, cash-free basis (the “JAFRA Acquisition”). JAFRA is a leading global brand in direct sales in the Beauty and Personal Care (B&PC) industry with strong presence in Mexico and the United States with 443,000 independent leaders and consultants who sell unique products. The JAFRA Acquisition was approved by the Federal Economic Competition Commission (“COFECE”) on March 24, 2022 and consummated on April 7, 2022. The funds necessary to pay the purchase price under the JAFRA Acquisition were obtained from (i) a long-term syndicated loan of US$225 million, and (ii) US$30 million from operating cashflow of the Company.

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PRESENTATION OF INDUSTRY AND MARKET DATA

In this annual report, we rely on, and refer to, information regarding our business and the markets in which we operate and compete. The market data and certain economic and industry data and forecasts used in this annual report were obtained from internal surveys, market research, governmental and other publicly available information and independent industry publications. Industry publications, surveys and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of such information is not guaranteed. We believe that these industry publications, surveys and forecasts are reliable, but we have not independently verified them and cannot guarantee their accuracy or completeness.

Certain market share information and other statements presented herein regarding our position relative to our competitors are not based on published statistical data or information obtained from independent third parties, but reflects our best estimates. We have based these estimates upon information obtained from publicly available information from our competitors in the industry in which we operate.

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PART I

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.KEY INFORMATION

A.[Reserved]

B.CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D.RISK FACTORS

An investment in our ordinary shares carries a significant degree of risk. You should carefully consider the following risk factors, together with all of the other information included in this annual report, before making a decision to invest in our ordinary shares. The risks described below are those which Betterware believes are the material risks that it faces. Some statements in this annual report, including such statements in the following risk factors, constitute forward-looking statements. See the section entitled “Cautionary Note Regarding Forward-Looking Statements.” If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

Risks Related to Betterware’s Business

If we are unable to retain our existing independent distributors and recruit additional distributors, our results of operations could be negatively affected.

We distribute almost all of our products through our independent distributors and we depend on them directly for the sale of our products. BWM experiences high turnover among distributors from year to year since they can terminate their services at any time. As a result, we need to make significant efforts to continue to retain existing and recruit additional independent distributors. To increase our revenue, we must increase the number and/or the productivity of our distributors. The number and productivity of BWM’s distributors also depends on several additional factors, including:

adverse publicity regarding BWM, our products, our distribution channel or its competitors;
failure to motivate BWM’s distributors with new products;
the public’s perception of BWM’s products;
competition for distributors from other direct selling companies;
the public’s perception of BWM’s distributors and direct selling businesses in general; and

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general economic and business conditions.

BWM’s operations would be harmed if we fail to generate continued interest and enthusiasm among our distributors or we fail to attract new distributors, or if BWM’s distributors are unable to operate due to internal or external factors.

The number of our active distributors, including those at the district director level, may not increase and could decline in the future. BWM’s operating results could be harmed if existing and new business opportunities and products do not generate sufficient interest to retain existing distributors and attract new distributors.

The loss of key high-level distributors could negatively impact Betterware’s consultant growth and our revenue.

As of December 31, 2021, we had approximately 1,063,720 active associates and approximately 50,972 distributors, and 13 district directors. The district directors, together with their extensive networks of downline distributors, account for an important part of our net revenue. As a result, the loss of a high-level consultant or a group of leading distributors in the consultant’s network of downline distributors, whether by their own choice or through disciplinary actions by BWM for violations of our policies and procedures, could negatively impact our consultant growth and our net revenue.

A decline in our customers’ purchasing power or consumer confidence or in customers’ financial condition and willingness to spend could materially and adversely affect our business.

The sale of home organization products correlates strongly to the level of consumer spending generally, and thus is significantly affected by the general state of the economy and the ability and willingness of consumers to spend on discretionary items. Reduced consumer confidence and spending generally may result in reduced demand for our products and limitations on our ability to maintain or increase prices. A decline in economic conditions or general consumer spending in any of our major markets could have a material adverse effect on our business, financial condition and results of operations.

Failure of new products to gain distributors and market acceptance could harm our business.

An important component of our business is our ability to develop new products that create enthusiasm among our customers. If we fail to introduce new products planned for the future, our distributors’ productivity could be harmed. In addition, if any new products fail to gain market acceptance, are restricted by regulatory requirements, or have quality problems, this would harm our results of operations. Factors that could affect our ability to continue to introduce new products include, among others, government regulations, proprietary protections of competitors that may limit our ability to offer comparable products and any failure to anticipate changes in consumer tastes and buying preferences.

Betterware’s markets are competitive, and market conditions and the strengths of competitors may harm our business.

The market for BWM’s products is competitive. Our results of operations may be harmed by market conditions and competition in the future. Many competitors have much greater name recognition and financial resources than hawse have, which may give them a competitive advantage. For example, our products compete directly with branded, premium retail products. We currently do not have significant patent or other proprietary protection, and competitors may introduce products with the same ingredients that we use in our products.

We also compete with other companies for distributors. Some of these competitors have a longer operating history, better name recognition and greater financial resources than we do. Some of our competitors have also adopted and could continue to adopt some of our business strategies. Consequently, to successfully compete in this market and attract and retain distributors, we must ensure that our business opportunities and compensation plans are financially rewarding. We may not be able to continue to successfully compete in this market for distributors, which would ultimately, affect our business operations.

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If the industry in which we operate, our business or our products are subject to adverse publicity, our business may suffer.

Betterware is very dependent upon our distributors’ and the general public’s perception of the overall integrity of our business, as well as the safety and quality of our products and similar products distributed by other companies. The number and motivation of our distributors and the acceptance by the general public of our products may be negatively affected by adverse publicity regarding:

the legality of network-marketing systems in general or our network-marketing system specifically;
the safety and quality of our products;
regulatory investigations of our products;
the actions of our distributors;
management of our distributors; and
the direct selling industry.

Failure of Betterware’s internet and our other technology initiatives to create sustained consultant enthusiasm and incremental cost savings could negatively impact our business.

We have been developing and implementing a strategy to use the internet to sign up distributors and take orders for our products. In certain demographic markets it has experienced some success using BWM’s internet strategy to improve our operating efficiency. However, any cost savings from our internet strategy may not prove to be significant, or we may not be successful in adapting and implementing the strategy to other markets in which BWM operates. This could result in our inability to service our distributors in the manner they expect.

We are dependent on information and communication technologies, and our systems and infrastructures face certain risks, including cybersecurity risks.

We are dependent on information and communication technologies, and our systems and infrastructures face certain risks, including cybersecurity risks.

The operation of complex infrastructures and the coordination of the many actors involved in our operation require the use of several highly specialized information systems, including both our own information technology systems and those of third-party service providers, such as systems that monitor our operations or the status of our facilities, communication systems to inform the public, access control systems and closed circuit television security systems, infrastructure monitoring systems and radio and voice communication systems used by our personnel. In addition, our accounting and fixed assets, payroll, budgeting, human resources, supplier and commercial, hiring, payments and billing systems and our websites are key to our functioning. The proper functioning of these systems is critical to our operations and business management. These systems may, from time to time, require modifications or improvements as a result of changes in technology, the growth of our business and the functioning of each of these systems.

The risk of cyber-crime continues to augment across all industries and geographies as infiltrating technology is becoming increasingly sophisticated. If we are unable to prevent a significant cyber-attack, such attack could materially disrupt our operations, damage our reputation and lead to regulatory penalties and financial losses. To prevent such disruptions to our operations we have implemented a multi-layer security framework, from strategic corporate policies to operational procedures and controls. To support this framework, we use sophisticated technologies to secure our perimeter, computing equipment, networks, servers, storage and databases.

Information technology systems cannot be completely protected against certain events such as natural disasters, fraud, computer viruses, hacking, communication failures, equipment breakdown, software errors and other technical problems. However, our security framework allows us to minimize and manage these risks through the use of enabling technologies such as, but not limited to, firewalls, mail & web filtering, endpoint protection, antivirus and antimalware, access lists, encryption and hardening.

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In addition, our business operations routine involves gathering personal information about vendors, distributors, customers and employees among others, through the use of information technologies. Breaches of our systems or those of our third-party contractors, or other failures to protect such information, could expose such people’s personal information to unauthorized use. Any such event could give rise to a significant potential liability and reputational harm.

During 2021 and 2020, we encountered an increased number of non-material phishing attempts which consisted on fake e-mails requesting minor payments and/or confidential information and e-mails with malicious files successfully quarantined and contained as well as sporadic attempted attacks, minor and unsuccessful, on our infrastructure. As mentioned, none of these attempts were material nor had any major consequences for our operations or our customers. However, we cannot guarantee any future events will not affect our operations or customers. We are constantly improving and strengthening our security strategy by aligning it with Security Frameworks and Best Practices such as NIST and ISO 27000.

Because of the costs and difficulties inherent in managing cross-border business operations, the Company’s results of operations may be negatively impacted.

Managing a business, operations, personnel or assets in another country is challenging and costly. Management may be inexperienced in cross-border business practices and unaware of significant differences in accounting rules, legal regimes and labor practices. Even with a seasoned and experienced management team, the costs and difficulties inherent in managing cross-border business operations, personnel and assets can be significant (and much higher than in a purely domestic business) and may negatively impact the Company’s financial and operational performance.

Our distributors are independent contractors and not employees. If regulatory authorities were to determine, however, that our distributors are legally our employees, BWM could have significant liability under social benefit laws.

BWM’s distributors are self-employed and are not our employees. Periodically, the question of the legal status of our distributors has arisen, usually with regard to possible coverage under social benefit laws that would require BWM to make regular contributions to social benefit funds. We cannot guarantee there will not be a future determination adverse to this criteria, which would substantial and materially adversely affect our business and financial condition.

BWM depends on multiple contract manufacturers mostly located in China, and the loss of the services provided by any of our manufacturers could harm our business and results of operations.

BWM has outsourced product manufacturing functions to third-party contractors mainly located in China. In 2021, products supplied by Chinese manufacturers accounted for approximately 94% of BWM’s revenues.

If these suppliers have unscheduled downtime or are unable to fulfill their obligations under these manufacturing agreements because of political or regulatory restrictions, equipment breakdowns, natural disasters, health diseases or health epidemics, such as the COVID-19 virus, or any other cause, this could adversely affect BWM’s overall operations and financial condition.

Also, although BWM provides all of the formulations used to manufacture our products, BWM has limited control over the manufacturing process itself. As a result, any difficulties encountered by the third-party manufacturer that result in product defects, production delays, cost overruns, or the inability to fulfill orders on a timely basis could have a material adverse effect on our business, financial condition and operating results.

During the second half of 2021 and as consequence of the COVID-19 pandemic, we faced external headwind as supply chain disruption in China, specifically due to increases in sea freight prices and the rationing of energy, has caused partial and total shutdowns of some factories. We cannot predict future events that could further disrupt our supply chain. If these events continue, our results of operations could be negatively impacted.

Goodwill, property, plant and equipment and intangible assets represent a significant portion of Betterware’s statement of financial position and our operating results may suffer from possible impairments.

Goodwill, property, plant and equipment and intangible assets in Betterware’s statement of financial position derived from past business combinations carried out by BWM, are further explained in the notes to the consolidated and combined financial statements

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located elsewhere in this annual report. Goodwill and intangible assets with indefinite useful lives are tested for impairment at least annually. Property, plant and equipment and intangible assets with definite useful lives are tested for impairment whenever there is an indication that these assets may be impaired. In the case of an impairment, we will recognize charges to our operating results based on the impairment assessment processes. In addition, future acquisitions may be made by BWM and a portion of the purchase price of these acquisitions may be allocated to acquired goodwill, property, plant and equipment and intangible assets. An impairment on property, plant and equipment or goodwill of acquired businesses could have a material adverse effect on our financial condition and results of operations.

The COVID-19 virus (nCoV), as well as any other public health crises that may arise in the future, is having and will likely continue to have a negative impact on our gross margins and in our results of operation.

In late December 2019, a notice of pneumonia of unknown cause originating from Wuhan, Hubei province of China was reported to the World Health Organization. A novel COVID-19 virus (nCoV) was identified, with cases soon confirmed in multiple provinces in China, as well as in several other countries. The Chinese government placed Wuhan and multiple other cities in Hubei province under quarantine, with approximately 60 million people affected. On March 11, 2020, the World Health Organization declared the coronavirus outbreak a pandemic. The ongoing COVID-19 has resulted in several cities be placed under quarantine, increased travel restrictions from and to several countries, such as the U.S., China, Italy, Spain and Mexico which had forced extended shutdowns of certain businesses in certain regions.

While it has eased, the COVID-19 pandemic continues to impact worldwide economic activity and continues to pose the risk that we or our employees, contractors, suppliers, customers, and other business partners may be prevented from conducting certain business activities for an indefinite period of time, including future shutdowns that may be mandated or reinstated by governmental authorities or otherwise elected by companies as a preventive measure.  In addition, mandated government authority measures or other measures elected by companies as preventive measures may lead to our consumers being unable to complete purchases or other activities.  Furthermore, its impact on the global and local economies has also adversely impacted and will likely continue to impact consumer discretionary spending

Our operations were not interrupted as a result of the COVID-19 pandemic. However, during the second half of 2021, people initiated the return to their normal lifestyles. As a result, some of the people that had joined our network during 2020, went back to their customary activities and decided to not continue selling our products, thus resulting on a higher-than-average churn rate for associates peaking at 4.6% a week (vs historical average churn rate of 2.8% a week) and a consequent mild decline in our average network of associates and distributors. This affected and will likely continue affecting our results of operations for so long as the COVID-19 pandemic continues to impact global and local economies.

Based on assumptions regarding the impact of the COVID-19 pandemic, we believe that our current financial resources, coupled with cash generation from operations, are sufficient to fund our liquidity requirements for the next 12 months, subject to a number of factors including, but not limited, to the evolution of the pandemic in the world, and more specifically its impact in our business.  Although impact of COVID-19 pandemic has eased as restrictions have been or are being lifted in most of the countries we operate, the continuing impact of COVID-19 pandemic remains uncertain and may continue to affect our operations, for so long as the health crisis and the virus impact continues, including the emergence of new strains such as the Omicron or Delta variant, of the virus arise.

Material weaknesses have been identified in Betterware’s internal control over financial reporting, and if we fail to establish and maintain proper and effective internal controls over financial reporting, our results of operations and our ability to operate our business may be harmed.

As of December 31, 2021, management has identified significant deficiencies which, when aggregated represent material weakness associated with the components of COSO, mainly related with the insufficient policies and procedures to review, analyze, account for and disclose significant and complex accounting matters. Additionally, we were not able to test certain information technology (“IT”) general and application controls during the entire reporting period as such controls were implemented at the last quarter of the year. We expect to finalize the implementation of IT General controls during the first half of 2022.

During 2021, the Company changed its status from an emerging growth company to an accelerated filer and, as consequence thereof, became subject to additional disclosure requirements. Therefore, the Company started the implementation of a formal internal

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control over financial reporting program based on a top-down risk assessment to validate the existence of controls over significant, accounts, processes, applications and IT environments. See “Disclosure Controls and Procedures—Control and Procedures.”

If we fail to establish and maintain proper and effective internal controls over financial reporting or adequately resolve our existing material weakness, our results of operations and our ability to operate our business may be harmed.

Betterware’s controlling shareholder may have interests that conflict with your interests.

As of the date of this annual report, Campalier owns approximately 53.38% of the outstanding common stock of Betterware. As the controlling shareholder, Campalier may take actions that are not in the best interests of the Company’s other shareholders. These actions may be taken in many cases even if they are opposed by the Company’s other shareholders. In addition, this concentration of ownership may discourage, delay or prevent a change in control which could deprive you of an opportunity to receive a premium for your Ordinary Shares as part of a sale of the Company.

Our business and results of operations may be adversely affected by the increased strain on our resources from complying with the reporting, disclosure and other requirements applicable to public companies in the United States promulgated by the U.S. Government, Nasdaq or other relevant regulatory authorities.

Compliance with existing, new and changing corporate governance and public disclosure requirements adds uncertainty to our compliance policies and increases our costs of compliance. Changing laws, regulations and standards include those relating to accounting, corporate governance and public disclosure, including the Dodd-Frank Wall Street Reform and Consumer Protection Act, the Sarbanes-Oxley Act of 2002, new SEC regulations and the Nasdaq listing guidelines. These laws, regulations and guidelines may lack specificity and are subject to varying interpretations. Their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. In particular, compliance with Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”) and related regulations regarding required assessment of internal controls over financial reporting and our external auditor’s audit of that assessment, requires the commitment of significant financial and managerial resources. We also expect the regulations to increase our legal and financial compliance costs, making it more difficult to attract and retain qualified officers and members of our board of directors, particularly to serve on our audit committee, and make some activities more difficult, time-consuming and costly.

Existing, new and changing corporate governance and public disclosure requirements could result in continuing uncertainty regarding compliance matters and higher costs of compliance as a result of ongoing revisions to such governance standards. Our efforts to comply with evolving laws, regulations and standards have resulted in, and are likely to continue to result in, increased general and administrative expenses. In addition, new laws, regulations and standards regarding corporate governance may make it more difficult for our company to obtain director and officer liability insurance. Further, our board members and senior management could face an increased risk of personal liability in connection with their performance of duties. As a result, we may face difficulties attracting and retaining qualified board members and senior management, which could harm our business. If we fail to comply with new or changed laws or regulations and standards differ, our business and reputation may be harmed.

We may not successfully integrate JAFRA into our operations.

We consider acquisitions a useful instrument to complement our organic growth. We opportunistically explore acquiring other businesses and assets, and we have recently completed the JAFRA Acquisition. 

However, we may face financial, managerial and operational challenges, including diversion of management attention and resources needed for existing operations, difficulties with integrating acquired businesses, including JAFRA, integration of different corporate cultures, increased expenses, potential dilution of our brand, assumption of unknown liabilities, potential disputes with the sellers and the need to evaluate the financial systems of and establish internal controls for acquired entities. Further, we seek out acquisitions of companies that maintain the same high quality standards that we maintain, and if we misjudge or overestimate a JAFRA’s product quality standards, we may not be able to use these products or implement the strategies that were the primary reason for the JAFRA Acquisition, which would lead to a significant loss both financially and in time spent by our teams trying to integrate the products or implement the strategy.

In addition, our ability to realize the benefits we anticipate from our acquisition activities, including the JAFRA Acquisition, including any anticipated sales growth, cost synergies and other anticipated benefits, will depend in large part upon whether we are able to integrate such businesses efficiently and effectively. Integration is an ongoing process, and we may not be able to fully integrate such

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businesses smoothly or successfully, and the process may take longer than expected. Further, the integration of certain operations and the differences in operational culture following such activity will continue to require the dedication of significant management resources, which may distract management’s attention from day-to-day business operations.

There may also be unasserted claims or assessments that we failed or were unable to discover or identify in the course of performing due diligence investigations of target businesses. While we normally negotiate representation and warranties and related indemnification in relation to such acquisitions, these may not be enough to cover our exposure if a significant liability arises in connection with any acquisition agreement, including the JAFRA Acquisition. We cannot assure you that these indemnification provisions will protect us fully or at all, and as a result we may face unexpected liabilities that could adversely affect our business, financial condition and results of operations.

If we are unable to successfully integrate the operations of JAFRA, or any other acquired business, into our business, we may be unable to realize the sales growth, cost synergies and other anticipated benefits of such transactions, and our business, results of operations and cash flow could be adversely affected.

Risks Related to Mexico

Since our operations are concentrated in Mexico, economic developments in Mexico may adversely affect our business and results of operations.

Currently, almost all of our operations are conducted, and almost all of our customers are located, in Mexico. Accordingly, our ability to raise revenues, our financial condition and results of operations are substantially dependent on the economic conditions prevailing in Mexico. As a result, our business may be significantly affected by the Mexican economy’s general condition, by the depreciation of the Mexican peso, by inflation and high interest rates in Mexico, or by political developments in Mexico. Declines in growth, high rates of inflation and high interest rates in Mexico have a generally adverse effect on our operations. If inflation in Mexico increases while economic growth slows, our business, results of operations and financial condition will be affected. In addition, high interest rates and economic instability could increase our costs of financing. For the years ended December 31, 2020, and 2021, GDP decreased 8.2% and increase 4.8%, respectively.

During 2019 and 2020, Mexico’s sovereign debt rating has been subject to downward revisions and negative outlooks from major rating agencies as a result of such agencies assessment of the overall financial capacity of the government of Mexico to pay its obligations and its ability to meet its financial commitments as they become due, citing among other factors, concerns with the state oil company (Petróleos Mexicanos, or “PEMEX”), and weakness in the macroeconomic outlook due to, among other things, trade tensions and political decisions. We cannot ensure that the rating agencies will not announce additional downgrades of Mexico and/or PEMEX in the future. These downgrades could adversely affect the Mexican economy and, consequently, our business, financial condition, operating results and prospects.

In the event that the Mexican economy continues to experience a deterioration of economic conditions such as inflation, interest rate increases, downgrade of sovereign debt, among other factors, the activities, financial situation, operating results, cash flows and/or prospects of the Company, could be adversely and significantly affected.

Developments in other countries could materially affect the Mexican economy and, in turn, our business, financial condition and results of operations.

Mexico’s economy is vulnerable to global market downturns and economic slowdowns. The global economy, including Mexico’s economy, has been materially and adversely affected by a significant lack of liquidity, disruption in the credit markets, reduced business activity, rising unemployment, interest rates changes and erosion of consumer confidence during the global pandemic and its effects. This situation has had a direct adverse effect on the purchasing power of our customers in Mexico. The macroeconomic environment in which we operate is beyond our control, and the future economic environment may continue to be less favorable than in recent years. There is no assurance of a strong economic recovery or that the current economic conditions will ameliorate. The risks associated with current and potential changes in the Mexican economy are significant and could have a material adverse effect on our business and results of operations.

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The market prices of securities issued by companies with Mexican operations are affected to varying degrees by the economic and market situation in other places, including the United States, China, the rest of Latin America and other countries with emerging markets. Therefore, investors’ reactions to events in any of these countries could have an adverse effect on the market price of securities issued by companies with Mexican operations. Past economic crises that have occurred in the United States, China or in countries with emerging markets could cause a decrease in the levels of interest in the securities issued by companies with Mexican operations.

In the past, the emergence of adverse economic conditions in other emerging countries has led to capital flight and, consequently, to decreases in the value of foreign investments in Mexico. The financial crisis that arose in the United States during the third quarter of 2008, unleashed a global recession that directly and indirectly affected the economy and the Mexican stock markets and caused, among other things, fluctuations in purchase prices the sale of securities issued by publicly traded companies, shortage of credit, budget cuts, economic slowdowns, volatility in exchange rates, and inflationary pressures.

Financial problems or an increase in risk related to investment in emerging economies or a perception of risk could limit foreign investment in Mexico and adversely affect the Mexican economy. Mexico has historically experienced uneven periods of economic growth and the economy as a whole has recently been adversely affected by the current global recession. There can be no assurance that the overall business environment in which we operate will improve and we cannot predict the impact any future economic downturn could have on our results of operations and financial condition. However, consumer demand generally decreases during economic downturns, which will negatively affect our business and results of operations.

The political situation in Mexico could negatively affect our operating results.

Mexican political events may significantly affect our business operations. As of this date, the president’s political party and its allies hold a majority in the Chamber of Deputies and the Senate and a strong influence in various local legislatures. The federal administration has significant power to implement substantial changes in law, policy and regulations in Mexico, including Constitutional reforms, which could negatively affect our business, results of operations, financial condition and prospects. We cannot predict whether potential changes in Mexican governmental and economic policy could adversely affect Mexico’s economic conditions or the sector in which we operate. We cannot provide any assurances that political developments in Mexico, over which we have no control, will not have an adverse effect on our business, results of operations, financial condition and prospects.

As of this date and after the mid-term elections held on June 6, 2021, the political party Movimiento Regeneración Nacional (National Regeneration Movement, or “Morena”) lost the absolute majority in the Cámara de Diputados (Chamber of Deputies) that it had held since 2018. However, Morena continues to hold the most seats relative to any other political party. We cannot predict the impact that political developments in Mexico will have on the Mexican economy nor can provide any assurances that these events, over which we have no control, will not have an adverse effect on our business, financial condition and results of operations.

The Mexican federal government has made significant changes to policies and regulations and may continue to do so in the future. For instance, the Mexican federal government drastically cut spending for the 2019 budget and it may cut spending in the future which may adversely affect economic growth. On July 2, 2019, the new Mexican Federal Republican Austerity Law (Ley Federal de Austeridad Republicana) was approved by the Mexican Senate. Federal government actions, such as those implemented to control inflation, federal spending cuts and other regulations and policies may include, among other measures, increases in interest rates, changes in tax policies, price controls, currency devaluations, capital controls and limits on imports. Our business, financial condition and results of operations may be adversely affected by changes in governmental policies or regulations involving or affecting our management, operations and tax regime.

We cannot predict the impact that economic, social and political instability in or affecting Mexico could adversely affect our business, financial condition and results of operations, as well as market conditions and prices of our securities. These and other future developments, over which we have no control, in the Mexican economic, political or social environment may cause disruptions to our business operations and decreases in our sales and net income

Currency exchange rate fluctuations, particularly with respect to the US dollar/Mexican peso exchange rate, could lower margins.

The value of the Mexican peso has been subject to significant fluctuations with respect to the U.S. dollar in the past and may be subject to significant fluctuations in the future. Historically, BWM has been able to raise their prices generally in line with local

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inflation, thereby helping to mitigate the effects of devaluations of the Mexican peso. However, BWM may not be able to maintain this pricing policy in the future, or future exchange rate fluctuations may have a material adverse effect on our ability to pay suppliers.

Given Betterware’s inability to predict the degree of exchange rate fluctuations, it cannot estimate the effect these fluctuations may have upon future reported results, product pricing or our overall financial condition. Although we attempt to reduce our exposure to short-term exchange rate fluctuations by using foreign currency exchange contracts, it cannot be certain that these contracts or any other hedging activity will effectively reduce exchange rate exposure. In particular, BWM currently employs a hedging strategy comprised of forwards U.S. dollar–Mexican peso derivatives that are designed to protect us against devaluations of the Mexican peso. The hedging contracts cover 100% of the product needs until October 2022. In addition, We generally purchase our hedging instruments on a rolling twelve-month basis; instruments protecting it to the same or a similar extent may not be available in the future on reasonable terms. Unprotected declines in the value of the Mexican peso against the U.S. dollar will adversely affect our ability to pay our dollar-denominated expenses, including our supplier obligations.

Any adverse changes in BWM’s business operations in Mexico would adversely affect our revenue and profitability.

BWM’s revenue is generated in Mexico. Various factors could harm BWM’s business in Mexico. These factors include, among others:

worsening economic conditions, including a prolonged recession in Mexico;
fluctuations in currency exchange rates and inflation;
longer collection cycles;
potential adverse changes in tax laws;
changes in labor conditions;
burdens and costs of compliance with a variety of laws;
political, social and economic instability;
increases in taxation; and
outbreaks of disease and health epidemics, such as the COVID-19 virus.

Economic and political developments in Mexico and the United States may adversely affect Mexican economic policy.

The U.S. economy heavily influences the Mexican economy, and therefore, the deterioration of the United States’ economy, the termination of the United States-Mexico-Canada trade agreement (“USMCA)”, claims thereunder or other related events may impact the economy of Mexico. Economic conditions in Mexico have become increasingly correlated to economic conditions in the United States as a result of the North American Free Trade Agreement (“NAFTA”), and, subsequently, the USMCA, which has induced higher economic activity between the two countries and increased the remittance of funds from Mexican immigrants working in the United States to Mexican residents. On an annual basis, as of 2020, close to 81% of Mexico’s total exports are purchased by the United States, the single country with the highest share of trade with Mexico. Due to its recent entry into force, it is currently unclear what the results of the USMCA and its implementation will be. The new terms of the USMCA could have an impact on Mexico’s economy generally and job creation in Mexico, which could significantly adversely affect our business, financial performance and results of operations.

Likewise, any action taken by the current U.S. or Mexico administrations, including changes to the USMCA and/or other U.S. government policies that may be adopted by the U.S. administration, could have a negative impact on the Mexican economy, such as reductions in the levels of remittances, reduced commercial activity or bilateral trade or declining foreign direct investment in Mexico. In addition, increased or perceptions of increased economic protectionism in the United States, Mexico and other countries could potentially lead to lower levels of trade and investment and economic growth, which could have a similarly negative impact on the

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Mexican economy. These economic and political consequences could adversely affect our business, operating results and financial condition.

We cannot make assurances that any events in the United States or elsewhere will not materially and adversely affect us.

Mexico is an emerging market economy, with attendant risks to BWM’s results of operations and financial condition.

The Mexican government has exercised, and continues to exercise, significant influence over the Mexican economy. Accordingly, Mexican governmental actions concerning the economy and state-owned enterprises could have a significant impact on Mexican private sector entities in general, as well as on market conditions, prices and returns on Mexican securities. The national elections held on July 2, 2018 ended six years of rule by the Institutional Revolutionary Party or PRI with the election of President Andres Manuel Lopez Obrador, a member of the Morena Party, and resulted in the increased representation of opposition parties in the Mexican Congress and in mayoral and gubernatorial positions. Multiparty rule is still relatively new in Mexico and could result in economic or political conditions that could materially and adversely affect BWM’s operations. BWM cannot predict the impact that this new political landscape will have on the Mexican economy. Furthermore, BWM’s financial condition, results of operations and prospects and, consequently, the market price for our shares, may be affected by currency fluctuations, inflation, interest rates, regulation, taxation, social instability and other political, social and economic developments in or affecting Mexico.

The Mexican economy in the past has suffered balance of payment deficits and shortages in foreign exchange reserves. There are currently no exchange controls in Mexico; however, Mexico has imposed foreign exchange controls in the past. Pursuant to the provisions of the United States-Mexico-Canada Agreement, if Mexico experiences serious balance of payment difficulties or the threat thereof in the future, Mexico would have the right to impose foreign exchange controls on investments made in Mexico, including those made by U.S. and Canadian investors.

Securities of companies in emerging market countries tend to be influenced by economic and market conditions in other emerging market countries. Emerging market countries, including Argentina and Venezuela, have recently been experiencing significant economic downturns and market volatility. These events could have adverse effects on the economic conditions and securities markets of other emerging market countries, including Mexico.

Investments in Mexican companies entail substantial risk; the Mexican government has exercised, and continues to exercise, an important influence on the Mexican economy

Investments in Mexico carry significant risks, including the risk of expropriation or nationalization laws being enacted or imposing exchange controls, taxes, inflationary, hyperinflationary, exchange rate risk, credit risk, among other governmental or political restrictions. We are incorporated under the laws of Mexico and most of our operations and assets are located in Mexico. As a consequence of the foregoing, our financial situation and operating results could be negatively affected.

The Mexican government has exercised, and continues to exercise, a strong influence on the country’s economy. Consequently, Mexican federal government actions and policies related to the economy, state-owned and controlled companies, and financial institutions financed or influenced, could have a significant impact on private sector entities in general, including us, in particular and on market conditions, prices and returns on Mexican securities, including counterparty risk. The Mexican federal government has made major policy and regulatory changes and may do so again in the future. Actions to control inflation and other regulations and policies have involved, among other measures, an increase in interest rates, changes in fiscal policies, price controls, currency devaluations, capital controls and limits on imports. Tax and labor legislation, in particular, in Mexico is subject to continuous change, and we cannot guarantee that the Mexican government will maintain current economic or other policies in force or if any the changes to such laws and policies would have a material adverse effect on us or on our financial performance. The measures adopted by the government could have a significant effect on private sector entities in general, as well as on the market situation and on the price of our shares.

Additionally, the Mexican federal government has implemented protectionist policies in the past and could implement certain national policies in the future that could restrict our operations, including restrictions on imports from certain countries.

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Mexico may experience high levels of inflation in the future, which could affect BWM’s results of operations.

Historically, inflation in Mexico has led to higher interest rates, depreciation of the Mexican peso and the imposition of substantial government controls over exchange rates and prices. The annual rate of inflation for the last three years, as measured by changes in the Mexican National Consumer Price Index (Índice Nacional de Precios al Consumidor), as provided by INEGI and as published by Banco de México, was 2.8% in 2019, 3.2% in 2020 and 7.4% in 2021. If Mexico experiences high levels of inflation as it has in the past, these might adversely affect our operations and financial performance. For example, during 2021, due to inflation effects, our business was impacted by a sluggish consumer in Mexico and by external factors related to cost pressures and supply chain disruptions prevailing globally.

In addition, increased inflation would raise our cost of funding, which we may not be able to fully pass on to our customers, given that doing so could adversely affect our business. Our financial condition and profitability may be adversely affected by the level of, and fluctuations in, interest rates, which affect our ability to earn a spread between the interest received on our loans or the rentals and fees charged on our leases and the cost of our funding. Although we have taken measures to minimize the potential impact of inflation by ensuring that the majority of our liabilities have fixed interest rates, if the rate of inflation increases or becomes uncertain and unpredictable, our business, financial condition and results of operations could be adversely affected

Security violence risks in Mexico could increase, and this could adversely affect our results.

Mexico is currently experiencing high levels of violence and crime due to, among others, the activities of organized crime. Despite the measures adopted by the Mexican government efforts, organized crime (especially drug-related crime) continues to exist and operate in Mexico. These activities, their possible escalation and the violence associated with them have had and may have a negative impact on the Mexican economy or on our operations in the future. The presence of violence among drug cartels, and between these and the Mexican law enforcement and armed forces, or an increase in other types of crime, pose a risk to our business, and might negatively impact business continuity.

The regulatory environment in which Betterware operates is evolving, and our operations may be modified or otherwise harmed by regulatory changes, subjective interpretations of laws or an inability to work effectively with national and local government agencies.

Although BWM reviews applicable local laws in developing our plans, our efforts to comply with them may be harmed by an evolving regulatory climate and subjective interpretation of laws by the authorities. Any determination that BWM’s operations or activities are not in compliance with applicable regulations could negatively impact our business and our reputation with regulators in the markets in which we operate.

Laws and regulations may restrict Betterware’s direct sales efforts and harm our revenue and profitability.

Various government agencies throughout the world regulate direct sales practices. These laws and regulations are generally intended to prevent fraudulent or deceptive schemes, often referred to as “pyramid” schemes, that compensate participants for recruiting additional participants irrespective of product sales and/or which do not involve legitimate products. The laws and regulations in BWM’s current markets often:

impose on it order cancellations, product returns, inventory buy-backs and cooling-off rights for consumers and distributors;
require us or our distributors to register with governmental agencies;
impose on it reporting requirements to regulatory agencies; and/or
require it to ensure that distributors are not being compensated solely based upon the recruitment of new distributors.

Complying with these sometimes inconsistent rules and regulations can be difficult and requires the devotion of significant resources on BWM’s part.

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In addition, Mexico could change its laws or regulations to negatively affect or prohibit completely network or direct sales efforts. Government agencies and courts in Mexico may also use their powers and discretion in interpreting and applying laws in a manner that limits BWM’s ability to operate or otherwise harms our business. If any governmental authority were to bring a regulatory enforcement action against BWM that interrupts BWM’s business, our revenue and earnings would likely suffer.

You may have difficulty enforcing your rights against Betterware and our directors and executive officers.

Betterware is a company incorporated in Mexico. All our directors and executive officers are non-residents of the U.S. You may be unable to effect service of process within the U.S. on Betterware, its directors and executive officers. In addition, as all of our assets and substantially all of the assets of our directors and executive officers are located outside of the U.S., you may be unable to enforce against BWM and our directors and executive officers’ judgments obtained in the U.S. courts, including judgments predicated upon civil liability provisions of the U.S. federal securities laws or state securities laws. There is also doubt as to the enforceability, in original actions in Mexican courts, of liabilities including those predicated solely on U.S. federal securities laws and as to the enforceability in Mexican courts of judgments of U.S. courts obtained in actions, including those predicated upon the civil liability provisions of U.S. federal securities laws. There is no bilateral treaty currently in effect between the United States and Mexico that covers the reciprocal enforcement of civil foreign judgments. In the past, Mexican courts have enforced judgments rendered in the United States by virtue of the legal principles of reciprocity and comity, consisting of the review in Mexico of the United States judgment, in order to ascertain, among other matters, whether Mexican legal principles of due process and public policy (orden público) have been complied with, without reviewing the merits of the subject matter of the case.

Risks Related to Ownership of our Ordinary Shares

As a “foreign private issuer” under the rules and regulations of the SEC, Betterware is permitted to, and is expected to, file less or different information with the SEC than a company incorporated in the United States or otherwise subject to these rules, and is expected to follow certain home country corporate governance practices in lieu of certain Nasdaq requirements applicable to U.S. issuers.

Betterware is considered a “foreign private issuer” under the Exchange Act and therefore exempt from certain rules under the Exchange Act, including the proxy rules, which impose certain disclosure and procedural requirements for proxy solicitations for U.S. and other issuers. Moreover, the Company is not required to file periodic reports and financial statements with the SEC as frequently or within the same time frames as U.S. companies with securities registered under the Exchange Act. We currently prepare our financial statements in accordance with IFRS. The Company is not required to file financial statements prepared in accordance with or reconciled to U.S. GAAP so long as our financial statements are prepared in accordance with IFRS. The Company is not required to comply with Regulation FD, which imposes restrictions on the selective disclosure of material information to shareholders. In addition, the Company’s officers, directors and principal shareholders are exempt from the reporting and short-swing profit recovery provisions of Section 16 of the Exchange Act and the rules under the Exchange Act with respect to their purchases and sales of Company securities.

In addition, as a “foreign private issuer” whose shares are listed on Nasdaq, the Company is permitted to, and is expected to, follow certain home country corporate governance practices in lieu of certain Nasdaq requirements. A foreign private issuer must disclose in its annual reports filed with the SEC each Nasdaq requirement with which it does not comply followed by a description of its applicable home country practice. As a Mexican corporation listed on Nasdaq, the Company is expected to follow our home country practice with respect to the composition of the board of directors and nominations committee and executive sessions. Unlike the requirements of Nasdaq, the corporate governance practices and requirements in Mexico do not require the Company to have a majority of its board of directors to be independent; do not require the Company to establish a nominations committee; and do not require the Company to hold regular executive sessions where only independent directors shall be present. Such home country practices of Mexico may afford less protection to holders of Company shares.

The Company could lose its status as a “foreign private issuer” under current SEC rules and regulations if more than 50% of the Company’s outstanding voting securities become directly or indirectly held of record by U.S. holders and one of the following is true: (i) the majority of the Company’s directors or executive officers are U.S. citizens or residents; (ii) more than 50% of the Company’s assets are located in the United States; or (iii) the Company’s business is administered principally in the United States. If the Company loses its status as a foreign private issuer in the future, it will no longer be exempt from the rules described above and, among other things, will be required to file periodic reports and annual and quarterly financial statements as if it were a company incorporated in the United States. If this were to happen, the Company would likely incur substantial costs in fulfilling these additional regulatory

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requirements and members of the Company’s management would likely have to divert time and resources from other responsibilities to ensuring these additional regulatory requirements are fulfilled.

If securities or industry analysts do not publish or cease publishing research or reports about Betterware, our business, or markets, or if they change their recommendations regarding the Company shares adversely, the price and trading volume of the Company shares could decline.

The trading market for the Company shares is influenced by the research and reports that industry or securities analysts may publish about the Company, our business, market or competitors. Securities and industry analysts do not currently, and may never, publish research on the Company. If no securities or industry analysts commence coverage of the Company, the price and trading volume of the Company shares would likely be negatively impacted. If any of the analysts who may cover the Company change their recommendation regarding the Company shares adversely, or provide more favorable relative recommendations about the Company’s competitors, the price of the Company shares would likely decline. If any analyst who may cover the Company were to cease coverage of the Company or fail to regularly publish reports on it, the Company could lose visibility in the financial markets, which in turn could cause our share price or trading volume to decline.

There can be no assurance that Betterware will be able to comply with the continued listing standards of Nasdaq.

Betterware’s shares are listed on Nasdaq under the symbol “BWMX.” If Nasdaq delists the Company’s securities from trading on its exchange for failure to meet the listing standards, the Company and its shareholders could face significant material adverse consequences including:

a limited availability of market quotations for the Company’s securities;
a determination that the Company shares are “penny stock” which will require brokers trading in the Company shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the Company shares;
a limited amount of analyst coverage; and
a decreased ability to issue additional securities or obtain additional financing in the future.

If Betterware is characterized as a passive foreign investment company, or a PFIC, adverse U.S. federal income tax consequences may result for U.S. holders of Company shares.

Based on the projected composition of our income and assets, including goodwill, it is not expected that the Company will be a PFIC for its taxable year that includes the date of the Merger or in the foreseeable future. However, the tests for determining PFIC status are applied annually after the close of the taxable year, and it is difficult to predict accurately future income and assets relevant to this determination. Accordingly, there can be no assurance that the Company will not be considered a PFIC for any taxable year.

If the Company is a PFIC for any year during which a U.S. holder holds Company shares, a U.S. holder generally would be subject to additional taxes (including taxation at ordinary income rates and an interest charge) on any gain realized from a sale or other disposition of the Company shares and on any “excess distributions” received from the Company. Certain elections may be available that would result in alternative treatments of the Company shares.

We urge U.S. holders to consult their own tax advisors regarding the possible application of the PFIC rules to the ownership of Company shares.

An investor may be subject to adverse U.S. federal income tax consequences in the event the IRS were to disagree with the U.S. federal income tax consequences described herein.

The Tax Cuts and Jobs Act of 2017, or the TCJA, was signed into law on December 22, 2017. The TCJA changes many of the U.S. corporate and international tax provisions, and certain of the provisions are unclear. No ruling has been or will be requested from

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the IRS as to any U.S. federal income tax consequences described herein. The IRS may disagree with the descriptions of U.S. federal income tax consequences contained herein, and its determination may be upheld by a court. Any such determination could subject an investor or the Company to adverse U.S. federal income tax consequences that would be different than those described herein. Accordingly, each prospective investor is urged to consult a tax advisor with respect to the specific tax consequences of the acquisition, ownership and disposition of DD3’s or the Company’s securities, including the applicability and effect of state, local or non-U.S. tax laws, as well as U.S. federal tax laws.

The Amended and Restated Charter of Betterware provides for the exclusive jurisdiction of the federal courts in Mexico City, Mexico for substantially all disputes between the Company and its shareholders, which could limit Company shareholders’ ability to obtain a favorable judicial forum for disputes with the Company or its directors, officers, other employees or shareholders.

The Amended and Restated Charter of the Company provides for the exclusive jurisdiction of the federal courts located in Mexico City, Mexico for the following civil actions:

any action between the Company and its shareholders; and
any action between two or more shareholders or groups of shareholders of the Company regarding any matters relating to the Company.

This exclusive jurisdiction provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or any of its directors, officers, other employees or shareholders, which may discourage lawsuits with respect to such claims, although the Company’s shareholders will not be deemed to have waived the Company’s compliance with U.S. federal securities laws and the rules and regulations thereunder applicable to foreign private issuers. Alternatively, if a court were to find the exclusive jurisdiction provision contained in the Amended and Restated Charter to be inapplicable or unenforceable in an action, the Company may incur additional costs associated with resolving such action in other jurisdictions, which could harm the Company’s business, operating results and financial condition. The exclusive jurisdiction provision would not prevent derivative shareholder actions based on claims arising under U.S. federal securities laws from being raised in a U.S. court and would not prevent a U.S. court from asserting jurisdiction over such claims. However, there is uncertainty whether a U.S. court would enforce the exclusive jurisdiction provision for actions for breach of fiduciary duty and other claims.

The anti-takeover protections included in our Bylaws and others provided under Mexican Law may deter potential acquirors

Our bylaws provide that, subject to certain exceptions as explained below, prior written approval from the board of directors shall be required for any person, or group of persons to acquire, directly or indirectly, any of our common shares or rights to our common shares, by any means or under any title whether in a single event or in a set of consecutive events, such that its total shares or rights to shares would represent 20% or more of our outstanding shares.

These provisions could make it substantially more difficult for a third party to acquire control of us. These provisions in our bylaws may discourage certain types of transactions involving the acquisition of our securities. These provisions could discourage transactions in which our shareholders might otherwise receive a premium for their shares over the then current market price. Holders of our securities who acquire shares in violation of these provisions will not be able to vote, or receive dividends, distributions or other rights in respect of, these securities and would be obligated to pay us a penalty. For a description of these provisions, see “Item 10. Additional Information—Bylaws——Anti-takeover Protections.”

Environmental laws and regulations risks:

Our operations are subject to a wide range of environmental laws and regulations in each of the jurisdictions in which we operate. These laws and regulations impose increasingly rigorous environmental protection standards. According to the General Law of Ecological Balance and Environmental Protection (Ley General de Equilibrio Ecológico y la Protección al Ambiente or LGEEPA in Spanish) in Mexico, organizations must comply with the following: (i) guarantee the human right of every person to a healthy environment for their development and well-being; (ii) the preservation, restoration and improvement of the environment; (iii) the preservation and protection of biodiversity, as well as the establishment and administration of protected natural areas; (iv) the sustainable use, preservation and, where appropriate, restoration of soil, water and other natural resources, so that they are compatible for obtaining economic benefits and the activities of society with the preservation of the ecosystems; (v) prevention and control of air, water and soil

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pollution, among others. The establishment of these controls and security measures exposes us to a risk of significant environmental costs and responsibilities, such as taxes, investment in equipment and technology, investment in spaces for development and well-being, fines and penalties. In addition, we are exposed to the fact that, over time, these laws and regulations may become more stringent over existing ones, which could lead to the imposition of new risks and costs resulting in a decrease in our profitability.

Since Betterware is a public company in Mexico and the United States of America, in addition to the laws and regulations that apply to us locally, we are required to comply with such laws and regulations in the United States and other parts of the world. It is worth to mention that, within our operations, 94% of Betterware products are imported from China, so we are bounded to comply with international environmental measures. Environmental requirements can restrict trade, that is, the member governments of the World Trade Organization (WTO), to which they belong, Mexico, the United States and China, consider that the protection of the environment and health are legitimate politic objectives. They also recognize that the measures adopted to achieve these objectives may restrict exports, which could lead to increased transportation and import costs for the products we sell to our customers. The WTO agrees that sustainable development depends on improving market access for products from developing countries. The environmental standards applied by some countries could be inadequate, causing an unjustified economic and social cost to other developing countries, by restricting exports. Small and medium-sized businesses are especially vulnerable.

ITEM 4.COMPANY INFORMATION

The Company makes its filings in electronic form under the EDGAR filing system of the SEC. Its filings are available through the EDGAR system at www.sec.gov. The Company’s filings are also available to the public through the Internet at the Company’s website at http://ri.betterware.com.mx/.

A.HISTORY AND DEVELOPMENT OF THE COMPANY

Founded in 1995, Betterware is a leading direct-to-costumer company in Mexico. The Company is focused on the home organization segment, with a wide product portfolio including home solutions, kitchen and food preservation, technology and mobility, among other categories.
On July 28, 2017, Betterware entered into a merger agreement with Betterware Controladora, S.A. de C.V. (“BWC”) and Strevo Holding, S.A. de C.V. (controlling company of BWC and in turn, subsidiary of Campalier). Betterware was the surviving entity to such merger and the merged companies ceased to exist.
On August 2, 2019, DD3 entered into a Combination and Stock Purchase Agreement with Sellers, Betterware, BLSM, pursuant to which DD3 agreed to merge with and into Betterware in a Business Combination. See “The Business Combination.”
In August 2019, the Group started building a distribution center which was completed in the first quarter of 2021. At the end of the years 2021, 2020 and 2019, payments related to this construction amounted to Ps.397,000, Ps.508,958 and Ps.165,000, respectively. The total investment amounted to Ps.1,070,958.
On March 13, 2020, the Merger with DD3 was closed and consummated.
On July 14, 2020, Betterware’s corporate name changed from Betterware de México, S.A.P.I. de C.V. to Betterware de México, S.A.B. de C.V.
On December 14, 2020, the Forteza Merger was closed and consummated.
On March 12, 2021, we acquired 60% of GurúComm for Ps.45,000. GurúComm is a Mobile Virtual Network Operator  and communications software developer, with an enterprise value of Ps.75,000 (approximately US$3,500). On March 28, 2022, we withdrew our investment in GurúComm and cancelled the shares subscribed and paid.
On July 22, 2021, we acquired 70% of Innova Catálogos, S.A. de C.V., for Ps.5,000. Innova Catálogos is dedicated to the purchase and sale of clothing, footwear and accessories.

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On August 2, 2021, Betterware’s corporate name changed from Betterware de México, S.A.B. de C.V. to Betterware de México, S.A.P.I. de C.V.

On August 30, 2021, we completed an offering of a two-tranche sustainability bond issuance for a total of Ps.1,500,000, with maturities across 4 and 7 years, offered in the Mexican Market.
On January 18, 2022, we entered into an agreement to acquire 100% of JAFRA’s operations in Mexico and the United States. The transaction was consummated on April 7, 2022. See “—Presentation of Financial Information—The JAFRA Acquisition.”

B.BUSINESS OVERVIEW

Company Overview

Founded in 1995, Betterware is a leading direct-to-customer company in Mexico. BWM is focused on creating innovative products that solve specific needs regarding organization, practicality, space-saving and hygiene within the household, with a wide product portfolio including home solutions, kitchen and food preservation, technology and mobility, bedroom, bathroom, laundry and cleaning, other categories.

Until September 2021, BWM sold its products through nine catalogues published throughout the year (approximately six weeks outstanding each), from October 2021 and onwards, BWM sells its products through twelve catalogues published throughout the year (one per month), with an offer of approximately 340 products in average per catalogue. BWM constantly innovates introducing approximately 338 products every year, representing 11% – 18% of the products in a catalogue. All of the products are Betterware branded with unique characteristics and manufactured by +302 certified manufactures in China and México, and then delivered to BWM’s warehouses in Guadalajara, Jalisco where they process and pack the products.

Betterware sells its products through a unique two-tier sales model that is comprised of more than 50,972 Distributors and 1,063,720 Associates across Mexico, that serve + 24% Household Penetration in Mexico, and 80% of Distributors and 34% of Associates place orders every week. The Distributors and Associates are monitored tightly through an in-house developed business intelligence platform that tracks weekly performance and has a detailed mapping system of the country to identify potential areas to penetrate and increase the network.

BWM’s business model is tailored to Mexico’s unique geographic, demographic and economic dynamics, where communities are small and scattered across the country, with very low retail penetration and difficult to fulfill last mile logistics, middle-income consumers are emerging, and historic high consumer confidence was present during 2021. Additionally, the business model is resilient to economic downturns given low average sales price to consumers and also because being a Distributor or Associate represents an additional source of income for households. As a result, BWM’s operations are not subject to significant seasonal fluctuations.

Betterware has a zero last mile cost, with its Distributors and Associates delivering the products to the final consumers, which means that our state-of-the-art infrastructure allows us to safely deliver products to every part of the country in a timely manner. Our infrastructure is backed by the strategic location of our distribution center in Jalisco, Mexico.

Supported by our top-notch product innovation, business intelligence and technology units, which provide daily monitoring of key metrics and product intelligence, Betterware has shown long term sustainable double-digit growth rates in revenue and adjusted EBITDA. During the second half 2021 people returned to normally and rejoined the economically active population massively that result a decrease in the number of distributors y associates and consumption softened of the Betterware products, although we had a 41% net revenue growth in comparison with 2020 period where Betterware had triple-digit growth. However, Betterware has built a platform that management believes can grow domestically in Mexico and in other markets.

On April 7, 2022, Betterware consummated the JAFRA Acquisition. The JAFRA business will replicate Betterwares´s three principal strategic pillars: (i) Product Innovation: Strengthening JAFRA´s Skin Care category and introduction of new categories, (ii) Technology: Leverage on Betterware´s digital platforms and replicating our e-commerce model as a tool for JAFRA´s consultants to

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accelerate their sales and (iii) Business Intelligence: Leverage on our big data capabilities to optimize JAFRA´s product offering and rewards program.

Industry Overview

Direct selling is a retail channel used by top global brands, the market serves all types of goods and services, including healthcare, jewelry, cookware, nutritional, cosmetics, housewares, energy and insurance, among others. The direct selling channel differs from broader retail in an important way mainly due to the avenue where entrepreneurial-minded individuals can work independently to build a business with low start-up and overhead costs.

17 Direct selling representatives work on their own but are affiliated with a company that uses the channel, retaining the freedom to run a business and have other sources of income.

An important number of representatives join direct selling companies because they enjoy their products or services and want to purchase them at a discount. Some others decide to market these offerings to friends, family and others and earn discounts from their sales.

Competitive Strengths

Unique Business Intelligence and Data Analytics Unit

Betterware’s in-house business intelligence unit plays a crucial role within the operations and strategy of the company. The unit’s team is comprised of geographers, anthropologists, actuaries, and more, in order to diversify the way of thinking and create the best analyses and business strategies.

The main functions of the business intelligence unit are:

1.Clear strategy development
2.Tight Monitoring
3.Product Intelligence

Product Development and Innovation Program

The Company offers a product portfolio with great depth in the home organization segment through six different categories; kitchen and food preservation, home solutions, bathroom, laundry & cleaning, tech and mobility and bedroom
Constant product innovation is engaged by Betterware through refreshing its catalogue content and attracting clients’ repeated purchases
The Company has a team focused solely in performing industry analyses and product development and monitoring backed by the data analytics unit’s commercial strategy
During 2021 the Company acquired multiple business that offer different products like a telephone services and equipment, clothes, shoes and skin care products.

Distributors and Associates Network & Loyalty and Reward Programs

Betterware has a unique two-tier sales model and one of the most robust networks with more than 50,972 Distributors and 1,063,720 Associates as of December 31, 2021.

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The Company’s Distributors and Associates serve around 24% Household Penetration in Mexico and 80% of Distributors place orders every week.
The Company has a remarkable rewards program that attracts, retains, and motivates Distributors and Associates through product discounts, Betterware Points, trips, gifts and more.

Unparalleled Logistics and Supply Chain Platform

All of Betterware’s products are manufactured by more than 302 third party factories certified under the Company’s quality standards.

Growth Strategies

The Company’s warehousing practices includes a 108-day service level inventory.
Betterware distributes all products from its distribution center in Jalisco, Mexico.
Distributors personally deliver orders to each of its associates, thus eliminating last mile costs for the Company

Experienced Management & Meritocratic Culture

Betterware’s president has more than 25 years of experience in the direct-to-consumer selling sector across the Americas and a strong track record of delivering value to its shareholders with commitment to excellence
Top management has been with the Company six years on average
The company’s culture is based on the following principles
1.Result driven management:

Incentives based on results

Highly professional operation and no bureaucracy

2.Meritocratic culture:

Culture focused on solutions, delivery, discipline and commitment

3.Closeness to salesforce:

Management are close and visible to Distributors and Associates

Open office spaces for efficient flow of information and data allows fast decision making

The company has a clear and executable plan for growth, which includes organic and inorganic initiatives. The main strategies divided by timeline are the following:

Short Term
1.Web marketing/E-commerce
2.Increase Service Capacity

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Medium Term
1.New Product Line
2.International Expansion to Latin America
3.Strategic Acquisitions

Offerings

The living spaces in our target communities are on a decreasing size trend. Hence it is becoming more and more important to optimize the organization within our living spaces and hectic lifestyles. The Company offers a unique and innovative product portfolio with great depth in the home organization segment focused on providing everyday solutions for modern spaces.

The company offers its products through 8 different categories; including kitchen and food preservation, home solutions, bathroom, laundry and cleaning, tech and mobility and bedroom
Products are sold through catalogues that offer approximately 340 products in average. Each catalogue has extensive consumer reading behavior analysis to ensure that the content is distributed in the most efficient way and purchase potential is maximized
Constant product innovation introducing approximately 338 new products every year and development is conducted where the focus is on refreshing catalogue content and attracting repeated purchases from clients
The Company employs an efficient pricing strategy focused in maximizing revenue and margins and minimizing inventory losses
The Company has a team focused solely on performing industry analyses and monitoring backed by the data analytics unit commercial market strategy

Logistics Infrastructure and Supply Chain

Customers

Betterware is 100% committed to provide products to its customers that serve as everyday solutions for modern space organization. Betterware also has the objective of providing products that are accessible to anyone. With these objectives in mind, the Company’s target market is all households in Mexico.
Most of the Company’s end customers are adult men and women with the desire of optimizing their homes organization

Sales& Marketing

Betterware does not rely on significant traditional advertising expenditures to drive net sales since Distributors and Associates distribute its catalogues directly to customers, thus making the sales catalog design and printing an important selling expense representing 4.2% of net revenue. Some of the main advertising costs incurred by the Company include social media and transit advertising in bus lines and subways that represent 0.8% of net revenue.

Betterware establishes and maintains credibility primarily through the quality of their products, their customer service and the attractiveness of their pricing.

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Research& Development

The Company performs constant product innovation with the objectives of refreshing its catalogue content and attracting clients’ repeated purchases
The Company has a team focused solely on performing industry analyses, product development and monitoring of products
Product development is backed by the data analytics unit’s commercial strategy

C.ORGANIZATIONAL STRUCTURE

The following diagram depicts the current organizational structure of Betterware:

Graphic

D.PROPERTY, PLANT AND EQUIPMENT

Our principal executive offices are located in El Arenal, Jalisco, Mexico. During August 2019, the Group started building a distribution center which was completed in the first quarter of 2021. As of December 31, 2021, 2020 and 2019, payments related to this construction amounted to Ps.397, million Ps.509, million and Ps.165, million respectively. The total investment amounted to Ps.1,071, millions of which Ps. 695, million were obtained originally from two long-term loans with disposals from 2019 to 2020. In 2021, these loans were prepaid with the resources obtained from the two-tranche sustainability bond offered in the Mexican Market through the Bolsa Mexicana de Valores.

As of the date of this annual report, the Company does not have plans to construct, expand or improve any facilities. We have not identified any environmental issues that may affect the Company's assets.

E.SUSTAINABILITY

Leadership and governance. Our sustainability efforts begin with our Chairman of the Board of Directors, who oversees, monitors and follow up on the implementation of our strategy. At the same time, sustainability efforts extend throughout the Company.

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Due to the Company's commitment to social and environmental issues, in the fiscal year 2021, public resources were obtained that amounted to Ps. 1,500 million pesos through a Sustainable Bond Program to merge the environmental and social spheres within the Company's strategy.

The main objective for the issuance of sustainable bonds is the implementation of projects or the acquisition of assets that contribute to the development of a resilient economy with low greenhouse gas emissions; likewise, to develop social projects that meet one or more goals of the Sustainable Development Goals (SDG), established in the 2030 Agenda for Sustainable Development, adopted by the United Nations (UN).

The projects mentioned above will be environmental and social impact projects that:

Allow reducing the consumption of electricity and water.
Use of recyclable materials for the construction of our products.
Development of products and purchase of environmentally friendly packaging.
Development of internal tools for measuring the Company's environmental impacts.
Employment generation through new sources of income.
Support for vulnerable groups and empowerment of women.
Development of local suppliers.

One of the most important projects that have been carried out is the new distribution center (Campus Betterware), which also houses the headquarters of the Company. It was built to i) concentrate activities in one place; ii) have a space that promotes care for the environment and the individual well-being of the people who work in the Company and iii) favor the quality of life of the communities around the Campus.

The construction of the Campus respects the ecosystem of the place and took advantage of natural light and ventilation to reduce the environmental footprint. Likewise, we take advantage of the characteristics of the land, and we incorporated local flora species of the place into the outdoor recreation areas.

Regarding the environmental practices that were implemented in the construction of the Campus, there are:

Around 90% of the materials used for the construction of the Campus were recyclable materials such as glass and aluminum.
Installation of LED lighting throughout the Campus.
Insulating materials were used to prevent the walls of the buildings from raising their temperatures, avoiding the excessive use of air conditioners.
Use materials from the zone to develop the campus streets.
Installation of drip irrigation systems to take care of the local vegetation.
Installation of a nursery to care for endemic trees and plants.

As of December 31, 2021, the investment of the new Campus amounted Ps. 1,071 million pesos.

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Quality of Life and Well-being. The Company seeks to have a progressive impact through its innovative solutions, our ability to operate as a responsible business is fundamental to our business model. This allows us to understand the relevant problems of our stakeholders, map social impacts and identify risks and opportunities to create shared value for ourselves and society. Due to the contingency of COVID-19 and the macroeconomic environment, the Company's business model allowed affected people or vulnerable groups to obtain an income or second income.

The Company will seek to ensure the full and effective participation of women and equal leadership opportunities at all decision-making levels of economic life. Likewise, we will seek to improve the use of information technologies to promote the empowerment of women. In line with the above, we will seek to increase or maintain the number of at least 20% the number of women in 2025 within the sales force compared to 2020. As of December 31, 2021, and 2020, the percentage of women in the sales force represents 70% and 68%, respectively. As well, we will seek to maintain at least 40% of women in the permanent labor force. As of December 31, 2021, and 2020, the percentage of women in the permanent workforce was 41% and 43%, respectively.

In this regard, women occupy key positions within the Company, including chief financial officer, human talent director, quality and development director, credit and collection director, international commercial director, national sales director, as well as a high number of managers from the different areas of the Company.

Additionally, we established a goal of including two women on the Board of Directors by 2025.

The Company aims to protect labor rights and promote a safe and secure work environment for all workers through an increase in the number of workers using Campus Betterware amenities, including a hair salon, infirmary, coffee shop, library, training room, basketball and soccer fields, a gym, laundry, and a meditation garden.

For all the amenities previously mentioned, on December 14, 2021, Betterware received a Fitwell certification for the “Campus Betterware” project, which was designed to promote the health and well-being of its occupants.

Environmental management. We believe that achieving excellence in environmental practices benefits sustainable growth, so we are committed contributing to the mitigation of climate change and its consequences.

As a result of the aforementioned, the Company will seek to support the reduction of the number of deaths and illnesses caused by dangerous chemical products and by the contamination of water, air, and soil. This is through the increase in the sale of ECO products within our portfolio. Additionally, it will be sought that other products used for packaging have environmental certification. The incremental costs of these campaigns are in the process of being quantified.

Likewise, the Company will seek to considerably increase the proportion of renewable energy through the installation of at least 30% of solar panels over the current contracted capacity and with this seek annual savings of 35,000 kWh. Additionally, it is expected to save 5,900 liters of water per day as a result of the use of water-saving furniture.

The Company set a goal of increasing sales of ECO products by 20% by 2022 compared to 2020. While, in packaging materials, the Company aims to maintain 100% of the Company's suppliers with certificates in environmental matters. It should be noted that, at the end of April 2021, 100% of the suppliers of boxes used for orders had the "Monarch Butterfly" certification, which establishes the minimum content of recycled fiber for the manufacture of paper that varies between 50 % and 80%.

Similarly, the Company delivers twice a year an endowment of ecological bags to all its distributors according to their registered associates. The idea of ​​these reusable ecological bags is to replace the distribution of their catalog products using disposable plastic bags, causing less environmental impact.

Human capital. Our employees are an important part of our competitive advantage and the reason for our success. We seek to offer programs, benefits, and a work environment that is designed to attract and retain talented employees. Our approach to performance management is to employ the right people to do the right job to achieve our strategy; enable a culture of high performance in a safe and ethical workplace and develop the capabilities of our employees to face challenges and seek excellence.

As we transform and look to expand, one of our main goals is to develop people with the potential to fill key leadership positions, enriching their experience and capabilities to make them successful in even more challenging roles. Through this process, we

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strive to strengthen our employees' commitment to us by helping them meet their career development expectations and preparing them to play a key role as they face critical challenges in their career development.

We seek to foster a dynamic, high-performance environment in which open dialogue is encouraged and rewarded. In addition to competitive compensation, 100% of our employees receives minor medical insurance benefits and 39% have major medical and life insurance benefits above local regulations.

In addition, the Company conducts a survey on the experience of employees (Workplace Climate Survey) that helps us to understand better, from the perspective of our employees, which organizational, digital, physical, and interpersonal elements of our company need to be reinforced or developed to offer a positive work experience to our employees. In 2021, 83% of our employees participated in the Company’s anonymous survey, from which arise an employee recognition campaign, an ongoing training campaign, an internal job growth campaign, labor flexibility campaign, and the implementation of a greater number of channels of communication for the employees with the administration and between all the areas of the Company.

Interest groups. We value our: (i) employees, having plans and other resources that we believe provide a good workplace that helps them develop skills, experience, and a strong sense of purpose; (ii) customers tailoring our solutions to meet their needs while making it easy for them to work with us and providing better performance and reliability; (iii) shareholders focusing on plans designed to maximize revenues, reduce costs, optimize assets and reduce risks; and (iv) community and suppliers serving as an engine of economic growth, building more capable, inclusive and resilient communities and striving to reduce local impacts on waste, to conserve biodiversity.

Business model. We focus on operating in the most efficient way and creating the greatest value possible, by leveraging our knowledge to establish best practices towards our customers, employees, and environment. Our operating model consists, among other things, of: (i) working with local networks to sale our products; (ii) provide ultimate customer support features and technology; (iii) obtain resources to invest in sustainable activities; and (vi) maintain efficient governance controls.

Some of the strategies that the Company is carrying out are the following:

In 2021, we made a sustainable long-term debt bonds issue to refinance the construction of the Betterware Campus, as well as to finance projects with social impact and empowerment for women.
The sale of ECO products is being promoted so that their participation in sales within the catalog become greater.
100% of Betterware suppliers are “Monarch Butterfly” certified.
Continuous work is being done on diversification in key positions in the Company to maintain gender equality.

ITEM 4A.UNRESOLVED SEC STAFF COMMENTS

The Company has no unresolved comments from the staff of the SEC with respect to its periodic reports under the Exchange Act.

ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS

Our discussion and analysis of our results of operations and financial condition are based upon our Audited Consolidated and Combined Financial Statements, which have been prepared in accordance with IFRS. Our operating and financial review and prospects should be read in conjunction with our Audited Consolidated and Combined Financial Statements, the accompanying notes thereto and other financial information appearing elsewhere in this annual report.

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A.Operating Results

Factors Affecting Our Results of Operations

A number of factors have a significant impact on our business and results of operations, the most important of which are regulations, fluctuations in exchange rates in the currencies in which we operate, external factors, such as the COVID-19 pandemic, See “—Operating and Financial Review and Prospects—Liquidity and Capital Resources—The COVID-19 Impact,” and our capital investment plans.

Distributors and Associates

Betterware sells its products through a unique two-tier sales model that is comprised of Distributors and Associates. Distributors are the link between the Company and the Associates. The Company distributes products in a weekly basis to the Distributors domicile, who in turn delivers to each Associate. To cover for the associated payment cycle, the Company provides to Distributors a two-- week credit line for them to make the payment back to the Company.

Net Revenue

BWM primarily generates its revenue through selling products focused on the home organization segment under the Betterware® brand. Some of the categories through which the Company offers its product line include Kitchen and Food Preservation, Bathroom, Bedroom, Home Solutions, among others. BWM’s products are sold through catalogues and are distributed to the end customer by its network of Distributors and Associates. BWM sells its products to a wide array of customers but focuses on the C and D segments of the socioeconomic pyramid in Mexico.

During 2021, BWM’s revenue was driven by the increase in volume of products sold and the general increase in the price of its products. Factors that impact unit pricing and sales volume include promotional campaigns, marketing campaigns, the Company’s business intelligence unit, increase in variable costs, and macroeconomic factors.

BWM reports net revenue, which represents its gross revenue less sales discounts, adjustments and allowances, also the Company has a deferred revenue due to undelivered performance obligations related to the promotional points. Revenue is recognized using in a five-step model:

Identify the contract with client (verbal or written).
Identify the performance obligations committed in the contract.
Consider the contractual terms and the business model of the Company in order to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. In determining the transaction price, the Company considers the variable considerations.
Allocate the transaction price to the performance obligations identified in the contract (generally each distinct good or service), to depict the amount of consideration to which an entity expects to be entitled in exchange for transferring the promised goods or services to the customer.
Recognition of revenue when or as it satisfies a performance obligation by transferring a good or service to a customer, either at a point in time (when) or over time (as).

Cost of Sales

Cost of sales consists of the purchase of finished goods, air and maritime freight costs, land freight costs, customs costs, provisions for defective inventory, among others. The cost of finished goods, air, maritime and land freight costs represent the majority of BWM total costs of goods sold.

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Selling Expenses

Selling expenses include all costs related to the sale of products, such as printing and design of sales catalog, packing material costs, events, marketing and advertising, a part of promotional points products expenses, and employee salaries related with sales, among others. Costs related to sales catalog and rewards program products account for most of the weight of total selling expenses.

Administrative Expenses

Administrative expenses primarily include employee salaries and related expenses of all departments of the company´s operations, such as accounting, planning, customer service, legal, and human resources. Also included are corporate operations, research and development, leases, professional services relating to BWM’s statutory corporate audit and tax advisory fees, legal fees, outsourcing fees relating to information technology, and corporate site and insurance costs.

Distribution Expenses

Distribution expenses include the cost to carry the products from the distribution center to the distributors. Financing Income (Cost)

Financing income/costs consists primarily of: (i) interest expense and charges in connection with financings, (ii) income derived from investments of excess cash, (iii) loss/gains from foreign exchange changes, and (iv) loss /gains in valuation of derivative financial instruments (including the fair value effects of the warrants in 2020).

Income Taxes

The Company is subject to a 30% Income Tax rate provided by the Mexican Income Tax Law, and 25% Income Tax rate by the Guatemala Income Tax Law.  

Fluctuations in Exchange Rates in the Currencies in which We Operate

Our primary foreign currency exposure gives rise to market risks associated with exchange rate movements of the, Mexican Peso against the U.S. dollar See “—Quantitative and Qualitative Disclosure about Market Risk—Exchange Rate Risk.”

Results of Operations — 2021 Period compared with the 2020 Period

All amounts discussed are in thousands of Mexican pesos unless otherwise noted

Net Revenue

December 31,

    

January 03,

    

2021

 

2021

Net Revenue

Ps.

10,039,668

7,260,408

Net revenue increased by 38.3%, or MX$2,779,260, to MX$10,039,668 for the 2021 period compared to MX$7,260,408 for the 2020 period, primarily due to: (i) an increase in volume of units sold of 185.5 million in 2021 compared to 133.7 million in 2020 mainly as a result of certain commercial actions implemented during 2021, such as increasing the share of lower price items and offer new products in our catalogues, (ii) focus on retention and recruitment of distributors and associates and improving in-person interaction with them, and (iii) since the second half of 2021, we applied a general increase of 12% in the price of our products. 

Cost of Sales

    

December 31,

    

January 03,

    

2021

    

2021

Cost of Sales

 

Ps.

4,399,164

 

3,290,994

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Cost of sales increased 33.7%, or MX$1,108,170, to MX$4,399,164 for the 2021 period compared to MX$3,290,994 for the 2020 period as a result of increased revenue, resulting in a gross profit of MX$5,640,504 for the 2021 period compared to MX$3,969,414 for the 2020 period. As a percentage of net revenue, cost of sales was 43.8% for the 2021 period and 45.3% for the 2020 period. The decrease of cost of sales as a percentage of net revenues was primarily because in the second half of 2021, we applied a general price increase of 12% to our products to offset the impact of the increase in air and sea freight costs to meet the demand.

Administrative Expenses

    

December 31,

    

January 03,

2021

2021

Administrative Expenses

 

Ps.

1,247,436

 

664,677

Administrative expenses increased 87.7%, or MX$582,759, to MX$1,247,436 for the 2021 period compared to MX$664,677 for the 2020 period primarily due to increases in wages paid to employees, fees paid of software as a services license, a one-time consulting corporate services fee payment, and the increase in depreciation primarily from the new office center business of the Company on Jalisco, Mexico. As a percentage of net revenues, these expenses represented 12.4% and 9.2% for the 2021 and 2020 periods, respectively.

Administrative expenses by department are as follows:

    

December 31,

    

January 03,

    

    

 

    

2021

    

2021

    

Var. $

    

Var.%

Operations

 

849,271

 

406,856

 

442,415

 

108.7

%

Finance

 

115,405

 

94,886

 

20,519

 

21.6

%

IT

 

89,007

 

45,355

 

43,652

 

96.2

%

Depreciation

 

82,122

 

43,612

 

38,510

 

88.3

%

Marketing

 

38,099

 

24,936

 

13,163

 

52.8

%

Quality

 

26,716

 

25,383

 

1,333

 

5.3

%

Others

 

46,816

 

23,649

 

23,167

 

98.0

%

Total

 

1,247,436

 

664,677

 

582,759

 

87.7

%

Selling Expenses

    

December 31,

    

January 03,

    

2021

    

2021

Selling Expenses

 

Ps.

1,264,581

 

853,355

Selling expenses increased 48.2%, or MX$411,226, to MX$1,264,581 for the 2021 period compared to MX$853,355 for the 2020 period, primarily due to an increase in our rewards program, expenses incurred in printing a higher volume of sales catalogues in order to satisfy demand from Distributors and Associates and packing materials. At the same time, the sales bonuses and wages decreased because of the reduction in the number of sales managers within the Company. The Company’s selling expenses were 12.6% of net revenue for the 2021 period compared to 11.8% of net revenue for the 2020 period. This increase was in proportion of the increase in sales during 2021. The selling expenses major line items include:

    

December 31,

    

January 03,

    

    

    

2021

    

2021

    

Var. $

    

Var. %

Rewards Program

 

502,976

 

172,177

 

330,799

 

192.1

%

Sales Catalogue

 

425,477

 

247,250

 

178,227

 

72.1

%

Sales Bonuses and Wages

 

105,520

 

288,658

 

(183,138)

 

(63.4)

%

Events and Conventions

 

29,939

 

19,237

 

10,702

 

55.6

%

Others

 

200,669

 

126,033

 

74,636

 

59.2

%

Total

 

1,264,581

 

853,355

 

411,226

 

48.2

%

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Distribution Expenses

    

December 31,

    

January 03,

    

2021

    

2021

Distribution Expenses

 

Ps.

463,779

 

331,023

Distribution expenses increased 40.1%, or MX$132,756 to MX$463,779 for the 2021 period compared to MX$331,023 for the 2020 period. This increase relates to the fact that distribution expenses are driven primarily by sales volume, which increased 38.3% for the 2021 period, compared to the 2020 period.

Financing Income (Cost)

    

December 31,

    

January 03,

    

2021

    

2021

Financing Income (Cost)

 

  

  

 

  

Interest Expense (1)

 

Ps.

(75,818)

 

(80,253)

Interest Income

 

  

25,872

 

10,930

Unrealized gain (loss) in Valuation of Financial Derivative Instruments (2)

 

  

330,315

 

(287,985)

Changes in fair value of warrants (3)

 

  

 

(851,520)

Foreign Exchange Loss, Net (4)

 

  

(319,739)

 

(30,402)

Financing Cost, Net

 

  

(39,370)

 

(1,239,230)

(1)Interest expenses decreased 5.5% or MX$4,435 in 2021 as compared to 2020, due to prepayment of loans in August 2021. The variation did not represent a high percentage because in September 2021, those interest payments were compensated by the interest expenses associated with our bond issuance in Mexico (See “Indebtedness”).  
(2)In connection with the secured line of credit for up to Ps.400,000 contracted with Banamex (see —“Indebtedness—Banamex Term Loans”), and in order to mitigate the risk of future increases in interest rates, we entered into a derivatives contract with Banamex, which consists of an interest rate swap. By using this interest rate swap, we converted our variable interest rates into fixed rates. The swap and the initial secured line were fully prepaid on August 31, 2021. In addition, to reduce the risks related to fluctuations in the exchange rate of the US dollar, we use derivative financial instruments such as forwards to mitigate foreign currency exposure resulting from inventory purchases made in US dollars. As of December 31, 2021, the Company had USD$134.1 million with an average rate of Ps. 20.66. The difference between the average exchange rate of the forward contracts and the real average exchange rate of Ps. 21.53 and Ps. 20.28 in each period represents the (loss) and gain in 2020 and 2021.
(3)During the 2020 period, we assumed the obligation associated with outstanding warrants upon the Merger with DD3. Changes in the fair value of the warrant obligations, which increased during the year in direct correlation with the increase in our share price, was recognized in financing income/costs. As of December 31, 2021, we do not have outstanding warrants.
(4)Our exposure to currency exchange rate fluctuations and how we mitigate this risk can be found in the section entitled “Risk Factors—Risks Related to Mexico” and "Currency Exchange Rate Fluctuations.” Additionally, the unrealized loss in valuation of financial derivative instruments from 2020 was converted in foreign exchange loss when forwards were paid during 2021.

Income Tax Expense

    

December 31,

    

January 03,

    

2021

    

2021

Current

 

Ps

782,901

 

576,834

Deferred

 

  

41,553

 

(34,066)

Total Income Tax Expense

 

  

824,454

 

542,768

Income taxes increased 51.9% or MX$281,686 to MX$824,454 for the 2021 period compared to MX$542,768 for the 2020 period due to higher pre-tax profits. The effective income tax rate is 31% in 2021 and 62% in 2020, the difference is derived from the effect of fair value of warrants for Ps. 851,520, that affects the accounting result before taxes in the year 2020.

.

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RECONCILIATION OF NON-IFRS MEASURES

Non IFRS Financial Measures

We define “EBITDA” as profit for the year adding back the depreciation of property, plant and equipment and right of use assets, amortization of intangible assets, financing cost, net and total income taxes. EBITDA is not measure required or presented in accordance with IFRS. The use of EBITDA has limitations as an analytical tool, and you should not consider it in isolation from, or as a substitute for analysis of, our results of operations or financial condition as reported under IFRS.

 

We believe that these non-IFRS financial measures are useful to investors because (i) We use these measures to analyze our financial results internally and believe they represent a measure of operating profitability and (ii) these measures will serve investors to understand and evaluate our EBITDA and provide more tools for their analysis as it makes our result comparable to industry peers that also prepare these measures.

Betterware’s EBITDA reconciliation

In thousands of Mexican Pesos

    

December 31, 2021

    

January 03, 2021

    

December 31, 2019

Net Income for the period

Ps.

1,800,884

338,361

472,142

Add: Total Income Taxes

824,454

542,768

232,692

Add: Financing Cost, net

39,370

1,239,230

107,411

Add: Depreciation and Amortization

82,122

43,688

38,394

EBITDA

Ps.

2,746,830

2,164,047

850,639

Capital Expenditures

Our capital expenditures were mainly related to the construction of our new headquarters and distribution center in Jalisco, Mexico. Our capital expenditures for the 2021, 2020 and 2019 periods amounted to MX$397,000 MX$508,958 and MX$165,000, respectively. The total investment amounted to MX$1,070,958.

Results of Operations — 2020 Period compared with the 2019 Period

The results of operations comparison between the 2020 Period and the 2019 Period has been omitted from this annual report, but may be found in “Operating and Financial Review and Prospects” of our Form 20-F filed with the SEC on April 19, 2021.

B.LIQUIDITY AND CAPITAL RESOURCES

Our primary source of liquidity is from cash flow generated from operations (sales of home organization products). Variation in sales of our products directly affect funds availability. We have historically met our short- and long-term working capital and capital expenditures requirements, including funding for expansion of operations, through net cash flow provided by operating activities. We have an efficient and high cash conversion cycle, which consists of recovering cash from customers between 14 to 28 days, with the purpose of paying our suppliers in average 120 days. Additionally, our capex requirements (besides our new distribution center) are mainly related to investment in technology. Due to these low capital requirements and negative working capital cycle, we have high cash conversion rate enabling us to annually distribute dividends to our shareholders.

In order to maintain sufficient liquidity, the Company maintains a minimum cash and cash equivalent monthly balance of Ps.200,000 in order to cover its Selling, General and Administrative expenses. For the 2021 period, cash and cash equivalents of the Company was Ps.1,175,198, above its minimum internal policy. It was an extraordinary situation because the Company had Ps. 513,993 cash from the two tranches bonus issued on August 30, 2021, which was going to be used for sustainability purposes (see below).

Since 94% of our products sold are imported in dollars, to reduce the risk related to fluctuations in exchange rates, we use derivative financial instruments as “forwards” to moderate the exchange risks resulting from future inventory and purchases in dollars. In short-term the hedging forwards contracts cover 100% of the product needs until October 2022.

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On August 30, 2021, Betterware successfully concluded the offering of a two-tranche sustainability bond issuance for a total of Ps.1,500 million, with maturities across 4 and 7 years, offered in the Mexican Market, with the objective of financing initiatives with positive environmental and social impacts. On August 31, 2021, an amount proceeds received from the offering, were used to prepay the long-term debt with Banamex and BBVA (See “Indebtedness”). As of the date of this annual report, we maintain current interest payments of the bonds.

In 2021, we acquired Innova Catálogos, which offers products like clothes, shoes, among others, also in April 2022, we acquired the 100% of JAFRA, which is a leading in sales of Beauty and Personal Care industry. In the long-term, we pretend to complement our liquidity needs through the operations of our subsidiaries (See “History and Development of the Company”).

Cash Flows

2021 Period compared with the 2020 Period

Cash Flows from Operating Activities

Cash flow provided by operating activities was MX$1,465,597 and MX$1,822,256 for the 2021 and 2020 periods, respectively. The cash flow from operations decreased primarily due to investment in working capital of MX$331,314 due to deacceleration in sales of 2021 compared to 2020. When the Company is growing does not need to invest in working capital because it is financed by the days payable to suppliers (sales are higher, cash collection from sales is shorter than payments to suppliers). Inventory management increased from 90 days during the 2020 period, to 108 during the 2021 period, Days of Payables increased from 145 during the 2020 period to 169 during the 2021 period, and Days of Receivables increased from 25 during the 2020 period to 28 during the 2021 period.

Cash Flows from Investing Activities

Cash flows used in investing activities was MX$320,378 and MX$631,401 for the 2021 and 2020 periods, respectively. Cash flows used in investing activities include investment in technological platform, product innovation, equipment, and property. The decrease in investing activities was mainly due to the decrease on payments made with respect to the construction of our distribution center in Jalisco when compared to the 2020 period. See “Property, Plants and Equipment.”

Cash Flows from Financing Activities

Cash flows used in financing activities was MX$619,841 and MX$754,732 for the 2021 and 2020 periods, respectively. For the 2021 period, we made repayments in the aggregate amount of MX$626,554 under our long-term financing agreements, as follows: (i) MX$561,833 was paid to Banamex, and (ii) MX$64,721 was paid to BBVA. Also, we made a repayment in the aggregate amount of MX$20,162 under its short-term financing agreements, as follows: (i) MX$20,000 was paid to HSBC (ii) MX$162 was paid to certain of our subsidiaries under different financial agreements. Additionally, on August 30, 2021, we completed the issuance of a two-tranche sustainability bond for a total of Ps.1,500,000, with maturities across 4 and 7 years, offered in the Mexican Market. With the proceeds of such offering, we repaid and cancelled the loans with Banamex and BBVA. For the 2021 and 2020 periods, we paid dividends in the amounts of MX$1,400,000 and MX$830,000, respectively. For the 2021 period, we paid interests for MX$49,123, a 59.5% decrease compared to MX$121,297 paid for the 2020 period, mainly due to the loans repayment of such Banamex and BBVA loans on August 31, 2021.

2020 Period and 2019 Period

A cash flow comparison between the 2020 Period and the 2019 Period has been omitted from this annual report but may be found in “Operating and Financial Review and Prospects” of our Form 20-F filed with the SEC on April 19, 2021.

Indebtedness

Long term debt- Offering of bonds

On August 30, 2021, Betterware successfully concluded the offering of a two-tranche sustainability bond issuance for a total of Ps.1,500,000, with maturities across 4 and 7 years, offered in the Mexican Market. The first offer of sustainability bonds for

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Ps.500,000 started paying interest at 5.15% plus 0.40bps for the first month and for subsequent monthly payments, the rate will be based on the 29-day TIIE rate issued by BANXICO plus 0.40bps and the second offer of Ps.1,000,000 will pay interest semi-annually at fixed rate of 8.35% during the sustainability bond term.  

On August 31, 2021, we used fund received from such bond offering to make payments under certain of our long-term debt in the total amount of Ps.588,300, as follows: (i) Ps.521,449 were paid to the secured credit line with Banamex, plus an additional Ps.18,172 to cancel the SWAP linked to that secured credit line, and (ii) Ps.48,679 was paid to the credit line with BBVA. The rest of the funds received from the bond offering were used for general corporate purposes, including additional investments in our office’s campus and other initiatives with positive environmental and social impacts.  

Banamex Term Loans

Banamex- Secured credit line

On December 18, 2018, Betterware, as borrower, and BLSM, as guarantor, entered into a secured credit line agreement with Banco Nacional de México, S.A., Integrante de Grupo Financiero Banamex for an aggregate principal amount of Ps.400,000 to build the new business offices campus. The credit line is secured by (i) a first priority mortgage over a 49,756.47 m2 property located in Jalisco, Mexico owned by BWM and (ii) a bond (fianza) granted by BLSM. On January 30, 2020, we renegotiated the interest rate under this the secured credit line, to change from the TIIE rate plus 317 basis points to the TIIE rate plus 260 basis points. In addition, withdrawals from this credit line were extended to August 2020 and were payable on a quarterly basis from September 2020 up to December 18, 2025. This loan was fully paid and cancelled on August 31, 2021.

On July 30, 2020, a total amount of Ps.195,000 was withdrawn from a credit line signed on June 3, 2020, with Banamex. This loan accrued interest at the TIIE rate plus 295 basis points maturing on December 30, 2025. This loan was liquidated on August 31, 2021.

During the first seven months of 2021, we made payments to secured credit line with Banamex, for Ps.46,167, and as of August 31, 2021, the secured credit line was prepaid for Ps.521,449, including interest.

Banamex- Unsecured credit line

We have an unsecured credit line with Banamex for up to Ps.100,000, which accrued interest at the TIIE plus 285 basis points. As of December 31, 2021, Betterware has not used this unsecured credit line.

BBVA-Credit line

On September 20, 2020, we entered into a credit line with BBVA for up to Ps.75,000 bearing interest at 7.5%, payable monthly. The credit line had racks in our distribution center located in Jalisco pledged as collateral for an amount of Ps.80,901. This credit line was liquidated on August 31, 2021.

During the first seven months of 2021, we made payments to credit line with BBVA, for Ps.16,325 and as of August 31, 2021, this credit line was liquidated for Ps.48,679, including interest.

HSBC- Credit line

On March 10, 2020, we entered into a current account credit line agreement with HSBC México, S.A., for an amount of Ps.50,000. BLSM is jointly liable for this credit. On May 4, 2020, we entered into a first amendment pursuant to which the amount of the credit line was increased to Ps.150,000. The credit line is set to mature on March 10, 2022, and it bears interest at the TIIE rate plus 350 basis points. During 2021 and 2020, we utilized Ps.20,000 and Ps.115,000, respectively. As of the date of this annual report, the entire amounts have been repaid. 

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COVID-19 Virus Impact

As a result of the coronavirus (COVID-19) outbreak and its global spread to a large number of countries, the World Health Organization classified the viral outbreak as a pandemic on March 11, 2020. See Risk Factors—The COVID-19 virus (nCoV), as well as any other public health crises that may arise in the future, is having and will likely continue to have a negative impact on the retail industry and in our results of operations.”

Our operations since beginning of the COVID-19 pandemic, were not interrupted, due to our product lines include hygiene and cleaning solutions, qualified as an essential activity in Mexico.

During the second half of 2021, people initiated the return to their normal lifestyles, leaving behind the worst months of the pandemic. As result, some of the people that had joined our network during 2020, went back to their old jobs activities and decided not to continue working with us. This resulted on higher-than-average churn rate for associates peaking at 4.6% weekly (vs historical average church rate of 2.8% weekly) and a consequent mild decline in our average network of Associates and Distributors.

Also, our business was negatively impacted by externals shocks principally due to worldwide supply chain disruptions that affected our business, such as: (i) shortage of sea freight containers led to increase our air freight expenses, (ii) stricter than expected energy restrains in China impacted our fulfillment capacity, and (iii) sea freight costs continued at abnormally high levels. To mitigate the impact, we started to adjust our commercial strategies with the objective of increasing our net revenue, EBITDA -and free cash flow (See the commercial strategies described in the “TREND INFORMATION” section).

C.RESEARCH AND DEVELOPMENT, PATENTS AND LICENSES, ETC.

Our research and development efforts consist of constant product innovation with the objectives of refreshing our catalogue content and attracting clients’ repeated purchases and data analytics unit technology in order to improve product development processes. For further details, see “Item 4.B. Information on the Company-Business Overview-Research and Development.”

D.TREND INFORMATION

Summary of trend information:

Commercial Strategies to incentive sales, increase net revenues and EBITDA in 2021 after COVID-19 pandemic impact:

To mitigate COVID-19 pandemic´s impact, we started to adjust our commercial strategies with the objective of increasing our net revenue, EBITDA and free cash flow. Some of the actions implemented, include: (i) a general price increase of 12% in our products to offset cost pressures, (ii) an increase of lower-price items offered in our catalogues, (iii) an increase in the number of catalogues from 9 to 12 per year, providing more innovation and enhanced flexibility to adapt to new requirements of products from our customers; (iv) increase of in-person interaction with distributors and associates, (v) an increase of share of new products per catalogue, and (vi) increased focus on recruitment and retention of distributors and associates.

Also, activity from our sales force maintains constant. In 2021, 80% of distributors and 34% of associates placed orders weekly, while in 2020 and 2019, such rates were of 82% and 35% and 81% and 32%, respectively.

Long term debt Bond Offerings:

On August 30, 2021, we successfully concluded the offering of a two-tranche sustainability bond issuance for a total of Ps.1,500 million, with maturities across 4 and 7 years, offered in the Mexican Market, with the objective of financing initiatives with positive environmental and social impacts. Among other purposes, the bond was used to cover capital expenditures incurred for the construction of the Company´s new national distribution center and headquarters of its corporate offices in Jalisco, Mexico. Such headquarter offices were built to: (i) concentrate our operations in one unique place, (ii) promote care for the environment and individuals well-being, and (iii) improve life quality of the communities around the campus (See “History and Development of the Company,” “Liquidity and Capital Resources” and “Indebtedness” sections in this annual report for more details).  

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JAFRA’s Acquisition:

On January 18, 2022, Betterware entered into the JAFRA Acquisition.

The JAFRA Acquisition has, among other, the following purposes: (i) increase diversification of our current operations by category and by geography, including a faster and more efficient way to enter the vast U.S. market, (ii) elevate JAFRA´s revenue growth and profit potential, and (iii) accelerate digital transformation of JAFRA´s by leveraging our omnichannel capabilities and capitalize on the significant e-commers opportunity and strong direct selling online market trends (See-“History and Development of the Company,” and “Liquidity and Capital Resources.”

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events, that are reasonably likely to have a material adverse effect in our revenues, income, profitability, liquidity or capital resources, or that would cause the reported financial information in this annual report to be not necessarily indicative of future operating results or financial conditions.

E.CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

Not applicable.

ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.DIRECTORS AND SENIOR MANAGEMENT

Set forth below is information concerning our officers and directors. Our executive officers are appointed by the board of directors to serve in their roles. Each executive officer is appointed for such term as may be prescribed by the board of directors or until a successor has been chosen and qualified or until such officer’s death, resignation or removal. Unless otherwise indicated, the business address of all of our executive officers and directors is Luis Enrique Williams, 549, Colonia Belenes Norte, Zapopan Jalisco, México C.P.45145.

Name

    

Age

    

Position Held

Luis Campos

69

Chairman of the Board

Andres Campos

39

Chief Executive Officer and Board Member

Diana Jones

40

Chief Financial Officer

Carlos Doormann

51

Chief Strategy

Luis Lozada

40

Chief Strategy Officer

Santiago Campos

30

Board Member

Jose de Jesus Valdez

69

Independent Board Member

Federico Clariond

48

Independent Board Member

Mauricio Morales

61

Independent Board Member

Joaquin Gandara

51

Independent Board Member

Dr. Martín M. Werner

59

Independent Board Member

Dr. Guillermo Ortiz

73

Independent Board Member

José Alberto Terán

68

Board Member

Reynaldo Vizcarra

56

Secretary

Background of Our Officers and Directors

Betterware’s board of directors is composed of the following members and a non-member Secretary:

Luis Campos has been in the direct to consumer business for almost 25 years. He has been chairman of Betterware de México since he bought the Company in 2001. Prior to Betterware, Mr. Campos served as Chairman of Tupperware Americas (1994 – 1999), Chairman of Sara Lee — House of Fuller Mexico (1991 – 1993), and Chairman of Hasbro Mexico (1984 – 1990). Mr. Luis Campos is an active member of the “Consejo Nacional de Comunicación”, an active member of the “Consejo Consultivo” of Banamex and he was an active member of the Direct Selling Association,

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The Latin America Regional Managers’ Club, The Conference Board, and a board member of the Economic Development Commission of Mid Florida, Casa Alianza-Covenant House, The Metro Orlando International Affairs Commission, SunTrust Bank and Casa de Mexico de la Florida Central, Inc. Mr. Campos was selected to serve on Betterware’s board of directors due to his extensive experience in consumer product companies, especially in the direct sales, as well as his relevant top-level experience in American public multinational companies. Luis Campos is the father of Andres and Santiago Campos.
Andres Campos has been CEO of Betterware de México since 2018. Prior to becoming CEO, within the Company, Andres Campos served as Commercial Director (2014 – 2018) and Strategy and New Businesses Director (2012 – 2014). Prior to Betterware, Mr. Campos worked in Banamex Corporate Banking area (2012 – 2014) and in KPMG as an Auditor (2004 – 2005). Andres holds a bachelor’s degree in Business Administration from Instituto Tecnológico y de Estudios Superiores de Monterrey and an MBA from Cornell University. Andres Campos is son of Luis Campos and brother of Santiago Campos.
Diana Jones has served as Betterware CFO since 2020. Mrs. Jones previously performed as Betterware’s Director of Comptroller (2018-2019) and Director of Finance Planning (2019-2020). Prior joining the Company, she worked as Director of External Audit in KPMG Cardenas Dosal, S.C., (2003-2018), including a term at New York City from 2008 to 2010. Mrs. Jones holds a degree in Public Accounting and Finance from the Monterrey Institute of Technology and Higher Education (ITESM), as well as an MBA with specialty in Finance from Tecmilenio University. She is also a Certified Public Accountant on behalf of the Mexican Institute of Public Accountants.
Carlos Doormann has a degree in Economics, graduated from the Institute Autónomo de Mexico, has an MBA in Business Administration and Yale School Of Management New Haven, Connecticut, and is currently pursuing an Executive MBA at the European Business School in Barcelona. He has a solid professional background in execution of business and finance strategies, team development, investor relations, risk management, treasury optimization, profitability models, international financial reporting standards and more, in leading companies in Mexico and USA as Grupo Alpura, Club Premier, Grupo Aeroméxico, Boehringer Ingelheim Promeco, Kraft Foods de México, among others, where he served as Director of Finance and Administration (CFO), Director of Analysis and Financial Planning and Treasury.
Luis Lozada joined Betterware in January 2021, as Chief Strategy Officer. Prior to joining Betterware, Mr. Lozada was an Associate Partner with Bain & Company, where he worked for almost fifteen years (2006 – 2020) advising senior executives of multi-multinational companies on a variety of management topics. Mr. Lozada’s area of expertise resides in business strategy and performance improvement, with retail and consumer-goods companies Mr. Lozada holds a bachelor’s degree in Chemical Engineering from the Monterrey Institute of Technology and Higher Education (Instituto Tecnologico y de Estudios Superiores de Monterrey – “ITESM”) and an MBA from Cornell University.
Santiago Campos has served as Director of Innovation and Communication at Betterware since 2018. Prior to joining Betterware, Santiago Campos served as Commercial Director at EPI Desarrollos, a Real Estate Development company, coordinating efforts between marketing, sales, finance and also taking care of administration, he was involved in achieving successful projects in a span of 2.5 years where 100% sales were accomplished before finishing construction. Santiago holds a bachelor’s degree in public accounting and finance from Instituto Tecnológico y de Estudios Superiores de Monterrey. Mr. Campos was selected to serve on Betterware’s board of directors due to his natural instinct in product innovation and household needs in BWM market target group. Santiago Campos is son of Luis Campos and brother of Andres Campos.
Jose de Jesus Valdez serves as CEO of Alpek since 1988. Mr. Valdez joined Alpek in 1976 and has held several senior management positions such as CEO of Petrocel, Indelpro and Polioles. He was also president of the “Asociación Nacional de la Industria Química” (ANIQ), of the “Comisión Energética de la Confederación de Cámaras Industriales de los Estados Unidos Mexicanos” (CONCAMIN) and of the “Cámara de la Industria de Transformación de Nuevo León” (CANAINTRA). Mr. Valdez is a mechanical engineer and has an MBA from Tecnológico de Monterrey (ITESM) and a master’s degree in industrial engineering from Stanford University. Mr. Valdez was selected to serve on the Company’s board of directors due to his vast experience in Mexican, US and Latin American business and market economy.

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Federico Clariond has served as CEO of Valores Aldabra, a single-family office with investments in financial services, aluminum, packaging and consumer goods companies, since 2011, and as CEO of Buro Inmobiliario Nacional, a Real Estate investment vehicle with holdings in the hospitality, industrial, office, and commercial spaces throughout Mexico, since 2015. Prior to Valores Aldabra and Buro Inmobiliario Nacional, from 2007 to 2011, Mr. Clariond served as CEO of Stabilit Mexico, a manufacturer of fiber glass reinforced plastics with operations in Mexico, the United States and Europe, and from 2004 to 2007, as Commercial VP of IMSA Acero. Additionally, he is board member of several companies ranging from the financial services, aluminum, packaging and consumer goods industries. Mr. Clariond is a mechanical engineer and has an MBA from Stanford University. Mr. Clariond was selected to serve on Betterware’s board of directors due to his vast business experience in Mexico’s private investment matters.
Mauricio Morales is a founding partner at MG Capital. Before his 21-year tenure at the firm, he worked at different financial institutions in Mexico, specializing in wealth management, with a focus on exchange-traded instruments. Mauricio hold a B.S. in Mechanical Engineering, from the Instituto Tecnológico y de Estudios Superiores de Monterrey. Mauricio participates as a board member at one private firm, and one private charity group. Mr. Morales was selected to serve on Betterware’s board of directors due to his vast experience in Mexico and USA capital markets.
Joaquin Gandara serves as CEO of Stone Financial Awareness since 2017. Prior to Stone Financial Awareness, he worked at Scotiabank for 24 years where he held several positions in different departments such as Credit, Consumer Banking, Branch Operations and Corporate Banking. Mr. Gandara was selected to serve on the Company’s board of directors due to his extensive knowledge in the financial and banking field.
Dr. Martín M. Werner, who has served as DD3’s Chief Executive Officer and Chairman of the Board since inception, is a founding partner of DD3 Capital. Prior to founding DD3 Capital in 2016, Dr. Werner worked at Goldman Sachs for 16 years (2000 – 2016) becoming a Managing Director in 2000 and a Partner in 2006. He was co-head of the Investment Banking Division for Latin America and the country head of the Mexico office. Dr. Werner continues to serve as the Chairman of the board of directors of Red de Carreteras de Occidente (RCO), which is one of Mexico’s largest private concessionaires and operates more than 760 kilometers of toll roads and is owned by Goldman Sachs Infrastructure Partners. Prior to his time with Goldman Sachs, Dr. Werner served in the Mexican Treasury Department as the General Director of Public Credit from 1995 to 1997, and as Deputy Minister from 1997 to 1999. Among his numerous activities, he was in charge of restructuring Mexico’s Public debt after the financial crisis of 1994 and 1995. Dr. Werner is the second largest investor of Banca Mifel, a leading mid-market Mexican bank with $3.3 billion in assets and a credit portfolio of $2.0 billion; he is also member of the Board of Directors of Grupo Comercial Chedraui, a leading supermarket chain in Mexico and the United States; the Board of Directors of Grupo Aeroportuario Centro Norte, one of Mexico’s largest airport operators; and he is a member of Yale University’s School of Management Advisory Board. Dr. Werner holds a bachelor degree in economics from Instituto Tecnológico Autónomo de Mexico (ITAM) and a Ph.D. in economics from Yale University.
Dr. Guillermo Ortiz has served as Chairman of BTG Pactual Latin America ex-Brazil, a leading Brazilian financial services company with operations throughout Latin America, the U.S. and Europe, since 2015. Prior to joining BTG, from 2010 to 2015, he was Chairman of the Board of Grupo Financiero Banorte-Ixe, the largest independent Mexican financial institution. Dr. Ortiz also served two consecutive six-year terms as Governor of Mexico’s Central Bank from 1998 to 2009. From 1994 to 1997, Dr. Ortiz served as Secretary of Finance and Public Credit in the Mexican Federal Government where he guided Mexico through the “Tequila” crisis and contributed to the stabilization of the Mexican economy, helping return the nation to growth in 1996. He has served on the Board of Directors of the International Monetary Fund, the World Bank and the Interamerican Development Bank. Dr. Ortiz is Chairman of the Pe Jacobsson Foundation, a member of Group of Thirty, Board of Directors of the Center for Financial Stability, Board of Directors of the Globalization and Monetary Policy Institute, Board of Directors in the Federal Reserve Bank of Dallas and Board of Directors of the China’s International Finance Forum. He is also an Officer of Zurich Insurance Group Ltd. and a Member of the Board of Directors of Wetherford International, a leading company in the oil and equipment industry, as well as of a number of Mexican companies, including Aeropuertos del Sureste, one of Mexico’s largest airport operators, Mexichem, a global leading petrochemical group, and Vitro, a leading glass manufacturer company in Mexico. Dr. Ortiz is also a member of the Quality of Life Advisory board of the Government of Mexico City. Dr. Ortiz holds a bachelor’s degree in economics from Universidad Nacional Autónoma de México (UNAM), a

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master’s degree and a Ph.D. in economics from Stanford University. Dr. Ortiz was selected to serve on our board of directors due to his significant government service and finance experience.
José Alberto Terán Vázquez was born in Mexico City in 1953. He studied administration at the Instituto Tecnológico Autónomo de México, he worked 2 years at the bancking sectory and in 1978 he joined to Terán Publicity; The dvertising agency was founded in 1947 by his father; In 1988 he was named as CEO of Terán Publicity. In 1995, Terán Publicity become part of OMNICOM group, thus joining the TBWA network and the agency was again named as TERAN / TBWA. Some of its clients are leading local and global brands operating in Mexico, such as Apple, Bachoco, BBVA, Domino’s, El Palacio de Hierro, GNP Seguros, Tequila Herradura, Jack Daniel’s, Kleen Bebe, Nissan, FUD, Yoplait and Volaris. José Alberto has been an active leader in the Mexican advertising industry and has served as President of the Mexican Association of Advertising Agencies (AMAP) in 1995, 200 and 2017. He has also been Vice President of the National Advertising Council. In 2000 he founded the EFFIE awards in Mexico, which are sponsored by the American Marketing Association and served as its president for 7 years.
Reynaldo Vizcarra (non-member Secretary) is a member of Baker & McKenzie’s Corporate and Transactional Practice Group. He is a professor at the University Anáhuac del Norte where he teaches foreign investment as part of the master of laws program, and an instructor at Universidad Panamericana’s Baker McKenzie Seminar. He joined Baker & McKenzie’s Mexico City office in 1986, handling foreign investments, banking and finance matters and international agreements. He also worked in the Chicago office’s Latin America Practice Group, advising on investments and acquisitions in Latin America (1996 – 1997). In 2000, Mr. Vizcarra co-founded Baker & McKenzie’s Guadalajara office, where he led the Banking & Finance Practice Group. In August 2005, he transferred to Baker McKenzie’s Cancun office as a founding member and director mainly handling tourism and real estate projects. In 2009, he transferred back to the Mexico City office, where he was local managing partner for four years and thereafter became National Managing Partner of the Firm in Mexico until August 2018.

B.COMPENSATION

For the 2021 period, we paid our top management for services in all capacities an aggregate compensation of approximately MX$38,610 and a variable aggregate compensation for bonuses of approximately MX$3,560. The amounts payable under the performance bonus depend on the results achieved and include certain qualitative and/or quantitative objectives that can be operative and financial. Overall, the total executive compensation for the 2021 period was MX$42,170.

On July 30, 2020, Betterware modified the share-based plan incentive (“Incentive Plan”) to the Chairman of the Board, certain executives and Directors (the “Incentive Plan”) which was granted on August 15, 2019. The purpose of the Incentive Plan was and continues being to provide to the Chairman of the Board, the eligible executives and Directors with the opportunity to receive share-based incentives to encourage them to contribute significantly to the growth of the Group and to align the economic interests of those individuals with those of the shareholders. The delivery of certain shares to key executives was agreed and approved by the Board of Directors. The Incentive Plan is aligned with the shareholders’ interest in terms of the management capacity to obtain operating results that potentially benefit the share price; if the established results are achieved, it will cause a gradual delivery of shares over a period of 4 to 5 years (see Note 22 of the Audited Consolidated and Combined Financial Statements). As of December 31, 2021, we have issued and delivered 731,669 shares to Campalier under the Incentive Plan.

C.BOARD PRACTICES

Board Committees

The Company’s Audit and Corporate Practices Committee has the following specifications:

Composition

The Audit and Corporate Practices Committee of the Company consists of three members appointed by the board itself, in accordance with the provisions of Nasdaq, the Company’s bylaws and other legal provisions, in the understanding, however, that the chairman of the Audit and Corporate Practices Committee will be elected by the General Assembly of Shareholders of the Company.

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The members of the Audit and Corporate Practices Committee are independent as under Nasdaq requirements.
The Audit and Corporate Practices Committee may create one or more sub-committees, to receive support in the performance of its functions. The Audit and Corporate Practices Committee is empowered to designate and remove the members of said sub-committees and to determine their powers.
As of the date of this annual report, the members of the Audit and Corporate Practices Committee are:
i.Joaquin Gandara Ruiz Esparza — Chairman — Mr. Gandara serves as CEO of Stone Financial Awareness since 2017. Prior to Stone Financial Awareness, he worked at Scotiabank for 24 years where he held several positions in different departments such as Credit, Consumer Banking, Branch Operations and Corporate Banking.
ii.America Taracido serves as Managing Partner at Consultores en Alta Direccion y Gestión de Empresas, S.C. and, she joined Desarrolladora de Ciudad as CFO. Mrs. Taracido served in various positions in countries such as Peru, the United States and Mexico and worked in important positions in companies such as “Ernst & Young México, Avon Cosmetics, Finanzas & CFO at Smurfit Kappa Group México”, and others. She is an active member of the Council of Americas and was a president of “Instituto Mexicano de Ejecutivos de Finanzas”. Mrs. Taracido holds a master degree in Administration in “Tecnológico Autonómo de México (ITAM)”. Since April 2020 she is part of the Audit Committee for Betterware Mexico.
iii.Federico Clariond has served as CEO of Valores Aldabra, since 2011, and as CEO of Buro Inmobiliario Nacional. Prior to Valores Aldabra and Buro Inmobiliario Nacional, from 2007 to 2011, Mr. Clariond served as CEO of Stabilit Mexico, a manufacturer of fiber glass reinforced plastics with operations in Mexico, the United States and Europe, and from 2004 to 2007, as Commercial VP of IMSA Acero. Additionally, he is board member of several companies. Mr. Clariond is a mechanical engineer and has an MBA from Stanford University. Mr. Clariond was selected to serve on Betterware’s board of directors due to his vast business experience in Mexico’s private investment matters.

Sessions Frequency

The Audit and Corporate Practices Committee and its sub-committees meet with the necessary frequency for the performance of their duties, at the request of any of its members, the Board of Directors or its Executive President or the General Assembly of Shareholders; in the understanding that it must meet at least 4 (four) times during a calendar year.
The sessions of the Audit and Corporate Practices Committee and its sub-committees may be held by telephone or videoconference, with the understanding that the Secretary of the respective session must take the corresponding minutes, which must in any case be signed by the Executive President and the respective Secretary, and collect the signatures of the members who participated in the session.

Functions

Regarding Corporate Practices, the Audit and Corporate Practices Committee will have the functions referred to in the Securities Market Law, especially the provisions of section I (first) of its Article 42 (forty-two), and other applicable legal provisions, as well as those determined by the General Assembly of Shareholders. They will also perform all those functions of which they must render a report in accordance with the provisions of the Securities Market Law. In an enunciative way, but not limited to, it will have the following functions:

Provide opinions regarding transactions between related parties to the General Assembly of Shareholders and the Board of Directors.

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Develop, recommend and review corporate governance guidelines and guidelines of the Company and its subsidiary.

Recommend modifications to the bylaws of the Company and its subsidiary.

Analyze and review all legislative, regulatory and corporate governance developments that may affect the operations of the Company, and make recommendations in this regard to the Board of Directors.

Prepare and propose the different manuals necessary for the corporate governance of the Company or for compliance with the applicable provisions.

Define the compensation and performance evaluation policies of the senior executives of the Company.

Use the best compensation practices to align the interests of the Shareholders and the senior executives of the Company, being able to hire any independent expert necessary for the development of this function.

Ensure access to market data and best corporate practices through external consultants specialized in the field.

Develop a plan for the succession of senior executives of the Company.

In matters of Audit, the Audit and Corporate Practices Committee will have the functions referred to in the Securities Market Law especially the provisions of section II of its Article 42 (forty-two), and other applicable legal provisions, as well as those determined by the General Assembly of Shareholders. They will also perform all those functions of which they must render a report in accordance with the provisions of the Securities Market Law. In an enunciative way, but not limited to, it will have the following functions:

Determine the need and viability of the fiscal and financial structures of the Company.

Comment on the financial and fiscal structure of the international expansion of the Company.

Comment on the financial reports, accounting policies, control and information technology systems of the Company.

Evaluate and recommend the external auditor of the Company.

Ensure the independence and efficiency of the internal and external audits of the Company.

Evaluate the transactions between related parties of the Company, as well as identify possible conflicts of interest derived from them.

Analyze the financial structure of the Company, in the short, medium and long term, including any financing and refinancing transactions.

Review and comment on the management of the Company’s treasury, risk and exposure to fluctuations in exchange rates and hedging instruments of the Company, whatever their nature or denomination.

Evaluate the processes and selection of insurance brokers, as well as the coverage and premiums of the Company’s insurance policies.

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D.EMPLOYEES

The following table provides information regarding the number of our employees for the 2021, 2020 and 2019 periods, respectively:

    

Number of Employees

December 31,

January 03,

December 31,

    

2021

    

2021

    

2019

Operations

977

962

296

Sales and marketing

 

167

 

148

 

263

Finance, administration, human resources, IT

 

128

 

184

 

115

Total

 

1,272

 

1,294

 

674

E.SHARE OWNERSHIP

Not applicable.

ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.MAJOR SHAREHOLDERS

The following table sets forth information with respect to the beneficial ownership of our shares as of the filing date of this annual report:

each shareholder, or group of affiliated shareholders, who we know beneficially owns more than 5% of our outstanding shares;
each of our directors and executive officers individually; and
all directors and executive officers as a group.

As of the filing date of this annual report, we had 37,316,546 issued and outstanding ordinary shares. Beneficial ownership is determined in accordance with the rules of the SEC and generally includes any shares over which a person exercises sole or shared voting and/or investment power. Except as otherwise indicated, we believe the beneficial owners of the shares listed below, based on

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information furnished by them, have sole voting and investment power with respect to the number of shares listed opposite their names. The address for Campalier is Av. Acueducto 6075-A, Local A, Puerta de Hierro, Zapopan, Jalisco, 45116, Mexico.

    

Ordinary shares 

 

Beneficially 

Owned as of filing

date of this

annual report

Ordinary Shares

 

    

Number

    

%

Five Percent or More Holders

  

  

 

Campalier S.A. de C.V.(1)

19,919,793

53.38

%

Cede & Co.

17,396,753

46.62

%

Our executive officers and directors:

  

  

 

Luis Campos

 

 

Andres Campos

 

 

Diana Jones

 

 

Carlos Doormann

 

Luis Lozada

 

 

Santiago Campos

 

 

Jose de Jesus Valdez

 

 

Federico Clariond

 

 

Mauricio Morales

 

 

Joaquin Gandara

 

 

Dr. Martín M. Werner

 

 

Dr. Guillermo Ortiz

 

 

José Alberto Terán

 

 

Reynaldo Vizcarra

 

 

All directors and executive officers as a group (fourteen individuals)

 

 

(1)This entity is controlled by Luis Campos, our board chairman

B.RELATED PARTY TRANSACTIONS

Other than as disclosed in this annual report and the Audited Consolidated and Combined Financial Statements attached hereto and other than in the ordinary course of business, since the beginning of the Company's preceding three financial years, there have been no transactions or loans with the Company’s related parties.

C.INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8.FINANCIAL INFORMATION

A.CONSOLIDATED AND COMBINED STATEMENTS AND OTHER FINANCIAL INFORMATION

The Company’s Audited Consolidated and Combined Financial Statements are included in Item 18. The Audited Consolidated and Combined Financial Statements were audited by independent registered public accounting firm and are accompanied by their audit reports.

Legal Proceedings

We are not involved in or threatened by any material proceeding that we  it is not adequately insured or indemnified or which, if determined adversely, would have a material adverse effect on our consolidated and combined financial position, results of operations and cash flows.

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On August 12, 2014, the International Inspection Administration “4” (“AFI” for its acronym in Spanish), under the Central Administration of International Control, in relation to the General Administration of Large Taxpayers of the Tax Administration Service (“SAT”, for its acronym in Spanish), requested information regarding the Group´s 2010 income tax filing, which was provided at the time. On February 20, 2017, the final agreement was signed with the Taxpayer Advocacy Office (“PRODECON”, for its acronym in Spanish) regarding this SAT review. On March 2, 2017, the SAT notified us, about certain issues on which an agreement was not reached. As a result, we filed a lawsuit for annulment before the SAT’s resolution, which is still in progress’. Based on the evaluation of the Group’s Management, tax liabilities are not expected to arise as a result of this matter. As of December 31, 2021, the maximum exposure was considered not significant.

Dividend Distribution Policy

The Company’s board of directors will consider whether or not to institute a dividend policy. As of the date of this annual report, we have not implemented a dividend policy.

B.SIGNIFICANT CHANGES

Please see Note 28 of the Audited Consolidated and Combined Financial Statements elsewhere in this annual report.

ITEM 9.THE OFFER AND LISTING

A.OFFER AND LISTING DETAILS

Our ordinary shares are listed on Nasdaq under the symbol “BWMX.”

B.PLAN OF DISTRIBUTION

Not applicable.

C.MARKETS

Our ordinary shares began trading on Nasdaq under the symbol “BWMX,” in connection with our initial public offering, on March 13, 2020.

D.SELLING SHAREHOLDERS

Not applicable.

E.DILUTION

Not applicable.

F.EXPENSES OF THE ISSUE

Not applicable.

ITEM 10.ADDITIONAL INFORMATION

A.SHARE CAPITAL

Not applicable.

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B.MEMORANDUM AND ARTICLES OF ASSOCIATION

The following is a summary of some of the terms of our ordinary shares, based on our articles of association in place. The following summary is not complete and is subject to, and is qualified in its entirety by reference to, the provisions of our articles of association, and applicable Mexican law, including Mexican corporate law.

General

Betterware is a company incorporated under the General Corporations Law. As Betterware is a Mexican corporation, the rights of holders of Betterware’s shares will be governed directly by Mexican law and the Amended and Restated Charter.

Shareholder Meetings

Held at the corporate domicile of the company or, in the case of unanimous resolutions, the place where the shareholders are met.
Notice:

○              A copy of the notice of any shareholders’ meeting shall be published not fewer than fifteen (15) calendar days prior to the date of the proposed meeting in the electronic system of the Corporations Publications of the Mexican Ministry of Economy.

Shareholders’ Voting Rights

Any person authorized to vote may be represented at a meeting by a proxy who may speak and vote on behalf of the member.
Depending on the matter that requires shareholders’ approval, the by-laws and Mexican law provide a fixed quorum.
The annual ordinary shareholders’ meeting must have a quorum of at least 50% plus one of the outstanding shares of the company’s capital stock and all resolutions shall be approved with the affirmative vote of at least the majority of the present shares. In the event of a second or subsequent call, the general ordinary stockholders’ meeting may be validly held regardless of the number of shares represented, and its resolutions shall be valid when adopted by majority vote of the shares represented at the meeting.
The extraordinary shareholders’ meetings must have a quorum of at least 75% of the outstanding shares of the company’s capital stock and all resolutions must be approved with the affirmative vote of at least 50% of the outstanding voting shares of the company. In the event of a second or subsequent call, extraordinary general stockholders’ meetings may be validly held if 50% of the outstanding voting shares of the company is represented, and their resolutions will be valid if adopted by the favorable vote of shares representing at least 50% of the outstanding voting shares of the company.
Notwithstanding the provisions of the preceding paragraph, the favorable vote of shares with or without voting rights representing (i) 75% (seventy-five percent) of the Company’s outstanding capital stock shall be required to amend the Company’s by-laws and (ii) 95% (ninety-five percent) of the capital stock of the Company to resolve and request from the National Banking and Securities Commission the cancellation of the registration of the shares of the Company in the National Securities Registry, under the terms provided in the Securities Market Law and other applicable provisions.
For special meetings, the rules provided for general extraordinary meetings shall apply considering only the shares of the applicable series or class.

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The annual ordinary shareholders’ meeting shall:

approve the chief executive officer and board of directors’ annual reports; the appointment of the members of the board of directors and statutory examiners; and if applicable, the members of the board or statutory examiners’ fees.

discuss and approve on the re-appointment, revocation and/or appointment, if any, of one third of the proprietary members and respective alternates of the board of directors that the annual general ordinary meeting resolves to re-appoint, revoke and/or appoint;

evaluate the independence of independent directors;

appoint the chairmen of the corporate practices and audit committees;

decide on the use of the company’s profit, if any;

if applicable, determine the maximum amount of resources that may be used for the acquisition of its own shares;

approve the execution of transactions whether simultaneously or subsequently by the company or the legal entities it controls within the same fiscal year that may be considered as one and the same transaction that the company when they represent 20% or more of the consolidated assets of the company, based on figures corresponding to the close of the immediately preceding quarter, regardless of the way in which they are applied. Stockholders holding shares with limited or restricted voting rights may vote at such meetings; and

any other matter that shall be convened with by the general ordinary meeting in accordance with applicable law or that is not specifically reserved for an extraordinary meeting.

An extraordinary shareholders’ meeting shall approve:

extension of the company’s term;

anticipated dissolution of the company;

any increase or decrease in the capital stock of the company;

any amendment in the company’s corporate purpose;

any change in the company’s nationality;

the company’s change in any other type of entity or company;

any merger;

issuance of shares different than ordinary shares and bonds;

redemption of shares; and

any amendment to the company’s by-laws.

Directors

The board of directors shall have a minimum of 9 and a maximum of 21 members.

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Any shareholder, or group of shareholders, that have 10% or more of the capital stock of the Company has the right to appoint one member of the board of directors.
The members of the board shall hold office for one year or until the shareholders that have appointed them revoke such appointment. The directors may be reelected as many times as deemed convenient and shall continue in office until their successors have been appointed and taken office.

Fiduciary Duties

Members of the board owe fiduciary duties in accordance with the Securities Market Law and in the applicable provisions of the stock exchange in which the shares are listed as follows:

The members of the board of directors must act in accordance with the duty of loyalty provided under Mexican law and in the applicable provisions of the stock exchange in which the shares are listed. The directors and the secretary, in the event they have a conflict of interest, must abstain from participating in the relevant matter and from being present in the deliberation and voting of said matter, without it affecting the quorum required for the installation of the board.

The members of the board of directors must act in accordance with the duty of care. For such purposes, they shall have the right to request, at any time and in accordance with the terms they deem appropriate, information from the company’s officers and the legal entities controlled by the company.

The breach of any director to his duty of care shall make him jointly and severally liable with other directors who have breached their duty of care or are responsible, for the damages and losses caused to the company, which shall be limited to direct damages and losses, but not punitive or consequential, caused to the company and to the events in which such director acted fraudulently, in bad faith, with gross negligence or unlawfully.

Shareholders’ Derivative Actions

The liability resulting from the breach of the duty of care or the duty of loyalty shall be exclusively in favor of the company or of the legal entity controlled by it or over which it has a significant influence and may be exercised by the company or by the stockholders who, individually or jointly, hold ordinary shares or shares with limited voting rights, restricted or without voting rights, representing 5% or more of the corporate capital in accordance with the provisions of Article 38 of the Securities Market Law.
The members of the board of directors shall not incur in liability for damages caused to the company or to the legal entities it controls, when a director acts in good faith.

Indemnification of Directors and Officers

The company shall indemnify and hold harmless the members and the secretary of the board of directors, any of the members of the company’s committees, and the relevant officers of the company, in connection with any liability arising from the performance of their duties, including any indemnification for any damage or injury, the necessary amounts to reach any settlement, and any fees and expenses incurred by such persons in connection with the above. Such indemnity shall not apply if any of such persons incurred or committed fraudulent acts, unlawful acts or omissions, or acted in bad faith.

Inspection of Books and Records

Members of the general public, on payment of a nominal fee, can obtain copies of the public records of the company available at the Public Registry of Commerce, which will include an extract of the company’s articles of incorporation with the initial capital stock and any increase in its fixed portion, the initial stockholders and members of the Board, as well as any merger, dissolution or liquidation provision.

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Any person that is registered as a stockholder in the company’s stockholder registry book can inspect, with prior written notice to the company, any of the company’s books or records.

Anti-takeover Protections

The Board of Directors needs to approve, with at least 66% of its Members present in a duly conveyed meeting and with at least 66% of its Members favorable vote, any change in Control of the Betterware or the transfer of the 20% or more of Betterware’s shares. Such change of Control or transfer must be notified to Betterware and Betterware’s shareholders.

The Board of Directors must approve the transfer within the following 90 calendar days after having all documentation the Board deems necessary for its consideration and approval.

In the event the Board of Directors authorizes the transaction, in addition to the Board approval, prior to the closing of the transaction, the person asking for the Board’s approval shall make a tender offer for 100% of the outstanding capital stock of the Company, at a price payable in cash not less than the highest of the following:

the book value per share, in accordance with the latest quarterly financial statements approved by the Board of Directors and presented to the National Banking and Securities Commission or to the applicable securities exchange; or
the highest closing price per share with respect to transactions in the securities exchange where the shares are placed, published in any of the 365 days prior to the date of the application filed or the authorization granted by the Board of Directors; or
the highest price paid with respect to the purchase of any shares, during the 365 days immediately before sending of the request or the authorization granted by the Board of Directors.

In each of these cases (items (i) to (iii) above), a premium equal to or greater than 15% shall be paid in respect of the price per share payable in connection with the requested transaction, it the understanding that the Board of Directors may modify, upwards or downwards, the amount of such premium, taking into account the opinion of a reputable investment bank.

The public tender offer must be completed within 90 days of the date of the Board of Directors’ authorization, on the understanding that such term may be extended for an additional period of 60 days if the applicable governmental authorizations continues to be pending on the date of expiration of the initial term referred to above.

In the event that the Board of Directors receives on or before closing, an offer from a third party, requesting to make the acquisition of at least the same number of shares, on better terms for the stockholders or holders of shares of Betterware, the Board of Directors shall have the capacity to consider and, if applicable, authorize such second request, revoking the authorization previously granted.

If the transaction is not (i) an acquisition representing the 20% of the capital stock of Betterware, or (ii) a change of Control, it shall be registered in Betterware’s Shares Registry Book once authorized by the Board of Directors.

In the event the Board of Directors rejects the transaction, the Secretary of the Board shall summon, within a period of 10 calendar days following such rejection (or within 20 calendar days prior to the termination of the term for the Board of Directors to decide on such request), to a General Ordinary Stockholders’ Meeting at which the shareholders may, by the simple majority of the votes of the outstanding shares, ratify the decision of the Board of Directors or revoke such decision. In such case, the shareholders’ resolution shall be deemed as final and shall replace any prior rejection by the Board of Directors.

Control” means in respect of any person, through a person or group of persons, (i) the power to impose, directly or indirectly, by any means, resolutions or decisions, or to veto or prevent such resolutions or decisions from being taken, in any sense, at General Shareholders Meetings, or to appoint or remove the majority of the directors, administrators, managers or their equivalents of said person; (ii) maintain the ownership of any class of shares or rights related thereto which permit, directly or indirectly, the exercise of

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voting rights in respect of more than 50% of the shares, of whatever nature, with voting rights of such person, and/or (iii) the power to direct, determine, influence, veto or impede, directly or indirectly, the policies and/or decisions of the Board of Directors or of the management, strategy, activities, operations or principal policies of such person, whether through ownership of shares, by contract or agreement, written or oral, or by any other means, regardless of whether such control is apparent or implied.

A copy of the Articles of Association, as amended, is furnished under Item 19. “Exhibits”.

C.MATERIAL CONTRACTS

We do not have material contracts to disclose.

D.EXCHANGE CONTROLS

None.

E.TAXATION

Material U.S. Federal Income Tax Considerations

The following is a summary of the material U.S. federal income tax consequences to U.S. Holders (as defined below) of the ownership and disposition of our ordinary shares. This summary is based upon U.S. federal income tax laws (including the U.S. Internal Revenue Code of 1986, as amended (the “Code”) final, temporary and proposed Treasury regulations, rulings, judicial decisions and administrative pronouncements), all as of the date hereof and such authorities may be repealed, revoked or modified, possibly with retroactive effect, so as to result in United States federal income tax consequences different from those discussed below.

As used herein, the term U.S. Holder means a beneficial owner of one or more of our ordinary shares:

that is for U.S. federal income tax purposes one of the following:

an individual citizen or resident of the United States,

a corporation (or other entity that treated as corporation for U.S. federal tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof, or the District of Columbia.

an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

trust if (1) a court within the United States can exercise primary supervision over it, and one or more United States persons have the authority to control all substantial decisions of the trust, or (2) the trust has a valid election in effect under applicable U.S. Treasury regulations to be treated as a United States person;

who holds the ordinary shares as capital assets for U.S. federal income tax purposes;
who owns, directly, indirectly or by attribution, less than 10% of the share capital or voting shares of the Company; and
whose holding is not effectively connected with a business carried on through a permanent establishment in Mexico.

The discussion does not cover all aspects of U.S. federal income taxation that may be relevant to, or the actual tax effect that any of the matters described herein will have on, the acquisition, ownership or disposition of our ordinary shares by particular investors (including consequences under the alternative minimum tax or net investment income tax), and does not address state, local, non-U.S. or other tax laws.

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This summary also does not address all of the tax considerations that may apply to holders that are subject to special tax rules, such as U.S. expatriates or former long-term residents of the United States, insurance companies, individual retirement accounts and other tax-deferred accounts, tax-exempt organizations, certain financial institutions, dealers and certain traders in securities, persons holding ordinary shares as part of a straddle, hedging, conversion or other integrated transaction, controlled foreign corporations or passive foreign investment companies, persons who are required to accelerate the recognition of any item of gross income with respect to the shares of the Company as a result of such income being recognized on an applicable financial statement; persons who acquired their ordinary shares pursuant to the exercise of employee shares options or otherwise as compensation, entities or arrangements classified as partnerships for U.S. federal income tax purposes or persons whose functional currency is not the U.S. dollar. Such holders may be subject to U.S. federal income tax consequences different from those set forth below.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds ordinary shares, the tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. An entity or arrangement treated as a partnership for U.S. federal income tax purposes, or partner in a partnership, is urged to consult its own tax advisor regarding the specific tax consequences of owning and disposing of the ordinary shares.

Except as otherwise noted, this summary assumes that the Company is not a passive foreign investment company (a “PFIC”) for U.S. federal income tax purposes, which the Company believes to be the case. The Company’s possible status as a PFIC must be determined annually and therefore may be subject to change. If the Company were to be a PFIC in any year, materially adverse consequences could result for U.S. Holders.

Potential investors in our ordinary shares should consult their own tax advisors concerning the specific U.S. federal, state and local tax consequences of the ownership and disposition of our ordinary shares in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction.

Taxation of distributions

Distributions received by a U.S. Holder on ordinary shares, including the amount of any Mexican taxes withheld, generally will constitute foreign source dividend income to the extent paid out of the Company’s current or accumulated earnings and profits (as determined for U.S. federal income tax purposes). Distributions in excess of current and accumulated earnings and profits will be treated as a non-taxable return of capital to the extent of the U.S. Holder’s basis in the ordinary shares and thereafter as capital gain. Because the Company does not maintain calculations of its earnings and profits under U.S. federal income tax principles, it is expected that such distributions (including any Mexican taxes withheld) will be reported to U.S. Holders as dividends. U.S. Holders should consult their own tax advisers with respect to the appropriate U.S. federal income tax treatment of any distribution received from the Company. Corporate U.S. Holders who own less than 10% of the share capital or voting shares of the Company will not be entitled to claim the dividends received deduction with respect to dividends paid by the Company. A non-corporate recipient of dividend income will generally be subject to tax on dividend income from a “qualified foreign corporation” at a reduced capital gains rate rather than the marginal tax rates generally applicable to ordinary income provided that the holding period requirement is met. A non-U.S. corporation (other than a corporation that is classified as a PFIC (defined below) for the taxable year in which the dividend is paid or the preceding taxable year) generally will be considered to be a qualified foreign corporation with respect to any dividend it pays on stock which is readily tradable on an established securities market in the United States. The ordinary shares are listed on Nasdaq, and should qualify as readily tradable on an established securities market in the United States so long as they are so listed. Therefore, the Company believes that it will be a qualified foreign corporation for purposes of the reduced tax rate, although no assurance can be given that it will continue to be treated as a qualified foreign corporation in the future. Non-corporate U.S. Holders should consult their own tax advisors to determine whether they are subject to any special rules that limit their ability to be taxed at this favorable rate.

Dividends received on ordinary shares will be treated, for United States foreign tax credit purposes, as foreign source income. A U.S. Holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit in respect of any non-United States withholding taxes imposed on dividends received on ordinary shares. Instead of claiming a credit, a U.S. Holder may elect to deduct foreign taxes (including any Mexican taxes) in computing its taxable income, subject to generally applicable limitations. An election to deduct foreign taxes (instead of claiming foreign tax credits) applies to all taxes paid or accrued in the taxable year to foreign countries and possessions of the United States. The limitations on foreign taxes eligible for credit is calculated separately with respect to specific classes of income. The rules governing foreign tax credits are complex. Therefore, U.S. Holders should consult their own tax advisors regarding the availability of foreign tax credits in their particular circumstances.

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Taxation upon sale or other disposition of ordinary shares

A U.S. Holder generally will recognize U.S. source capital gain or loss on the sale or other disposition of ordinary shares, which will be long-term capital gain or loss if the U.S. Holder has held such ordinary shares for more than one year. The amount of the U.S. Holder’s gain or loss will be equal to the difference between such U.S. Holder’s tax basis in the ordinary shares sold or otherwise disposed of and the amount realized on the sale or other disposition. Net long-term capital gains of non-corporate U.S. Holders, including individuals, may be eligible for reduced rates of taxation. The deductibility of capital losses is subject to limitations. Any gain or loss that a U.S. Holder recognizes generally will be treated as gain or loss from sources within the United States for U.S. foreign tax credit limitation purposes.

Additional tax on net investment income

An additional 3.8% federal income tax may be assessed on net investment income (including dividends, other distributions, and gain realized on the sale of ordinary shares) earned by certain U.S. Holders. This tax does not apply to U.S. Holders who hold ordinary shares in the ordinary course of certain trades or businesses.

Passive foreign investment company rules

The Company believes that it was not a PFIC for its 2021 taxable year and does not expect to be a PFIC for its 2022 taxable year or in the foreseeable future. A non-U.S. corporation will be a PFIC in any taxable year in which, after taking into account the income and assets of the corporation and certain subsidiaries pursuant to applicable “look-through rules,” either (i) at least 75% of its gross income is “passive income” or (ii) at least 50% of the average value of its assets is attributable to assets which produce passive income or are held for the production of passive income. However, because PFIC status depends upon the composition of the Company’s income and assets and the market value of its assets (including, among others, less than 25% owned equity investments) from time to time, there can be no assurance that the Company will not be considered a PFIC for any taxable year.

If the Company were a PFIC for any taxable year during which a U.S. Holder held ordinary shares, unless the U.S. Holder makes a mark-to-market election as discussed below, gain recognized by a U.S. Holder on a sale or other disposition of an ordinary shares would be allocated ratably over the U.S. Holder’s holding period for the ordinary shares. The amounts allocated to the taxable year of the sale or other disposition and to any year before the Company became a PFIC would be taxed as ordinary income. The amount allocated to each other taxable year would be subject to tax at the highest rate in effect for individuals or corporations, as appropriate, and an interest charge at the rates generally applicable to underpayments of tax payable in those years would be imposed on the resulting tax liability. The same treatment would apply to any distribution in respect of ordinary shares to the extent such distribution exceeds 125% of the average of the annual distributions on ordinary shares received by the U.S. Holder during the preceding three years or the U.S. Holder’s holding period, whichever is shorter. Certain elections may be available that would result in alternative treatments (such as mark-to-market treatment) of the ordinary shares.

In addition, if the Company were treated as a PFIC in a taxable year in which it pays a dividend or in the prior taxable year, the reduced rate discussed above with respect to dividends paid to certain non-corporate U.S. Holders would not apply.

In certain circumstances, instead of being subject to the excess distribution rules discussed above, a U.S. Holder may make an election to include gain on the ordinary shares of a PFIC as ordinary income under a mark-to-market method, provided that the ordinary shares are regularly traded on a qualified exchange. Under current law, the mark-to-market election is only available for ordinary shares that are regularly traded within the meaning of U.S. Treasury regulations on certain designated U.S. exchanges and foreign exchanges that meet trading, listing, financial disclosure and other requirements to be treated as a qualified exchange under applicable U.S. Treasury regulations. Nasdaq is a qualified exchange.

If a U.S. Holder makes a mark-to-market election, the U.S. Holder will include each year as ordinary income, rather than capital gain, the excess, if any, of the fair market value of the U.S. Holder’s ordinary shares at the end of the taxable year over such U.S. Holder’s adjusted basis in the ordinary shares and will be permitted an ordinary loss in respect of the excess, if any, of the adjusted basis of these ordinary shares over their fair market value at the end of the taxable year, but only to the extent of the net amount previously included in income as a result of the mark-to-market election. A U.S. Holder’s basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. Any gain or loss on the sale of the ordinary shares will be ordinary income or loss, except that this loss will be ordinary loss only to the extent of the previously included net mark-to-market gain.

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A U.S. Holder who owns, or is treated as owning, PFIC stock during any taxable year in which the Company is a PFIC would generally be required to file IRS Form 8621 annually. Prospective purchasers should consult their tax advisors regarding the requirement to file IRS Form 8621 and the potential application of the PFIC regime.

Information reporting and backup withholding

Under U.S. federal income tax law and the Treasury regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. For example, U.S. Holders that hold certain specified foreign financial assets in excess of $50,000 are subject to U.S. return disclosure obligations (and related penalties). The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also, unless held in accounts maintained by a financial institution, any stock or security issued by a non-U.S. person, any financial instrument or contract held for investment that has an issuer or counterparty other than a U.S. person and any interest in a foreign entity. U. S. Holders may be subject to these reporting requirements unless their ordinary shares are held in an account at a domestic financial institution. Penalties for failure to file certain of these information returns are substantial.

Payments of dividends and sales proceeds with respect to ordinary shares by a U.S. paying agent or other U.S. intermediary will be reported to the IRS and to the U.S. Holder as may be required under applicable regulations. Backup withholding may apply to these payments if the U.S. Holder fails to provide a correct taxpayer identification number or certification that it is not subject to backup withholding. Certain U.S. Holders are not subject to backup withholding. The amount of any backup withholding from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability and may entitle such U.S. Holder to a refund, provided that the required information is timely furnished to the Internal Revenue Service. U.S. Holders should consult their tax advisors about these rules and any other reporting obligations that may apply to the ownership or disposition of ordinary shares, including requirements related to the holding of certain foreign financial assets.

F.DIVIDENDS AND PAYING AGENTS.

Not applicable.

G.STATEMENT BY EXPERTS

Not applicable.

H.DOCUMENTS ON DISPLAY

The Company makes its filings in electronic form under the EDGAR filing system of the SEC. Its filings are available through the EDGAR system at www.sec.gov. The Company’s filings are also available to the public through the Internet at the Company’s website at http://ri.betterware.com.mx/. Such filings and other information on its website are not incorporated by reference in this annual report. Interested parties may request a copy of this filing, and any other report, at no cost, by writing to the Company at the following email address: ir@better.com.mx.

I.SUBSIDIARY INFORMATION

Not applicable.

ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

We are exposed to market risks arising from our normal business activities, which mainly consists of exchange rate risk and interest rate risk. These market risks principally involve the possibility that fluctuations in exchange rates and interest rates will adversely affect the value of our financial assets and liabilities, or future cash flows and earnings. Market risk is the potential loss arising from adverse changes in market rates and prices.

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Market risk

Our activities expose it primarily to the financial risks of changes in exchange rates and interest rates (see below). We entered into a variety of derivative financial instruments to manage its exposure to interest rate and foreign currency risk, including:

In order to reduce the risks related to fluctuations in the exchange rate of foreign currency, we use derivative financial instruments such as forwards to adjust exposures resulting from foreign exchange currency.
Additionally, the Group occasionally used interest rate swaps to adjust its exposure to the variability of the interest rates or to reduce their financing costs. The Group’s practices vary from time to time depending on judgments about the level of risk, expectations of change in the movements of interest rates and the costs of using derivatives.

    

December 31,

January 03,

December 31,

2021

2021

2019

    

Long-term bond

Borrowings

Borrowings

Fair value.(1)

Ps.

1,499,867

634,992

679,188

(1) The fair value of the long term bond in 2021, was calculated based on level 1 of the value hierarchy, since its price is quoted in an active market on that date, meanwhile the fair value of borrowings in 2020 and 2019 periods, was calculated using the discounted cash flow method and the Interbank Equilibrium Interest Rate (“TIIE”, for its acronym in Spanish), adjusted for credit risk, and used to discount future cash flows.

Exchange risk management

We undertake transactions denominated in foreign currencies, mainly U.S. dollars; consequently, exposures to exchange rate fluctuations arise. Exchange rate exposures are managed within approved policy parameters utilizing forward foreign exchange contracts.

As of December 31, 2021, we do not have borrowings in foreign currency-denominated or pesos.

The carrying amounts of U.S. dollars denominated financial assets and financial liabilities at the reporting date are as follows:

    

December 31,

January 03,

December 31,