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 YearPeriod Ended December 31, 2019January 3, 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

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:

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: 5,037,93936,584,968 Ordinary Shares, as of December 31, 2019January 3, 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

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 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.

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

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

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:

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.

CERTAIN CONVENTIONS

Betterware de México, S.A.P.I.S.A.B. de C.V. (formerly Betterware de México, S.A.S.A.P.I. 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.S.A.B. de C.V. and BLSM Latino América Servicios, S.A. de C.V., a Mexican sociedad anónima de capital variable.

CURRENCY PRESENTATION

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

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 January 3, 2021 and December 31, 2019 and 2018 and for our fiscal yearsthe 53 weeks ended January 3, 2021 (referred to as the “2020 period”), the 52 weeks ended December 31, 2019 (referred to as the “2019 period”) and the 52 weeks ended December 31, 2018 and 2017(referred to as the “2018 period”) (our “Audited Consolidated and Combined Financial Statements”).

Our financial year consists of a 52- or 53-week period ending on the Sunday nearest to, either before or after, December 31. 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 all 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 for the year endedas of January 3, 2021 and December 31, 2019, and for the 2020 period and the 2019 period, 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 May 4, 2020,March 25, 2021, is also included in this annual report. Our Audited Combined Financial Statements for the year ended December 31, 2018 and 2017, have beenperiod, were audited by KPMG Cárdenas Dosal, S.C. a member firm of KPMG International Coperative (“KPMG”), an independent registered public accounting firm, whose report dated September 27, 2019, is also included in this annual report.

We preparePrior 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 providesprovided more meaningful information to the reader as Betterware and BLSM Latino América Servicios, S.A. de C.V. are complementary towere subsidiaries under the same operation, they arecommon control of Campalier, operating under common controlmanagement; Considering the foregoing, combined financial statements of these entities were prepared as of December 31, 2019 and operate under common management.2018. On March 10, 2020, BLSM became a subsidiary of Betterware and thus included in our consolidated financial statements as of such date. As a result, the combined statement of changes in stockholders’ equity for the 2019 and 2018 periods 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 2020 period. Our Audited Consolidated and Combined Financial Statements are presented in thousands of Mexican Pesos (Ps). Our fiscal year ends on December 31 of each year. Accordingly, all references to a particular year are to the year ended December 31 of that year.

Non-IFRS InformationMeasures

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. Adjusted EBITDA also excludes the effects of gains or losses on sale of fixed assets and adds back other non-recurring expenses. EBITDA and Adjusted EBITDA are not measures required by or presented in accordance with IFRS. The use of EBITDA and Adjusted 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 Merger and Company RestructureInitial 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, Latino América Servicios, S.A. de C.V., a Mexican sociedad anónima de capital variable (“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.

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, to be 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 initial public offering in the U.S. to be completed no later than December 31, 2020 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.

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 theThe 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:

Immediately after the Business Combination closed,Closing, on the same day, 2,040,000 shares of the Company offered for subscription and payment under the Company’s initial public offering in the U.S. on the Nasdaq Capital Market (“Nasdaq”) were subscribed and paid for by differentvarious investors. The remaining 2,460,000 ordinary treasury shares were cancelled.

As a result of the Business Combination and the subscription and payment of 2,040,000 Betterware’s shares in Nasdaq, all of Betterware’sadditional shares issued and outstanding were canceled and new shares were issued. As a result, ofin the Business Combination,public offering, Betterware hashad 34,451,020 issued and outstanding shares, distributed as follows:

Upon consummation

As part of the Merger, Betterware now presents consolidated financial statements,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 include its wholly owned subsidiary BLSM.had an observable fair value. The following events occurred in 2020 as part of the warrants agreement:

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 36,584,968.

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.

PART I

Not applicable.

Not applicable.

The following selected consolidated and combined financial information and other data of the Company should be read in conjunction with, and are qualified by reference to, “Item 5. Operating and Financial Review and Prospects” and our Audited Consolidated and Combined Financial Statements and the notes thereto included elsewhere in this annual report. Our financial information is presented in thousands of Mexican pesos unless otherwise instructed.

The selected consolidated and combined statement of financial position data as of December 31, 2019, 2018 and 2017 and the selected consolidated and combined statement of income, comprehensive income and cash flow data for the years ended December 31,2020, 2019 and 2018 and 2017periods, respectively have been derived from our Audited Consolidated and Combined Financial Statements included elsewhere in this annual report.

We prepare our Audited Consolidated and Combined Financial Statements in accordance with IFRS as issued by the IASB. We have applied all IFRS issued by the IASB effective at the time of preparing our Audited Consolidated and Combined Financial Statements. We applied IFRS for the first time for our fiscal year ended December 31, 2018 presenting 2017 comparative information with our date of transition being January 1, 2017.

Selected Balance SheetStatement of Financial Position Data as of January 3, 2021, December 31, 2019 2018 and 20172018
(In thousands of Mexican pesos “Ps.”)

Selected Balance SheetStatement of Financial Position Data as of December 31,January 3, 2021, December 31, 2019 2018 and 20172018
(In thousands of Mexican pesos “Ps.”)

Selected Statement of Profit or Loss Data for the years ended December 31,2020 period, the 2019 period and the 2018 and 2017period
(In thousands of Mexican pesos “Ps.”)

The following table shows the income and share data used in the calculation of basic and diluted earnings per share for the years ended December 31,2020, 2019 and 2018 and 2017:periods, respectively:

IFRS requires thatPlease see Note 23 of the calculationAudited Consolidated and Combined Financial Statements elsewhere in this annual report for details of the transactions impacting basic and diluted earnings per share (“EPS”) for all periods presented be adjusted retrospectively when the number of ordinary or potential ordinary shares outstanding increases as a result of a capitalization, bonus issue, or share split, or decreases as a result of a reverse share split. If such changes occur after the statement of financial position date but before the financial statements are authorized, the EPS calculation for those2020, 2019 and any prior period financial statements presented are based on the new number of shares.2018 periods.

As a result of the cancellation and issuance of new shares under the Business Combination, the EPS in the combined financial statements has been adjusted for all periods presented to reflect the amount of shares attributable to Betterware original shareholders resulting from the Business Combination. Such adjustment resulted in an EPS of 87.7% of the total outstanding shares, or 30,199,945 shares (without giving effect to the DD3 shareholders’ capital contribution and the proceeds from the Nasdaq listing). The effects of the DD3 transaction, including the related share issuance that resulted in DD3’s shareholders obtaining a 6.4% ownership interest and the capital contribution of $7,519 (Ps. 181,734), and the effects of the Nasdaq listing, have not been included in the calculation of EPS for the periods presented as they are considered to be non-adjusting subsequent events that will be reflected in Betterware’s 2020 consolidated financial statements, which will include BLSM as its wholly owned subsidiary.

RECONCILIATION OF NON-IFRS DATAMEASURES

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. Adjusted EBITDA also excludes the effects of gains or losses on sale of fixed assets and adds back other non-recurring expenses. EBITDA and Adjusted EBITDA are not measures required by, or presented in accordance with IFRS. The use of EBITDA and Adjusted 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.

Betterware’s EBITDA and Adjusted EBITDA Reconciliation

Not applicable.

Not applicable.

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 believebelieves 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 Betterware iswe are unable to retain itsour existing independent distributors and recruit additional distributors, itsour results of operations could be negatively affected.

Betterware distributesWe distribute almost all of itsour products through itsour independent distributors and it depends on them directly for the sale of itsour products. BWM’s distributors can terminate their services at any time, and itBWM experiences high turnover among distributors from year to year.year since they terminate their services at any time. As a result, it needs to continue to retain existing and recruit additional independent distributors. To increase at attractive rates its revenue, BWM must increase the number and/or the productivity of itsour distributors. The number and productivity of BWM’s distributors also depends on several additional factors, including:

BWM’s operations would be harmed if it failswe fail to generate continued interest and enthusiasm among itsour distributors and failsor we fail to attract new distributors, or if BWM’s distributors are unable to operate due to internal or external factors, such as restrictions that the Mexican government may adopt as a consequence of the COVID-19 virus. See “Risk Factors— Outbreaks of disease and health epidemics, such as the recent COVID-19 virus (nCoV), could have affect our distributors, customers and ultimately, our results of operation.”factors.

Although in the recent past BWM experienced an increase in active distributors, it could experience declines in active distributors, including senior distributors at the manager and district director levels. The number of itsour active distributors, including those at the manager and district director level, may not increase and could decline in the future. BWM’s operating results could be harmed if its existing and new business opportunities and products do not generate sufficient interest to retain existing distributors and attract new distributors. The number and productivity of BWM’s distributors also depends on several additional factors, including:

BWM’s distributors are independent contractors and not employees. If regulatory authorities were to determine, however, on a facts and circumstances basis, that its distributors are legally its employees, BWM could have significant liability under social benefit laws.

BWM’s distributors are self-employed and are not its employees. Periodically, the question of the legal status of its distributors has arisen, usually with regard to possible coverage under social benefit laws that would require BWM, and in most instances its distributors, to make regular contributions to social benefit funds. BWM is positioned to address these questions in a satisfactory manner; nevertheless there could be a final determination adverse to it that could be substantial and materially adversely affect its business and financial condition.

Failure of new products to gain distributors and market acceptance could harm Betterware’s business.

An important component of BWM’s business is its ability to develop new products that create enthusiasm among its customers. If it fails to introduce new products planned for the future, its 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 its results of operations. Factors that could affect its ability to continue to introduce new products include, among others, government regulations, proprietary protections of competitors that may limit its ability to offer comparable products and any failure to anticipate changes in consumer tastes and buying preferences.

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

As of December 31, 2019,January 3, 2021, BWM had approximately 417,0001,230,699 active associates and approximately 21,00059,713 distributors, district managers and district directors. The district directors, together with their extensive networks of downline distributors, account for an important part of itsour 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 itsour policies and procedures, could negatively impact itsour consultant growth and itsour net revenue.

BWM dependsA 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 multiple contract manufacturers to provide it withdiscretionary items. Reduced consumer confidence and spending generally may result in reduced demand for BWM’s products and the loss of the services provided bylimitations on our ability to maintain or increase prices. A decline in economic conditions or general consumer spending in any of its manufacturers could harm its business and results of operations.

BWM has outsourced product manufacturing functions to third-party contractors located in China and Mexico. In 2019, products supplied by Chinese manufacturers accounted for approximately 89% of BWM’s revenues.

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

Although BWM provides all of the formulations used to manufacture its 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 basisour major markets could have a material adverse effect on itsour business, financial condition and operating results.results of operations.

Betterware is committed to providing high-qualityFailure of new products to its customers. With this in mind, Betterware works with third-party manufacturers that it believes can better provide it withgain distributors and market acceptance could harm Betterware’s business.

An important component of BWM’s business is our ability to develop new products that comply with itscreate 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 standards within its time requirements. Currently, Chinese manufacturers are the primary suppliersproblems, this would harm our results of operations. Factors that best meet Betterware’s requirements, and Betterware currently expects this trendcould 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 future financial periods.consumer tastes and buying preferences.

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

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

If Betterware’s industry, business or its products are subject to adverse publicity, its business may suffer.

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

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

The market for BWM’s products is competitive. ItsOur 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 BWM has, which may give them a competitive advantage. For example, BWM’s products compete directly with branded, premium retail products. BWM currently does not has significant patent or other proprietary protection, and competitors may introduce products with the same ingredients that BWM uses in its products.

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

BecauseIf Betterware’s industry, 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 costsoverall integrity of our business, as well as the safety and difficulties inherent in managing cross-border business operations,quality of our products and similar products distributed by other companies. The number and motivation of our distributors and the Company’s resultsacceptance by the general public of operationsour products may be negatively impacted.affected by adverse publicity regarding:

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

ManagingWe have been developing and implementing a business, operations, personnelstrategy 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 assetswe may not be successful in another country is challengingadapting and costly. Any management thatimplementing the Company may have (whether based abroad orstrategy to other markets in which BWM operates. This could result in our inability to service our distributors in the U.S.) 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.manner they expect.

GoodwillWe are dependent on information and other intangible assets represent a significant portion of Betterware’s balance sheetcommunication technologies, and its operating results may suffer from possible impairments.

Goodwillour systems and intangible assets in Betterware’s balance sheet derived from past business combinations carried out by BWM, which are further explained in the notes to combined financial statements located elsewhere in this annual report. Goodwill, intangible assets with indefinite useful lives, and intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication that these assets may be impaired. In the case of an impairment, BWM will take charges to its operating results based on these 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 and other intangible assets.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 has been increasing, especiallycontinues 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.

We have implemented, among others, contingency procedures, backup systems, information and communication redundant systems, testing procedures, information technology auditing systems and network protection systems. However, these informationInformation 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. The occurrenceHowever, our security framework allows us to minimize and manage these risks through the use of any of these events could disrupt our operations, resulting in increased costs, a decline in revenue and damage to our business in general, including,enabling technologies such as, but not limited to, harm to our public image.firewalls, mail & web filtering, endpoint protection, antivirus and antimalware, access lists, encryption and hardening.

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. As part of its risk management process, the Company is mapping the security measures on data privacy risks.

During 2020 and 2019, we encountered an increased number of non-material phishing attacks attempts which consisted on fake e-mails requesting minor payments and/or confidential information. As mentioned, none of these attackattempts 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.

A declineBecause 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.

BWM’s distributors are independent contractors and not employees. If regulatory authorities were to determine, however, that our customers’ purchasing power or consumer confidence or in customers’ financial conditiondistributors are legally BWM employees, BWM could have significant liability under social benefit laws.

BWM’s distributors are self-employed and willingnessare not our employees. Periodically, the question of the legal status of our distributors has arisen, usually with regard to spend couldpossible 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 and adversely affect our business.business and financial condition.

The saleBWM depends on multiple contract manufacturers mostly located in China, and the loss of home organizationthe 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 2020, products correlates stronglysupplied by Chinese manufacturers accounted for approximately 90% 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 levelCOVID-19 virus, or any other cause, this could adversely affect BWM’s overall operations and financial condition.

Also, although BWM provides all of consumer spending generally, and thus is significantly affectedthe formulations used to manufacture our products, BWM has limited control over the manufacturing process itself. As a result, any difficulties encountered 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 maythird-party manufacturer that result in reduced demand for BWM’s products and limitationsproduct defects, production delays, cost overruns, or the inability to fulfill orders on its ability to maintain or increase prices. A decline in economic conditions or general consumer spending in any of its major marketsa timely basis could have a material adverse effect on itsour business, financial condition and operating results.

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 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 recent 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 retail industryour 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 SpainMexico which had forced airlines to cancel flights and extended shutdowns of certain businesses in certain regions.

The COVID-19 viruspandemic continues to impact worldwide economic activity and 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 due to shutdowns that may be requested or mandated 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 a preventive measuresmeasure may lead to our consumers being unable to complete purchases or other activities. Furthermore, itsIts impact on the global and local economies may also adversely impact consumer discretionary spending.

Given the uncertainty around the extent and timingAlthough our operations were not interrupted as a result of the potential future spread or mitigation and aroundCOVID-19 pandemic, our gross margin was negatively affected by the imposition or relaxationdepreciation of protective measures,the Mexican peso compared to the US dollar, as we cannot reasonably estimate the impact toacquire most of our future results of operations, cash flows or financial condition. However, COVID-19 virus is havingproducts in US dollars. This affected and will likely continue to have,affecting our results of operations for so long as the health crisisCOVID-19 pandemic continues to impact global and the virus impact continue, a negative impact on retailers and in our results of operation.

The transition away from the London Interbank Offered Rate (LIBOR) could affect our ability to seek additional debt financinglocal economies.

In 2017, the United Kingdom’s Financial Conduct Authority announced that after 2021 it would no longer compel banks to submit the rates required to calculate the London Interbank Offered Rate (“LIBOR”). This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021. Consequently, at this time, it is not possible to predict whether and to what extent banks will continue to provide submissions for the calculation of LIBOR. Similarly, it is not possible to predict whether LIBOR will continue to be viewed as an acceptable market benchmark, what rate or rates may become accepted alternatives to LIBOR, or what the effect of any such changes in views or alternatives may be on the markets for LIBOR-indexed financial instruments.

If LIBOR ceases to exist or if the methods of calculating LIBOR change from their current form, interest rates on future indebtedness may be adversely affected. While we currently do not have financial instruments subject to LIBOR, there remains uncertainty regarding the future utilization of LIBOR and the nature of any replacement rate, and any potential effects of the transition away from LIBOR on certain instruments in to which we may enter in the future are not known.

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.

We are in the process of implementing Internal Control—Integrated Framework (2013 Framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) and as of December 31, 2019January 3, 2021 management has identified material weaknesses associated with the components of COSO. See “Disclosure Controls and Procedures—Control and Procedures.”

Betterware’s failure to timely and effectively implement controls and procedures required by Section 404(a) of the Sarbanes-Oxley Act couldcontrolling shareholder may have a material adverse effect on its business.interests that conflict with your interests.

As an emerging growth company, weof January 3, 2021, Campalier owns approximately 51.57% of the outstanding common stock of Betterware. As the controlling shareholder, Campalier may take actions that are not required to comply with attestation reports forin the year ended December 31, 2019. However, Betterware will be required to provide management’s attestation on internal controls for future years. The standards required for a public company under Section 404(a)best interests of the Sarbanes-Oxley ActCompany’s other shareholders. These actions may be taken in many cases even if they are significantly more stringent than those requiredopposed by the Company’s other shareholders. In addition, this concentration of Betterwareownership 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 privately-held company. Management may not be able to effectively and timely implement controls and procedures that adequately respond tosale of the increased regulatory compliance and reporting requirements that will be applicable after the Business Combination. If the Company is not able to implement the additional requirements of Section 404(a) in a timely manner or with adequate compliance, it may not be able to assess whether its internal controls over financial reporting are effective, which may subject it to adverse regulatory consequences and could harm investor confidence and the market price of its securities.Company.

Betterware’s management has limited experience in operating a public company. Any failure to comply or adequately comply with federal securities laws, rules or regulations could subject us to fines or regulatory actions, which may materially adversely affect our business, results of operations and financial condition.

Betterware’s executive officers have limited experience in the management of a publicly traded company. Betterware’s management team may not successfully or effectively manage the Business Combination that is subject to significant regulatory oversight and reporting obligations under federal securities laws. Their limited experience in dealing with the increasingly complex laws pertaining to public companies could be a significant disadvantage in that it is likely that an increasing amount of their time may be devoted to these activities which will result in less time being devoted to the management and growth of the Company. Betterware currently may not have a complement of personnel with the appropriate level of knowledge, experience, and training in the accounting policies, practices or internal controls over financial reporting required of public companies in the United States. The implementation of accounting standards and controls necessary for the Company to achieve the level of quality of financial reporting required of a public company in the United States may require costs greater than expected. It is possible that the Company will be required to expand its employee base and hire additional employees to support its operations as a public company which will increase its operating costs in future periods.

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 U.S. Securities and Exchange Commission (“SEC”)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.

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

As of December 31, 2019, Campalier and Forteza indirectly owned, through Invex Security Trust, approximately 99.99% of the outstanding common stock of Betterware. As of the Business Combination, Campalier and Forteza indirectly own approximately 74.5% of the outstanding common stock of Betterware. See “The Business Combination.”

Accordingly, Campalier and Forteza currently exercise, and for the foreseeable future will exercise, significant influence over its board of directors and business and operations. The interests of Campalier and Forteza could conflict with your interests as a holder of shares.

Risks Related to Mexico

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 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 itsour ability to pay its 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 itsour overall financial condition. Although BWM attemptswe attempt to reduce itsour 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, BTWBWM currently employs a hedging strategy comprised of forwards U.S. dollar–Mexican peso derivatives that are designed to protect itus against devaluations of the Mexican peso. As of the date of this annual report, the hedging contracts cover 100% of the product needs as of March 2020.November 2021. In addition, BWMWe generally purchases itspurchase 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 itsour ability to pay itsour dollar-denominated expenses, including itsour supplier obligations.

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

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

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

Economic conditions in Mexico are highly correlated with economic conditions in the United States due to the physical proximity and the high degree of economic activity between the two countries generally, including the trade facilitated by NAFTA and USMCA, the successor agreement to NAFTA. As a result, political developments in the United States, including changes in the administration and governmental policies, can also have an impact on the exchange rate between the U.S. dollar and the Mexican peso, economic conditions in Mexico and the global capital markets.

On November 30, 2018, the presidents of Mexico, the United States and Canada signed the USMCA, which has now been ratified by all members. NAFTA will remain in place until the USMCA is implemented by all three members. Any increase of import tariffs resulting from the implementation of the USMCA or the re-negotiation or termination of NAFTA could make it economically unsustainable for U.S. companies to import certain products if they are unable to transfer those additional costs onto consumers, which would increase the Company’s expenses and decrease its revenues, even if domestic and international prices for its products remain constant. Higher tariffs on products that the Company may export to the United States could also require the Company to renegotiate its contracts or lose business, resulting in a material adverse impact on the Company’s business and results of operations. In addition, because the Mexican economy is heavily influenced by the U.S. economy, policies that may be adopted by the U.S. government may adversely affect economic conditions in Mexico. These developments could in turn have an adverse effect on the Company’s financial condition, results of operations and ability to repay its debt.

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. Although there have not yet been any material adverse repercussions resulting from this political change, multipartyMultiparty 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 its share,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.

Political and social events in Mexico could adversely affect our business.

Mexico will hold federal and local intermediate elections on June 6, 2021. Due to the fact that the Partido Movimiento Regeneración Nacional (Morena), has majority in both houses of congress, the Party, and therefore the President of Mexico, has substantial power to approve new laws, amend existing ones and freely determine the policies and governmental actions including those related to the country’s economy and therefore affect or impact the operations and financial results of Mexican companies. We cannot predict what the result of the elections will bring regarding the integration of congress and the ruling party’s ability to maintain its current ability to dictate and implement public policies. The uncertainty associated with the result of the election and the result itself may adversely affect our operations and financial condition.

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.

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

During most of the 1980s and during the mid- and late-1990s, Mexico experienced periods of high levels of inflation, although the country has had stable inflation during the last five years. The annual rates of inflation for the last five years as measured by changes in the National Consumer Price Index, as provided by Banco de Mexico, were:

A substantial increase in the Mexican inflation rate would have the effect of increasing some of BWM’s costs, which could adversely affect itsour results of operations and financial condition.

Mexico has experienced a period of increasing criminal activity, which could affect the Company’s operations.

In recent years, Mexico has experienced a period of increasing criminal activity, primarily due to the activities of drug cartels and related criminal organizations. In response, the Mexican Government has implemented various security measures and has strengthened its military and police forces aimed at decreasing incidents of theft and other criminal activity. Despite these efforts, criminal activity continues to exist in Mexico. These activities, their possible escalation and the violence associated with them, in an extreme case, may have a negative impact on the Company’s financial condition and results of operations.

The regulatory environment in which Betterware operates is evolving, and itsour 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 itsour plans, itsour 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 itsour business and itsour reputation with regulators in the markets in which BWM operates.we operate.

Laws and regulations may restrict Betterware’s direct sales efforts and harm itsour 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:

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

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 itsour business. If any governmental authority were to bring a regulatory enforcement action against BWM that interrupts BWM’s business, itsour revenue and earnings would likely suffer.

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

Betterware is a company incorporated in Mexico. Most of itsAll 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 itsour assets and substantially all of the assets of itsour directors and executive officers are located outside of the U.S., you may be unable to enforce against BTWBWM and itsour 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 the Business Combination

If the Business Combination’s benefits do not meet the expectations of investors or securities analysts, the market price of Betterware’s securities may decline.

If the benefits of the Business Combination do not meet the expectations of investors or securities analysts, the market price of the Company’s securities may decline.

Fluctuations in the price of the Company’s securities could contribute to the loss of all or part of your investment. If an active market for the Company’s securities develops and continues, the trading price of the Company’s securities could be volatile and subject to wide fluctuations in response to various factors, some of which will be beyond the company’s control. Any of the factors listed below could have a material adverse effect on your investment in the Betterware’s securities and such securities may trade at prices significantly below the price you paid for them. In such circumstances, the trading price of the Company’s securities may not recover and may experience a further decline.

Factors affecting the trading price of the Company’s securities may include:

Broad market and industry factors may materially harm the market price of the Company’s securities irrespective of the Company’s operating performance. The stock market in general, and Nasdaq in particular, have experienced price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of the particular companies affected. The trading prices and valuations of these stocks, and of the Company’s securities, may not be predictable. A loss of investor confidence in the market for retail stocks or the stocks of other companies which investors perceive to be similar to the Company could depress the Company’s share price regardless of the Company’s business, prospects, financial conditions or results of operations. A decline in the market price of the Company’s securities also could adversely affect the Company’s ability to issue additional securities and the Company’s ability to obtain additional financing in the future.

The warrants and the unit purchase option are exercisable for securities of the Company, which would increase the number of shares eligible for future resale in the public market and result in dilution to the Company’s shareholders.

At Closing, DD3’s outstanding warrants automatically converted into warrants to purchase an aggregate of 5,804,125 Company shares and are exercisable in accordance with the terms of the warrant agreement governing those securities, and the unit purchase option automatically converted into an option to purchase the same number of Company securities underlying such units and is expected to become exercisable in accordance with its terms which, if exercised, will result in the issuance of 250,000 Company shares and warrants to purchase an additional 250,000 Company shares. The warrants became exercisable on April 12, 2020 and will expire on March 25, 2025 at 5:00 p.m., New York City time, or earlier upon redemption or liquidation. The unit purchase option was exercisable as of Closing and will expire at 5:00 p.m., Eastern time, on October 11, 2023. The exercise price of the warrants is $11.50 per share, or $66,747,438 in the aggregate for all shares underlying these warrants, and the exercise price of the unit purchase option is $10.00 per unit, or $2,500,000 in the aggregate, in each case assuming none of the securities are exercised through “cashless” exercise.

To the extent the warrants and the unit purchase option (and the underlying securities) are exercised, additional Company shares will be issued, which will result in dilution to the shareholders of the Company and increase the number of Company shares eligible for resale in the public market. Sales of substantial numbers of such shares in the public market or the fact that such securities may be exercised could adversely affect the market price of the Company shares.

The exercise of registration rights may adversely affect the market price of the Company shares.

In connection with the Business Combination, the Company, DD3 and certain security holders of the Company (the “Holders”) entered into the Registration Rights Agreement, dated as of March 11, 2020 (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, such holders can demand that the Company register certain of the Company’s securities they received in connection with the Business Combination, to include Company shares and warrants and the Company shares issuable upon exercise of such warrants. The Company will bear the cost of registering these securities. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of the Company shares and the Company warrants.

Mexican law will likely govern many of the Company’s material agreements and the Company may not be able to enforce its legal rights.

In connection with the Business Combination, DD3 re-domiciled out of the British Virgin Islands and continued as a company incorporated under the laws of Mexico. As a consequence of such re-domiciliation, Mexican law will likely govern many of the Company’s material agreements. The system of laws and the enforcement of existing laws in Mexico may not be as certain in implementation and interpretation as in the United States or the British Virgin Islands. The inability to enforce or obtain a remedy under any of the Company’s future agreements could result in a significant loss of business, business opportunities or capital. Any such reincorporation may subject the Company to foreign regulations that could materially and adversely affect the Company’s business.

Our shareholders may sell a substantial amount of Betterware’s shares, and these sales could cause the price of the securities to fall.

As of the Business Combination, there are 34,451,020 Company shares outstanding. All of the Company’s shares held by former DD3 shareholders will be freely transferable, except for any shares held by Betterware’s “affiliates,” as that term is defined in Rule 144 under the Securities Act, and those shares that remain subject to escrow restrictions pursuant to the escrow agreement entered into by former DD3 shareholders in connection with DD3’s initial public offering. Following completion of the Business Combination, approximately 87.7% of the outstanding Company shares are held by entities affiliated with Betterware and its executive officers and directors.

Sales of substantial amounts of the Company shares in the public market after the Business Combination, or the perception that such sales will occur, could adversely affect the market price of the Company shares and make it difficult for the Company to raise funds through securities offerings in the future.

Betterware may be required to take write-downs or write-offs, restructuring and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and share price, which could cause you to lose some or all of your investment.

Betterware may be forced to later write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in the Company reporting losses. Even though these charges may be non-cash items and not have an immediate impact on the Company’s liquidity, the fact that the Company reports charges of this nature could contribute to negative market perceptions about the Company or its securities. In addition, charges of this nature may cause the Company to violate net worth or other covenants to which it may be subject or to be unable to obtain future financing on favorable terms or at all.

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. BetterwareWe currently prepares itsprepare 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 itsour 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 itsour home country practice with respect to the composition of itsthe 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 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.

Betterware qualifies as an emerging growth company within the meaning of the Securities Act, and if it takes advantage of certain exemptions from disclosure requirements available to emerging growth companies, which could make the Company’s securities less attractive to investors and may make it more difficult to compare the Company’s performance to the performance of other public companies.

Betterware qualifies as an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As such, the Company is eligible for and intends to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as it continues to be an emerging growth company, including (i) the exemption from the auditor attestation requirements with respect to internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act, (ii) the exemptions from say-on-pay, say-on-frequency and say-on-golden parachute voting requirements and (iii) reduced disclosure obligations regarding executive compensation in its periodic reports and proxy statements. The Company will remain an emerging growth company until the earliest of (i) the last day of the fiscal year in which the market value of itsour ordinary shares that are held by non-affiliates exceeds $700 million as of June 30 of that fiscal year, (ii) the last day of the fiscal year in which it has total annual gross revenue of $1.07 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which it has issued more than $1 billion in non-convertible debt in the prior three-year period or (iv) the last day of the fiscal year following the fifth anniversary of the date of the first sale of DD3’s ordinary shares in its initial public offering. In addition, Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the exemption from complying with new or revised accounting standards provided in Section 7(a)(2)(B) of the Securities Act as long as the Company is an emerging growth company. An emerging growth company can therefore delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. DD3 has elected not to opt out of such extended transition period and, therefore, the Company may not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. Investors may find the Company shares less attractive because the Company will rely on these exemptions, which may result in a less active trading market for the Company shares and their price may be more volatile.

If securities or industry analysts do not publish or cease publishing research or reports about Betterware, itsour business, or its market,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, itsour 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 itsour 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:

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 itsour 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, and 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 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:

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.”

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/.

Company Overview

Founded in 1995, Betterware is a leading direct-to-customer company in Mexico. BWM 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.

BWM sells its products through nine catalogues published throughout the year (approximately six weeks outstanding each) with an offer of approximately 400380 products per catalogue. BWM constantly innovates introducing approximately 300 products every year, representing 10% – 15% of the products in a catalogue. All of the products are Betterware branded with unique characteristics and manufactured by +200+300 certified producers in Mexico and China, 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 438,0001,290,412 Distributors and Associates across Mexico, that serve +3 million households+ 20% Household Penetration in Mexico, and 82% of Distributors place orders every six weeks in +800 communities.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 2019.2020. 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.

BWMBetterware has shown long term sustainable double-digit growth rates in revenue and EBITDAadjusted EBITDA. For the 2020 period, Betterware had triple-digit growth and has built a platform that management believes can grow locallydomestically in Mexico and in other regions.markets.

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, nutritionals, 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:

Product Development and Innovation Program

Distributors and Associates Network & Loyalty and Reward Programs

Unparalleled Logistics and Supply Chain Platform

Growth Strategies

Experienced Management & Meritocratic Culture

Growth Strategies

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:

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.

Logistics Infrastructure and Supply Chain

Customers

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%3.4% 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 0.3%0.2% of net revenue.

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

Research & Development

The following diagram depicts the organizational structure of DD3, Betterware and BLSM immediately prior to the consummation of the Business Combination:

The following diagram depicts the current organizational structure of Betterware after the consummation of the Business Combination and before the total repayment of the credit facility agreement with MCRF P, S.A. de C.V. in April 27, 2020:Betterware:

Our principal executive offices are located in Guadalajara, Mexico, whereMexico. As of January 3, 2021, we leaseleased premises of approximately 26,318 square meters. We also lease offices in Mexico City, with an aggregate area of approximately 384 square meters. We lease our premises from unrelated third parties. Below is a summary of the termterms of each of our current leases. We do not plan to renew most of these leases when they expire because we areas in the processfirst quarter of building2021, we completed the construction of a distribution center in Guadalajara, Mexico, which is expected to be completed during the fourth quarter of 2020.Mexico. As of December 31, 2019, paymentsJanuary 3, 2021, the total amount of investment capital expenditures related to this construction amounted to Ps. 165was Ps.674 million. The total investment is estimated to amount to Ps. 581 million.

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

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.

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 twotwo-- 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.

BWM’s revenues are driven by the increase in volume of products sold, the price of its products and by the increase in its network of Distributors and Associates. 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, so the revenue is determined in a five-step model:

Cost of Sales

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

Distribution Expenses

BWM’s distribution expenses are highly correlated with its sales volume, meaning that if sales volume increases, distribution costs increase, and vice versa. Distribution costs refer to the logistics services paid to third party logistics companies that distribute the products from the Company’s distribution center to the Distributors’ domiciles. The delivery to the final client is responsibility of the Distributors and Associates, thus Betterware has zero last mile costs.

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, travel expenses, a part of promotional points products expenses, 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’scompany´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, transportation planning, and corporate site and insurance costs.

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 derivatives.instruments (including the fair value effects of the warrants).

Income Taxes

The Company is subject to a 30% Corporate Income Tax rate provided by the Mexican 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 — Year Ended December 31, 2018 Compared2020 period compared with Year Ended December 31,the 2019 period

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

Net Revenue

Net revenue increased by 33.1%135.4%, or MX$767,946, 4,175,746, to MX$7,260,408 for the 2020 period compared to MX$3,084,662 for the year ended December 31, 2019 compared to MX$2,316,716 for the year ended December 31, 2018,period, primarily due to theto: (i) an increase in volume of units sold, mainly as a consequence of an increase in the distribution network, including distributors and associates volume of units sold, and average unit price. For(for the year ended December 31, 2019,2020 period the Company had a Distributors and Associates network of 437,872,1,290,412 and 133.7 million units compared to 42.3 million units and a 342,867437,872 Distributors and Associates network and 42.3 million units for the year ended December 31, 2018.2019 period), and (ii) an increase of the average unit price of our products.

Cost of Goods Sold

Cost of goods sold increased 33.6%156.9%, or MX$322,360,2,010,165, to MX$3,290,994 for the 2020 period compared to MX$1,280,829 for the year ended December 31, 2019 compared to MX$958,469 for the year ended December 31, 2018period as a result of increased revenue, resulting in a gross profit of MX$3,969,414 for the 2020 period compared to MX$1,803,833 for the year ended December 31, 2019 compared to MX$1,358,247 for the year ended December 31, 2018.period. As a percentage of net revenues, cost of goods sold was 45.3% for the 2020 period and 41.5% for the year ended December 31, 2019 and 41.4% for the year ended December 31, 2018.period. The increase of cost of goods sold as a percentage of net revenues was primarily because of the impact of the increase in air freight costs to meet the surge in demand, and lesser extent due to the depreciation of the Mexican peso compared to the US dollar, exchange rate in 2019 compared to 2018. This was mainly due to the volume of purchases denominated in US dollars, as approximately(approximately 90% of our purchases are imported from China, and sold in Mexican Pesos.China).

Administrative Expenses

Administrative expenses increased 28.1%108.3%, or MX$69,985,345,544, to MX$664,677 for the 2020 period compared to MX$319,133 for the year ended December 31, 2019 compared to MX$249,148 for the year ended December 31, 2018,period, primarily due to increases in Betterware’s wagesthe number of employees to support operation growth and benefits to employees.one-time consulting services fee payments. As a percentage of net revenues, these expenses represented 10.4%9.2% and 10.8%10.4% for the years ended December 31,2020 and 2019 and 2018,periods, respectively. ThisDecrease in percentage decrease was a result of maintaining fixed administrative expenses, such as salaries and wages, leases and fees.is due to operating leverage.

Administrative expenses by department are as follows:

Selling Expenses

Selling expenses increased 21.4%54.8%, or MX$97,284,302,055, to MX$853,355 for the 2020 period compared to MX$551,300 for the year ended December 31, 2019 compared to MX$454,016 for the year ended December 31, 2018,period, primarily due to an increase in sales bonusesour rewards program and wages, and an increase of expenses incurred in connection with the higher numbervolume of sales catalogues printed in order to have enough copies to provide for the increased number of Distributors and Associates. The Company’s selling expenses were 11.8% of net revenue for the 2020 period compared to 17.9% of net revenue for the year ended December 31, 2019 compared to 19.6% of net revenue for the year ended December 31, 2018.period. This decrease was mainly a combination of maintaining the same expenses related to employees during 2020 and 2019 and 2018 and anthe increase in sales during 2019.2020. The selling expenses major line items include:

Distribution Expenses

Distribution expenses increased 17.2%173.2%, or MX$17,819,209,868 to MX$331,023 for the 2020 period compared to MX$121,155 for the year ended December 31, 2019 comparedperiod. This increase relates to MX$103,336 for the year ended December 31, 2018. Distributionfact that distribution expenses are driven primarily by sales volume, which increased 33.1%135.4% for the year ended December 31, 2019,2020 period, compared to the year ended December 31, 2018.2019 period.

Financing Income/Costs

Income Tax Expense

Income taxes increased 54.9%133.3% or MX$82,513310,076 to MX$542,768 for the 2020 period compared to MX$232,692 for the year ended December 31, 2019 compared to MX$150,179 for the year ended December 31, 2018period due to higher pre-tax profits. EffectiveThe effective income tax rate increased as a result of an increase in, mainly, the tax effect of inflation and non-deductible expenses.

Capital Expenditures

Our capital expenditures for the year ended December 31, 2019,2020 period, were mainly related to the construction of our new headquarters and distribution center in Guadalajara, Mexico. Our capital expenditures for the year ended December 31,2020 and 2019 2018 and 2017periods amounted to MX$182.6 million, MX$21.3617.7 million and MX$33.7182.6 million, respectively.

Results of Operations — Year Ended December 31, 2017 Compared2019 period compared with Year Ended December 31,the 2018 period

A resultThe results of operations comparison ofbetween the years ended December 31,2019 and 2018 and 2017periods has been omitted from this annual report, but may be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Registrant’s Registration Statement on Form F-120-F filed with the SEC and effective on January 22,May 4, 2020.

BWM’s primary source of liquidity is from cash flow generated from operations. BWM has an efficient working capital structure where its seller supplier financing matches the Company requirements to serve their clients and inventory supplemented by lines of credit. Additionally, the Company capex requirements to sustain its growth is levered on the existing platform with minimum increased investment in technology. Due to these low capital requirements and closed working capital cycle, the Company has high cash conversion rate enabling it to annually serve their shareholders through dividends.

In order to maintain sufficient liquidity, the Company establishes maintaining a minimum cash and cash equivalent monthly balance to equal approximately MX$100,000Ps.200,000 in order to cover its Selling, General and Administrative expenses. As of December 31, 2019,For the 2020 period, cash and cash equivalents of the Company was MX$213,697,Ps.649,820, above its minimum internal policy.

Years ended December 31,2020 period compared with the 2019 and 2018period

Cash Flows from Operating Activities

Cash flow provided by operating activities was MX$605,4461,822,256 and MX$338,214 during605,446 for the year ended December 31,2020 and 2019 and 2018,periods, respectively. The cash flow from operations increased primarily due to an increase in cash received from sales. Inventory management decreasedincreased from 10488 days as of December 31, 2018,during the 2019 period, to 88 as of December 31, 2019,90 during the 2020 period, Days of Payables increased from 95 as of December 31, 2018135 during the 2019 period to 135 as of December 31, 2019,145 during the 2020 period, and Days of Receivables decreasedincreased from 22 as of December 31, 201820 during the 2019 period to 20 as of December 31, 2019.25 during the 2020 period.

Cash Flows from Investing Activities

Cash flows (used in) provided by investing activities were MX$(175,597)(631,401) and MX$13,549 during(175,597) for the year ended December 31,2020 and 2019 and 2018,periods, respectively. Cash outflows from investing activities include purchases of molds for products, investment in technological platform, product innovation, equipment, and property. The increase in investing activities was mainly due to the construction of a distribution center in Guadalajara. See Property,“Property, Plants and Equipment.”

Cash Flows from Financing Activities

Cash flows used in financing activities were MX$393,535754,732 and MX$405,235 during393,535 for the year ended December 31,2020 and 2019 and 2018,periods, respectively. DuringFor the year ended December 31, 2019,2020 period, the Company made repayments in the amount of MX$83,041692,113 under its long-term financing agreements, of whichwhich: (i) MX$78,750 were521,250 was repaid to Credit Suisse, and(ii) MX$4,291168,376 to Banamex, and (iii) MX$2,487 to BBVA. Also, the Company made a repayments in the amount of MX$1,064,999 under its short-term financing agreements, of which: (i) MX$434,999 was paid to Banamex, and (ii) MX$630,000 was paid to HSBC. Additionally, we received twoan additional disbursementsdisbursement under the existing such long-term financing agreements for the total amount of MX$104,500. During195,000. For the year ended December 31,2020 and 2019 and December 31, 2018,periods, the Company paid dividends in the amounts of MX$342,955830,000 and MX$235,124, respectively, to shareholders.342,955, respectively. Interests paid for the year ended December 31, 2019 were2020 period of MX$82,654,121,297, a 2.9% decrease46.7% increase compared to MX$85,18982,654 paid for the year ended December 31, 20182019 period; mainly due to a lower outstanding balance of credits resulting from principal repayments made during 2019.

Debt

MCRF P, S.A. de C.V., S.O.F.O.M., E.N.R. Term Loan

On May 10, 2017, Betterware, as borrower, and BLSM, as guarantor (obligado solidario), entered into a secured credit facility agreement with MCRF P, S.A. de C.V., S.O.F.O.M., E.N.R. for an aggregate principal amount of MX$600 million. The loan was secured by (i) the Invex Security Trust with approximately 61.06% of the outstanding common stock of Betterware priorprepaid commission paid to the Business Combination, and (ii) a non-possessory pledge over all assets, inventory and intellectual property of BWM and BLSM. MCRF P, S.A. de C.V. SOFOM, E.N.R. Term Loan bore a fixed interest rateE.N.R for Ps.45,000.

2019 Period and 2018 Period

A cash flow comparison of 13.10%. Principalthe 2019 and interests are paid2018 periods has been omitted from this annual report but may be found in quarterly installments,“Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Form 20-F filed with final maturitythe SEC on May 15, 2023. This loan was partially repaid on March 27, 2020 in the amount of MX$258,750 and repaid in full on April 27,4, 2020.

Banamex Term LoanIndebtedness

Banamex Term Loans

On December 18, 2018, Betterware, as borrower, and BLSM, as guarantor (fiador), entered into a secured credit facility agreement with Banco Nacional de México, S.A., Integrante de Grupo Financiero Banamex for an aggregate principal amount of MX$400 million. The loan is secured by (i) a first priority mortgage over a 49,756.47 m² property located in Jalisco, Mexico property of BLSMBWM and (ii) a bond (fianza) granted by BLSM.

This Banamex credit line bared TIIE rate plus 317 basis points as of December 31, 2019 and bears a TIIE rate plus 260 basis points starting January 30, 2020. Withdrawals from this credit line can be made no later than August 2020, and are payable on a quarterly basis from September 2020 until December 18, 2025.

Under this facility, Betterware and BLSM must observe certain restrictive covenants, which require the BWM and BLSM (i) to continuecontinuing to perform the same type of activities and businesses, maintaining their legal existence, (ii) complying with all applicable laws, (ii) having audited its consolidated and combined financial statements by internationally recognized auditors authorized by the financial institution, (iii) paying all applicable taxes, (iv) obtaining all licenses and permits required by government to operate, (v) keeping assets and businesses insured against loss or damage, (vi) not to incur liens on BWM and BLSM’s assets, and (vii) not to givegiving or sellselling any rights of financial documents.

The line of credit agreement with Banamex contains the following financial covenants:

a) To maintain a short-term debt coverage ratio not lower than 1.5.

b) To maintain a total debt coverage ratio not greater than 3.0.

c) To maintain a leverage ratio not greater than 7.0.

d) To maintain a minimum cash and cash equivalents balance of MX$40,000.

On January 30, 2020, the Group renegotiated the interest rate of the secured line of credit with Banamex, which changed from the TIIE rate plus 317 basis points to the TIIE rate plus 260 basis points. In addition, withdrawals from this line of credit were extended to August 2020, and are payable on a quarterly basis from September 2020 up to December 18, 2025.

On March 25, 2020 and April 13, 2020, the Group withdrew Ps.74,000 and Ps.100,000, respectively, from its secured line of credit with Banamex.

As of the date of this annual report, the Company is in compliance with all covenants under this facility. In connection with the Merger, Banamex granted the Company the required permission from Banamex to consummate the transaction under the Business Combination.Combination

Supplemental Banamex Term Loan

On March 27,July 30, 2020 and April 13, 2020, the Company withdrew from the line of credit Ps. 74 million and Ps. 100 million, respectively.

Banamex Revolving Facility

On April 30, 2019, Betterware, as borrower, and BLSM, as guarantor (fiador), entered into a revolving facility agreement with Banco Nacional de México, S.A., Integrante de Grupo Financiero Banamex for an aggregate principaltotal amount of MX$80 million.

Ps.195,000 was withdrawn from a credit agreement signed on June 3, 2020 with Banamex. This Banamex credit lineloan bears ainterest at the TIIE rate plus 275295 basis points. The final maturity of this facility ispoints maturing on AprilDecember 30, 2020.2025.

Under this facility, Betterware and BLSM must observe certain restrictive covenants, which require the BWM and BLSM (i) to continuecontinuing to perform the same type of activities and businesses, maintaining their legal existence, (ii) complying with all applicable laws, (ii) having audited its consolidated and combined financial statements by internationally recognized auditors authorized by the financial institution, (iii) paying all applicable taxes, (iv) obtaining all licenses and permits required by government to operate, (v) keeping assets and businesses insured against loss or damage, (vi) not to incur liens on BWM and BLSM’s assets, and (vii) not giving or selling any rights of financial documents.

Banamex Revolving Facility

On April 30, 2019, Betterware, as borrower, and BLSM, as guarantor (fiador), entered into a revolving facility agreement with Banco Nacional de México, S.A., a member of Grupo Financiero Banamex for an aggregate principal amount of MX$80 million. As of January 3, 2021, the interest rate amounted to TIIE plus 285 basis points. As of December 31, 2019, the interest rate was TIIE plus 275 basis points. The credit is renewable on yearly basis.

Under this facility, Betterware and BLSM must observe certain restrictive covenants, which require BWM and BLSM (i) continuing to perform the same type of activities and businesses, maintaining their legal existence, (ii) complying with all applicable laws, (ii) having audited its consolidated and combined financial statements by internationally recognized auditors authorized by the financial institution, (iii) paying all applicable taxes, (iv) obtaining all licenses and permits required by government to operate, (v) keeping assets and businesses insured against loss or damage, (vi) not incurring liens on BWM and BLSM’s assets, and (vii) not to give or sell any rights of financial documents.

Under this facility, Betterware and BLSM shall maintain a short-term debt coverage ratio not lower than 1.0.

HSBC

On March 10, 2020, Betterware entered into a current account credit agreement with HSBC México, S.A., for an amount of Ps.50,000, with provisions by means of promissory notes specifying payment of principal and interest. BLSM is jointly liable for this credit. On May 4, 2020, an amendment to this agreement was signed, in which the amount of the line of credit was increased to Ps.150,000. The maturity date of this line of credit is March 10, 2022, and it bears interest at the TIIE rate plus 350 basis points. During 2020, the Group utilized Ps.115,000 of which as of January 3, 2021 the entire amount has been repaid.

BBVA

On September 20, 2020, Betterware entered into a line of credit with BBVA for up to Ps.75,000 bearing interest at 7.5%, payable monthly. The line of credit has racks in the Group’s distribution center pledged as collateral for an amount of Ps.80,901.

COVID-19 virusVirus Impact

As of the issuance date of our annual report, our operations have not been interrupted as a result of the COVID-19coronavirus (COVID-19) outbreak and its recent global spread to a large number of countries, the World Health Organization classified the viral outbreak as a pandemic as our product lines include hygiene and cleaning solutions, which qualify as an essential activity in Mexico. Our supply chain has not been affected either, as we maintain sufficient inventory levels to supply sales for the subsequent 13 weeks, and our foreign suppliers restarted normal activities on March 1,11, 2020. Net sales in 2020 from week one to sixteen increased with respect to the same period of the previous year. Our gross margin has been negatively affected by promotions aimed at gaining market share and the appreciation of the U.S. dollar compared to the Mexican peso’s impact on inventory costs as we purchase most of our products in U.S. dollars, which may continue during 2020. In order to mitigate this risk, the Company enters into forward contracts to fix the exchange rate for future purchases in U.S. dollars, which has allowed us to partially reduce the exchange rate effects of the COVID-19 pandemic. In addition, management is working on plans to increase the introduction of products with higher profit margins and therefore reduce the negative effects that impact our profit margin. We maintain sufficient liquidity to meet our contractual obligations as a result of available sources of financing, in addition our customer’s payment terms are maintained between 14 and 28 days, while our payment terms to our suppliers are 120 days. For further information, see “RiskSee Risk Factors—Risks Related to Our Business and Industry— The recent 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 operation.operations.”

Years ended December 31, 2018Our operations were not interrupted as a result of the COVID-19 pandemic, as its product lines include hygiene and 2017cleaning solutions, which qualify as an essential activity in Mexico. Our gross margin was negatively affected by the depreciation of the Mexican peso compared to the US dollar, as it acquires most of its products in US dollars. To mitigate this risk, we enter into derivative forward contracts to fix the exchange rate for future purchases in US dollars, which has allowed it to partially reduce the effects of the increase in the exchange rate between the Mexican peso and US dollar due to the COVID-19 pandemic.

A cash flow comparisonWe have a proven track record of performance and a clear and executable growth plan, which includes expansion in current geographies and categories, as well as the years ended December 31, 2018addition of new markets and 2017 has been omitted from this annual report, but may be foundproduct extensions, all supported by a strong infrastructure deeply rooted in “Management’s Discussionbusiness intelligence.

The Company maintains sufficient liquidity to comply with its contractual obligations as a result of having financing sources, in addition, the payment conditions of its clients are maintained between 14 and Analysis of Financial Condition and Results of Operations” of our Registration Statement on Form F-1 filed with28 days, while the SEC and effective as of January 22, 2020.payment conditions to its suppliers are 120 days.

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.”.

The COVID-19 pandemic had no impactadverse impacts on our financial performance for the period ended December 31, 2019.2020 period. However, its trajectory remains highly uncertain and we cannot predict the duration and severity of the outbreak and its containment measures. Ourour gross margin has beenwas negatively affected by promotions aimed at gaining market share and the appreciation of the U.S. dollar compared to the Mexican peso impact on inventory costs as we purchase most of our products in U.S. dollars, which might continue throughout 2020.2021. In order to mitigate this risk, the Company enters into forward contracts to fix the exchange rate for future purchases in U.S. dollars, which has allowed us to partially reduce the exchange rate effects of the COVID-19 pandemic. In addition, management is working on plans to increase the introduction of products with higher profit margins and therefore reduce the negative effects that impact our profit margin. We will continue to monitor the impacts that COVID-19 might have on our financial performance during the remainder of 2020, however as of the date of this annual report, we cannot predict the extent of such impact, nor trends involving the pandemic’s effects on economic activity.2021 and beyond.

Other than as disclosed elsewhere in this annual report, we are not aware of any trends, uncertainties, demands, commitments or events, since December 31, 2019, 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.

BWM does not engage in any off-balance sheet financing activities, nor does it have any interest in entities referred to as variable interest entities.

Our Contractual Obligations

Set forth below is a tabular presentation of our contractual obligations as of December 31, 2019,January 3, 2021, for the next five years, presented by type and nature of contractual obligation. The table details the Company’s remaining contractual maturity for its financial liabilities with agreed repayment periods. The maturity analysis has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on which the Company can be required to pay. The table includes both interest and principal cash flows:

See the disclaimer with respect to Cautionary Note Regarding Forward-Looking Statements.

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, 45145, México.

Background of Our Officers and Directors

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

For the year ended December 31, 2019,2020 period, we paid our top management for services in all capacities an aggregate compensation of approximately MX$27,860,000 of fixed compensation, also the executive herein mentioned are entitled to receive performance bonuses. The amount31,917,000 and rules applicable vary among the different divisions and/or officers. Thea variable aggregate compensation for bonuses wasof approximately MX$6,660,000 during 2019, and the5,796,000. 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. Hence, the total executive compensation for the year ended December 31, 20192020 period was MX$34,450,000.37,713,000.

During 2019, theOn July 30, 2020, Betterware’s Board of Directors did notawarded certain officers and directors a long-term share-based incentive plan (the “Incentive Plan”). The purpose of the Incentive Plan is to provide eligible officers and directors with the opportunity to receive any compensationshare-based incentives to encourage them to contribute significantly to the growth of the Group and going forwardto align the Company does not expect haveeconomic interests of those individuals with those of the shareholders. 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 compensation plan forgradual delivery of shares over a period of 4 to 5 years (see Note 22 of the Board of Directors.Audited Consolidated and Combined Financial Statements elsewhere in this annual report).

Board Committees

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

IntegrationComposition

Sessions PeriodicityFrequency

Functions