Betterware de México, S.A.P.I. de C.V. 20F 2021 Annual report

Betterware de México, S.A.P.I. de C.V. (BWMX) 20-F2021 FY Annual report (foreign)

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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

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

For the Fiscal Period Ended December 31, 2021

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

For the transition period from __________ to __________

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

Date of event requiring this shell company report __________

Commission file number 001-39251

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

(Exact name of Registrant as specified in its charter)

Not Applicable

(Translation of Registrant’s name into English)

MEXICO

(Jurisdiction of incorporation or organization)

Luis Campos, Board Chairman

+52 (33) 3836-0500

Luis Enrique Williams 549

Colonia Belenes Norte

Zapopan, Jalisco, 45145, México

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

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


Title of each class	Trading Symbol	Name of each exchange in which registered
Ordinary Shares, no par value per share	BWMX	The Nasdaq Stock Market LLC

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

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

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

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

☐ Yes ☒ No

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

☐ Yes ☒ No

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

☒ Yes ☐ No

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



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

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

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

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

☒ Yes ☐ No

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


U.S. GAAP ☐	International Financial Reporting Standards as issued by the International Accounting Standards Board ☒	Other ☐

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

☐ Item 17 ☐ Item 18

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

☐ Yes ☒ No

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TABLE OF CONTENTS

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS			ii

CERTAIN CONVENTIONS			iii

CURRENCY PRESENTATION			iii

PRESENTATION OF FINANCIAL INFORMATION			iii

PRESENTATION OF INDUSTRY AND MARKET DATA			viii

PART I			1

	ITEM 1.	IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

	ITEM 2.	OFFER STATISTICS AND EXPECTED TIMETABLE	1

	ITEM 3.	KEY INFORMATION	1

	ITEM 4.	COMPANY INFORMATION	15

	ITEM 4A.	UNRESOLVED SEC STAFF COMMENTS	23

	ITEM 5.	OPERATING AND FINANCIAL REVIEW AND PROSPECTS	23

	ITEM 6.	DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	32

	ITEM 7.	MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	38

	ITEM 8.	FINANCIAL INFORMATION	39

	ITEM 9.	THE OFFER AND LISTING	40

	ITEM 10.	ADDITIONAL INFORMATION	40

	ITEM 11.	QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK	48

	ITEM 12.	DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	51

PART II		CONTROLS AND PROCEDURES	53

	ITEM 13.	DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	53

	ITEM 14.	MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	53

	ITEM 15.	CONTROLS AND PROCEDURES	53

	ITEM 16.	Reserved	56

	ITEM 16A.	AUDIT COMMITTEE FINANCIAL EXPERT	56

	ITEM 16B.	CODE OF ETHICS	56

	ITEM 16C.	PRINCIPAL ACCOUNTANT FEES AND SERVICES	57

	ITEM 16D.	EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES	57

	ITEM 16E.	PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS	57

	ITEM 16F.	CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT	58

	ITEM 16G.	CORPORATE GOVERNANCE	58

	ITEM 16H.	MINE SAFETY DISCLOSURE	58

	ITEM 16I.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	58

PART III			59

	ITEM 17.	FINANCIAL STATEMENTS	59

	ITEM 18.	FINANCIAL STATEMENTS	59

	ITEM 19.	EXHIBITS	60

SIGNATURES			61

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

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

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

●

the inability to profitably expand into new markets;

●

the possibility that Betterware may be adversely affected by other economic, business and/ or competitive factors;

●

operational risk;

●

financial performance;

●

litigation and regulatory enforcement risks, including the diversion of management time and attention and the additional costs and demands on Betterware’s resources;

●

changes in our investment commitments or our ability to meet our obligations thereunder;

●

natural disaster-related losses which may not be fully insurable;

●

epidemics, pandemics and other public health crises, particularly the COVID-19 virus;

●

geopolitical risk and changes in applicable laws or regulations;

●

fluctuations in exchange rates between the Mexican peso and the United States dollar; and

●

changes in interest rates or foreign exchange rates.

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

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CERTAIN CONVENTIONS

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

CURRENCY PRESENTATION

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

●

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

●

“MX$,” “Ps.” and “peso” each refer to the Mexican peso.

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

PRESENTATION OF FINANCIAL INFORMATION

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

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

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

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

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

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

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

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

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

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

Non-IFRS Measures

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

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

The Business Combination

The Initial Public Offering

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

The Merger

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

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

The Company Restructure

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

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

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

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

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

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

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

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

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

Closing of the Business Combination

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

(i)

DD3 issued to the Sellers as consideration for the purchase of a portion of the Series C and Series D shares and the BLSM shares outstanding as of January 3, 2021, a debt acknowledgement in an amount equal to $15,000,546.

(ii)

all of Betterware shares issued and outstanding immediately prior to the Closing were canceled and, Campalier and Forteza received, directly and indirectly (through the Invex Security Trust), 18,438,770 and 11,761,175, respectively, of Betterware’s shares; and

(iii)

all of DD3’s ordinary shares issued and outstanding immediately prior to the Closing were canceled and exchanged for Betterware shares on a one-for-one basis.

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

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

(i)

25,669,956 shares, representing 74.5% of the total capital stock, are held by Invex Security Trust, as trustee and for the benefit of CS, as first place beneficiary thereunder;

(ii)

1,764,175 shares, representing 5.1% of the total capital stock, are owned by Forteza;

(iii)

2,765,814 shares, representing 8.0% of the total capital stock, are owned by Campalier;

(iv)

2,211,075 shares, representing 6.4% of the total capital stock, are owned by former DD3 Shareholders as a result of the cancellation of DD3’s ordinary shares and exchange for Betterware shares on a one-for-one basis; and

(v)

2,040,000 shares, representing 5.9% of the total capital stock, are owned by the F-1 Investors.

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

(i)

During July and August 2020, the Group repurchased 1,573,888 warrants. During August and October, 2020, 895,597 warrants were exchanged for 621,098 shares, of which, 462,130 warrants were settled on a cash basis by exchanging 1 warrant for 1 share at a price of US$11.44 for share, which resulted in receiving cash by an amount of Ps.116,419. The remaining 433,467 warrants were exchanged on a cashless basis by exchanging 1 warrant for 0.37 shares.

(ii)

in September 2020, the purchase option of units was exercised by their holders on a cashless basis, which resulted in the issuance of 214,020 Betterware shares.

(iii)

Additionally, in October, 2020, and as part of the terms of the warrant agreement, the Company exercised the redemption of the warrants on a cashless basis by exchanging 3,087,022 warrants for 1,142,325 of the Company’s

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shares. A total of 8,493 public warrants were not exercised by their holders during the redemption period that expired on November 9, 2020, therefore, they were paid by the Company for a price of US$0.01 per warrant.

(iv)

In December, 2020, holders exercised a total of 239,125 private warrants on a cashless basis and exchanged for 156,505 of the Company’s shares.

(v)

As of the January 3, 2021, the warrant holders redeemed all of the outstanding warrants and purchase option of units and the Company recognized a loss for the increase in the fair value of the warrants of Ps.851,520, which was recognized under the heading “Loss in valuation of warrants” in the consolidated and combined statement of profit or loss. As of the date of this annual report, all of the warrants have been redeemed.

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

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

The Forteza Merger

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

Other Transactions during 2021

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

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

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

The JAFRA Acquisition

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

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PRESENTATION OF INDUSTRY AND MARKET DATA

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

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

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PART I

ITEM 1.IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

Not applicable.

ITEM 2.OFFER STATISTICS AND EXPECTED TIMETABLE

Not applicable.

ITEM 3.KEY INFORMATION

A.[Reserved]

B.CAPITALIZATION AND INDEBTEDNESS

Not applicable.

C.REASONS FOR THE OFFER AND USE OF PROCEEDS

Not applicable.

D.RISK FACTORS

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

Risks Related to Betterware’s Business

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

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

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adverse publicity regarding BWM, our products, our distribution channel or its competitors;

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failure to motivate BWM’s distributors with new products;

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the public’s perception of BWM’s products;

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competition for distributors from other direct selling companies;

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the public’s perception of BWM’s distributors and direct selling businesses in general; and

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general economic and business conditions.

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

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

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

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

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

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

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

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

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

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

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

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

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

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the legality of network-marketing systems in general or our network-marketing system specifically;

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the safety and quality of our products;

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regulatory investigations of our products;

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the actions of our distributors;

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management of our distributors; and

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the direct selling industry.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

We may not successfully integrate JAFRA into our operations.

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

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

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

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

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

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

Risks Related to Mexico

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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worsening economic conditions, including a prolonged recession in Mexico;

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fluctuations in currency exchange rates and inflation;

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longer collection cycles;

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potential adverse changes in tax laws;

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changes in labor conditions;

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burdens and costs of compliance with a variety of laws;

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political, social and economic instability;

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increases in taxation; and

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outbreaks of disease and health epidemics, such as the COVID-19 virus.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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impose on it order cancellations, product returns, inventory buy-backs and cooling-off rights for consumers and distributors;

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require us or our distributors to register with governmental agencies;

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impose on it reporting requirements to regulatory agencies; and/or

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require it to ensure that distributors are not being compensated solely based upon the recruitment of new distributors.

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

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

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

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

Risks Related to Ownership of our Ordinary Shares

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

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

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

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

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

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

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

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

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

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a limited availability of market quotations for the Company’s securities;

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a determination that the Company shares are “penny stock” which will require brokers trading in the Company shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for the Company shares;

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a limited amount of analyst coverage; and

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a decreased ability to issue additional securities or obtain additional financing in the future.

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

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

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

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

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

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

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

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

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

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any action between the Company and its shareholders; and

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

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

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

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

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

Environmental laws and regulations risks:

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

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

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

ITEM 4.COMPANY INFORMATION

A.HISTORY AND DEVELOPMENT OF THE COMPANY

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Founded in 1995, Betterware is a leading direct-to-costumer company in Mexico. The Company is focused on the home organization segment, with a wide product portfolio including home solutions, kitchen and food preservation, technology and mobility, among other categories.

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On July 28, 2017, Betterware entered into a merger agreement with Betterware Controladora, S.A. de C.V. (“BWC”) and Strevo Holding, S.A. de C.V. (controlling company of BWC and in turn, subsidiary of Campalier). Betterware was the surviving entity to such merger and the merged companies ceased to exist.

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On August 2, 2019, DD3 entered into a Combination and Stock Purchase Agreement with Sellers, Betterware, BLSM, pursuant to which DD3 agreed to merge with and into Betterware in a Business Combination. See “The Business Combination.”

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In August 2019, the Group started building a distribution center which was completed in the first quarter of 2021. At the end of the years 2021, 2020 and 2019, payments related to this construction amounted to Ps.397,000, Ps.508,958 and Ps.165,000, respectively. The total investment amounted to Ps.1,070,958.

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On March 13, 2020, the Merger with DD3 was closed and consummated.

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On July 14, 2020, Betterware’s corporate name changed from Betterware de México, S.A.P.I. de C.V. to Betterware de México, S.A.B. de C.V.

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On December 14, 2020, the Forteza Merger was closed and consummated.

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On March 12, 2021, we acquired 60% of GurúComm for Ps.45,000. GurúComm is a Mobile Virtual Network Operator and communications software developer, with an enterprise value of Ps.75,000 (approximately US$3,500). On March 28, 2022, we withdrew our investment in GurúComm and cancelled the shares subscribed and paid.

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On July 22, 2021, we acquired 70% of Innova Catálogos, S.A. de C.V., for Ps.5,000. Innova Catálogos is dedicated to the purchase and sale of clothing, footwear and accessories.

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

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On August 30, 2021, we completed an offering of a two-tranche sustainability bond issuance for a total of Ps.1,500,000, with maturities across 4 and 7 years, offered in the Mexican Market.

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On January 18, 2022, we entered into an agreement to acquire 100% of JAFRA’s operations in Mexico and the United States. The transaction was consummated on April 7, 2022. See “—Presentation of Financial Information—The JAFRA Acquisition.”

B.BUSINESS OVERVIEW

Company Overview

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

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

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

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

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

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

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

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

Industry Overview

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

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

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

Competitive Strengths

Unique Business Intelligence and Data Analytics Unit

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

The main functions of the business intelligence unit are:

Clear strategy development

Tight Monitoring

Product Intelligence

Product Development and Innovation Program

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The Company offers a product portfolio with great depth in the home organization segment through six different categories; kitchen and food preservation, home solutions, bathroom, laundry & cleaning, tech and mobility and bedroom

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Constant product innovation is engaged by Betterware through refreshing its catalogue content and attracting clients’ repeated purchases

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The Company has a team focused solely in performing industry analyses and product development and monitoring backed by the data analytics unit’s commercial strategy

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During 2021 the Company acquired multiple business that offer different products like a telephone services and equipment, clothes, shoes and skin care products.

Distributors and Associates Network & Loyalty and Reward Programs

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

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The Company’s Distributors and Associates serve around 24% Household Penetration in Mexico and 80% of Distributors place orders every week.

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The Company has a remarkable rewards program that attracts, retains, and motivates Distributors and Associates through product discounts, Betterware Points, trips, gifts and more.

Unparalleled Logistics and Supply Chain Platform

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

Growth Strategies

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The Company’s warehousing practices includes a 108-day service level inventory.

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Betterware distributes all products from its distribution center in Jalisco, Mexico.

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Distributors personally deliver orders to each of its associates, thus eliminating last mile costs for the Company

Experienced Management & Meritocratic Culture

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Betterware’s president has more than 25 years of experience in the direct-to-consumer selling sector across the Americas and a strong track record of delivering value to its shareholders with commitment to excellence

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Top management has been with the Company six years on average

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The company’s culture is based on the following principles

Result driven management:

○Incentives based on results

○Highly professional operation and no bureaucracy

Meritocratic culture:

○Culture focused on solutions, delivery, discipline and commitment

Closeness to salesforce:

○Management are close and visible to Distributors and Associates

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

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

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Short Term

Web marketing/E-commerce

Increase Service Capacity

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Medium Term

New Product Line

International Expansion to Latin America

Strategic Acquisitions

Offerings

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

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The company offers its products through 8 different categories; including kitchen and food preservation, home solutions, bathroom, laundry and cleaning, tech and mobility and bedroom

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Products are sold through catalogues that offer approximately 340 products in average. Each catalogue has extensive consumer reading behavior analysis to ensure that the content is distributed in the most efficient way and purchase potential is maximized

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Constant product innovation introducing approximately 338 new products every year and development is conducted where the focus is on refreshing catalogue content and attracting repeated purchases from clients

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The Company employs an efficient pricing strategy focused in maximizing revenue and margins and minimizing inventory losses

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The Company has a team focused solely on performing industry analyses and monitoring backed by the data analytics unit commercial market strategy

Logistics Infrastructure and Supply Chain

Customers

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Betterware is 100% committed to provide products to its customers that serve as everyday solutions for modern space organization. Betterware also has the objective of providing products that are accessible to anyone. With these objectives in mind, the Company’s target market is all households in Mexico.

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Most of the Company’s end customers are adult men and women with the desire of optimizing their homes organization

Sales& Marketing

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

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

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Research& Development

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The Company performs constant product innovation with the objectives of refreshing its catalogue content and attracting clients’ repeated purchases

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The Company has a team focused solely on performing industry analyses, product development and monitoring of products

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Product development is backed by the data analytics unit’s commercial strategy

C.ORGANIZATIONAL STRUCTURE

The following diagram depicts the current organizational structure of Betterware:

D.PROPERTY, PLANT AND EQUIPMENT

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

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

E.SUSTAINABILITY

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

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

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

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

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Allow reducing the consumption of electricity and water.

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Use of recyclable materials for the construction of our products.

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Development of products and purchase of environmentally friendly packaging.

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Development of internal tools for measuring the Company's environmental impacts.

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Employment generation through new sources of income.

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Support for vulnerable groups and empowerment of women.

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Development of local suppliers.

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

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

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

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Around 90% of the materials used for the construction of the Campus were recyclable materials such as glass and aluminum.

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Installation of LED lighting throughout the Campus.

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Insulating materials were used to prevent the walls of the buildings from raising their temperatures, avoiding the excessive use of air conditioners.

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Use materials from the zone to develop the campus streets.

●

Installation of drip irrigation systems to take care of the local vegetation.

●

Installation of a nursery to care for endemic trees and plants.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

●

In 2021, we made a sustainable long-term debt bonds issue to refinance the construction of the Betterware Campus, as well as to finance projects with social impact and empowerment for women.

●

The sale of ECO products is being promoted so that their participation in sales within the catalog become greater.

●

100% of Betterware suppliers are “Monarch Butterfly” certified.

●

Continuous work is being done on diversification in key positions in the Company to maintain gender equality.

ITEM 4A.UNRESOLVED SEC STAFF COMMENTS

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

ITEM 5.OPERATING AND FINANCIAL REVIEW AND PROSPECTS

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

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A.Operating Results

Factors Affecting Our Results of Operations

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

Distributors and Associates

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

Net Revenue

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

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

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

●

Identify the contract with client (verbal or written).

●

Identify the performance obligations committed in the contract.

●

Consider the contractual terms and the business model of the Company in order to determine the transaction price. The transaction price is the amount of consideration to which an entity expects to be entitled in exchange for transferring goods or services to a customer, excluding amounts collected on behalf of third parties. In determining the transaction price, the Company considers the variable considerations.

●

Allocate the transaction price to the performance obligations identified in the contract (generally each distinct good or service), to depict the amount of consideration to which an entity expects to be entitled in exchange for transferring the promised goods or services to the customer.

●

Recognition of revenue when or as it satisfies a performance obligation by transferring a good or service to a customer, either at a point in time (when) or over time (as).

Cost of Sales

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

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Selling Expenses

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

Administrative Expenses

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

Distribution Expenses

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

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

Income Taxes

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

Fluctuations in Exchange Rates in the Currencies in which We Operate

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

Results of Operations — 2021 Period compared with the 2020 Period

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

Net Revenue


	December 31,		January 03,
	2021		2021
Net Revenue	Ps.	10,039,668	7,260,408

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

Cost of Sales


	December 31,		January 03,
	2021		2021
Cost of Sales	Ps.	4,399,164	3,290,994

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

Administrative Expenses


	December 31,		January 03,
	2021		2021
Administrative Expenses	Ps.	1,247,436	664,677

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

Administrative expenses by department are as follows:


	December 31,	January 03,
	2021	2021	Var. $	Var.%
Operations	849,271	406,856	442,415	108.7	%
Finance	115,405	94,886	20,519	21.6	%
IT	89,007	45,355	43,652	96.2	%
Depreciation	82,122	43,612	38,510	88.3	%
Marketing	38,099	24,936	13,163	52.8	%
Quality	26,716	25,383	1,333	5.3	%
Others	46,816	23,649	23,167	98.0	%
Total	1,247,436	664,677	582,759	87.7	%

Selling Expenses

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


	December 31,	January 03,
	2021	2021	Var. $	Var. %
Rewards Program	502,976	172,177	330,799	192.1	%
Sales Catalogue	425,477	247,250	178,227	72.1	%
Sales Bonuses and Wages	105,520	288,658	(183,138)	(63.4)	%
Events and Conventions	29,939	19,237	10,702	55.6	%
Others	200,669	126,033	74,636	59.2	%
Total	1,264,581	853,355	411,226	48.2	%

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Distribution Expenses


	December 31,		January 03,
	2021		2021
Distribution Expenses	Ps.	463,779	331,023

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

Financing Income (Cost)


	December 31,		January 03,
	2021		2021
Financing Income (Cost)
Interest Expense ⁽¹⁾	Ps.	(75,818)	(80,253)
Interest Income		25,872	10,930
Unrealized gain (loss) in Valuation of Financial Derivative Instruments ⁽²⁾		330,315	(287,985)
Changes in fair value of warrants ⁽³⁾		—	(851,520)
Foreign Exchange Loss, Net ⁽⁴⁾		(319,739)	(30,402)
Financing Cost, Net		(39,370)	(1,239,230)

(1)

Interest expenses decreased 5.5% or MX$4,435 in 2021 as compared to 2020, due to prepayment of loans in August 2021. The variation did not represent a high percentage because in September 2021, those interest payments were compensated by the interest expenses associated with our bond issuance in Mexico (See “Indebtedness”).

(2)

In connection with the secured line of credit for up to Ps.400,000 contracted with Banamex (see —“Indebtedness—Banamex Term Loans”), and in order to mitigate the risk of future increases in interest rates, we entered into a derivatives contract with Banamex, which consists of an interest rate swap. By using this interest rate swap, we converted our variable interest rates into fixed rates. The swap and the initial secured line were fully prepaid on August 31, 2021. In addition, to reduce the risks related to fluctuations in the exchange rate of the US dollar, we use derivative financial instruments such as forwards to mitigate foreign currency exposure resulting from inventory purchases made in US dollars. As of December 31, 2021, the Company had USD$134.1 million with an average rate of Ps. 20.66. The difference between the average exchange rate of the forward contracts and the real average exchange rate of Ps. 21.53 and Ps. 20.28 in each period represents the (loss) and gain in 2020 and 2021.

(3)

During the 2020 period, we assumed the obligation associated with outstanding warrants upon the Merger with DD3. Changes in the fair value of the warrant obligations, which increased during the year in direct correlation with the increase in our share price, was recognized in financing income/costs. As of December 31, 2021, we do not have outstanding warrants.

(4)

Our exposure to currency exchange rate fluctuations and how we mitigate this risk can be found in the section entitled “Risk Factors—Risks Related to Mexico” and "Currency Exchange Rate Fluctuations.” Additionally, the unrealized loss in valuation of financial derivative instruments from 2020 was converted in foreign exchange loss when forwards were paid during 2021.

Income Tax Expense


	December 31,		January 03,
	2021		2021
Current	Ps	782,901	576,834
Deferred		41,553	(34,066)
Total Income Tax Expense		824,454	542,768

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

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RECONCILIATION OF NON-IFRS MEASURES

Non IFRS Financial Measures

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

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

Betterware’s EBITDA reconciliation


In thousands of Mexican Pesos	December 31, 2021		January 03, 2021		December 31, 2019
Net Income for the period	Ps.	1,800,884		338,361	472,142
Add: Total Income Taxes		824,454		542,768	232,692
Add: Financing Cost, net		39,370		1,239,230	107,411
Add: Depreciation and Amortization		82,122		43,688	38,394
EBITDA	Ps.	2,746,830		2,164,047	850,639

Capital Expenditures

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

Results of Operations — 2020 Period compared with the 2019 Period

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

B.LIQUIDITY AND CAPITAL RESOURCES

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

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

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

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

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

Cash Flows

2021 Period compared with the 2020 Period

Cash Flows from Operating Activities

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

Cash Flows from Investing Activities

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

Cash Flows from Financing Activities

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

2020 Period and 2019 Period

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

Indebtedness

Long term debt- Offering of bonds

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

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

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

Banamex Term Loans

Banamex- Secured credit line

●

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

●

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

●

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

Banamex- Unsecured credit line

●

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

BBVA-Credit line

●

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

●

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

HSBC- Credit line

●

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

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COVID-19 Virus Impact

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

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

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

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

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

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

D.TREND INFORMATION

Summary of trend information:

●

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

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

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

●

Long term debt Bond Offerings:

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

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●

JAFRA’s Acquisition:

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

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

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

E.CRITICAL ACCOUNTING JUDGMENTS AND ESTIMATES

Not applicable.

ITEM 6.DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.DIRECTORS AND SENIOR MANAGEMENT

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

Name	Age	Position Held
Luis Campos	69	Chairman of the Board
Andres Campos	39	Chief Executive Officer and Board Member
Diana Jones	40	Chief Financial Officer
Carlos Doormann	51	Chief Strategy
Luis Lozada	40	Chief Strategy Officer
Santiago Campos	30	Board Member
Jose de Jesus Valdez	69	Independent Board Member
Federico Clariond	48	Independent Board Member
Mauricio Morales	61	Independent Board Member
Joaquin Gandara	51	Independent Board Member
Dr. Martín M. Werner	59	Independent Board Member
Dr. Guillermo Ortiz	73	Independent Board Member
José Alberto Terán	68	Board Member
Reynaldo Vizcarra	56	Secretary

Background of Our Officers and Directors

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

●

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

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The Latin America Regional Managers’ Club, The Conference Board, and a board member of the Economic Development Commission of Mid Florida, Casa Alianza-Covenant House, The Metro Orlando International Affairs Commission, SunTrust Bank and Casa de Mexico de la Florida Central, Inc. Mr. Campos was selected to serve on Betterware’s board of directors due to his extensive experience in consumer product companies, especially in the direct sales, as well as his relevant top-level experience in American public multinational companies. Luis Campos is the father of Andres and Santiago Campos.

●

Andres Campos has been CEO of Betterware de México since 2018. Prior to becoming CEO, within the Company, Andres Campos served as Commercial Director (2014 – 2018) and Strategy and New Businesses Director (2012 – 2014). Prior to Betterware, Mr. Campos worked in Banamex Corporate Banking area (2012 – 2014) and in KPMG as an Auditor (2004 – 2005). Andres holds a bachelor’s degree in Business Administration from Instituto Tecnológico y de Estudios Superiores de Monterrey and an MBA from Cornell University. Andres Campos is son of Luis Campos and brother of Santiago Campos.

●

Diana Jones has served as Betterware CFO since 2020. Mrs. Jones previously performed as Betterware’s Director of Comptroller (2018-2019) and Director of Finance Planning (2019-2020). Prior joining the Company, she worked as Director of External Audit in KPMG Cardenas Dosal, S.C., (2003-2018), including a term at New York City from 2008 to 2010. Mrs. Jones holds a degree in Public Accounting and Finance from the Monterrey Institute of Technology and Higher Education (ITESM), as well as an MBA with specialty in Finance from Tecmilenio University. She is also a Certified Public Accountant on behalf of the Mexican Institute of Public Accountants.

●

Carlos Doormann has a degree in Economics, graduated from the Institute Autónomo de Mexico, has an MBA in Business Administration and Yale School Of Management New Haven, Connecticut, and is currently pursuing an Executive MBA at the European Business School in Barcelona. He has a solid professional background in execution of business and finance strategies, team development, investor relations, risk management, treasury optimization, profitability models, international financial reporting standards and more, in leading companies in Mexico and USA as Grupo Alpura, Club Premier, Grupo Aeroméxico, Boehringer Ingelheim Promeco, Kraft Foods de México, among others, where he served as Director of Finance and Administration (CFO), Director of Analysis and Financial Planning and Treasury.

●

Luis Lozada joined Betterware in January 2021, as Chief Strategy Officer. Prior to joining Betterware, Mr. Lozada was an Associate Partner with Bain & Company, where he worked for almost fifteen years (2006 – 2020) advising senior executives of multi-multinational companies on a variety of management topics. Mr. Lozada’s area of expertise resides in business strategy and performance improvement, with retail and consumer-goods companies Mr. Lozada holds a bachelor’s degree in Chemical Engineering from the Monterrey Institute of Technology and Higher Education (Instituto Tecnologico y de Estudios Superiores de Monterrey – “ITESM”) and an MBA from Cornell University.

●

Santiago Campos has served as Director of Innovation and Communication at Betterware since 2018. Prior to joining Betterware, Santiago Campos served as Commercial Director at EPI Desarrollos, a Real Estate Development company, coordinating efforts between marketing, sales, finance and also taking care of administration, he was involved in achieving successful projects in a span of 2.5 years where 100% sales were accomplished before finishing construction. Santiago holds a bachelor’s degree in public accounting and finance from Instituto Tecnológico y de Estudios Superiores de Monterrey. Mr. Campos was selected to serve on Betterware’s board of directors due to his natural instinct in product innovation and household needs in BWM market target group. Santiago Campos is son of Luis Campos and brother of Andres Campos.

●

Jose de Jesus Valdez serves as CEO of Alpek since 1988. Mr. Valdez joined Alpek in 1976 and has held several senior management positions such as CEO of Petrocel, Indelpro and Polioles. He was also president of the “Asociación Nacional de la Industria Química” (ANIQ), of the “Comisión Energética de la Confederación de Cámaras Industriales de los Estados Unidos Mexicanos” (CONCAMIN) and of the “Cámara de la Industria de Transformación de Nuevo León” (CANAINTRA). Mr. Valdez is a mechanical engineer and has an MBA from Tecnológico de Monterrey (ITESM) and a master’s degree in industrial engineering from Stanford University. Mr. Valdez was selected to serve on the Company’s board of directors due to his vast experience in Mexican, US and Latin American business and market economy.

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Federico Clariond has served as CEO of Valores Aldabra, a single-family office with investments in financial services, aluminum, packaging and consumer goods companies, since 2011, and as CEO of Buro Inmobiliario Nacional, a Real Estate investment vehicle with holdings in the hospitality, industrial, office, and commercial spaces throughout Mexico, since 2015. Prior to Valores Aldabra and Buro Inmobiliario Nacional, from 2007 to 2011, Mr. Clariond served as CEO of Stabilit Mexico, a manufacturer of fiber glass reinforced plastics with operations in Mexico, the United States and Europe, and from 2004 to 2007, as Commercial VP of IMSA Acero. Additionally, he is board member of several companies ranging from the financial services, aluminum, packaging and consumer goods industries. Mr. Clariond is a mechanical engineer and has an MBA from Stanford University. Mr. Clariond was selected to serve on Betterware’s board of directors due to his vast business experience in Mexico’s private investment matters.

●

Mauricio Morales is a founding partner at MG Capital. Before his 21-year tenure at the firm, he worked at different financial institutions in Mexico, specializing in wealth management, with a focus on exchange-traded instruments. Mauricio hold a B.S. in Mechanical Engineering, from the Instituto Tecnológico y de Estudios Superiores de Monterrey. Mauricio participates as a board member at one private firm, and one private charity group. Mr. Morales was selected to serve on Betterware’s board of directors due to his vast experience in Mexico and USA capital markets.

●

Joaquin Gandara serves as CEO of Stone Financial Awareness since 2017. Prior to Stone Financial Awareness, he worked at Scotiabank for 24 years where he held several positions in different departments such as Credit, Consumer Banking, Branch Operations and Corporate Banking. Mr. Gandara was selected to serve on the Company’s board of directors due to his extensive knowledge in the financial and banking field.

●

Dr. Martín M. Werner, who has served as DD3’s Chief Executive Officer and Chairman of the Board since inception, is a founding partner of DD3 Capital. Prior to founding DD3 Capital in 2016, Dr. Werner worked at Goldman Sachs for 16 years (2000 – 2016) becoming a Managing Director in 2000 and a Partner in 2006. He was co-head of the Investment Banking Division for Latin America and the country head of the Mexico office. Dr. Werner continues to serve as the Chairman of the board of directors of Red de Carreteras de Occidente (RCO), which is one of Mexico’s largest private concessionaires and operates more than 760 kilometers of toll roads and is owned by Goldman Sachs Infrastructure Partners. Prior to his time with Goldman Sachs, Dr. Werner served in the Mexican Treasury Department as the General Director of Public Credit from 1995 to 1997, and as Deputy Minister from 1997 to 1999. Among his numerous activities, he was in charge of restructuring Mexico’s Public debt after the financial crisis of 1994 and 1995. Dr. Werner is the second largest investor of Banca Mifel, a leading mid-market Mexican bank with $3.3 billion in assets and a credit portfolio of $2.0 billion; he is also member of the Board of Directors of Grupo Comercial Chedraui, a leading supermarket chain in Mexico and the United States; the Board of Directors of Grupo Aeroportuario Centro Norte, one of Mexico’s largest airport operators; and he is a member of Yale University’s School of Management Advisory Board. Dr. Werner holds a bachelor degree in economics from Instituto Tecnológico Autónomo de Mexico (ITAM) and a Ph.D. in economics from Yale University.

●

Dr. Guillermo Ortiz has served as Chairman of BTG Pactual Latin America ex-Brazil, a leading Brazilian financial services company with operations throughout Latin America, the U.S. and Europe, since 2015. Prior to joining BTG, from 2010 to 2015, he was Chairman of the Board of Grupo Financiero Banorte-Ixe, the largest independent Mexican financial institution. Dr. Ortiz also served two consecutive six-year terms as Governor of Mexico’s Central Bank from 1998 to 2009. From 1994 to 1997, Dr. Ortiz served as Secretary of Finance and Public Credit in the Mexican Federal Government where he guided Mexico through the “Tequila” crisis and contributed to the stabilization of the Mexican economy, helping return the nation to growth in 1996. He has served on the Board of Directors of the International Monetary Fund, the World Bank and the Interamerican Development Bank. Dr. Ortiz is Chairman of the Pe Jacobsson Foundation, a member of Group of Thirty, Board of Directors of the Center for Financial Stability, Board of Directors of the Globalization and Monetary Policy Institute, Board of Directors in the Federal Reserve Bank of Dallas and Board of Directors of the China’s International Finance Forum. He is also an Officer of Zurich Insurance Group Ltd. and a Member of the Board of Directors of Wetherford International, a leading company in the oil and equipment industry, as well as of a number of Mexican companies, including Aeropuertos del Sureste, one of Mexico’s largest airport operators, Mexichem, a global leading petrochemical group, and Vitro, a leading glass manufacturer company in Mexico. Dr. Ortiz is also a member of the Quality of Life Advisory board of the Government of Mexico City. Dr. Ortiz holds a bachelor’s degree in economics from Universidad Nacional Autónoma de México (UNAM), a

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master’s degree and a Ph.D. in economics from Stanford University. Dr. Ortiz was selected to serve on our board of directors due to his significant government service and finance experience.

●

José Alberto Terán Vázquez was born in Mexico City in 1953. He studied administration at the Instituto Tecnológico Autónomo de México, he worked 2 years at the bancking sectory and in 1978 he joined to Terán Publicity; The dvertising agency was founded in 1947 by his father; In 1988 he was named as CEO of Terán Publicity. In 1995, Terán Publicity become part of OMNICOM group, thus joining the TBWA network and the agency was again named as TERAN / TBWA. Some of its clients are leading local and global brands operating in Mexico, such as Apple, Bachoco, BBVA, Domino’s, El Palacio de Hierro, GNP Seguros, Tequila Herradura, Jack Daniel’s, Kleen Bebe, Nissan, FUD, Yoplait and Volaris. José Alberto has been an active leader in the Mexican advertising industry and has served as President of the Mexican Association of Advertising Agencies (AMAP) in 1995, 200 and 2017. He has also been Vice President of the National Advertising Council. In 2000 he founded the EFFIE awards in Mexico, which are sponsored by the American Marketing Association and served as its president for 7 years.

●

Reynaldo Vizcarra (non-member Secretary) is a member of Baker & McKenzie’s Corporate and Transactional Practice Group. He is a professor at the University Anáhuac del Norte where he teaches foreign investment as part of the master of laws program, and an instructor at Universidad Panamericana’s Baker McKenzie Seminar. He joined Baker & McKenzie’s Mexico City office in 1986, handling foreign investments, banking and finance matters and international agreements. He also worked in the Chicago office’s Latin America Practice Group, advising on investments and acquisitions in Latin America (1996 – 1997). In 2000, Mr. Vizcarra co-founded Baker & McKenzie’s Guadalajara office, where he led the Banking & Finance Practice Group. In August 2005, he transferred to Baker McKenzie’s Cancun office as a founding member and director mainly handling tourism and real estate projects. In 2009, he transferred back to the Mexico City office, where he was local managing partner for four years and thereafter became National Managing Partner of the Firm in Mexico until August 2018.

B.COMPENSATION

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

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

C.BOARD PRACTICES

Board Committees

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

Composition

●

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

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●

The members of the Audit and Corporate Practices Committee are independent as under Nasdaq requirements.

●

The Audit and Corporate Practices Committee may create one or more sub-committees, to receive support in the performance of its functions. The Audit and Corporate Practices Committee is empowered to designate and remove the members of said sub-committees and to determine their powers.

●

As of the date of this annual report, the members of the Audit and Corporate Practices Committee are:

Joaquin Gandara Ruiz Esparza — Chairman — Mr. Gandara serves as CEO of Stone Financial Awareness since 2017. Prior to Stone Financial Awareness, he worked at Scotiabank for 24 years where he held several positions in different departments such as Credit, Consumer Banking, Branch Operations and Corporate Banking.

ii.

America Taracido serves as Managing Partner at Consultores en Alta Direccion y Gestión de Empresas, S.C. and, she joined Desarrolladora de Ciudad as CFO. Mrs. Taracido served in various positions in countries such as Peru, the United States and Mexico and worked in important positions in companies such as “Ernst & Young México, Avon Cosmetics, Finanzas & CFO at Smurfit Kappa Group México”, and others. She is an active member of the Council of Americas and was a president of “Instituto Mexicano de Ejecutivos de Finanzas”. Mrs. Taracido holds a master degree in Administration in “Tecnológico Autonómo de México (ITAM)”. Since April 2020 she is part of the Audit Committee for Betterware Mexico.

iii.

Federico Clariond has served as CEO of Valores Aldabra, since 2011, and as CEO of Buro Inmobiliario Nacional. Prior to Valores Aldabra and Buro Inmobiliario Nacional, from 2007 to 2011, Mr. Clariond served as CEO of Stabilit Mexico, a manufacturer of fiber glass reinforced plastics with operations in Mexico, the United States and Europe, and from 2004 to 2007, as Commercial VP of IMSA Acero. Additionally, he is board member of several companies. Mr. Clariond is a mechanical engineer and has an MBA from Stanford University. Mr. Clariond was selected to serve on Betterware’s board of directors due to his vast business experience in Mexico’s private investment matters.

Sessions Frequency

●

The Audit and Corporate Practices Committee and its sub-committees meet with the necessary frequency for the performance of their duties, at the request of any of its members, the Board of Directors or its Executive President or the General Assembly of Shareholders; in the understanding that it must meet at least 4 (four) times during a calendar year.

●

The sessions of the Audit and Corporate Practices Committee and its sub-committees may be held by telephone or videoconference, with the understanding that the Secretary of the respective session must take the corresponding minutes, which must in any case be signed by the Executive President and the respective Secretary, and collect the signatures of the members who participated in the session.

Functions

●

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

○

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

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○

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

○

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

○

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

○

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

○

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

○

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

○

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

○

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

●

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

○

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

○

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

○

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

○

Evaluate and recommend the external auditor of the Company.

○

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

○

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

○

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

○

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

○

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

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D.EMPLOYEES

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


	Number of Employees
	December 31,	January 03,	December 31,
	2021	2021	2019
Operations	977	962	296
Sales and marketing	167	148	263
Finance, administration, human resources, IT	128	184	115
Total	1,272	1,294	674

E.SHARE OWNERSHIP

Not applicable.

ITEM 7.MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.MAJOR SHAREHOLDERS

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

●

each shareholder, or group of affiliated shareholders, who we know beneficially owns more than 5% of our outstanding shares;

●

each of our directors and executive officers individually; and

●

all directors and executive officers as a group.

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

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


	Ordinary shares
	Beneficially
	Owned as of filing
	date of this
	annual report
	Ordinary Shares
	Number	%
Five Percent or More Holders
Campalier S.A. de C.V.⁽¹⁾	19,919,793	53.38	%
Cede & Co.	17,396,753	46.62	%
Our executive officers and directors:
Luis Campos	—	—
Andres Campos	—	—
Diana Jones	—	—
Carlos Doormann	—	—
Luis Lozada	—	—
Santiago Campos	—	—
Jose de Jesus Valdez	—	—
Federico Clariond	—	—
Mauricio Morales	—	—
Joaquin Gandara	—	—
Dr. Martín M. Werner	—	—
Dr. Guillermo Ortiz	—	—
José Alberto Terán	—	—
Reynaldo Vizcarra	—	—
All directors and executive officers as a group (fourteen individuals)	—	—

(1)

This entity is controlled by Luis Campos, our board chairman

B.RELATED PARTY TRANSACTIONS

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

C.INTERESTS OF EXPERTS AND COUNSEL

Not applicable.

ITEM 8.FINANCIAL INFORMATION

A.CONSOLIDATED AND COMBINED STATEMENTS AND OTHER FINANCIAL INFORMATION

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

Legal Proceedings

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

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

Dividend Distribution Policy

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

B.SIGNIFICANT CHANGES

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

ITEM 9.THE OFFER AND LISTING

A.OFFER AND LISTING DETAILS

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

B.PLAN OF DISTRIBUTION

Not applicable.

C.MARKETS

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

D.SELLING SHAREHOLDERS

Not applicable.

E.DILUTION

Not applicable.

F.EXPENSES OF THE ISSUE

Not applicable.

ITEM 10.ADDITIONAL INFORMATION

A.SHARE CAPITAL

Not applicable.

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B.MEMORANDUM AND ARTICLES OF ASSOCIATION

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

General

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

Shareholder Meetings

●

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

●

Notice:

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

Shareholders’ Voting Rights

●

Any person authorized to vote may be represented at a meeting by a proxy who may speak and vote on behalf of the member.

●

Depending on the matter that requires shareholders’ approval, the by-laws and Mexican law provide a fixed quorum.

●

The annual ordinary shareholders’ meeting must have a quorum of at least 50% plus one of the outstanding shares of the company’s capital stock and all resolutions shall be approved with the affirmative vote of at least the majority of the present shares. In the event of a second or subsequent call, the general ordinary stockholders’ meeting may be validly held regardless of the number of shares represented, and its resolutions shall be valid when adopted by majority vote of the shares represented at the meeting.

●

The extraordinary shareholders’ meetings must have a quorum of at least 75% of the outstanding shares of the company’s capital stock and all resolutions must be approved with the affirmative vote of at least 50% of the outstanding voting shares of the company. In the event of a second or subsequent call, extraordinary general stockholders’ meetings may be validly held if 50% of the outstanding voting shares of the company is represented, and their resolutions will be valid if adopted by the favorable vote of shares representing at least 50% of the outstanding voting shares of the company.

●

Notwithstanding the provisions of the preceding paragraph, the favorable vote of shares with or without voting rights representing (i) 75% (seventy-five percent) of the Company’s outstanding capital stock shall be required to amend the Company’s by-laws and (ii) 95% (ninety-five percent) of the capital stock of the Company to resolve and request from the National Banking and Securities Commission the cancellation of the registration of the shares of the Company in the National Securities Registry, under the terms provided in the Securities Market Law and other applicable provisions.

●

For special meetings, the rules provided for general extraordinary meetings shall apply considering only the shares of the applicable series or class.

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●

The annual ordinary shareholders’ meeting shall:

○

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

○

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

○

evaluate the independence of independent directors;

○

appoint the chairmen of the corporate practices and audit committees;

○

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

○

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

○

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

○

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

●

An extraordinary shareholders’ meeting shall approve:

○

extension of the company’s term;

○

anticipated dissolution of the company;

○

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

○

any amendment in the company’s corporate purpose;

○

any change in the company’s nationality;

○

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

○

any merger;

○

issuance of shares different than ordinary shares and bonds;

○

redemption of shares; and

○

any amendment to the company’s by-laws.

Directors

●

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

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●

Any shareholder, or group of shareholders, that have 10% or more of the capital stock of the Company has the right to appoint one member of the board of directors.

●

The members of the board shall hold office for one year or until the shareholders that have appointed them revoke such appointment. The directors may be reelected as many times as deemed convenient and shall continue in office until their successors have been appointed and taken office.

Fiduciary Duties

●

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

○

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

○

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

○

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

Shareholders’ Derivative Actions

●

The liability resulting from the breach of the duty of care or the duty of loyalty shall be exclusively in favor of the company or of the legal entity controlled by it or over which it has a significant influence and may be exercised by the company or by the stockholders who, individually or jointly, hold ordinary shares or shares with limited voting rights, restricted or without voting rights, representing 5% or more of the corporate capital in accordance with the provisions of Article 38 of the Securities Market Law.

●

The members of the board of directors shall not incur in liability for damages caused to the company or to the legal entities it controls, when a director acts in good faith.

Indemnification of Directors and Officers

●

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

Inspection of Books and Records

●

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

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●

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

Anti-takeover Protections

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

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

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

●

the book value per share, in accordance with the latest quarterly financial statements approved by the Board of Directors and presented to the National Banking and Securities Commission or to the applicable securities exchange; or

●

the highest closing price per share with respect to transactions in the securities exchange where the shares are placed, published in any of the 365 days prior to the date of the application filed or the authorization granted by the Board of Directors; or

●

the highest price paid with respect to the purchase of any shares, during the 365 days immediately before sending of the request or the authorization granted by the Board of Directors.

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

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

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

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

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

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

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

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

C.MATERIAL CONTRACTS

We do not have material contracts to disclose.

D.EXCHANGE CONTROLS

None.

E.TAXATION

Material U.S. Federal Income Tax Considerations

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

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

●

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

○

an individual citizen or resident of the United States,

○

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

○

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

○

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

●

who holds the ordinary shares as capital assets for U.S. federal income tax purposes;

●

who owns, directly, indirectly or by attribution, less than 10% of the share capital or voting shares of the Company; and

●

whose holding is not effectively connected with a business carried on through a permanent establishment in Mexico.

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

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

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

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

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

Taxation of distributions

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

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

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Taxation upon sale or other disposition of ordinary shares

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

Additional tax on net investment income

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

Passive foreign investment company rules

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

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

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

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

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

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

Information reporting and backup withholding

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

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

F.DIVIDENDS AND PAYING AGENTS.

Not applicable.

G.STATEMENT BY EXPERTS

Not applicable.

H.DOCUMENTS ON DISPLAY

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

I.SUBSIDIARY INFORMATION

Not applicable.

ITEM 11.QUANTITATIVE AND QUALITATIVE DISCLOSURES REGARDING MARKET RISK

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

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Market risk

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

●

In order to reduce the risks related to fluctuations in the exchange rate of foreign currency, we use derivative financial instruments such as forwards to adjust exposures resulting from foreign exchange currency.

●

Additionally, the Group occasionally used interest rate swaps to adjust its exposure to the variability of the interest rates or to reduce their financing costs. The Group’s practices vary from time to time depending on judgments about the level of risk, expectations of change in the movements of interest rates and the costs of using derivatives.


	December 31,		January 03,		December 31,
	2021		2021		2019
	Long-term bond		Borrowings		Borrowings

Fair value.⁽¹⁾	Ps.	1,499,867		634,992		679,188

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

Exchange risk management

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

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

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


	December 31,		January 03,		December 31,
	2021		2021		2019
Financial assets	US$	10,686		29,559		1,331
Financial liabilities		(35,148)		(49,570)		(16,095)
Net position	US$	(24,462)		(20,011)		(14,764)
Closing exchange rate of the year		20.5157		19.9352		18.8452

Exchange rate sensitivity analysis

We are mainly exposed to variations in the Mexican Peso / the U.S. Dollar exchange rate. For sensitivity analysis purposes, we have determined a 10% increase and decrease in Ps. currency units against the U.S. dollar (“relevant currency”). A 10% is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated financial assets/liabilities and adjusts their translation at the year-end for a 10% change in foreign currency rates. Given that the foreign exchange currency net position results in a liability, a positive number below indicates an increase in profit where currency units strengthen 10% against the relevant currency. For a 10% weakening of currency units against the relevant currency, there would be a comparable impact on the net income, and the balances below would be negative.


	December 31,		January 03,		December 31,
	2021		2021		2019
Impact on net income	US$	50,186	US$	39,982	US$	27,823

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Foreign exchange forward contracts

It is the policy of the Group to enter into foreign exchange forward contracts to manage the foreign currency risk associated with anticipated purchase transactions up to six months. Basis adjustments are made to the initial carrying amounts of inventories when the anticipated purchases take place.

See Note 18 to our Audited Consolidated and Combined Financial Statements for details on foreign currency forward contracts outstanding at the end of the reporting period. Foreign currency forward contract liabilities are disclosed in the line item ‘Derivative financial instruments’ within the consolidated and combined statement of financial position.

We have entered into contracts to purchase raw materials from suppliers in China, with such purchases denominated in U.S. dollars. We have entered into foreign exchange forward contracts to hedge the exchange rate risk arising from these anticipated future purchases.

Interest rate risk management

During 2020 and 2019, we were exposed to interest rate risk from borrowings at variable interest rates. We manage the risk by maintaining an appropriate balance between fixed and variable rate borrowings, and by the use of interest rate swap contracts. Hedging activities were evaluated regularly to align with interest rate views and defined risk appetite; ensuring the most cost-effective hedging strategies are applied.

Our exposures to interest rates on financial assets and financial liabilities are detailed in the section of liquidity risk management in our Audited Consolidated and Combined Financial Statements.

As of December 2021, we do not have any SWAP contracted.

Interest rate sensitivity analysis

The sensitivity analyses determined in 2020, were based on the exposure to interest rates on the reporting date. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the reporting date was outstanding during the year. A one per cent increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been one per cent higher/lower and all other variables would have held constant, our net income as of January 3, 2021, and December 31, 2019, would decrease/increase by Ps 6,266 and Ps.1,352, respectively. This is attributable to our exposure to interest rates on its borrowings as described in Note 15 in our Audited Consolidated and Combined Financial Statements. As of December 31, 2021, the borrowings were liquidated.

Interest rate swap contracts

During the first months of 2021 and prior periods, under interest rate swap contracts, we agreed to exchange the difference between fixed and variable rate interest amounts calculated on agreed notional principal amounts. Such contracts enabled us to mitigate the risk of changing interest rates on the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps in 2020 was determined by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract and was disclosed in Note 18 in our Audited Consolidated and Combined Financial Statements. The average interest rate was based on the outstanding balances at the end of the financial period.

Credit risk management

Our exposure to credit risk is not significant as no customer represents more than 10% of sales and receivables. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated, spread across diverse geographical areas. Credit policy has been implemented for each customer establishing purchase limits. Customers who do not satisfy the credit references set out by us, can only carry out transactions with the Group through prepayment.

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See Note 6 in our Audited Consolidated and Combined Financial Statements, for further details on trade account receivables and the expected credit loss estimate.

Collateral held as security and other credit enhancements

We do not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Overview of the Group’s exposure to credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss/gain to us. As of December 31, 2021, our maximum exposure to credit risk without taking into account any collateral held or other credit enhancements, which will cause a financial loss to us due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group, arises from the carrying amount of the respective recognized financial assets as stated in the consolidated and combined statement of financial position.

For trade receivables, we have applied the simplified approach to measure the loss allowance at lifetime ECL. We determine the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix. Our Note 6 in our Audited Consolidated and Combined Financial Statements includes further details on the loss allowance for these assets.

Liquidity risk management

The ultimate responsibility for liquidity risk management rests with the board of directors, which has established an appropriate liquidity risk management framework for management of the Group’s short, medium and long-term funding and liquidity management requirements. The Group manages liquidity risk by maintaining adequate reserves, banking facilities, and reserve borrowing facilities, by continuously monitoring the forecast and actual cash flows, and by matching the maturity profiles of financial assets and liabilities. Details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk are set out below.

Liquidity maturity analysis

We manage our liquidity risk by maintaining adequate reserves of cash and bank credit lines available and consistently monitoring its projected and actual cash flows. The maturity analysis of lease liabilities and long-term debt maturities effectives in 2021, 2020 and 2019 are presented in Note 13 and 15, respectively in our Audited Consolidated and Combined Financial Statements.

We have access to financing facilities as described below. We have expected to meet its other obligations from operating cash flows and proceeds of maturing financial assets.


Bank credit lines and long term debt	2021		2020	2019
Amount used	Ps.	1,500,000	626,554	656,459
Amount not used		250,000	297,828	260,500
Total credit lines and long term debt	Ps.	1,750,000	924,382	916,959

ITEM 12.DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

A.DEBT SECURITIES

Not applicable.

B.WARRANTS AND RIGHTS

On November 9, 2020, the Company redeemed all of its outstanding public warrants to purchase shares of the Company’s ordinary shares, no par value per share, that were issued under the Warrant Agreement, dated as of October 11, 2018 (as amended from time to time), by and between the Company (as successor of DD3 Acquisition Corp.) and Continental, as warrant agent, for a redemption

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price of USD$0.01 per Public Warrant. See “Related-Party Transactions–Warrants Amendment.” Also, on December 23, 2020, 239,125 private warrants were exercised on a cashless basis by their holders and exchanged for 156,505 of the Company’s shares. As of January 3, 2021, the Company or the warrant holders had redeemed all of the outstanding warrants and purchase option of units and the Company recognized a loss for the increase in the fair value of the warrants of Ps.851,520, which is recognized under the heading “Loss in valuation of warrants” in the consolidated and combined statement of profit or loss.

C.OTHER SECURITIES

Not applicable.

D.AMERICAN DEPOSITARY SHARES

Not applicable.

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PART II

ITEM 13.DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

None.

ITEM 14.MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

Not applicable.

ITEM 15.CONTROLS AND PROCEDURES

A.DISCLOSURE CONTROLS AND PROCEDURES

The Company’s Chief Executive Officer (CEO) and Chief Financial Officer (CFO) are responsible for implementing disclosure controls and procedures to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms. Such information is necessary for our officers who certify the Company’s financial reports and for other members of senior management and the CEO and CFO as appropriate to allow timely decisions regarding required disclosure. Because of these inherent limitations, our disclosure controls and procedures may not prevent or detect misstatements. Additionally, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

The CEO and CFO oversee and review all materials for which there is a disclosure requirement, together with all data required to support the documents mentioned above. These executives meet at regular intervals in order to review all data. Our CEO and CFO conducted an evaluation of the effectiveness of our disclosure controls and procedures (pursuant to Rule 13a-15(e) under the Exchange Act) as of December 31, 2021. Based on that evaluation, our CEO and CFO have concluded that the Company’s disclosure controls and procedures were not effective as of December 31, 2021, due to the existence of material weaknesses in our internal controls over financial reporting.

Notwithstanding the material weaknesses in our internal control over financial reporting, we have concluded that the Consolidated and Combined Financial Statements included in this annual report on Form 20-F present fairly, in all material respects, our financial position, results of operations and cash flows for the periods presented in conformity with IFRS. Additionally, the material weakness did not result in any restatements of our Consolidated and Combined Financial Statements or disclosures for any prior period.

See Exhibits 12.1 and 12.2 for the certifications required by this Item.

B.MANAGEMENT’S ANNUAL ASSESSMENT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Betterware’s management is responsible for establishing and maintaining adequate internal control over financial reporting for Betterware as defined in Exchange Act Rule 13a-15(f) and 15d-15(f). Our internal control over financial reporting was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Internal control over financial reporting includes those policies and procedures that:

●

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of Betterware;

●

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with IFRS and that receipts and expenditures of Betterware are being made only in accordance with authorizations of Management and directors of Betterware; and

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●

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of Betterware’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements due to the possibility that a control can be circumvented or overridden or that misstatements due to error or fraud may occur that are not detected. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that a reasonable possibility exists that a material misstatement of our annual or interim financial statements would not be prevented or detected on a timely basis.

During our assessment of internal control over financial reporting we have identified deficiencies, and based on their nature, we consider that certain of these deficiencies represents significant deficiencies on an individual basis. When considered in the aggregate the deficiencies rise to the level of material weaknesses due to their nature, and severity.

The material weaknesses in the Company’s internal controls include: (i) ineffective control activities to review, analyze, record and disclose financial information, including complex accounting matters, and (ii) certain control activities, including general information technology (“IT”) controls and application controls were not fully implemented or did not operate effectively for a sufficient period of time during the reporting period. We expect to finalize the implementation of additional control activities and IT General controls during the first half of 2022.

During 2021, the Company ceased to be classified as an emerging growth company (“EGC”) and its status was changed to that of large accelerated filer. Consequently, the Company was no longer eligible for an exception from compliance with the requirements of section 404 of the Sarbanes-Oxley Act of 2022, which stipulates those enterprises must establish internal controls for financial reporting and must have processes to document, test and maintain internal controls continuously. Therefore, the Company started the implementation of a formal Internal Control over Financial Reporting Program based on a top-down risk assessment to validate the existence of controls over significant, accounts, processes, applications and IT environments. Our management has worked, and continues to work, to strengthen our internal control over financial reporting, however, we have not completed all remediation efforts. Accordingly, we will continue to enhance the internal control environment and focus on the remediation of the material weaknesses described above, performing additional procedures prescribed by management, including the use of manual mitigating control procedures and employing any additional tools and resources deemed necessary to ensure that our consolidated and combined financial statements are fairly stated in all material respects.

Management conducted an evaluation of the effectiveness of Betterware’s internal control over financial reporting based on the framework in Internal Control – Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO 2013”). Based on its evaluation, Management concluded that Betterware’s internal control over financial reporting was not effective as of December 31, 2021.

Guadalajara, Mexico

April 28, 2022


/s/		/s/
Andrés Campos, CEO		Diana Jones, CFO

C.REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROLS

Opinion on Internal Control over Financial Reporting

We have audited the internal control over financial reporting of Betterware de México, S.A.P.I. de C.V. and subsidiaries (collectively, the “Group”) as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). In our opinion, because of the effect of the material weaknesses identified below on the achievement of the objectives of the control criteria, the Group has not maintained

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effective internal control over financial reporting as of as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by COSO.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated financial statements as of and for the year ended December 31, 2021 of the Group and our report dated April, 28, 2022, expressed an unqualified opinion on those financial statements.

Basis for Opinion

The Group’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Annual Assessment on Internal Control over Financial Reporting” appearing in Item 15 B. Our responsibility is to express an opinion on the Group’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Material Weaknesses

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. We identified deficiencies that, when considered in the aggregate, rise to the level of material weaknesses due to their nature and severity. The following material weaknesses have been identified and included in management's assessment: (i) ineffective control activities to review, analyze, record and disclose financial information, including complex accounting matters, and (ii) certain control activities, including general information technology (“IT”) controls and application controls were not fully implemented or did not operate effectively for a sufficient period of time during the reporting period. These material weaknesses

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were considered in determining the nature, timing, and extent of audit tests applied in our audit of the consolidated financial statements as of and for the year ended December 31, 2021, of the Group, and this report does not affect our report on such financial statements.

Galaz, Yamazaki, Ruiz Urquiza, S.C.

Member of Deloitte Touche Tohmatsu Limited

/s/JOSE GERARDO CASTILLO MORALES

C.P.C. José Gerardo Castillo Morales

Guadalajara, Jalisco, Mexico

April 28, 2022

D.CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

During 2021, we implemented certain changes in our internal control over financial reporting to begin to address our material weaknesses, which include:

●

Started the design and implementation of an Internal Control over Financial Reporting (ICFR) program, which is aligned with leading control frameworks such as COSO and COBIT.

Our ICFR program focuses on the identification, documentation, and testing of the controls intended to mitigate the risk of material financial statement misstatements and is the basis to assess the effectiveness of our ICFR as of the end of each fiscal year.

●

Documented process and controls, by which transactions are initiated, authorized, recorded, processed, corrected as necessary, transferred to the general ledger and reported in our consolidated financial statements;

●

As of December 31, of 2021, implemented most of the controls intended to mitigate risks on areas of higher risk to financial reporting. We expect to finalize the implementation of control activities during the first half of 2022.

We acknowledge that control deficiencies in our ICFR have been identified which constitute a material weakness. We will continue to work to enhance the maturity level of our implemented ICFR.

ITEM 16.Reserved

ITEM 16A.AUDIT COMMITTEE FINANCIAL EXPERT

See “Directors, Senior Management and Employees—Board Practices—Board Committees—Audit Committee.” Our Board of Directors has determined that Joaquin Gandara Ruiz Esparza qualifies as an “audit committee financial expert” under applicable SEC rules.

ITEM 16B.CODE OF ETHICS

We have a Code of Ethics that applies to all directors, officers and employees of Betterware, including our Chief Executive Officer, Chief Financial Officer, principal accounting officer, controller and persons performing similar functions. Our Code of Ethics is included as an exhibit to this annual report on Form 20-F.

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ITEM 16C.PRINCIPAL ACCOUNTANT FEES AND SERVICES

Fees Paid to the Company’s Principal Accountant

The following table sets forth the fees for the 2021 and 2020 periods, respectively:


	For the Year Ended
	December 31,	January 03,
	2021	2021

	(in thousands of MX$)
Audit fees	6,945	8,975
Audit related fees	2,258	3,811
Other fees	2,064	1,642
Total	11,267	14,428

Audit Fees

Audit fees were paid for professional services rendered by the auditors for the audit of the Consolidated and Combined Financial Statements of the Company and the statutory financial statements of the Company and its subsidiary.

Audit-Related Fees

Audit-related fees are typically services that are reasonably related to the performance of the audit or review of the Consolidated and Combined Financial Statements and are not reported under the audit fee item above. This item includes fees for attestation services on financial information of the Company included in the Company’s registration statements on Form F-1 and Form F-4 as well as its listing process in the Bolsa Institucional de Valores (“BIVA”, Mexican Stock Exchange) in 2020 and for the 2021 the listing process in Bolsa Mexicana de Valores (“BMV”).

Other Fees

Other fees were paid for transfer pricing services and social security compliance.

Audit Committee’s Pre-approval Policies and Procedures

The Company’s audit committee is responsible for, among other things, the oversight of the Company’s independent auditors. The audit committee has adopted a policy of pre-approval of audit and permissible non-audit services provided by its independent auditors in its charter.

Under the policy, the audit committee makes its recommendations through the Board of Directors to the shareholders’ meeting concerning the continuing appointment or termination of the Company’s independent auditors. On a yearly basis, the audit committee reviews together with management and the independent auditor, the audit plan, audit related services and other non-audit services and approves the related fees. Any changes to the approved fees must be reviewed and approved by the audit committee. In addition, the audit committee delegated to its Chairman the authority to consider and approve, on behalf of the Audit Committee, additional non-audit services that were not recognized at the time of engagement, which must be reported to the other members of the audit committee at its next meeting. No services outside the scope of the audit committee’s approval can be undertaken by the independent auditor.

ITEM 16D.EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

Not applicable.

ITEM 16E.PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

None.

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ITEM 16F.CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT.

On December 23, 2019, we approved the appointment of Galaz, Yamazaki, Ruiz Urquiza, S.C. member of Deloitte Touche Tohmatsu Limited, as our independent registered public accountant.

ITEM 16G.CORPORATE GOVERNANCE

As a Mexican company listed on the Nasdaq, we are subject to the Nasdaq corporate governance listing standards. However, Nasdaq rules permit a foreign private issuer like us to follow the corporate governance practices of its home country. Certain corporate governance practices in Mexico, which is our home country, may differ significantly from the Nasdaq corporate governance listing standards. Currently, we rely on home country practice. As a result, our shareholders could be subject to less protection than they would otherwise enjoy under the Nasdaq corporate governance listing standards applicable to U.S. domestic issuers. See “Risk Factors-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.”

ITEM 16H.MINE SAFETY DISCLOSURE

Not applicable.

ITEM 16I.DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

Not applicable.

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PART III

ITEM 17.FINANCIAL STATEMENTS

The Company has responded to Item 18 in lieu of responding to this item.

ITEM 18.FINANCIAL STATEMENTS

(a)	Financial Statements

Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.)

Audited Consolidated and Combined Financial Statements

Report of Independent Registered Public Accounting Firm PCAOB ID 1153		F-2

Consolidated and Combined Statements of Financial Position as of December 31, 2021, and January 3, 2021		F-5

Consolidated and Combined Statements of Profit or Loss and Other Comprehensive Income for the year ended December 31, 2021, the 53-week period ended January 3, 2021, and the year ended December 31, 2019		F-7

Consolidated and Combined Statements of Changes in Stockholders’ Equity for the year ended December 31, 2021, the 53-week period ended January 3, 2021, and the year ended December 31, 2019		F-8

Consolidated and Combined Statements of Cash Flows for the year ended December 31, 2021, the 53-week period ended January 3, 2021, and the year ended December 31, 2019		F-9

Notes to the Audited Consolidated and Combined Financial Statements		F-11

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ITEM 19.EXHIBITS

(b)List of Exhibits

The following exhibits are filed or incorporated by reference as part of this annual report:


Exhibit Number		Description
1.1		Articles of Association of Betterware de México, S.A.P.I. de C.V.
2.1		Description of Securities
8.1		List of Subsidiaries.
11.1		English Translation of the Company’s Code of Ethics.
12.1		Certification of Andres Campos, Chief Executive Officer of Betterware de México, S.A.P.I. de C.V., pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
12.2		Certification of Diana Jones, Chief Financial Officer of Betterware de México, S.A.P.I. de C.V., pursuant to Section 302 of the Sarbanes Oxley Act of 2002.
13.1		Certification of Andres Campos, Chief Executive Officer of Betterware de México, S.A.P.I. de C.V., pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
13.2		Certification of Diana Jones, Chief Financial Officer of Betterware de México, S.A.P.I. de C.V., pursuant to Section 906 of the Sarbanes Oxley Act of 2002.
101.INS		INLINE XBRL Instance Document
101.SCH		INLINE XBRL Taxonomy Extension Schema
101.CAL		INLINE XBRL Taxonomy Calculation Linkbase
101.DEF		INLINE XBRL Definition Linkbase Document
101.LAB		INLINE XBRL Taxonomy Label Linkbase
101.PRE		INLINE XBRL Definition Linkbase Document
104		Cover Page Interactive Data File (embedded within the Inline XBRL document)

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SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.


	Betterware de México, S.A.P.I. de C.V.

	By:	/s/ Luis Campos
	Name:	Luis Campos
	Title:	Board Chairman
Dated: April 28, 2022

Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V., subsidiary of Campalier, S.A. de C.V.) and subsidiaries

Consolidated and combined financial statements as of December 31, 2021, January 3, 2021, and December 31, 2019 and for the year ended December 31, 2021, the 53 weeks ended January 3, 2021 and the year ended December 31, 2019, and Report of Independent Registered Accounting Firm dated April 28, 2022

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Betterware de México, S.A.P.I. de C.V. and subsidiaries

Consolidated and combined financial statements as of December 31, 2021 and January 3, 2021and December 31, 2019 and for the year ended December 31, 2021, the 53 weeks ended January 3, 2021 and the year ended December 31, 2019 and Report of Independent Registered Accounting Firm

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	Page

Report of Independent Registered Accounting Firm	F-2

Consolidated and combined statements of financial position	F-5

Consolidated and combined statements of profit or loss and other comprehensive income	F-7

Consolidated and combined statements of changes in stockholders’ equity	F-8

Consolidated and combined statements of cash flows	F-9

Notes to the consolidated and combined financial statements	F-11

F-1

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Report of Independent Registered Accounting Firm

To the Shareholders and Board of Directors of Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

(In Thousands of Mexican pesos)

Opinion on the Consolidated and Combined Financial Statements

We have audited the accompanying consolidated and combined statements of financial position of Betterware de México, S.A.P.I. de C.V. and subsidiaries (collectively, the “Group”) as of December 31, 2021, January 3, 2021 and December 31, 2019, the related consolidated and combined statements of profit and loss and other comprehensive income, changes in stockholders’ equity, and of cash flows, for the year ended December 31, 2021, the 53-week period ended January 3, 2021 and the year ended December 31, 2019, and the related notes (collectively referred to as the "consolidated and combined financial statements"). In our opinion, the consolidated and combined financial statements present fairly, in all material respects, the financial position of the Group as of December 31, 2021, January 3, 2021 and December 31, 2019 and the results of its operations and its cash flows for the year ended December 31, 2021, the period ended January 3, 2021 and the year ended December 31, 2019, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Group’s internal control over financial reporting as of December 31, 2021 based on criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated April 28, 2022 expressed an adverse opinion on the Group’s internal control over financial reporting because of material weaknesses.

Basis for Opinion

These consolidated and combined financial statements are the responsibility of the Group's management. Our responsibility is to express an opinion on the Group's consolidated and combined financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Group in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Mexico according to the “Codigo de Etica Profesional del Instituto Mexicano de Contadores Publicos” (“IMCP Code”), and the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Until 2020, the Group was not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Group´s internal control over financial reporting. Accordingly, we express no such opinion as of January 3, 2021 and December 31, 2019.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated and combined financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated and combined financial statements. We believe that our audit provides a reasonable basis for our opinion.

F-2

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Basis of preparation

As discussed in Note 2.a, until 2020, Betterware’s financial year was a 52- or 53-weeks period ending on the Sunday nearest to December 31, however, due to the fact that in 2021 Betterware placed debt on the Mexican Stock Exchange, the financial period must be presented in compliance with the Mexican General Corporate Law, which must coincide with the calendar year, therefore the financial information of 2021 is presented as of December 31, 2021 and for the year then ended. The comparative financial year of 2020 and of 2019 consisted of 53 and 52 weeks ended on January 3, 2021 and December 31, 2019, respectively, which were not adjusted to calendar year because the effects of the change are not significant.

In addition, the financial statements for the financial year of 2019 have been presented on a combined basis because both entities were under common control as of such dates.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Impairment of Goodwill and Brand Intangible Asset

Refer to Notes 2 o), 2 p), 4, 11 and 12 to the consolidated and combined financial statements

Critical Audit Matter Description

The Group’s evaluation of goodwill and brand intangible asset for impairment involves the comparison of their fair value to its carrying value. The Group used the discounted cash flow model to estimate fair value, which requires management to make significant estimates and assumptions related to discount rates, revenue long-term growth rate and operating profit margins. Changes in these assumptions could have a significant impact on either the fair value of the cash-generating unit (CGU). The goodwill balance and brand intangible asset was $348,441 and $253,000, respectively as of December 31, 2021. Goodwill and brand intangible asset are allocated to CGU from which the fair value exceeded its carrying value as of the measurement date and, therefore, no impairment was recognized. The Group’s discount rates, revenue long-term growth rate and operating profit margins are sensitive to changes in demand.

We identified the impairment of goodwill and brand intangible asset as a critical audit matter because of the significant estimates and assumptions management makes to estimate the fair value of the CGU and the sensitivity of the Group’s operations to changes in demand. This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s estimates and assumptions related to discount rates, revenue long-term growth rate and operating profit margins.

F-3

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the discount rates, revenue long-term growth rate and operating profit margins used by management to estimate the fair value of the CGU included the following, among others:

•

With the assistance of our fair value specialists, we evaluated the reasonableness of the: (1) valuation methodology and (2) discount rate, through developing a range of independent estimates and comparing those to the discount rate used by management.

•

We evaluated management’s ability to accurately forecast future revenue long-term growth rate and operating profit margin by comparing actual results to management’s historical forecasts.

Account receivable (Expected Credit Loss) — Assessment of allowance for credit losses under the expected credit loss (ECL) methodology

Refer to Notes 2 g), 4 and 6 to the consolidated and combined financial statements

Critical Audit Matter Description

At December 31, 2021, accounts receivable and the allowance for credit losses were $868,218 and $90,164, respectively. The expected credit loss reserve is estimated by using the simplified approach by using a provision matrix, which is determined based on historical credit loss experience and analysis of certain factors that are specific to the debtors, adjusted as appropriate to reflect current and forecasted economic conditions in which the debtors operate.

Significant growth in recent years has caused volatility in collections. Accordingly, management has applied significant judgment in estimating expected credit losses, including the assessment of historical credit loss experience given the impact of the COVID-19 pandemic.

Given the magnitude of the qualitative factors and significant amount of judgment required by management in developing the recovery of cash flows as part of the allowance, performing audit procedures to evaluate the reasonableness of the estimated the expected credit losses, including procedures to evaluate the recovery of cash flows, required a high degree of auditor judgment and an increased extent of effort, including the need to involve our credit risk specialists.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to testing the allowance for credit losses included the following, among others:

•

We assessed management's ability to accurately forecast expected credit loss by comparing actual results to management's historical forecasts.

•

With the assistance of our credit risk specialists, we evaluated the reasonableness of: (1) valuation methodology (2) management's assumptions, including those used to determine the recoverability of cash flows, and (3) the expected credit losses calculation through a different model than the one used by management and compared such estimates with those determined by management.

•

We evaluated the sources of information, including historical data used in management’s models.

Galaz, Yamazaki, Ruiz Urquiza, S.C.

Member of Deloitte Touche Tohmatsu Limited

/s/JOSE GERARDO CASTILLO MORALES

C.P.C. José Gerardo Castillo Morales

Guadalajara, Jalisco, Mexico

April 28, 2022

We have served as the Company's auditor since 2019.

F-4

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Consolidated and combined statements of financial position

As of December 31, 2021, January 03, 2021, and December 31, 2019

(In Thousands of Mexican pesos)


		As of		As of		As of
		December 31,		January 03,		December 31,
Assets	Note	2021		2021		2019

Current assets:
Cash and cash equivalents	5	$	1,175,198	$	649,820	$	213,697
Trade accounts receivable, net	6,20		778,054		757,806		247,087
Accounts receivable from related parties	24		24		—		610
Inventories	7		1,339,378		1,274,026		345,554
Prepaid expenses	8		69,224		94,501		53,184
Derivative financial instruments	18		28,193		—		—
Other assets	9		81,988		130,417		20,574
Total current assets			3,472,059		2,906,570		880,706

Non-current assets:
Property, plant and equipment, net	10		1,069,492		791,127		207,350
Right of use assets, net	13		17,384		24,882		23,811
Deferred income tax	16		—		17,605		5,082
Investment in subsidiaries			497		—		-
Intangible assets, net	12		369,760		319,361		310,965
Goodwill	11		371,075		348,441		348,441
Other assets	9		4,274		5,774		13,371
Total non-current assets			1,832,482		1,507,190		909,020

Total assets		$	5,304,541	$	4,413,760	$	1,789,726

(Continued)

F-5

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Consolidated and combined statements of financial position

As of December 31, 2021, January 03, 2021, and December 31, 2019

(In Thousands of Mexican pesos)


		As of		As of		As of
		December 31,		January 03,		December 31,
Liabilities and stockholders’ equity	Note	2021		2021		2019

Current liabilities:
Short term debt and borrowings	15	$	28,124	$	105,910	$	148,070
Accounts payable to suppliers	14		1,984,932		2,078,628		529,348
Accrued expenses			142,169		109,767		54,456
Provisions	17		115,192		151,008		46,689
Income tax payable	16		88,679		85,221		34,709
Value added tax payable			—		26,703		30,299
Employee profit sharing payable			55,305		7,354		5,006
Lease liability	13		6,102		7,691		14,226
Derivative financial instruments	18		—		295,115		15,555

Total current liabilities		$	2,420,503	$	2,867,397	$	878,358

Non-current liabilities:
Statutory employee benefits	19	$	2,093	$	1,678	$	1,630
Derivative financial instruments	18		—		25,179		16,754
Deferred income tax	16		80,907		56,959		78,501
Lease liability	13		11,778		16,687		10,358
Long term debt and borrowings	15		1,482,261		523,967		529,643

Total non-current liabilities			1,577,039		624,470		636,886

Total liabilities			3,997,542		3,491,867		1,515,244

Stockholder’s equity	21
Common stock			294,999		281,722		55,985
Share premium account			6,659		909,428		-
Retained earnings (deficit)			990,103		(268,539)		218,376
Other comprehensive income			583		(718)		121

Equity attributable to owners of the company			1,292,344		921,893		274,482

Non-controlling interest			14,655		—		—

Total stockholders’ equity			1,306,999		921,893		274,482

Total liabilities and stockholders’ equity		$	5,304,541	$	4,413,760	$	1,789,726

(Concluded)

See accompanying notes to consolidated and combined financial statements.

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Consolidated and combined statements of profit or loss and other comprehensive income

For the year ended December 31, 2021 (“2021”), the 53-week period ended January 03, 2021 (“2020”), and the year ended December 31, 2019 (“2019”)

(Thousands of Mexican pesos, except per share amounts)


	Note	2021		2020		2019

Net revenue	25	$	10,039,668	$	7,260,408	$	3,084,662

Cost of sales	7		4,399,164		3,290,994		1,280,829

Gross profit			5,640,504		3,969,414		1,803,833

Administrative expenses	25		1,247,436		664,677		319,133
Selling expenses	25		1,264,581		853,355		551,300
Distribution expenses	25		463,779		331,023		121,155
			2,975,796		1,849,055		991,588

Operating income			2,664,708		2,120,359		812,245

Financing income (cost):
Interest expense			(75,818)		(80,253)		(85,429)
Interest income			25,872		10,930		7,028
Unrealized gain (loss) in valuation of derivative financial instruments	18		330,315		(287,985)		(15,680)
Changes in fair value of warrants			—		(851,520)		—
Foreign exchange loss, net			(319,739)		(30,402)		(13,330)
			(39,370)		(1,239,230)		(107,411)

Income before income taxes			2,625,338		881,129		704,834

Income taxes:
Current	16		782,901		576,834		229,900
Deferred	16		41,553		(34,066)		2,792
			824,454		542,768		232,692

Net income for the year			1,800,884		338,361		472,142

Net income for the year attributable to:
Owners of the Company		$	1,804,590	$	338,361	$	472,142
Non-controlling interest			(3,706)		—		—
		$	1,800,884	$	338,361	$	472,142

Items that will not be reclassified subsequently to profit or loss:
Remeasurement of defined benefit obligation, net of taxes	19		83		(839)		76

Total comprehensive income for the year		$	1,800,967	$	337,522	$	472,218

Comprehensive income for the year attributable to:
Owners of the Company		$	1,804,673	$	337,522	$	472,218
Non-controlling interest			(3,706)		—		—
		$	1,800,967	$	337,522	$	472,218

Basic earnings per common share (pesos)	23	$	48.81	$	9.93	$	15.63

Diluted earnings per common share (pesos)	23	$	48.33	$	9.84	$	15.63

See accompanying notes to consolidated and combined financial statements.

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Consolidated and combined statements of changes in stockholders’ equity

For the year ended December 31, 2021 (“2021”), the 53-week period ended January 03, 2021 (“2020”), and the year ended December 31, 2019 (“2019”)

(Thousands of Mexican pesos)


					Share		Retained		Other		Non-		Total
			Common		premium		earnings		comprehensive		Controlling		stockholders’
	Note		stock		account		(deficit)		income		interest		equity
Balance as of January 01, 2019		$	55,985	$	—	$	24,234	$	45	$	—	$	80,264
Dividends paid	21		—		—		(278,000)		—		—		(278,000)
Total comprehensive income for the year			—		—		472,142		76		—		472,218
Balance as of December 31, 2019			55,985		—		218,376		121		—		274,482
Capital increase	21		225,737		909,428		—		—		—		1,135,165
Effects of merger with related party	21		—		—		4,724		—		—		4,724
Dividends paid	21		—		—		(830,000)		—		—		(830,000)
Total comprehensive income for the year			—		—		338,361		(839)		—		337,522
Balance as of January 03, 2021			281,722		909,428		(268,539)		(718)		—		921,893
Accounting effects for changing reporting period			—		—		(22,466)		—		—		(22,466)
Balance as of December 31, 2020		$	281,722	$	909,428	$	(291,005)	$	(718)	$	—	$	899,427
Reclassification of share premium to retained earnings	21		—		(876,518)		876,518		—		—		—
Others			13,277		(26,251)		—		1,218		—		(11,756)
Dividends paid	21		—		—		(1,400,000)		—		—		(1,400,000)
Effect of acquisition of subsidiaries			—		—		—		—		18,361		18,361
Total comprehensive income for the year			—		—		1,804,590		83		(3,706)		1,800,967
Balance as of December 31, 2021		$	294,999	$	6,659	$	990,103	$	583	$	14,655	$	1,306,999

See accompanying notes to consolidated and combined financial statements.

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Consolidated and combined statements of cash flows

For the year ended December 31, 2021 (“2021”), the 53-week period ended January 03, 2021 (“2020”), and the year ended December 31, 2019 (“2019”)

(Thousands of Mexican pesos)


	2021		2020		2019

Operating activities:
Net income for the year	$	1,800,884	$	338,361	$	472,142
Adjustments for:
Income tax expense		824,454		542,768		232,692
Depreciation and amortization		82,122		43,688		38,394
Accounting effects for changing reporting period		(22,466)		—		—
Interest expense		75,818		80,253		85,429
Interest income		(25,872)		(10,930)		(7,028)
(Gain) loss on disposal of non-current assets		(478)		9,216		—
Share-based payment expense		—		32,910		—
Others		(12,974)		—		—
Changes in fair value of warrants		—		851,520		—
Unrealized gain (loss) in valuation of derivative financial instruments		(330,315)		287,985		15,680
		2,391,173		2,175,771		837,309
(Increase) decrease in:
Trade accounts receivable		(19,720)		(510,719)		(48,311)
Trade accounts receivable from related parties		(24)		610		(610)
Inventory		(64,312)		(928,472)		(43,348)
Prepaid expenses and other assets		31,184		(95,532)		(40,263)
Increase (decrease) in:
Accounts payable to suppliers and accrued expenses		(81,882)		1,604,591		101,857
Provisions		(35,843)		104,319		7,703
Value-added tax payable		(26,703)		(3,596)		12,675
Statutory employee profit sharing		47,951		2,348		2,290
Employee benefits		1,722		(743)		351
Income taxes paid		(777,949)		(526,321)		(224,207)
Net cash provided by operating activities		1,465,597		1,822,256		605,446

Investing activities:
Control obtained over subsidiaries		50		—		—
Payments of fixed and intangible assets		(401,736)		(617,686)		(182,625)
Proceeds from disposal of fixed assets		12,521		18,270		—
Interest received		25,872		10,930		7,028
Restricted cash		42,915		(42,915)		—
Net cash used in investing activities		(320,378)		(631,401)		(175,597)

(Continued)

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Consolidated and combined statements of cash flows

For the year ended December 31, 2021 (“2021”), the 53-week period ended January 03, 2021 (“2020”), and the year ended December 31, 2019 (“2019”)

(Thousands of Mexican pesos)


	2021		2020		2019

Financing activities:
Proceeds from borrowings	$	1,520,000	$	1,712,207	$	104,500
Repayment of borrowings		(646,716)		(1,757,112)		(83,041)
Repayment of derivative financial instruments		(18,172)		—		—
Bond emission costs		(18,931)		—		—
Interest paid on borrowings		(49,123)		(121,297)		(82,654)
Restricted cash		—		—		22,940
Lease payments		(6,899)		(8,825)		(12,325)
Cash received for issuance of shares		—		250,295		—
Dividends paid		(1,400,000)		(830,000)		(342,955)
Net cash used in financing activities		(619,841)		(754,732)		(393,535)

Increase in cash and cash equivalents		525,378		436,123		36,314
Cash and cash equivalents at the beginning of year		649,820		213,697		177,383
Cash and cash equivalents at the end of year	$	1,175,198	$	649,820	$	213,697

See accompanying notes to consolidated and combined financial statements.

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Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) and subsidiaries

Notes to consolidated and combined financial statements

As of December 31, 2021, January 03, 2021, and December 31, 2019, and for the year ended December 31, 2021, the 53 weeks ended January 03, 2021, and the year ended December 31, 2019

(Thousands of Mexican pesos, except the number of shares and earnings per share expressed in Mexican pesos)

1.Nature of business and significant events

Betterware de México, S.A.P.I. de C.V. (formerly Betterware de México, S.A.B. de C.V.) (“Betterware”) is a direct-to-consumer selling company, focused on the home organization sector, whose product portfolio includes home organization products, kitchen utensils and appliances, food containers, and other categories of products (“home organization products”). Betterware purchases these home organization products and sells them in 12 catalogs published throughout the year. Betterware’s controlling shareholder is Campalier, S.A. de C.V. (“Campalier”).

BLSM Latino America Servicios, S.A. de C.V., (“BLSM”), which as of March 10, 2020, became a wholly-owned subsidiary of Betterware, provided administrative, technical, and operational services to Betterware until June 30, 2021 (formerly a related party of Betterware). On July 1^st, 2021, all employees from BLSM were transferred to Betterware.

Betterware and BLSM (hereinafter jointly referred to as the “Group” or the “Company”) are entities incorporated in Mexico that carry out their operations in Mexico. The Group’s address, registered as its office and primary place of business, is Gdl-Ameca-Huaxtla Km-5, El Arenal, Jalisco, México, and Zip Code 45350.

Significant events and transactions –

2021

The Company´s legal form was changed to Sociedad Anónima Promotora de Inversión (S.A.P.I.) de Capital Variable, as approved during an extraordinary shareholders meeting held on August 2, 2021.

On August 30,2021 Betterware successfully concluded the offering of 2-tranche sustainability bond issuance for a total of Ps.1,500,000, with maturities across 4 and 7 years, offered in the Mexican Market (see Note 15).

2020

As a result of the coronavirus (COVID-19) outbreak and its global spread to a large number of countries, the World Health Organization classified the viral outbreak as a pandemic on March 11, 2020. Public health measures were taken in Mexico to limit the spread of this virus, including but not limited to, social isolation and the closure of educational centers (schools and universities), commercial establishments and non-essential businesses.

The Group’s operations were not interrupted as a result of the COVID-19 pandemic, as its product lines include hygiene and cleaning solutions, which qualify as an essential activity in Mexico. The Group’s gross margin was negatively affected by the depreciation of the Mexican peso compared to the US dollar, since 90% of its products sold are in US dollars. To mitigate this risk, the Company enters into forwards contracts to fix the exchange rate for future purchases in US dollars, which allowed it to partially reduce the effects of the exchange rate due to the COVID-19 pandemic.

The Group implemented 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 addition of new markets and product extensions, all supported by a strong infrastructure deeply rooted in business intelligence.

The Company maintained 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 28 days, while the payment conditions to its suppliers are 120 days.

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On March 10, 2020, Betterware’s legal name changed from Betterware de México, S.A. de C.V. to Betterware de México, S.A.P.I. de C.V. On August 5, 2019, Betterware and DD3 Acquisition Corp. (“DD3”, a publicly listed entity in the US and whose shares were trading on the Nasdaq Capital Market (“Nasdaq”)), announced they had entered into a business combination agreement. As part of this transaction, DD3 merged into Betterware through an exchange of shares with their respective shareholders and Betterware survived as the acquiror. BLSM would became a wholly-owned subsidiary of Betterware. The transaction closed on March 13, 2020, and as a result, all Betterware shares that were issued and outstanding immediately prior to the closing date were canceled and new shares were issued. This transaction 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 (see description below), 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, 2,040,000 Betterware shares, that were offered for subscription and payment under its initial public offering on Nasdaq, were subscribed and paid for by different investors. As of the closing date of the transaction, BLSM became in a fully-owned subsidiary of Betterware. The acquisition by Betterware of BLSM was considered a common control transaction and accounted for as a pooling of interests, whereby the historical values of BLSM’s assets and liabilities where the same before and after. As a result of the transaction, Betterware’s original shareholders held 87.7% of the total outstanding shares; DD3 shareholders obtained a 6.4% stake, and investors under the Nasdaq listing, a 5.9% shake. After the closing date, Betterware had 34,451,020 issued and outstanding shares.

On March 10, 2020 and as a result of the aforementioned transaction, the warrants that DD3 had issued were automatically converted into warrants for the purchase of a total of 5,804,125 Betterware shares. Such warrants were exercised in accordance with the terms of the warrant agreement governing those securities, which also considered the option to purchase 250,000 units that automatically became an option to issue 250,000 Betterware shares and warrants to buy 250,000 additional Betterware shares. This purchase option of units resulted in the issuance of 214,020 Betterware shares, which were exercised on a cashless basis. Warrants could be exercised starting on April 12, 2020, and expired on November 9, 2020 (see Note 1.i). The exercise price of the warrants was US$ 11.50 per share, adjusted by dividends paid that exceeded US$ 0.50 per share within a year, resulting in an exercise price of US$ 11.44.

As warrants and securities purchase options (and underlying securities) were exercised in the 53-week period ended January 3, 2021, additional Betterware shares were issued, resulting in a dilution for Betterware shareholders and increasing the number of Betterware shares eligible for resale in the public market.

On July 30, 2020, Betterware modified the long-term share-based incentive plan with certain officers and directors (“Incentive Plan”) granted on August 15, 2019. The purpose of the Incentive Plan was and remains being to provide eligible officers and directors with the opportunity to receive share-based incentives to encourage them to contribute significantly to the growth of the Group and to align the economic interests of those individuals with those of the shareholders. The delivery of certain shares to the executives and directors was agreed and approved by the Board of Directors. The Incentive Plan is aligned with the shareholders’ interest in terms of the management capacity to obtain operating results that potentially benefit the share price; if the established results are achieved, it will cause a gradual delivery of shares over a period of 4 to 5 years (see Note 22).

On July 14, 2020, Betterware’s legal name changed from Betterware de México, S.A.P.I. de C.V. to Betterware de México, S.A.B. de C.V.

On August 28, 2020, the Company filed a Registration Statement on Form F-1 with the SEC in order to (i) register the warrants that were protected under the Registration Rights Agreement, and (ii) modify the Registration Declaration on Form F-4 that had been filed with the SEC on January 22, 2020. In the terms established in the Registration Declaration, it was effective on September 11, 2020. The registration of Form F-1 triggered the investors rights to exercise their warrants on a cash basis.

On October 8, 2020, the Company announced that, based on the agreements reached at the Ordinary General Shareholders’ meeting held on October 2, 2020, it would carry out the redemption of all outstanding warrants for the

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purchase of shares of the Group. As a result of the redemption, a “cashless” exercise of the warrants was considered for an exercise price of US$ 11.44 per share, expiring on November 9, 2020, with which the warrant holders would receive 0.37 shares of the Company for each warrant that was redeemed.

On December 14, 2020, Betterware and Promotora Forteza, S.A. de C.V. (“Forteza”, and one of Betterware’s shareholder), entered into a merger agreement pursuant to which Forteza agreed to merge with and into Betterware, surviving Betterware as the acquiror. On December 16, 2020, the merger was completed. Consequently, considering that Forteza was a Betterware shareholder, the number of Betterware shares were delivered to Forteza’s shareholders in proportion to their shareholding in Betterware, without implying an increase in Betterware’s share capital or in the total number of outstanding shares of the Company. The net effects of the merger was an increase in equity of Ps. 4,724.

2019

During August 2019, the Group started building a distribution center which were completed in the first quarter of 2021. At the end of the years 2021, 2020 and 2019, payments related to this construction amounted to Ps. 397,000, Ps. 508,958 and Ps. 165,000, respectively. The total investment amounted Ps. 1,070,958.

2.Significant accounting policies

a.Basis of preparation

The consolidated and combined financial statements of 2021 include the financial statements of Betterware, BLSM, GurúComm, Innova Catálogos, Programa Lazos and Betterware de Guatemala (the “consolidated and combined financial statements”).

Prior to the merger transaction disclosed in Note 1.d, Betterware and BLSM were subsidiaries under the common control of Campalier, operating under common management; therefore, combined financial statements of these entities were prepared as of December 31, 2019. On March 10, 2020, BLSM became a subsidiary of Betterware resulting in the preparation of its consolidated financial statements as of such date. As a result, the combined statement of changes in stockholders’ equity for the year ended on December 31, 2019, 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 as of and for the year ended December 31, 2021 and the 53-week period ended January 3, 2021. On March 12, 2021, GurúComm became a subsidiary of Betterware and later on July 22, 2021, Innova Catálogos, S.A. de C.V., became a subsidiary of Betterware.

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

The financial information as of December 31, 2021, and for the year then ended is also herein referred to the 2021 period (the “2021 period” or the “period of 2021”). The financial information as of January 3, 2021, and for the 53-week period ended on such date is also herein referred to the 2020 period (the “2020 period” or the “period of 2020”). The financial information for the year ended December 31, 2019 (equivalent to a 52-week period) is also herein referred to the 2019 period (the “2019 period” or the “period of 2019”).

Transactions among Betterware and its subsidiaries: BLSM GurúComm, Innova Catálogos, Programa Lazos and Betterware de Guatemala, and the balances and unrealized gains or losses arising from intra-group transactions have been eliminated in the preparation of the consolidated and combined financial statements.

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b.Basis of accounting

The consolidated and combined financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“IASB”).

c.Basis of measurement

The consolidated and combined financial statements have been prepared on the historical cost basis except for certain financial instruments measured at fair value.

Functional and presentation currency

These consolidated and combined financial statements are presented in Mexican pesos (“Ps or $”), which is the Group’s functional currency. All financial information presented in Mexican pesos has been rounded to the nearest thousand (except where otherwise specified). When referring to U.S. dollars (“US$”), means thousands of United States dollars.

Consolidated and combined statement of profit or loss and other comprehensive income

The Group opted to present a single consolidated and combined statement of profit or loss and comprehensive income, combining and consolidating the presentation of profit and loss, including an operating profit line item, and comprehensive income in the same statement. Due to the commercial activities of the Group, costs and expenses presented in the consolidated and combined statements of profit or loss and other comprehensive income were classified according to their function. Accordingly, cost of sales and operating expenses were presented separately.

d.Basis of consolidation

The consolidated financial statements of the Group, incorporate the financial statements of the Betterware, and the entities controlled by Betterware: BLSM, GurúComm, S.A.P.I. de C.V., Betterware de Guatemala, S.A., Programa Lazos, S.A. de C.V., and Innova Catálogos, S.A. de C.V. Control is achived when the Company:

●

Has the power over the investee

●

Is exposed, or has rights, to variable returns from its involvement with the investee

●

Has the ability to use its power to affect its returns

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances an assessing whether or not the Company´s voting rights in an investee are sufficient to give power, including:

●

The size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders.

●

Potential voting rights held by the Company, other vote holders or other parties.

●

Rights arising from other contractual arrangements; and

●

Any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a subsidiary begins when the Company obtains control over the subsidiary and ceases when the Company loses control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the

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year are included in profit or loss from the date the Company gains control until the date when the Company ceases to control the subsidiary.

Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used into line with the Group’s accounting policies.

All intragroup assets and liabilities, equity, income, expenses and cash flows relating to transactions between the members of the Group are eliminated on consolidation.

Non-controlling interests in subsidiaries are identified separately from the Group’s equity therein. Those interests of non-controlling shareholders that are present ownership interests entitling their holders to a proportionate share of net assets upon liquidation may initially be measured at fair value or at the non-controlling interests’ proportionate share of the fair value of the acquiree’s identifiable net assets. The choice of measurement is made on an acquisition-by-acquisition basis. Other non-controlling interests are initially measured at fair value. Subsequent to acquisition, the carrying amount of non-controlling interests is the amount of those interests at initial recognition plus the non-controlling interests’ share of subsequent changes in equity.

Profit or loss and each component of other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. Total comprehensive income of the subsidiaries is attributed to the owners of the Company and to the non-controlling interests even if this results in the non-controlling interests having a deficit balance.

Changes in the Group’s interests in subsidiaries that do not result in a loss of control are accounted for as equity transactions. The carrying amount of the Group’s interests and the non-controlling interests are adjusted to reflect the changes in their relative interests in the subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration paid or received is recognized directly in equity and attributed to the owners of the Company.

When the Group loses control of a subsidiary, the gain or loss on disposal recognized in profit or loss is calculated as the difference between (i) the aggregate of the fair value of the consideration received and the fair value of any retained interest and (ii) the previous carrying amount of the assets (including goodwill), less liabilities of the subsidiary and any non-controlling interests. All amounts previously recognized in other comprehensive income in relation to that subsidiary are accounted for as if the Group had directly disposed of the related assets or liabilities of the subsidiary (i.e. reclassified to profit or loss or transferred to another category of equity as required/permitted by applicable IFRS Standards). The fair value of any investment retained in the former subsidiary at the date when control is lost is regarded as the fair value on initial recognition for subsequent accounting under IFRS 9 Financial Instruments when applicable, or the cost on initial recognition of an investment in an associate or a joint venture.

Betterware, has control over its subsidiaries due to the shares and voting rights acquired, which generate rights over the variable returns from the subsidiaries, and has the ability to influence those returns through his power over them. As of December 31, 2021, the percentage of participation that it maintains over its subsidiaries are the following:


		Participation´s %
BLSM Latino America Servicios, S.A. de C.V.		99%
GurúComm, S.A.P.I. de C.V.		60%
Betterware de Guatemala, S.A.		70%
Programa Lazos, S.A. de C.V.		70%
Innova Catálogos, S.A. de C.V.		70%

e. Cash and cash equivalents and restricted cash

Cash and cash equivalents consist mainly of bank deposits and short-term investments in securities, highly liquid and easily convertible into cash in a period no longer than three months. Cash is stated at nominal value and cash

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equivalents are valued at fair value. Any cash or cash equivalent that cannot be disposed of in less than three months is classified as restricted cash.

In cases where the definition of cash and cash equivalents is not met due to restrictions, the amounts are presented in a separate line in the consolidated and combined statements of financial position and is excluded from cash and cash equivalents in the consolidated and combined statements and cash flows.

f.Financial instruments

Financial assets and financial liabilities are recognized in the Group’s consolidated and combined statement of financial position when the Group becomes a party to the contractual provisions of the instrument.

Financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

g.Financial assets

All recognized financial assets are measured subsequently in their entirety at either amortized cost or fair value, depending on the classification of the financial assets.

Classification of financial assets

Debt instruments that meet the following conditions are measured subsequently at amortized cost:

●

the financial asset is held within a business model whose objective is to hold financial assets in order to collect contractual cash flows; and

●

the contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest (“SPPI”) on the principal amount outstanding.

Debt instruments that meet the following conditions are measured subsequently at fair value through other comprehensive income (FVTOCI):

●

the financial asset is held within a business model whose objective is achieved by both collecting contractual cash flows and selling the financial assets; and

●

the contractual terms of the financial asset give rise on specified dates to cash flows that are SPPI on the principal amount outstanding.

By default, all other financial assets are measured subsequently at fair value through profit or loss (FVTPL).

Despite the foregoing, the Group may make the following irrevocable election/designation at initial recognition of a financial asset:

●

the Group may irrevocably elect to present subsequent changes in fair value of an equity investment in other comprehensive income if certain criteria are met; and

●

the Group may irrevocably designate a debt investment that meets the amortized cost or FVTOCI criteria as measured at FVTPL if doing so eliminates or significantly reduces an accounting mismatch.

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Amortized cost and effective interest method

The effective interest method is a method of calculating the amortized cost of a debt instrument and of allocating interest income over the relevant period.

The amortized cost of a financial asset is the amount at which the financial asset is measured at initial recognition minus the principal repayments, plus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount, adjusted for any loss allowance. The gross carrying amount of a financial asset is the amortized cost of a financial asset before adjusting for any loss allowance.

Foreign exchange gains and losses

The carrying amount of financial assets that are denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of each reporting period. Specifically, for financial assets measured at amortized cost that are not part of a designated hedging relationship, exchange differences are recognized in profit or loss.

Impairment of financial assets

The Group always recognizes lifetime expected credit losses (“ECL”) for trade receivables. The expected credit losses on these financial assets are estimated using the simplified approach by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions.

For financial assets that are not subject to the simplified approach, the Group recognizes lifetime ECL when there has been a significant increase in credit risk since initial recognition. However, if the credit risk on the financial instrument has not increased significantly since initial recognition, the Group measures the loss allowance for that financial instrument at an amount equal to 12-month ECL.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument. In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are possible within 12 months after the reporting date.

Write-off policy

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic prospect of recovery, e.g., when the debtor has been placed under liquidation or has entered into bankruptcy proceedings, or in the case of trade receivables, when the amounts are over one year past due, whichever occurs sooner. Financial assets written off may still be subject to enforcement activities under the Group’s recovery procedures, taking into account legal advice where appropriate. Any recoveries made are recognized in profit or loss.

h.Financial liabilities

All financial liabilities are measured subsequently at amortized cost using the effective interest method or at FVTPL.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognized in profit or loss to the extent that they are not part of a designated hedging relationship.

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Financial liabilities and equity

Classification as debt or equity

Debt and equity instruments are classified as either financial liabilities or as equity in accordance with the substance of the contractual arrangements and the definitions of a financial liability and an equity instrument.

Financial liabilities measured subsequently at amortized cost

Financial liabilities that are not (i) contingent consideration of an acquirer in a business condensation combination and consolidation, (ii) held-for-trading, or (iii) designated as at FVTPL, are measured subsequently at amortized cost using the effective interest method.

The effective interest method is a method of calculating the amortized cost of a financial liability and of allocating interest expense over the relevant period. The effective interest rate is the rate that exactly discounts estimated future cash payments (including all fees and points paid or received that form an integral part of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the financial liability, or (where appropriate) a shorter period, to the amortized cost of a financial liability.

Foreign exchange gains and losses

For financial liabilities that are denominated in a foreign currency and are measured at amortized cost at the end of each reporting period, the foreign exchange gains and losses are determined based on the amortized cost of the instruments. These foreign exchange gains and losses are recognized in the ‘Foreign exchange (loss) gain, net’ line item in the consolidated and combined Statements of Profit or Loss and Other Comprehensive Income for financial liabilities that are not part of a designated hedging relationship.

The fair value of financial liabilities denominated in a foreign currency is determined in that foreign currency and translated at the spot rate at the end of the reporting period. For financial liabilities that are measured as at FVTPL, the foreign exchange component forms part of the fair value gains or losses and is recognized in profit or loss for financial liabilities that are not part of a designated hedging relationship.

Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, canceled or have expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any fees paid net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present value of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between (1) the carrying amount of the liability before the modification; and (2) the present value of the cash flows after modification should be recognized in profit or loss as the modification gain or loss within other gains and losses.

i.Derivative financial instruments

The Group enters into a variety of derivative financial instruments to manage its exposure to interest rate and foreign exchange rate risks, including foreign exchange forward contracts and interest rate swaps. Further details of derivative financial instruments are disclosed in Note 18.

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Derivatives are recognized initially at fair value at the date a derivative contract is entered into and are subsequently remeasured to their fair value at each reporting date. The resulting gain or loss is recognized in profit or loss immediately unless the derivative is designated and effective as a hedging instrument, in which event the timing of the recognition in profit or loss depends on the nature of the hedge relationship.

A derivative with a positive fair value is recognized as a financial asset whereas a derivative with a negative fair value is recognized as a financial liability. Derivatives are not offset in the consolidated and combined financial statements unless the Group has both legal right and intention to offset. A derivative is presented as a non-current asset or a non-current liability if the remaining maturity of the instrument is more than 12 months and it is not expected to be realized or settled within 12 months. Other derivatives are presented as current assets or current liabilities.

Warrants

The warrants meet the definition of a derivative financial instrument as they represent a written put option that gives the holders of the warrants the right to exchange them for the Group’s shares at a fixed price. Although the warrants will be exchanged for the Group’s shares based on the terms of the warrant agreement, the warrants were classified as a derivative financial liability measured at FVTPL, and not as an equity instrument, given that the functional currency of the Company (MXN) differs from the strike-price of the warrants, which is fixed in USD. Changes in the fair value of the financial liability are presented in the consolidated and combined statements of profit or loss under the heading “Loss in valuation of warrants”.

For purposes of the Company’s adjusted EBITDA, the changes in the fair value of the liability are excluded as they represent non-cash charges.

The exchange of warrants for the Group’s shares give rise to the settlement of the obligation associated with the liability with a corresponding increase in equity. The redemption of warrants will result in a net impact in equity resulting from the increase in their fair value is recorded in profit or loss (reducing retained earnings), offset by the equivalent increase in equity as a result of the issuance of shares.

j.Inventories and cost of sales

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on weighted-average. The net realizable value represents the estimated selling price less all estimated costs of completion and costs to be incurred in marketing, selling and distribution.

k.Prepaid expenses

Prepaid expenses are mainly comprised of advanced payments for printed catalogs, as well as, advanced payments for the purchase of inventories that are received after the date of the consolidated and combined statement of financial position and during the normal course of business, and they are presented in current assets in accordance with the classification of the destination item.

l.Other assets

Other assets mainly include inventory of rewards, and rent security deposits. They are presented in current or non-current assets in accordance with the classification of the destination item.

Under the reward program, the Group grants reward points to its distributors for the recruitment of associates, while associates receive such points for the referral of new associates within a catalogue. These points are exchangeable for products that Betterware acquires from other suppliers, which are not related to a revenue contract. The points expire based on commercial terms established by the Group that can be modified at management’s discretion. Inventory of rewards mainly consist of certain products and items (in the form of rewards) that Betterware acquires with the purpose to encourage sales among the distributors and associates. Such inventory is acquired once the distributors and associates redeem the reward points that are granted by the Group so that the balance of inventory at each reporting

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period only relates to items already redeemed but not delivered. Inventory of rewards are recognized at cost of acquisition.

m.Property, plant and equipment, net

Items of property, plant and equipment are measured at cost less accumulated depreciation and any accumulated impairment losses.

If significant parts of an item have different useful lives, then they are accounted for as separate items (major components).

Depreciation is recognized using the straight-line method. The estimated useful lives and depreciation method are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis.

The following useful lives, considering separately each of the asset's components, are used in the calculation of depreciation:


Buildings		5 - 50 years
Molds		5 years
Vehicles		4 years
Computers and equipment		3 - 10 years
Leasehold improvements		3 years

Property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognized in profit or loss.

Borrowing costs directly attributable to the acquisition or construction of qualifying assets (designated asset), which are assets that necessarily take a substantial period of time before they are available for their intended use, are added to the cost of those assets, until such time as the assets are available for their intended use. If any specific borrowing remains outstanding after the related asset is ready for its intended use or sale, that borrowing becomes part of the funds that an entity borrows generally when calculating the capitalization rate on general borrowings.

Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred.

Intangible assets

●

Brand

This is an intangible asset with an indefinite useful life and corresponds mainly to the value of the “Betterware” brand, which was transmitted to the Group through a merger with Strevo Holding, S.A. de C.V. (“Strevo”, an unrelated third party) on July 28, 2017. This intangible asset is subject to annual impairment testing, and whenever there is an indication that the asset may be impaired.

Additionally, the Group has incurred expenditures related to registration of trademark rights, which have a finite life. Such expenditures are amortized on a straight-line basis over their estimated useful lives which range from 10 to 30 years.

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●

Customers relationship

This is an intangible asset with a definite useful life of ten years and is being amortized on a straight-line basis. It was transmitted to the Group through a merger with Strevo on July 28, 2017. This intangible asset is subject to impairment testing whenever there is an indication that the asset may be impaired.

●

Derecognition of intangible assets

An intangible asset is derecognized on disposal, or when no future economic benefits are expected from use or disposal. Gains or losses arising from derecognition of an intangible asset, measured as the difference between the net disposal proceeds and the carrying amount of the asset, are recognized in profit or loss when the asset is derecognized.

Impairment of tangible and intangible assets other than goodwill

At the end of each reporting period, the Group reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss (if any). When it is not possible to estimate the recoverable amount of an individual asset, the Group estimates the recoverable amount of the cash-generating unit to which the asset belongs. When a reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-generating units, or otherwise, they are allocated to the smallest group of cash-generating units for which a reasonable and consistent allocation basis can be identified.

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 the asset may be impaired.

Recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset is estimated to be less than its carrying amount, the carrying amount of the asset is reduced to its recoverable amount. Any impairment is recognized immediately in profit or loss.

When an impairment loss subsequently reverses, the carrying amount of the asset is increased to the revised estimate of its recoverable amount, but so that the increased carrying amount does not exceed the carrying amount that would have been determined had no impairment loss been recognized for the asset in prior years. A reversal of an impairment loss is recognized immediately in profit or loss unless the relevant asset is carried at a revalued amount, in which case the reversal of the impairment loss is treated as a revaluation increase.

Goodwill

Goodwill represents the excess of the acquisition cost of a subsidiary over the Company´s interest in the fair values of the net assets acquired determined at the date of acquisition and is not subject to amortization.

Goodwill is not amortized but is tested annually for impairment. Goodwill arising from a business combination is allocated to the cash generating unit (“CGU”) receiving a benefit from the synergies of the combination. An impairment loss is recognized if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognized in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other long-lived assets in the CGU on a pro rata basis. An impairment loss in respect of goodwill is not reversed.

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Leases

The Group as lessee

The Group evaluates whether a contract is or contains a lease agreement at inception of a contract. A lease is defined as an agreement or part of an agreement that conveys the right to control the use of an identified asset for a period of time in exchange for a consideration. The Group recognizes an asset for right-of-use and the corresponding lease liability, for all lease agreements in which it acts as lessee, except in the following cases: short-term leases (defined as leases with a lease term of less than 12 months); leases of low-value assets (defined as leases of assets with an individual market value of less than US$5,000 (five thousand dollars)); and, lease agreements whose payments are variable (without any contractually defined fixed payment). For these agreements, which exempt the recognition of an asset for right-of-use and a lease liability, the Group recognizes the rent payments as an operating expense in a straight-line method over the lease period.

The right-of-use asset comprises all lease payments discounted at present value; the direct costs to obtain a lease; the advance lease payments; and the obligations of dismantling or removal of assets. The Group depreciates the right-of-use asset over the shorter of the lease term or the useful life of the underlying asset; therefore, when the lessee will exercise a purchase option, the lessee shall depreciate the right-of-use asset from the commencement date to the end of the useful life of the underlying asset. Depreciation begins on the lease commencement date.

The lease liability is initially measured at the present value of the future minimum lease payments that have not been paid at that date, using a discount rate that reflects the cost of obtaining funds for an amount similar to the value of the lease payments, for the acquisition of the underlying asset, in the same currency and for a similar period to the corresponding contract (incremental borrowing rate). To determine the lease term, the Group considers the non-cancellable period, including the probability to exercise any right to extend and/or terminate the agreement.

Subsequently, the lease liability is measured increasing the carrying amount to reflect interest on the lease liability (using the effective interest method) and reducing the carrying amount to reflect the lease payments made.

When there is a modification in future lease payments resulting from changes in an index or a rate used to determine those payments, the Group remeasures the lease liability when the adjustment to the lease payments takes effect, without reassessing the discount rate. However, if the modifications are related to the lease term or exercising a purchase option, the Group reassesses the discount rate during the liability’s remeasurement. Any increase or decrease in the value of the lease liability subsequent to this remeasurement is recognized as an adjustment to the right-of-use asset to the same extent.

Finally, the lease liability is derecognized when the Group fulfills all lease payments. When the Group determines that it is probable that it will exercise an early termination of the contract that leads to a cash disbursement, such disbursement is accounted as part of the liability’s remeasurement mentioned in the previous paragraph; however, in cases in which the early termination does not involve a cash disbursement, the Group cancels the lease liability and the corresponding right-of-use asset, recognizing the difference immediately in the consolidated and combined statement of profit or loss and other comprehensive income.

The Group as lessor

During 2021, Betterware leased a space on its offices at the “Betterware Campus” to a related party.

As of January 3, 2021, and December 31, 2019, the Group did not maintain any leases as lessor.

Foreign currency

In preparing the consolidated and combined financial statements, transactions in currencies other than the Mexican Peso, which is the functional currency of the consolidated and combined entities with the exception of Betterware de Guatemala, S.A., which has the Quetzal as its functional currency, are recognized at the exchange rates at the dates of

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the transactions. Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of transaction.

Exchange differences on monetary items are recognized in profit or loss in the period in which they arise.

Employee benefits

Retirement benefits - Defined benefit obligations

The Group’s defined benefit obligations cover seniority premiums which consist of a lump sum payment of 12 day’s wage for each year worked, calculated using the most recent salary, not to exceed twice the legal minimum wage established by law. The related liability and annual cost of such benefits are calculated with the assistance of an independent actuary on the basis of formulas defined in the plans using the projected unit credit method at the end of each annual reporting period.

The Group’s net obligation with respect to the defined-benefit plan are calculated separately for each plan, estimating the amount of future benefit accrued by employees in return for their services in ongoing and past periods; that benefit is discounted to determine its present value, and the costs for the services that have not been recognized and the fair value of the plan assets are deducted. The discount rate is the yield at the reporting date of the government bonds that have maturity dates approximate to the maturities of the Group’s obligations which are denominated in the same currency in which benefits are expected to be paid (Mexican pesos).

Net interest is calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset. Defined benefit costs are categorized as follows:

●

Service cost (including current service cost, past service cost, as well as gains and losses on curtailments and settlements).

●

Net interest expense or income; and

●

Remeasurements.

Remeasurements of the net defined benefit liability, which comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect of the asset ceiling (if applicable), are recognized immediately in the liability against other comprehensive income in the period in which they occur. Remeasurement recognized in other comprehensive income is never reclassified to profit or loss. Past service cost is recognized in profit or loss in the period in which a plan amendment or curtailment occurs, or when the Group recognizes the related restructuring costs or termination benefits, if earlier.

Short-term and other long-term employee benefits and statutory employee profit sharing (“PTU”)

A liability is recognized for benefits accruing to employees in respect of wages and salaries, annual leave and sick leave in the period the related service is rendered at the undiscounted amount of the benefits expected to be paid in exchange for that service. Likewise, a liability is recognized for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Liabilities recognized in respect of short-term employee benefits are measured at the undiscounted amount of the benefits expected to be paid in exchange for the related service.

Liabilities recognized in respect of other long-term employee benefits are measured at the present value of the estimated future cash outflows expected to be made by the Group in respect of services provided by employees up to the reporting date.

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Statutory employee profit sharing (“PTU”)

PTU is recorded in the results of the year in which it is incurred and is presented in operating expenses line item in the consolidated and combined statement of profit or loss and other comprehensive income.

As a result of the 2014 Income Tax Law, PTU is determined based on taxable income, according to Section I of Article 9 of the that Law.

Termination benefits

Termination benefits are recognized as an expense when the Group’s commitment can be evidenced, without real possibility of reversing, with a detailed formal plan either to terminate employment before the normal retirement date, or else, to provide benefits for termination as a result of an offer that is made to encourage voluntary retirement. If the benefits are payable no later than 12 months after the reporting period, then they are discounted at present value.

Income taxes

Income tax expense represents the sum of the tax currently payable and deferred tax.

●

Current tax

Current income tax (“ISR”) is recognized in the results of the year in which is incurred.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in profit or loss because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the end of the reporting period.

A provision is recognized for those matters for which the tax determination is uncertain but it is considered probable that there will be a future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable. The assessment is based on the judgment of tax professionals within the Group supported by previous experience in respect of such activities.

●

Deferred income tax

Deferred tax is recognized on temporary differences between the carrying amounts of assets and liabilities in the consolidated and combined financial statements and the corresponding tax bases used in the computation of taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences. Deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such deferred tax assets and liabilities are not recognized if the temporary difference arises from the initial recognition (other than in a business combination) of assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. In addition, deferred tax liabilities are not recognized if the temporary difference arises from the initial recognition of goodwill.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.Deferred tax liabilities and assets are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of the reporting date.

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The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.

●

Current and deferred tax for the year

Current and deferred tax are recognized in profit or loss, except when they relate to items that are recognized in other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income or directly in equity respectively.

Provisions

Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Provisions mainly include incentives granted to distributors and associates in the form of reward points, discounts and others such as compensations to employees (bonuses) not paid at the reporting date, professional services fees, among others.

The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at the end of the reporting period, taking into account the risks and uncertainties surrounding the obligation. When a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is the present value of those cash flows (when the effect of the time value of money is material).

When some or all of the economic benefits required to settle a provision are expected to be recovered from a third party, a receivable is recognized as an asset if it is virtually certain that reimbursement will be received and the amount of the receivable can be measured reliably.

Warranties

When the Group grants assurance-type warranties in contracts with customers, those rights to the customer are recognized in profit or loss in the cost of sales line item against a provision in the statement of financial position; however, when the Group provides its customers with service-type warranties, those are treated under the revenue recognition model as a performance obligation. The Group has not granted any service-type warranties to its customers.

Reward Points

Through its loyalty program (see Note 2v), the Group also grants reward points to its distributors for the recruitment of associates, while associates receive such points for the referral of new associates within a catalogue. The loyalty program allows the Group’s distributors and associates to accumulate sales points which are exchangeable for products that are purchased from other retailers. Since these types of points also provide a benefit to distributors and associates that they would not receive without purchasing the Group’s products, this loyalty program represents a separate performance obligation, which is recognized as described in Note 2v.

Revenue recognition

Revenues comprise the fair value of the consideration received or to receive for the sale of goods and services in the ordinary course of the transactions, and are presented in the consolidated and combined statement of profit or loss, net of the amount of variable considerations (discounts and product returns). To recognize revenues from contracts with its customers, the Group applies a comprehensive model, which is based on a five-step approach consisting of the following: (1) identify the contract (verbal or written); (2) identify performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to each performance obligation in the contract;

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and (5) recognize revenue when the Group satisfies a performance obligation. The Group recognizes revenue at a point in time, when it transfers control over a product to a customer, which occurs when the customers take delivery of the products and formally accepts them.

The Group invoices its customers at the shipment date with payment terms between 15 and 30 days; customers are allowed to request for a product return only if the product has technical issues or physical damages. However, this right qualifies as an assurance-type warranty (and not a performance obligation) related to the functionality of the products sold, and therefore, it is recognized in accordance with the policy disclosed in Note 2u.

Discounts to distributors and associates are included in the invoice price and are presented in the net sales line item from the moment in which the customer acquires control of the products sold; thus, management does not perform estimates over discounts to be taken by the customers.

Loyalty program

The Group operates a loyalty program through which its distributors and associates accumulate points on sales of Betterware goods that entitle them to exchange the points for products the Group acquires from different suppliers. Since these points provide a benefit to distributors and associates that they would not receive without purchasing the Betterware products, this loyalty program represents a separate performance obligation.

Therefore, the transaction price is allocated between the product and the points on a relative stand-alone selling price basis. The stand-alone selling price per point is estimated based on the fair value of the product to be given when the points are redeemed by the distributors and associates and the likelihood of redemption, as evidenced by the Group’s historical experience. Additionally, a contract liability is recognized for revenue relating to the loyalty points at the time of the initial sales transaction, reducing the revenue recognized upon the initial sale of the goods. Revenue from the loyalty points is recognized when the points are redeemed by the customer and exchanged for the related products. Revenue for points that are not expected to be redeemed is recognized in proportion to the pattern of rights exercised by customers.

Variable considerations

The Group adjusts the transaction price according to the estimations that may result in a variable consideration. These estimates are determined according to the terms and conditions of the contracts with the customer, the history or the customer’s performance.

Contract costs

The Group capitalizes incremental costs to obtain a contract with a customer if it expects to recover those costs. However, the Group does not capitalize incremental costs if the amortization period for the asset is one year or less. For any other costs related to the fulfillment of a contract with a customer, that is not part of the revenue recognition, it is considered as an asset including all the costs incurred, only if such costs are directly related to an existing contract or specific anticipated contract and if those costs generate or enhance resources that will be used to satisfy performance obligations in the future and are expected to be recovered. The Group amortizes the asset recognized for the costs to obtain and/or fulfill a contract on a systematic basis, consistent with the pattern of transfer of the good to which the asset relates.

Share-based payments

The share-based compensation plans to eligible executives and directors settled by providing Betterware shares are measured at their fair value as of the grant date and are subject to compliance with certain business performance metrics of the business and their continuance at the Company for an established period.

The fair value determined at the grant date is recorded as an expense based on the vesting period and the intrinsic value method, which consists of recognizing the expense from the grant date over the period the executives or directors

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render the service and earn the benefits stipulated according to the plan, with a corresponding increase in equity. At the end of each period, the Company reviews its estimates of the number of equity instruments that are expected to be awarded.

Financing income and cost

Financing income (cost) are comprised of interest income, interest expense, the foreign currency gain (loss) on financial assets and financial liabilities; and gain (loss) in valuation of financial derivative instruments. Those are recognized in the consolidated and combined statement of profit or loss and other comprehensive income when accrued.

Contingencies

Significant obligations or losses related to contingencies are recognized when it is probable that their effects will materialize and there are reasonable elements for their quantification. If these reasonable elements do not exist, their disclosure is included qualitatively in the notes to the consolidated and combined financial statements. Income, profits or contingent assets are recognized until such time as there is certainty of their realization.

3.Changes in significant accounting policies

Application of new and revised International Financing Reporting Standards (“IFRSs” or “IAS”) that are mandatorily effective for the current year

In the current year, the Group has applied a number of new and amended IFRS and interpretations issued by the International Accounting Standards Board (“IASB”) that are mandatorily effective for an accounting period that begins on or after January 1, 2021. The conclusions related to their adoption are described as follows:

New and amended IFRS Standards that are effective for the current year

Phase 2 of the benchmark interest rate reform (IBOR- Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)

Interbank benchmark rates such as LIBOR, EURIBOR and TIBOR, which represent the cost of obtaining unsecured funds, have been questioned about their viability as long-term financing benchmarks. The changes in the reform to the reference interest rates in its phase 2 refer to the modifications of financial assets, financial liabilities and lease liabilities, requirements for accounting coverage and disclosure of financial instruments. These improvements are effective as of January 1, 2021, with retrospective application, without the need to redo the comparative periods.

Regarding the modification of financial assets, financial liabilities and lease liabilities, the IASB introduced a practical expedient that involves updating the effective interest rate. At the time a fall-back clause is activated due to the substitution of the reference rate defined in the contract, without requiring recognition of a change in the valuation of the financial instrument.

On the other hand, regarding hedge accounting, the hedge relationships and documentation must reflect the modifications to the hedged item, the hedging instrument and the risk to be hedged. Hedging relationships must meet all criteria for applying hedge accounting, including effectiveness requirements.

Finally, regarding disclosures, entities should disclose how they are managing the transition to alternative reference rates and the risks that may arise from the transition; in addition, they must include quantitative information on financial assets and non-derivative financial liabilities, as well as non-derivative financial instruments, that continue under the reference rates subject to the reform and the changes that have arisen to the risk management strategy.

The Company evaluated the impacts arising from the application of these amendments, however it does not have a material impact on its consolidated financial position or results of operations, due to the Company does not maintain financial instruments related to LIBOR rate.

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Amendments to IFRS 16, Rent concessions related to Covid-19

The amendments introduce a practical expedient that provides lessees the option not to assess whether a rent concession that meets certain conditions is a lease modification. The practical expedient is applicable to rent concessions occurring as a direct consequence of the Covid-19 pandemic and only if all of the following conditions are met:

The change in the lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change.

Any reduction in lease payments affects only payments originally due on or before June 30, 2022 (previously on or before June 30, 2021); and

There is no substantive change to other terms and conditions of the lease.

The Group determined there were no impacts on the adoption of these amendments, considering that it did not enter into rental concessions for the leases that it maintains as a lessee

Additionally, the Group adopted the following amendments, which did not have any effects on the financial statements in the current year:

●

Amendments to IAS 1 and IAS 8, Definition of material

●

Amendments to IFRS 3, Definition of a business

●

Amendments to IFRS 4, Insurance Contracts in the application of IFRS 9, Financial Instruments

●

Amendments to IFRS 9, IAS 39 and IFRS 7, Interest rate benchmark reform – Phase 1

●

Amendments to the IFRS’s conceptual framework

New and revised IFRS Standards in issue but not yet effective

At the issuance date of these financial statements, the Group has not applied the following new and revised IFRS that have been issued but are not yet effective. Based on management’s analysis, the Group does not expect that the adoption of the following standards will have a material impact on the financial statements in future periods:

●

Amendments to IAS 1, Classification of liabilities as current or non-current (1)

●

Amendments to IAS 16, Property, plant and equipment - proceeds before intended use (1)

●

Amendments to IAS 37, Onerous contract - Cost of fulfilling a contract (1)

●

Amendments to IFRS 9, Financial instruments (1)

●

Amendments to IAS 41, Biological Assets (1)

●

Amendments to IAS 1, and Statement of practice 2 - Disclosure of accounting policies (2)

●

Amendments to IAS 8, Disclosure of accounting estimates (2)

●

Amendments to IAS 12, Deferred tax related to assets and liabilities arising from a single transaction (2)

●

IFRS 17, Insurance Contracts ⁽²⁾

(1)^{Effective for annual reporting periods beginning on January 1, 2022}

(2)^{Effective for annual reporting periods beginning on January 1, 2023}

4.Critical accounting judgments and key sources of estimation uncertainty

In the application of the Group’s accounting policies, which are described in Note 2, management of the Group is required to make judgments, estimates, and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The judgments, estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.

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Management has exercised the following critical judgments in the process of applying its accounting policies, which is considered to have the most significant effect on the amounts recognized in the consolidated and combined financial statements:

Contingencies

Management makes judgments and estimates in recording provisions for matters relating to claims and litigation. Actual costs may vary from estimates for several reasons, such as changes in cost estimates for resolution of complaints and disputes based on different interpretations of the law, opinions and evaluations concerning the amount of loss.

Contingencies are recorded as provisions when it is probable that a liability has been incurred and the amount of the loss is reasonably estimable. It is not practical to estimate sensitivity to potential losses if other assumptions were used to record these provisions, due to the number of underlying assumptions and the range of possible reasonable outcomes regarding potential actions by third parties, such as regulators, both in terms of loss probability and estimates of such loss.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision affects both current and future periods. The significant estimates impacting the Group’s consolidated and combined financial statements are as follows:

Key assumptions used in impairment testing on long-lived assets

The Group performs annual impairment testing on long-lived assets, for which key assumptions are used in the calculation of the recoverable amount (see Note 11). For impairment testing, goodwill is allocated to the cash-generating unit (“CGU”) from which the Group has considered that economic and operational synergies of business combinations are generated. The recoverable amounts of the CGU have been determined based on the calculations of their value in use, which require the use of estimates. The most significant of these estimates are as follows

●

Estimates of future gross and operating margins, according to the historical performance and industry expectations of the CGU.

●

Discount rate based on the weighted average cost of capital (WACC) of the CGU.

●

Long-term growth rates.

Estimation of probability of default and recovery rate to apply the model of expected losses in the impairment of financials assets

The Group assigns to the debtors with whom it maintains an account receivable at each reporting date, either individually or as a group, an estimate of the probability of default in the payment of accounts receivable and the estimated recovery rate, in order to reflect the cash flows that are expected to be received from the current assets on that date.

5.Cash and cash equivalents


	2021		2020	2019

Cash on hand in banks	Ps.	951,092	629,146	96,008

Time deposits		224,106	20,674	117,689

	Ps.	1,175,198	649,820	213,697

As of December 31, 2021, and 2019 the Group did not maintain restricted cash.

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As of January 3, 2021, cash and cash equivalents balance excluded an amount of Ps. 42,915 of restricted cash derived from the guarantee of some forwards which were due between May and August 2021, which was presented as a current asset in the consolidated and combined statement of financial position (see Note 9) and under investing activities in the consolidated and combined statements of cash flows.

6.Trade account receivables


	2021		2020	2019

Trade account receivables	Ps.	868,218	766,889	260,727

Expected credit loss		(90,164)	(9,083)	(13,640)

	Ps.	778,054	757,806	247,087

The trade accounts receivable detailed above are measured at their amortized cost. The average, with respect to the turnover of accounts receivable, is from 14 to 28 days as of December 31, 2021, and January 3, 2021, and 30 days as of December 31, 2019. No interest is charged on pending accounts receivable.

The Group measures the loss reserve for commercial accounts receivable in an amount equal to the expected lifetime credit loss. Expected credit losses in accounts receivable are estimated using a provisions matrix with reference to the debtor's previous default history and an analysis of the debtor's current financial situation, adjusted for factors specific to the debtors and the general economic conditions of the industry in which the debtors operate, and assessing both current and predicted conditions as of the reporting date.

The Group’s significant growth in recent years combined with the impacts of the COVID-19 pandemic have caused volatility in collections. Because of this, management has applied significant judgment in evaluating and giving effect to historical loss information in estimated expected credit losses.

The Group cancels an account receivable when there is information that indicates that the debtor is experiencing serious financial difficulties and there is no realistic prospect of recovery, e.g., when the debtor has been placed in liquidation or has entered bankruptcy proceedings, or when a commercial account receivable is more than one year old, whichever occurs first. For the periods ended December 31, 2021, January 3, 2021, and December 31, 2019, Ps. 117,414, Ps. 62,184 and Ps. 18,215 have been canceled, respectively.

The following table shows the expected lifetime credit loss recognized for accounts receivable in accordance with the simplified approach established in IFRS 9.


Trade receivables – days past due
	Not past
As of December 31, 2021	due			14-21		21 – 28		>28		Total

Expected credit loss rate		1	%	27	%	60	%	28	%
Estimated total gross carrying amount at default	Ps.	593,104		31,439		22,463		221,212		868,218
Expected credit loss	Ps.	6,814		8,338		13,386		61,626		90,164


Trade receivables – days past due
	Not past
As of January 03, 2021	due			14-21		21 – 28		>28		Total

Expected credit loss rate		2	%	30	%	62	%	33	%
Estimated total gross carrying amount at default	Ps.	539,693		31,918		17,772		53,743		643,126
Expected credit loss	Ps.	8,163		9,588		10,946		17,563		46,260

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Trade receivables – days past due
	Not past
As of December 31, 2019	due			14-21		21 – 28		>28		Total

Expected credit loss rate		2	%	20	%	49	%	42	%
Estimated total gross carrying amount at default	Ps.	207,032		12,098		7,045		29,807		255,982
Expected credit loss	Ps.	3,950		2,454		3,477		12,634		22,515

The following table shows the movement in lifetime expected credit loss that has been recognized for trade account receivables in accordance with the simplified approach set out in IFRS 9.


	Total
Balance as of January 01, 2019	Ps.	(9,340)
Expected credit loss		(22,515)
Amounts written off		18,215
Balance as of December 31, 2019		(13,640)
Expected credit loss		(46,260)
Specific credit loss		(11,367)
Amounts written off		62,184
Balance as of January 03, 2021		(9,083)
Expected credit loss		(198,495)
Amounts written off		117,414
Balance as of December 31, 2021	Ps.	(90,164)

7.Inventories and cost of sales


	2021		2020		2019

Finished goods	Ps.	901,523		904,999		224,025
Packing material		35,718		26,029		4,577
		937,241		931,028		228,602
Merchandise in transit		402,137		342,998		116,952
	Ps.	1,339,378		1,274,026		345,554

The cost of inventories recognized in income within cost of sales of the year was Ps. 4,399,164, Ps. 3,290,994 and Ps. 1,280,829 for the periods of 2021, 2020 and 2019.

The cost of inventories recognized as an expense includes Ps. 43,645, Ps. 24,438 and Ps. 14,273 for the periods 2021, 2020 and 2019, respectively, in respect of write-downs of inventory to net realizable value. Such write-downs have been recognized to account for obsolete inventories.

8.Prepaid expenses


	2021		2020		2019

Printed catalogs	Ps.	33,628		41,920		21,692
Premiums paid in advance for insurance		16,961		10,061		9,628
Advances to suppliers		1,320		2,689		12,973
Other		17,315		39,831		8,891

	Ps.	69,224		94,501		53,184

9.Other assets

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	2021		2020		2019

Inventory of rewards	Ps.	54,247		28,804		13,315
Rewards catalogs		12,067		10,492		—
Recoverable taxes		10,725		44,618		—
Security deposit		4,274		5,774		3,549
Restricted cash		—		42,915		—
Transaction costs of the merger		—		—		9,822
Other receivables		4,949		3,588		7,259

		86,262		136,191		33,945

Current		81,988		130,417		20,574
Non-current		4,274		5,774		13,371

	Ps.	86,262		136,191		33,945

10.Property, plant and equipment, net


	2021		2020		2019

Acquisition cost	Ps.	1,231,794		905,840		305,874
Accumulated depreciation		(162,302)		(114,713)		(98,524)

	Ps.	1,069,492		791,127		207,350


	As of				As of
	January 01,				December 31,
Acquisition cost:	2019		Additions	Disposals	2019

Land	Ps.	—	47,124	—	47,124
Molds		37,515	3,754	—	41,269
Vehicles		1,602	—	—	1,602
Computers and equipment		59,640	7,183	—	66,823
Leasehold improvements		24,492	5,390	—	29,882
Construction in progress		—	119,174	—	119,174

	Ps.	123,249	182,625	—	305,874


	As of				As of
	January 01,		Depreciation		December 31,
Accumulated depreciation:	2019		Additions	Disposals	2019

Molds	Ps.	(22,963)	(2,685)	—	(25,648)
Vehicles		(1,446)	(59)	—	(1,505)
Computers and equipment		(36,500)	(11,503)	—	(48,003)
Leasehold improvements		(19,368)	(4,000)	—	(23,368)


	Ps.	(80,277)	(18,247)	—	(98,524)

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	As of				As of
	December 31,				January 03,
Acquisition cost:	2019		Additions	Disposals	2021

Land	Ps.	47,124	2,132	—	49,256
Molds		41,269	85,049	(22)	126,296
Vehicles		1,602	28,740	(17,235)	13,107
Computers and equipment		66,823	3,273	(2,056)	68,040
Leasehold improvements		29,882	4,426	—	34,308
Buildings		—	326,644	—	326,644
Construction in progress		119,174	169,015	—	288,189

	Ps.	305,874	619,279	(19,313)	905,840


	As of				As of
	December 31,		Depreciation		January 03,
Accumulated depreciation:	2019		Additions	Disposals	2021

Molds	Ps.	(25,648)	(3,636)	—	(29,284)
Vehicles		(1,505)	(633)	—	(2,138)
Computers and equipment		(48,003)	(9,837)	1,043	(56,797)
Leasehold improvements		(23,368)	(1,856)	—	(25,224)
Buildings		—	(1,270)	—	(1,270)

	Ps.	(98,524)	(17,232)	1,043	(114,713)


	As of						As of
	January 03,		Acquisition of				December 31,
Acquisition cost:	2021		subsidiaries	Additions	Disposals	Transferred	2021

Land	Ps.	49,256	—	—	—	—	49,256
Molds		126,296	—	82,457	(2,334)	63,729	270,148
Vehicles		13,107	—	6,046	(1,439)	—	17,714
Computers and equipment		68,040	13,473	709	(19,764)	18,521	80,979
Leasehold improvements		34,308	539	119	(831)	3,980	38,115
Buildings		326,644	—	—	—	351,654	678,298
Construction in progress		288,189	—	246,979	—	(437,884)	97,284

	Ps.	905,840	14,012	336,310	(24,368)	—	1,231,794


	As of				As of
	January 03,		Depreciation		December 31,
Accumulated depreciation:	2021		expense	Disposals	2021

Molds	Ps.	(29,284)	(20,236)	759	(48,761)
Vehicles		(2,138)	(3,162)	17	(5,283)
Computers and equipment		(56,797)	(9,374)	11,983	(54,188)
Leasehold improvements		(25,224)	(4,915)	203	(29,936)
Buildings		(1,270)	(22,864)	—	(24,134)

	Ps.	(114,713)	(60,551)	12,962	(162,302)

Depreciation expense is included in administrative expenses line in the consolidated and combined statement of profit or loss and other comprehensive income. No impairment losses have been determined.

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During August 2019, the Group began to build a distribution center, which was completed in the first quarter of 2021. As of December 31, 2021, January 3, 2021, and December 31, 2019, the total payments related to this construction amounted Ps. 397,000 Ps. 508,958, and Ps. 165,000, respectively. The total investment amounted to Ps. 1,070,958.

For the periods of 2020 and 2019, the Group capitalized borrowing costs in the amount of Ps. 33,460 and Ps. 9,284, respectively, directly related to the distribution center that was under construction. In 2021 the Group didn´t capitalized borrowing costs related to the distribution center that was under construction.

11.Goodwill


	As of				As of
	January 03,				December 31,
	2019		Additions	Disposals	2019

Cost	Ps.	348,441	—	—	348,441


	As of				As of
	December 31,				January 03,
	2019		Additions	Disposals	2021

Cost	Ps.	348,441	—	—	348,441


	As of				As of
	January 03,				December 31,
	2021		Additions	Disposals	2021

Cost	Ps.	348,441	22,634	—	371,075

As of January 3, 2021 and December 31, 2019, goodwill corresponded to the resulting excess between the consideration given and the fair values of the net assets acquired on the acquisition date by Betterware Latinoamerica Holding México, S.A. de C.V. (BLHM) and Strevo Holding, S.A. de C.V.

On March 12, 2021, Betterware entered into an agreement to acquire 60% of GurúComm for Ps.45,000. GurúComm is a Mobile Virtual Network Operator ("MVNO") and communications software developer. Moreover, on July 22, 2021, Betterware entered into an agreement more to acquire 70% of Innova Catálogos, S.A. de C.V., for Ps.5,000. Innova Catálogos is a company dedicated to the purchase and sale of clothing, footwear and accessories. The goodwill addition of Ps.22,634 is the result between the consideration paid and the fair values of the net assets acquired from both companies.

For impairment testing purposes, goodwill has been allocated to a cash generating unit (“CGU”). The recoverable value of the CGU was based on the fair value minus disposal costs, estimated using discounted cash flows. The fair value measurement was classified as a Level 3 fair value based on the inputs in the valuation technique used.

The values assigned to the key assumptions represent the administration’s assessment of future trends in relevant industries and are based on historical data from external and internal sources.

As of December 31, 2021, January 3, 2021, and December 31, 2019, the estimated recoverable amount of the CGU, exceeded its carrying amount.

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The key assumptions used in the estimation of the recoverable amount are set out below. The values assigned to the key assumptions represent Management’s assessment of future trends in the relevant industries and have been based on historical data from both internal and external sources.


In percentages	2021	2020	2019
Discount rate	12.8	11.2	12.4
Terminal value growth rate	3.0	3.0	3.0
Budgeted EBITDA growth rate	30.0	38.0	14.0

The discount rate was a post-tax measurement estimated based on the historical industry average, weighted-average cost of capital and a market interest rate of 5.7%, 7.3% and 7.2% as of December 31, 2021, January 3, 2021, and December 31, 2019, respectively.

The cash flow projections included specific estimates for 5 years and a terminal growth rate thereafter. The terminal growth rate was determined based on management’s estimate of the long-term compound annual EBITDA growth rate, consistent with the assumptions that a market participant would make.

Budgeted EBITDA was estimated taking into account past experience and a revenue growth rate projected taking into account the average growth levels experienced over the past 5 years and the estimated sales volume and price growth for the next five years. It was assumed that the sales price would increase in line with forecast inflation over the next five years.

12.Intangible assets, net


	As of				As of
	January 01,				December 31,
Acquisition cost:	2019		Additions	Disposals	2019

Brand	Ps.	253,000	—	—	253,000
Customer relationships		64,000	—	—	64,000
Software		17,135	4,516	—	21,651
Brands and logo rights		6,209	1,399	—	7,608

	Ps.	340,344	5,915	—	346,259


	As of				As of
	January 01,		Amortization		December 31,
Accumulated amortization:	2019		expense	Disposals	2019

Customer relationships	Ps.	(24,533)	(6,400)	—	(30,933)
Software		—	(421)	—	(421)
Brands and logo rights		(3,712)	(228)	—	(3,940)

	Ps.	(28,245)	(7,049)	—	(35,294)


	As of				As of
	December 31,				January 03,
Acquisition cost:	2019		Additions	Disposals	2021

Brand	Ps.	253,000	—	—	253,000
Customer relationships		64,000	—	—	64,000
Software		21,651	24,333	—	45,984
Brands and logo rights		7,608	276	(2,491)	5,393

	Ps.	346,259	24,609	(2,491)	368,377

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Table of Contents


	As of				As of
	December 31,		Amortization		January 03,
Accumulated amortization:	2019		expense	Disposals	2021

Customer relationships	Ps.	(30,933)	(6,400)	—	(37,333)
Software		(421)	(6,675)	—	(7,096)
Brands and logo rights		(3,940)	(647)	—	(4,587)

	Ps.	(35,294)	(13,722)	—	(49,016)


	As of				As of
	January 03,				December 31,
Acquisition cost:	2021		Additions	Disposals	2021

Brand	Ps.	253,000	—	—	253,000
Customer relationships		64,000	—	—	64,000
Software		45,984	65,356	—	111,340
Brands and logo rights		5,393	70	—	5,463

	Ps.	368,377	65,426	—	433,803


	As of				As of
	January 03,		Amortization		December 31,
Accumulated amortization:	2021		expense	Disposals	2021

Customer relationships	Ps.	(37,333)	(6,400)	—	(43,733)
Software		(7,096)	(8,377)	—	(15,473)
Brands and logo rights		(4,587)	(250)	—	(4,837)

	Ps.	(49,016)	(15,027)	—	(64,043)

As of December 31, 2021, January 3, 2021, and December 31, 2019, a carrying amount of Ps. 253,000 for the value of “Betterware” brand is presented in the consolidated and combined statements of financial position. Such brand was transmitted to the Group through a merger carried out on July 28, 2017 with Strevo (a related party, under common control). Strevo obtained such brand when acquiring the majority of the Group’s shares in March 2015.

As of December 31, 2021, January 3, 2021, and December 31, 2019, a carrying amount of Ps. 20,267 Ps. 26,667, and Ps. 33,067, respectively, for the value of the Group’s intangible asset comprised of customers relationships, is presented in the consolidated and combined statements of financial position. Such intangible asset was transmitted to the Group through the merger carried out on July 28, 2017 with Strevo as previously discussed. This intangible asset has a useful life of ten years and is being amortized on a straight-line basis.

Additionally, as of December 31, 2021, January 3, 2021, and December 31, 2019, the intangible asset line in the consolidated and combined statement of financial position includes Ps. 626, Ps. 808, and Ps. 3,668, respectively, corresponding to paid rights related to registration of brands and logos before the intellectual property authorities. Such rights are valid ranging a defined period from 10 to 30 years and therefore, are amortized over such useful lives.

At each reporting date, the Group reviews the carrying amounts of its non-financial assets to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. As of December 31, 2021, January 3, 2021, and December 31, 2019, no indications of impairment have been identified.

In relation to impairment of intangible assets with indefinite useful life (brand), the Group estimates the recoverable amount of the intangible asset which is based on fair value less costs of disposal, estimated using discounted cash flows. The fair value measurement was categorized as a Level 3 fair value based on the inputs in the valuation technique used. Key assumptions are the same as those used for estimating the recoverable amount for Goodwill (See Note 11).

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13.Leases

Right of use assets, net

The Group leases a fleet of cars for its sales staff and qualified employees with different contract expiration dates, as well as computers and servers being the latest expiration date in April 2025. Those leases were recorded as right of use assets as follows:


	As of				As of
	January 1,				December 31,
	2019		Additions	Disposals	2019

Cost	Ps.	36,909	—	—	36,909


	As of				As of
	January 1,		Depreciation		December 31,
	2019		expense	Disposals	2019

Accumulated depreciation	Ps.	—	(13,098)	—	(13,098)


	As of				As of
	December 31,				January 03,
	2019		Additions	Disposals	2021

Cost	Ps.	36,909	20,531	(17,861)	39,579


	As of				As of
	December 31,		Depreciation		January 03,
	2019		expense	Disposals	2021

Accumulated depreciation	Ps.	(13,098)	(12,734)	11,135	(14,697)


	As of				As of
	January 03,				December 31,
	2021		Additions	Disposals	2021

Cost	Ps.	39,579	1,388	(3,275)	37,692


	As of				As of
	January 03,		Depreciation		December 31,
	2021		expense	Disposals	2021

Accumulated depreciation	Ps.	(14,697)	(6,544)	933	(20,308)

The right-of-use asset depreciation expense for the periods of 2021, 2020 and 2019 amounted to Ps.6,544, Ps.12,666 y Ps.13,098, respectively.

During 2021 and 2020, the Group entered into master lease agreements of computers and servers.

As of December 31, 2021, the Group lease warehouses, offices, commercial locals, and equipment, used in normal operations of the Company, to which the short-term exemption was applied, considering that the lease term was for less than one year. The rental expense for the year ended December 31, 2021, was Ps.52,660.

As of January 3, 2021, and December 31, 2019, the Group leased warehouses and an administrative office space that expired on January 3, 2021, and that were renewed during the first three months of 2021 in order to relocate the operations to the new distribution center. Rental expense for the periods of 2020 and 2019 was Ps.15,703 and Ps.11,605, respectively.

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Lease liability

The lease liabilities as of December 31, 2021, January 3, 2021, and December 31, 2019, amounted Ps. 17,880, Ps. 24,378 and Ps. 24,584, respectively.

The maturity analysis of total future minimum lease payments, including non-accrued interest, is as follows:


Year	Amount
2022	Ps	6,543
2023		5,980
2024		3,078
2025		2,925
2026		339

	Ps	18,865

Interest expense generated from the lease liability amounted to Ps. 717, Ps. 2,054 and Ps. 3,765 for the periods of 2021, 2020 and 2019, respectively.

14.Accounts payable to suppliers

Trade accounts payables to suppliers principally comprise amounts outstanding for trade purchases and ongoing costs.

The average payment period is 4 months, with no interest charged. The Group has financial risk management policies in place to ensure that all payables are paid within the pre-agreed credit terms.

15.Borrowings

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	2021		2020	2019
NaN-tranche sustainability bond, with maturities across 4 and 7 years, offered in the Mexican Market through the Bolsa Mexicana de Valores; the first offer of Ps.500,000 started paying interest at 5.15% plus 0.40% and for the monthly subsequent payments, the rate will be based on the 29-day TIIE rate issued by BANXICO plus 0.40%; the second offer of Ps.1,000,000 will pay interest semi-annually at a fixed rate of 8.35%, during the sustainability bond term.	Ps.	1,482,261	—	—

Innova Catálogos has a loan for financial support or "Emerging Plan for the protection of employment and income of people"; The loan was acquired at the beginning of 2021, for the amount of Ps.40, with maturity across 18 months, and monthly payments of Ps.2.2, this loan does not accrue interest, however in case of default, it will accrue interest at the rate of 24% on unpaid balances.		15	—	—

Secured credit line with Banamex, for up to Ps.400,000, bearing interest at the TIIE rate plus 260 basis points. Withdrawals from this secured credit line can be made during a 10-month period starting December 15, 2018, and are payable on a quarterly basis from December 17, 2019, up to December 18, 2025. This secured credit line was prepaid on August 31, 2021, with the proceeds from the sustainability bond.		—	373,333	135,209

Secured credit line with Banamex for up to Ps.195,000, bearing interest at the TIIE rate plus 295 basis points, payable on a quarterly basis from October 30, 2020, to December 30, 2025. This secured credit line was prepaid on August 31, 2021 with the proceeds from the sustainability bond.		—	188,500	—

Credit line with BBVA for up to Ps.75,000 bearing interest at 7.5%, payable monthly from September 20, 2020, to August 31, 2023. This credit line was prepaid on August 31, 2021 with the proceeds from the sustainability bond.		—	64,721	—

Credit line with MCRF P, S.A. de C.V. SOFOM, E.N.R. of Ps.600,000, bearing interest at a fixed rate of 13.10%. This credit line is payable on a quarterly basis starting May 15, 2019, through May 15, 2023. BLSM Latino América Servicios, S.A. de C.V., is a guarantor in this loan.		—	—	516,597

Unsecured credit line with Banamex, for up to Ps. 80,000, bearing interest at the TIIE rate plus 285 basis points (renewable on a yearly basis).		—	—	15,000

Interest payable	Ps.	28,109	3,323	10,907

Total debt		1,510,385	629,877	677,713

Less: Current portion		28,124	105,910	148,070

Long-term debt	Ps.	1,482,261	523,967	529,643

Long term debt- Offering of bonds

On August 30, 2021, Betterware successfully concluded the offering of a 2-tranche sustainability bond issuance for a total of Ps.1,500,000, with maturities across 4 and 7 years, offered in the Mexican Market and issued at favorable conditions for the Company. The first offer of sustainability bonds for Ps.500,000 started paying interest at 5.15% plus 0.40% and for subsequent monthly payments, the rate will be based on the 29-day TIIE rate issued by Banxico plus 0.40% and the second offer of Ps.1,000,000 will pay interest semi-annually at a fixed rate of 8.35%, during the sustainability bond term.

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On August 31, 2021, Ps. 588,300 of proceeds received from the bond offering, were used for the prepayment of the following long-term debt: Ps.521,449 were paid to the secured credit line with Banamex, plus an additional Ps.18,172 to cancel the swap linked to that loan, and Ps.48,679 to the credit line with BBVA. The rest of the proceeds were used for general corporate purposes, including additional investments in Campus Betterware and other initiatives with positive environmental and social impacts.

Banamex- Secured credit line

●

On December 2018, the Group obtained a secured credit line with Banamex for an amount of Ps.400,000 to build the new Campus Betterware. On January 30, 2020, the Group renegotiated the interest rate of the secured credit line 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 credit line were extended to August 2020 and were payable on a quarterly basis from September 2020 up to December 18, 2025. This loan was liquidated on August 31, 2021.

●

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

●

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

Banamex- Unsecured credit line

●

Betterware has an unsecured credit line with Banamex up to Ps. 100,000 amounted to TIIE plus 285 basis points. As of December 31, 2019, the interest rate was TIIE plus 275 basis points. As of December 31, 2021, Betterware has not used this unsecured credit line.

BBVA-Credit line

●

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

●

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

HSBC-Credit line

●

On March 10, 2020, Betterware entered into a current account credit line 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, the first amendment agreement was signed, in which the amount of the credit line was increased to Ps. 150,000. The maturity date of this credit line is March 10, 2022, and it bears interest at the TIIE rate plus 350 basis points. During 2021 and 2020, the Group utilized Ps. 20,000 and Ps. 115,000, respectively, of which as of December 31, 2021, and January 3, 2021, the entire amounts have been repaid.

CreditSuisse- Credit line

●

On March 27, 2020, the Group made a prepayment to the credit line with MCRF P, S.A. de C.V. SOFOM, E.N.R of Ps. 258,750. In addition, on April 27, 2020, the Group paid the outstanding amount of the credit line.

As of December 31, 2021, Betterware does not have payable borrowings to banks. As of December 31, 2021, January 3, 2021, and December 31, 2019, the fair value of the debt in 2021, 2020 and 2019, amounted to Ps. 1,499,867, Ps. 634,992, and Ps.

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679,188, respectively. The fair value of the long term bond in 2021, was calculated based on level 1 of the value hierarchy, since its price is quoted in an active market on that date, meanwhile the fair value of borrowings in 2020 and 2019 periods, was calculated using the discounted cash flow method and the Interbank Equilibrium Interest Rate (“TIIE”, for its acronym in Spanish), adjusted for credit risk, and used to discount future cash flows.

Interest expenses related to the borrowings presented above are included in the interest expense item in the consolidated and combined statement of earnings and other comprehensive income.

Reconciliation of movements of liabilities to cash flows arising from financing activities

The table below details changes in the Group’s liabilities arising from financing activities, including both cash and non-cash changes. Liabilities arising from financing activities are those for which cash flows were, or future cash flows will be, classified in the Group’s consolidated and combined statement of cash flows as cash flows from financing activities.


				Derivative
	Long-term debt			financial
	and borrowings		Interest payable	instruments, net

Balance as of January 01, 2019	Ps.	620,164	11,227	16,629
Changes that represent cash flows -
Loans obtained		104,500	—	—
Restricted cash⁽¹⁾		22,940	—	—
Payments		(82,996)	(95,033)	—
	��
Changes that do not represent cash flows -
Interest expense		—	85,429	—
Borrowing costs capitalized in PP&E		—	9,284	—
Valuation effects of derivative financial instruments		—	—	15,680
Amortization of commissions and debt issuance costs		2,198	—	—

Balance as of December 31, 2019	Ps.	666,806	10,907	32,309
Changes that represent cash flows -
Loans obtained		1,712,207	—	—
Restricted cash⁽¹⁾		(42,915)	—	—
Payments		(1,757,112)	(121,297)	—

Changes that do not represent cash flows -
Interest expense		—	80,253	—
Borrowing costs capitalized in PP&E		—	33,460	—
Valuation effects of derivative financial instruments		—	—	287,985
Amortization of commissions and debt issuance costs		4,653	—	—

Balances as of January 03, 2021	Ps.	583,639	3,323	320,294
Changes that represent cash flows -
Loans obtained		1,520,000	—	—
Restricted cash⁽¹⁾		42,915	—	—
Payments		(646,716)	(49,123)	(18,172)
Bond issuance costs		(18,931)	—	—
Changes that do not represent cash flows -
Interest expense		—	73,909	—
Control obtained over subsidiaries		177
Amortization of commissions and debt issuance cost		1,192	—	—
Valuation effects of derivative financial instruments		—	—	(330,315)
Balance as of December 31, 2021	Ps.	1,482,276	28,109	(28,193)

(1)	Balances in column “Long-term debt” in the table above, are netted with restricted cash balances on 2020 period.

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The Group’s long-term debt and interest maturities as of December 31, 2021, including non-accrued interest, are as follows:


Year	Amount

2022	Ps.	115,343
2023		115,343
2024		115,343
2025		605,829
2026-2028		1,253,283
	Ps.	2,205,141

The long-term debt has the following financial covenants:

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

Use the resources derived from the placement of the Stock Certificates for initiatives with positive environmental and social impacts.

Compliance with the general provisions applicable to securities issuers and other participants; Among them, the delivery of quarterly financial information and an annual report to the Banking Commission (CNBV, for its acronym in Spanish) and Securities Commission and to the Mexican Stock Exchange (BMV, for its acronym in Spanish).

Compliance with the general provisions applicable to entities and issuers supervised by the CNBV that hire external audit services.

The credit line agreements with Banamex contained the following financial covenants:

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

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

To maintain a leverage ratio not greater than 7.0.

To maintain a minimum cash and cash equivalents balance of Ps. 40,000

The Group was in compliance with all covenants as of December 31, 2021, January 3, 2021, and December 31, 2019. The Group obtained permission from Banamex prior to December 31, 2019. to consummate the merger disclosed in Note 1.d

16.Income taxes

The subsidiaries of the Group in México and abroad are individually subject to the payment of income taxes. These taxes are not determined based on the consolidates figures of the Group but are calculated individually at the level of each company declaration and each of these presents its taxes separately.

According to the specific requirements of each country, the statutory rates for 2021, 2020 and 2019 periods were 30% for México and 25% for Guatemala and will continue as such in future periods.

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Income tax recognized in profit or loss for the periods of 2021, 2020 and 2019 was comprised of the following:


	2021		2020	2019

Current tax	Ps.	782,901	576,834	229,900
Deferred tax expense (benefit)		41,553	(34,066)	2,792

	Ps.	824,454	542,768	232,692

Income tax expense recognized at the effective ISR rate differs from income tax expense at the statutory tax rate. Reconciliation of income tax expense recognized from statutory to effective ISR rate is as follows:


	2021			2020		2019

Profit before income tax	Ps.	2,625,338		881,129		704,834
Tax rate		30	%	30	%	30	%
Income tax expense calculated at 30% statutory tax rate		787,601		264,339		211,450

Inflation effects, net		25,039		8,333		6,278
Non-deductible expenses		5,790		5,493		3,202
Loss on valuation of warrants		—		255,456		—
Share-based payments		1,744		8,275		—
Other items, net		4,280		872		11,762

	Ps.	824,454		542,768		232,692
		31	%	62	%	33	%

Realization of deferred tax assets depends on the future generation of taxable income during the period in which the temporary differences will be deductible. Management considers the reversal of deferred tax liabilities and projections of future taxable income to make its assessment on the realization of deferred tax assets. Based on the results obtained in previous years and in future profit and tax projections, management has concluded that it is probable the deferred tax assets will be realized.

As of December 31, 2021, January 3, 2021, and December 31, 2019, the Group had no tax loss carryforwards.

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Composition of the deferred tax asset (liabilities) as well as the reconciliation of changes in deferred taxes balances as of December 31, 2021, January 3, 2021, and December 31, 2019, is presented below:


				Recognized in
	As of			other	As of
	January 01,		Recognized in	comprehensive	December 31,
Temporary differences	2019		profit or loss	income	2019

Deferred tax assets:
Expected credit loss	Ps.	2,802	2,415	—	5,217
Accruals and provisions		26,632	(668)	(26)	25,938
Derivative financial instruments		4,989	(4,989)	—	—
Property, plant and equipment		74	4,505	—	4,579

Deferred tax liabilities:
Intangible assets		(87,740)	1,920	—	(85,820)
Inventories		(6,192)	(3,161)	—	(9,353)
Derivative financial instruments		—	(89)	—	(89)
Other assets and prepaid expenses		(11,192)	(2,699)	—	(13,891)

Net deferred tax liability	Ps.	(70,627)	(2,766)	(26)	(73,419)


				Recognized in
	As of			other	As of
	December 31,		Recognized in	comprehensive	January 03,
Temporary differences	2019		profit or loss	income	2021

Deferred tax assets:
Expected credit loss	Ps.	5,217	(3,732)	—	1,485
Accruals and provisions		25,938	42,340	360	68,638
Derivative financial instruments		—	35,886	—	35,886
Property, plant and equipment		4,579	(4,579)	—	—

Deferred tax liabilities:
Intangible assets		(85,820)	1,920	—	(83,900)
Inventories		(9,353)	(21,687)	—	(31,040)
Derivative financial instruments		(89)	89	—	—
Property, plant and equipment		—	(10,888)	—	(10,888)
Other assets and prepaid expenses		(13,891)	(5,644)	—	(19,535)

Net deferred tax liability	Ps.	(73,419)	33,705	360	(39,354)

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	As of			other	As of
	January 03,		Recognized in	comprehensive	December 31,
Temporary differences	2021		profit or loss	income	2021

Deferred tax assets:
Expected credit loss	Ps.	1,485	21,203	—	22,688
Accruals and provisions		68,638	(31,514)	—	37,124
Derivative financial instruments		35,886	(35,886)	—	—
Property, plant and equipment		—	5,538	—	5,538

Deferred tax liabilities:
Intangible assets		(83,900)	1,920	—	(81,980)
Inventories		(31,040)	830	—	(30,210)
Derivative financial instruments		—	(7,380)	—	(7,380)
Property, plant and equipment		(10,888)	10,888	—	—
Other assets and prepaid expenses		(19,535)	(7,152)	—	(26,687)

Net deferred tax liability	Ps.	(39,354)	(41,553)	—	(80,907)

17.Provisions


	Commissions,		Bonuses and
	promotions and		other employee	Professional
	other		benefits	services fees	Total

As of, January 01, 2019	Ps.	35,805	1,958	1,223	38,986

Increases		345,148	90,843	2,026	438,017
Payments		(348,174)	(79,445)	(2,695)	(430,314)

As of December 31, 2019	Ps.	32,779	13,356	554	46,689

Increases		1,272,651	51,253	16,947	1,340,851
Payments		(1,198,284)	(21,039)	(17,209)	(1,236,532)

As of January 03, 2021	Ps.	107,146	43,570	292	151,008

Increases		2,054,420	140,130	17,541	2,212,091
Payments		(2,048,135)	(182,439)	(17,333)	(2,247,907)

As of December 31, 2021	Ps.	113,431	1,261	500	115,192

Commissions, promotions and other

Commissions, promotions, and other includes commissions payable to the sales force on the last week of the period, which are paid in the first week of the year or of the following period. Additionally, it includes the provision of reward points obtained by distributors and associates for the sale of products and for expanding the network of registered distributors and associates.

Bonuses and other employee benefits

Bonuses and other employee benefits include annual performance bonuses as well as vacation provisions, vacation bonuses, savings funds, and more.

Fees for professional services

Fees for professional services includes fees for services such as external audits, legal services, internal audits, and more.

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18.Derivative financial instruments

18.1 Interest rate and exchange rate derivatives

In connection with the secured credit line for up to Ps. 400,000 contracted with Banamex, and in order to mitigate the risk of future increases in interest rates, the Group entered into a derivatives contract with Banamex, which consists of an interest rate swap. By using this interest rate swap, the Group converts its variable interest rates into fixed rates.

On August 31, 2021, the SWAP with Banamex, was cancelled as the secured credit line was prepaid. A cancellation fee of Ps.18,172 was paid, as mentioned in Note 15.

In addition, to reduce the risks related to fluctuations in the exchange rate of the US dollar, the Group uses derivative financial instruments such as forwards to mitigate foreign currency exposure resulting from inventory purchases made in US dollars.

The details of the derivative financial instrument contracts entered into by the Group as of December 31, 2021, January 3, 2021, and December 31, 2019, are as follows:

As of December 31, 2021


	Notional				Average
	amount in			Fair	Strike
Instrument	thousands			Value	Ps./US$	Maturity date

Forwards US Dollar / Mexican Peso	US$	134,050	Ps.	28,193	20.66	Weekly, through October 2022

Total Assets			Ps.	28,193

As of January 3, 2021

Notional

amount in

Fair

Contract

Maturity

Rate

Instrument

thousands

Value

date

received

paid

Liabilities:

Interest rate swap

Ps.

353,333

Ps.

32,842

11/15/2018

12/15/2023

TIIE 28 days⁽¹⁾

8.33

Average

Strike

Ps./US$

Maturity date

Forwards US Dollar / Mexican Peso

US$

140,325

Ps.

287,452

22.36

Weekly, through October 2021

Total Liabilities

Ps.

320,294

Non-current liability

Ps.

25,179

Total current liability

Ps.

295,115

(2)

As of January 3, 2021, the 28-day TIIE rate was 4.49%.

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As of December 31, 2019

Notional

amount in

Fair

Contract

Maturity

Rate

Instrument

thousands

Value

date

received

paid

Liabilities:

Interest rate swap

Ps.

50,000

Ps.

19,614

11/15/2018

12/15/2023

TIIE 28 days⁽¹⁾

8.33

Average

Strike

Ps./US$

Maturity date

Forwards US Dollar / Mexican Peso

US$

47,690

Ps.

12,695

19.61

Weekly, through October 2020

Total Liabilities

Ps.

32,309

Non-current liability

Ps.

16,754

Total current liability

Ps.

15,555

(1)

As of December 31, 2019, the 28-day TIIE rate was 7.55%.

The impacts in profit or (loss) of the derivative financial instruments for the periods of 2021,2020, and 2019 amounted to gain (loss) of Ps. 330,315, Ps. (287,985) and Ps. (15,680), respectively, which is included in the consolidated and combined statements of comprehensive income in the line item of “unrealized gain (loss) in valuation of derivative financial instruments.”

18.2 Warrants

As part of the merger with DD3 as disclosed in Note 1.d, during 2020, Betterware assumed an obligation that allowed existing warrant holders to purchase (i) a total of 5,804,125 Betterware shares subject to exercise as of April 12, 2020 at a price of is US$ 11.50 per share that would expire on or before March 25, 2025 at the time of redemption or settlement, and (ii) the option to purchase 250,000 units that automatically became an option to issue 250,000 Betterware shares and warrants to buy 250,000 additional Betterware shares. The Company registered the warrants to be traded on OTC Markets, which had an observable fair value.

During July and August 2020, the Group repurchased 1,573,888 warrants. From August 18^th to October 7, 2020, 895,597 warrants were exchanged for 621,098 shares, of which, 462,130 warrants were settled on a cash basis by exchanging 1 warrant for 1 share at a price of US$ 11.44 for share, which resulted in receiving cash by an amount of Ps. 116,419. The remaining 433,467 warrants were exchanged on a cashless basis by exchanging 1 warrant for 0.37 shares.

During September 2020, the purchase option of units was exercised by their holders on a cashless basis, which resulted in the issuance of 214,020 Betterware shares.

Additionally, on October 8, 2020 and as part of the terms of the warrant agreement, the Company issued a notice requiring all of its outstanding public warrants to be redeemed by its holders given that the condition to exercise the redemption was complied. Such condition required that the share price reached US$ 18.00 during a period of at least 20 days. The redemption of warrants was exercised on a cashless basis by exchanging 3,087,022 warrants for 1,142,325 of the Company’s shares. 8,493 public warrants were not exercised by their holders during the redemption period that expired on November 9, 2020, and they were paid by the Company for a price of US$ 0.01 per warrant.

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Finally on December 23, 2020, 239,125 private warrants were exercised on a cashless basis by their holders and exchanged for 156,505 of the Company’s shares.

As of January 3, 2021, the warrant holders had redeemed all of the outstanding warrants and purchase option of units and the Company recognized a loss for the increase in the fair value of the warrants of Ps. 851,520, which is recognized under the heading “Loss in valuation of warrants” in the consolidated and combined statement of profit or loss.

19.Employee benefits

Post-employment benefits –

The Group recognizes the liability and corresponding impacts to profit and loss as well as comprehensive income regarding to the seniority premiums to be paid to its employees. This benefit is determined considering the years of service and the compensation from the employees.

The components of the defined benefit liability for the periods of 2021, 2020 and 2019, are as follows:

Movement in net defined liability –

The following table shows a reconciliation from the opening balances to the closing balances for the net defined benefit liability and its components:


	2021		2020	2019

Balance at January 01	Ps.	1,678	1,630	1,355

Included in profit or loss:
Current service cost		614	425	424
Interest cost		101	114	123

Net cost of the period		715	539	547

Included in other comprehensive income:
Actuarial loss (gain)		(83)	1,199	(102)
Income tax effect		—	(360)	26

Other:

Benefits paid		(217)	(1,330)	(196)

Balance as of December 31, 2021	Ps.	2,093	1,678	1,630

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Actuarial assumptions –

The following were the principal actuarial assumptions at the reporting date (expressed as weighted averages):


	2021		2020		2019

Financial:
Future salary growth	5.0	%	4.0	%	4.5	%
Discount rate	7.6	%	6.1	%	7.1	%

Demographic:
Number of employees	1,272		1,294		654
Age average	32 years		31 years		35 years
Longevity average	2 years		2 years		3 years

Sensitivity analysis –

Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have affected the defined benefit obligation considering a change of ±0.50% in the discount rate.


	Effects as of		Effects as of	Effects as of
	December 31,		January 03,	December 31,
	2021		2021	2019

Increase / decrease in the discount rate
+ 0.50%	Ps.	156	126	(127)
- 0.50%		(174)	(141)	115

20.Financial instruments

Below is the categorization of the financial instruments, excluding cash and cash equivalents, held by the Group as of December 31, 2021, January 3, 2021, and December 31, 2019, as well as the indication of fair value hierarchy level, when applicable:

Accounting classification and fair values


				Fair value
	Amortized			through profit	Fair value
As of December 31, 2021	cost			or loss	hierarchy level

Financial assets -
Trade account receivables, net	Ps.	778,054		—
Trade account receivables from related parties		24		—
Derivative financial instruments		—		28,193	2
Total		778,078		28,193
Financial liabilities -
Accounts payable to suppliers		1,984,932		—
Lease liability		17,880		—
Long term debt		1,510,385		—	—
			��
Total		3,513,197		—

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			Fair value
	Amortized		through profit	Fair value
As of January 03, 2021	cost		or loss	hierarchy level

Financial assets -
Trade account receivables, net	Ps.	757,806	—
Total		757,806	—
Financial liabilities -
Debt		629,877	—
Accounts payable to suppliers		2,078,628	—
Lease liability		24,378	—
Derivative financial instruments		—	320,294	2

Total		2,732,883	320,294


			Fair value
	Amortized		through profit	Fair value
As of December 31, 2019	cost		or loss	hierarchy level

Financial assets -
Trade account receivables, net	Ps.	266,938	—
Other receivables		5,867	—
Total		272,805	—
Financial liabilities -
Debt		677,713	—
Accounts payable to suppliers		529,348	—
Lease liability		24,584	—
Derivative financial instruments		—	32,309	2

Total		1,231,645	32,309

Measurements of fair values

Fair value hierarchy levels 1 to 3 are based on the degree to which the fair value is observable:

●

Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities;

●

Level 2 fair value measurements are those derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and

●

Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

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As previously disclosed, some of the Group’s financial liabilities are measured at fair value at the end of each reporting period. The following table gives information about how the fair values of these financial liabilities are determined (in particular, the valuation technique(s) and inputs used).

Financial assets/ financial liabilities		Valuation technique(s) and key input(s)		Significant unobservable input(s)		Relationship and sensitivity of unobservable inputs to fair value
Foreign currency forward contracts and interest rate swaps (see Note 18)		Discounted cash flows. Future cash flows are estimated based on forward exchange rates (from observable forward exchange rates at the end of the reporting period) and contract forward rates, discounted at a rate that reflects the credit risk of various counterparties.		N/A		N/A

There were 0 transfers between Level 1 and 2 during the current or prior year.

Financial risk management

The Group’s Treasury function provides services to the business, coordinates access to domestic and international financial markets, monitors and manages the financial risks relating to the operations of the Group through internal risk reports which analyses exposures by degree and magnitude of risks. These risks include market risk (including currency risk, interest rate risk, and price risk), credit risk, liquidity risk.

The Group seeks to minimize the effects of these risks by using derivative financial instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s policies approved by the board of directors, which provide written principles on foreign exchange risk, interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and the investment of excess liquidity. Compliance with policies and exposure limits is reviewed by the internal auditors on a continuous basis. The Group does not enter into or trade financial instruments, including derivative financial instruments, for speculative purposes.

Market risk

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

●

In order to reduce the risks related to fluctuations in the exchange rate of foreign currency, the Group uses derivative financial instruments such as forwards to adjust exposures resulting from foreign exchange currency.

●

See Note 18 for disclosure of the derivative financial instruments entered into for the periods of 2021, 2020 and 2019.

Exchange risk management

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

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


	2021		2020	2019

Assets	US$	10,686	29,559	1,331
Liabilities		(35,148)	(49,570)	(16,095)

Net position	US$	(24,462)	(20,011)	(14,764)
Closing exchange rate of the year		20.5157	19.9352	18.8452

Exchange rate sensitivity analysis

The Group is mainly exposed to variations in the Mexican Peso / the U.S. Dollar exchange rate. For sensitivity analysis purposes, the Group has determined a 10 percent increase and decrease in Ps. currency units against the U.S. dollar (“relevant currency”). The 10 percent is the sensitivity rate used when reporting foreign currency risk internally to key management personnel and represents management’s assessment of the reasonably possible change in foreign exchange rates. The sensitivity analysis includes only outstanding foreign currency denominated financial assets/liabilities and adjusts their translation at the year-end for a 10 percent change in foreign currency rates. Given that the foreign exchange currency net position results in a liability, a positive number below indicates an increase in profit where currency units strengthen 10 percent against the relevant currency. For a 10 percent weakening of currency units against the relevant currency, there would be a comparable impact on the net income, and the balances below would be negative.


	2021

Impact on net income	Ps.	50,186

Foreign exchange forward contracts

It is the policy of the Group to enter into foreign exchange forward contracts to manage the foreign currency risk associated with anticipated purchase transactions up to 6 months. Basis adjustments are made to the initial carrying amounts of inventories when the anticipated purchases take place.

See Note 18 with details on foreign currency forward contracts outstanding at the end of the reporting period. Foreign currency forward contract assets and liabilities are presented in the line ‘Derivative financial instruments’ within the consolidated and combined statement of financial position.

The Group has entered into contracts to purchase raw materials from suppliers in China, with such purchases denominated in U.S. dollars. The Group has entered into foreign exchange forward contracts to hedge the exchange rate risk arising from these anticipated future purchases.

Interest rate risk management

During 2020 and 2019, the Group was exposed to interest rate risk from the borrowings at a variable interest rates. The risk is managed by the Group by maintaining an appropriate balance between fixed and variable rate borrowings, and by the use of interest rate swap contracts. Hedging activities are evaluated regularly to align with interest rate views and defined risk appetite; ensuring the most cost-effective hedging strategies are applied.

The Group’s exposures to interest rates on financial assets and financial liabilities are detailed in the liquidity risk management section of this note.

As of December 2021, the Group does not have any SWAP contracted.

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Interest rate sensitivity analysis

The sensitivity analyses determined in 2020, ware based on the exposure to interest rates on the reporting date. For floating rate liabilities, the analysis was prepared assuming the amount of the liability outstanding at the reporting date was outstanding during the year. A one per cent increase or decrease was used when reporting interest rate risk internally to key management personnel and represents management’s assessment of the reasonably possible change in interest rates.

If interest rates had been one per cent higher/lower and all other variables would have held constant, the Group’s net income as of January 3, 2021, and December 31, 2019, would decrease/increase by Ps. 6,266 and Ps.1,352, respectively. This is attributable to the Group’s exposure to interest rates on its borrowings as described in Note 15. As of December 31, 2021, the borrowings were prepaid.

Interest rate swap contracts

During the first months of 2021 and prior periods, under interest rate swap contracts, the Group agreed to exchange the difference between fixed and variable rate interest amounts calculated on agreed notional principal amounts. Such contracts enabled the Group to mitigate the risk of changing interest rates on the cash flow exposures on the issued variable rate debt held. The fair value of interest rate swaps in 2020 was determined by discounting the future cash flows using the curves at the reporting date and the credit risk inherent in the contract and was disclosed in Note 18. The average interest rate was based on the outstanding balances at the end of the financial period.

Credit risk management

The Group’s exposure to credit risk is not significant as no customer represents more than 10% of sales and receivables. The concentration of credit risk is limited due to the fact that the customer base is large and unrelated, spread across diverse geographical areas. Credit policy has been implemented for each customer establishing purchase limits. Customers who do not satisfy the credit references set out by the Group, can only carry out transactions with the Group through prepayment.

See Note 6 for further details on trade account receivables and the expected credit loss estimate.

Collateral held as security and other credit enhancements

The Group does not hold any collateral or other credit enhancements to cover its credit risks associated with its financial assets.

Overview of the Group’s exposure to credit risk

Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in a financial loss/gain to the Group. As of December 31, 2021, the Group’s maximum exposure to credit risk without taking into account any collateral held or other credit enhancements, which will cause a financial loss to the Group due to failure to discharge an obligation by the counterparties and financial guarantees provided by the Group, arises from the carrying amount of the respective recognized financial assets as stated in the consolidated and combined statement of financial position.

For trade receivables, the Group has applied the simplified approach to measure the loss allowance at lifetime ECL. The Group determines the expected credit losses on these items by using a provision matrix, estimated based on historical credit loss experience based on the past due status of the debtors, adjusted as appropriate to reflect current conditions and estimates of future economic conditions. Accordingly, the credit risk profile of these assets is presented based on their past due status in terms of the provision matrix. Note 6, includes further details on the loss allowance for these assets.

Liquidity risk management

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financial assets and liabilities. Details of additional undrawn facilities that the Group has at its disposal to further reduce liquidity risk are set out below

Liquidity maturity analysis

The Group manages its liquidity risk by maintaining adequate reserves of cash and bank credit lines available and consistently monitoring its projected and actual cash flows. The maturity analysis of lease liabilities is presented in Note 13 and long-term debt maturities effectives in 2021, 2020 and 2019 are presented in Note 15.

The Group has access to financing facilities as described below. The Group expects to meet its other obligations from operating cash flows and proceeds of maturing financial assets.


Bank credit lines and long-term debt	2021		2020	2019

Amount used	Ps.	1,500,000	626,554	656,459
Amount not used		250,000	297,828	260,500

Total credit lines and long-term debt	Ps.	1,750,000	924,382	916,959

On August 31, 2021, the bank credit lines were liquidated in advance see Note 15.

Capital risk management

The Group manages its capital to ensure it will be able to continue as a going concern, while it maximizes returns for its shareholders through the optimization of its capital structure. The Group’s management reviews the capital structure when presenting its financial projections to the Board of Directors and stockholders as part of the annual business plan. When performing its review, the Board of Directors considers the cost of equity and its associated risks.

The capital structure of the Group consists of net debt (bonds in 2021 and borrowings in 2020 disclosed in Note 15 after deducting cash and bank balances) and stockholders’ equity of the Group.

21.Stockholders’ equity

Stockholders’ equity as of December 31, 2021, January 3, 2021, and December 31, 2019, by number of shares, is as follows:


	Betterware de	Betterware de México, S.A.P.I. de C.V.
	México, S.A.P.I. de	and BLSM Latino America Servicios,
	C.V.	S.A. de C.V. ⁽¹⁾
	As of December 31,	As of January 03,	As of December 31,
	2021	2021	2019

Fixed capital	10,000	10,000	10,000
Variable capital	37,306,546	36,574,968	8,687,317
	37,316,546	36,584,968	8,697,317

(1)

As of December 31, 2019, for the period ended December 31, 2019, the Group presented combined financial statements including Betterware and BLSM as they were entities under common control. The Group previously prepared combined statements of changes in net parent investment when all periods presented represented the combined results of both entities. As a result of the merger in March 2020, which resulted in BLSM becoming a wholly owned subsidiary of Betterware and the issuance of shares to the existing shareholders of such entities, the Group now prepares consolidated financial statements as of such date. The Group has therefore presented a combined statement of changes in stockholders’ equity for the period ended December 31, 2019, (presenting the net parent investment gross by including contributed capital and retained earnings, rather than net as presented in prior periods), as management believes it is a preferable presentation for comparability purposes with the existing share structure and

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presentation applicable to the consolidated financial statements as of December 31, 2021, and January 3, 2021, and for the periods ended December 31, 2021, and January 3, 2021.

The capital stock is represented by fully subscribed and paid common shares with no par value, with the exception of fixed capital, for which the par value per share is Ps. 10. The variable capital stock is unlimited. As of December 31, 2021 and January 3, 2021 the Company had 283,403 and 1,015,072 treasury shares.

2021

During the ordinary shareholders’ meeting held on February 18, 2021, a reclassification of Ps.876,518 from share premium account to retained earnings was approved.

On June 21, 2021, the Group issued 731,669 treasury shares in favor to Campalier, related to the long-term incentive plan based on shares with the Executive Chairman of the Board, agreed between shareholders on August 15, 2019 and modified on June 30, 2020.

2020

On March 10, 2020, DD3 was merged into Betterware. Due to the merger, which resulted in the Company increased its variable capital by issuing shares to the previous shareholders of DD3 by Ps.181,865, less issuance costs of Ps.16,736. On the same date, a liability of Ps. 55,810 for the fair value of the assumed warrants obligation was recognized.

On October 2, 2020, the Ordinary Shareholders’ Meeting approved an increase in the Company’s variable capital by an amount of Ps. 89,235, due to the cash exercise of 352,256 warrants, equivalent to 352,256 shares.

On November 9, 2020, the Ordinary Shareholders’ Meeting approved an increase in the Company’s variable capital by an amount of Ps. 27,183, due to the cash exercise of 109,874 warrants, equivalent to 109,874 shares.

On November 9, 2020, the Ordinary Shareholders’ Meeting approved an increase in the Company’s share premium by an amount of Ps. 860,571, due to the cashless exercise of 3,520,489 warrants as of such date and as part of the redemption (see Note 1.f), equivalent to 1,301,293 shares.

On December 14, 2020, the Ordinary Shareholders’ Meeting approved the merger of Promotora Forteza (a commonly controlled entity) into Betterware. As part of the merger stockholders’ equity increased Ps. 4,724.

As of January 3, 2021, and as a result of the exercise of the purchase option of units by its holders (see Note 18.2) and the share-based payments granted to certain directors and executives (see Note 22), the total capital increase in share premium amounted Ps. 909,428.

Dividends

2021

On February 18, 2021, the General Shareholders' Meeting approved a payment of dividends from retained earnings in the amount of Ps.350,000, which were paid in cash on March 4, 2021. Part of this amount (Ps.180,489) was paid to Campalier based on its shareholding. The dividend per share was Ps.9.57.

On May 12, 2021, the General Shareholders' Meeting approved a payment of dividends from retained earnings in the amount of Ps.350,000, which were paid in cash on May 20, 2021. Part of this amount (Ps.180,489) was paid to Campalier based on its shareholding. The dividend per share was Ps.9.57.

On August 13, 2021, the General Shareholders' Meeting approved a payment of dividends from retained earnings in the amount of Ps.350,000, which were paid in cash on August 19, 2021. Part of this amount (Ps.183,812) was paid to Campalier based on its shareholding. The dividend per share was Ps.9.38.

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On October 29, 2021, the General Shareholders' Meeting approved a payment of dividends in the amount of Ps.350,000, which were paid in cash on November 4, 2021. Part of this amount (Ps.183,812) was paid to Campalier based on its shareholding. The dividend per share was Ps.9.38.

2020

On January 10, 2020, the General Shareholders’ Meeting approved a payment of dividends from retained earnings in the amount of Ps. 70,000, which were paid in cash on January 10, 2020. Part of this amount (Ps. 42,739) was paid to Campalier based on its shareholding. The dividend per share was Ps. 2.32.

On May 8, 2020, the General Shareholders’ Meeting approved a payment of dividends on account of the profits to be generated in the fiscal year 2020 in the amount of Ps. 100,000, which were paid in cash on May 28, 2020. Part of this amount (Ps. 53,522) was paid to Campalier based on its shareholding. The dividend per share was Ps. 2.90.

On August 17, 2020, the Ordinary General Shareholders’ Meeting approved a payment of dividends on account of the profits to be generated in fiscal year 2020 in the amount of Ps. 330,000, which were paid in cash on August 20, 2020. Part of this amount (Ps. 176,621) was paid to Campalier based on their shareholding. The dividend per share was Ps. 9.27.

On November 9, 2020, the Ordinary General Shareholders’ Meeting approved a payment of dividends on account of the profits to be generated in the fiscal year 2020 in the amount of Ps. 330,000, which were paid in cash on November 19, 2020. Part of this amount (Ps. 168,136) was paid to Campalier based on their shareholding. The dividend per share was Ps. 9.11.

2019

On May 29, 2019, the Ordinary General Shareholders’ Meeting approved dividends payment from retained earnings for an amount of Ps. 128,000 which were paid in cash. Part of this amount (Ps. 78,151) was paid to Campalier based on its equity interest.

On October 8, 2019, the Ordinary General Shareholders’ Meeting approved dividends payment from retained earnings for an amount of Ps. 150,000 which were paid in cash. Part of this amount (Ps. 91,583) was paid to Campalier based on its equity interest.

Legal reserve

Retained earnings include the statutory legal reserve. The Mexican General Corporate Law requires that at least 5% of net income of the year be transferred to the legal reserve until the reserve equals 20% of common stock at par value (historical pesos). The legal reserve may be capitalized but may not be distributed unless the Group is dissolved. The legal reserve must be replenished if it is reduced for any reason. As of December 31, 2021, January 3, 2021, and December 31, 2019, the legal reserve, in pesos, was Ps. 10,679. Ps. 10,679, and Ps. 10,370, respectively and it is included in retained earnings.

22.Share-based payments

As disclosed in Notes 1.f and 2.w, the Group grants a compensation plan based on Betterware’s shares to Executive Chairman and certain key Directors and executives. The plans were granted at the Board of Directors' Meeting on August 15, 2019, and modified July 30, 2020, in which it was established that to obtain the rights to the corresponding shares of the Group, there should be a performance metric based on EBITDA (Earnings before interest, taxes, depreciation and amortization) and their continuance at Betterware, which will be delivered based on the particular compensation plans of each individual.

The effects associated with the award of share-based payments were recognized in the consolidated and combined statement of income and other comprehensive income, with the corresponding effect in stockholders' equity. In May 2021, the conditions of the share-based compensation plan for the Executive Chairman of the Board were met, for which Betterware shares equivalent to 2% were delivered to Campalier.

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23.Earnings per share

The amount of basic earnings per share is calculated by dividing the net income for the period attributable to shareholders of the Group’s ordinary shares by the weighted average of the ordinary shares outstanding during the period.

The amount of diluted earnings per share is calculated by dividing the net income attributable to shareholders of the Group's common shares (after adjusting it due to changes in the fair value of warrants recognized at FVTPL in accordance with IFRS 9 in 2020) by the weighted average of the common shares outstanding during the period plus the weighted average number of ordinary shares that would have been issued at the time of converting all diluted potential ordinary shares into ordinary shares.

The following events resulted in the issuance of ordinary shares for the 2021 and 2020 periods:

2021

●

For the year 2021, the share-based payment incentive plans with the Executive Chairman of the Board, certain key Directors and executives, issued by the Group (see Note 22) qualified as a potentially dilutive event, resulting in 20,680 potentially dilutive shares, corresponding to the share-based incentive plan for directors and key executives. The Group issued 731,669 treasury shares during the year related to the share-based incentive plan of the Executive Chairman of the Board; such shares were considered from January 1, 2021, within the calculation of diluted earnings per share for the year ended December 31, 2021.

2020

●

The warrants that DD3 had issued and that were automatically converted into warrants to purchase a total of 5,804,125 shares, exercised by its holders through a cash and cashless basis. The cash exercises resulted in the issuance of 462,130 shares and the cashless exercises in the issuance of 1,457,798 shares.

●

The unit purchase option subject to the warrant contract to issue 250,000 Betterware shares and warrants to buy 250,000 additional Betterware shares (see Note 1.e). The purchase option resulted in the issuance of 214,020 Betterware shares, which were excersied on a cashless basis.

●

The effect of warrants and unit purchase options throughout the 2020 and while not exercised in the period qualified as antidilutive events. In accordance with IAS 33, antidilutive potential ordinary shares are disregarded in the calculation of diluted earnings per share.

●

On 2020, the merger transaction was, which closed on March 13, 2020, between Betterware and DD3 and the subscription and payment of Betterware shares on Nasdaq, were considered on the operation, moreover all Betterware shares issued and outstanding immediately prior to the closing date were canceled and new shares were issued.

Additionally, IFRS requires that the calculation of basic and diluted earnings per share ("EPS") for all periods presented be adjusted retrospectively when the number of ordinary shares or potential ordinary shares outstanding increases as a result of a capitalization, bond issue, or share split, or decreases as a result of a reverse share split, EPS calculations for the reporting period and the comparative period should be based on the new number of shares.

As of December 31, 2021, January 3, 2021, and December 31, 2019, Betterware had 37,316,546, 34,451,020 and 30,199,945 outstanding shares, respectively.

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The following table shows the income and share data used in the calculation of basic and diluted earnings per share for the periods of 2021, 2020 and 2019:


	2021		2020	2019
Net income (in thousands of pesos)
Attributable to Owners of the Company	Ps.	1,804,590	338,361	472,142

Shares (in thousands of shares)
Weighted average of outstanding shares
Basic		36,974	34,083	30,200
Diluted		37,337	34,383	30,200

Basic and diluted earnings per share:

Basic earnings per share (pesos per share)	Ps.	48.81	9.93	15.63
Diluted earnings per share (pesos per share)		48.33	9.84	15.63

24.Related party balances and transactions

The following balances were outstanding as of December 31, 2021, January 3, 2021, and December 31, 2019:

Trading transactions –


	2021
	Lease income		Donations
Revenues /expenses to Betterware with:
Fundación Betterware., A.C.	Ps.	42	920

Remuneration of key management personnel –

Key management personnel compensation comprised short-term employee benefits of Ps. 42,170, Ps.37,713 and Ps.34,540 as of December 31, 2021, January 3, 2021, and December 31, 2019, respectively. Compensation of the Group’s key management personnel includes salaries and non-cash benefits. No long-term employee benefits were paid to key management personnel during 2021, 2020 and 2019.

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25.Revenue and operating expenses

Revenue –

Revenue recognized in the 2021, 2020 and 2019 periods, is generated in Mexico. A disaggregation per home product is as follows:


	2021		2020	2019

Kitchen and food preservation	Ps.	3,274,245	2,532,420	1,229,148
Home solutions		2,312,675	1,456,666	529,551
Bedroom		1,603,930	826,965	275,722
Bathroom		1,214,524	842,724	441,093
Laundry & Cleaning		823,880	828,473	318,782
Tech & mobility		767,614	773,160	290,366
Internet, telephone services and equipment		19,030	—	—
Interest income		12,498	—	—
Clothes and shoes		11,272	—	—

	Ps.	10,039,668	7,260,408	3,084,662

Contract balances

As of December 31, 2021, January 3, 2021, and December 31, 2019, the Group did not identify significant costs to obtain/fulfill a contract that are required to be capitalized as an asset. Consequently, the Group did not perform any analysis in order to identify possible impairment losses. See Note 6 about the expected credit loss model applicable to all financial assets measured at amortized cost.

Operating expenses –

Operating expenses by nature, for the periods of 2021, 2020 and 2019 are as follows:


	2021		2020	2019

Cost of personnel services and other employee benefits	Ps.	621,519	564,213	423,956
Promotions for the sales force		503,291	172,177	26,311
Distribution costs		463,762	331,023	121,155
Sales catalog		425,814	247,250	128,687
Packing materials		201,006	112,512	58,361
Impairment loss on trade accounts receivables		198,495	57,627	22,512
Events, marketing and advertising		109,822	19,237	37,848
Depreciation and amortization		82,122	43,688	38,394
Commissions and professional fees		69,954	61,403	13,577
Rent expense		52,660	22,451	17,663
Bank fees		34,335	23,965	15,436
Travel expenses		11,258	13,522	18,835
Other		201,758	179,987	68,853

	Ps.	2,975,796	1,849,055	991,588

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26.Segment information

Information reported to the Chief Operating Decision Maker (“CODM”), for the purposes of resource allocation and assessment of business performance, focuses on the Group as a whole and with main strategies on a company-wide basis. As discussed in Note 1, the Group is focused on the home organization segment whose product portfolio includes home organization; kitchen preparation, food containers, and practical furniture, among other categories (see Note 25). The Group’s products are offered through 9 catalogs in Mexico over the year. As such, no reporting on segment information is deemed necessary to assess the Group performance given its business model and current operations.

In addition to the above, the Group obtains all its revenue from the Mexican market, therefore no geographic information is disclosed. Also, the Group considers that there are no major customers, and therefore, no concentration risks exist given the nature of the business and the sale of its products through a significant number of distributors.

27.Contingencies

The Group is a subject to various legal actions in the normal course of its business. The Group is not involved in or threatened by proceedings for which the Group believes it is not adequately insured or indemnified or which, if determined adversely, would have a material adverse effect on its consolidated and combined financial position, results of operations and cash flows.

Additional taxes payable could arise in transactions with related parties if the tax authority, during a review, believes that prices and amounts used by the Group are not similar to those used with or between independent parties in comparable transactions.

In accordance with the current tax legislation, the authorities have the power to review up to five fiscal years prior to the last income tax return filed.

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

28.Subsequent events

In the preparation of the consolidated and combined financial statements, the Company has evaluated the events and transactions for their recognition or disclosure subsequent to December 31, 2021, and until April 28, 2022 (date of issuance of the consolidated and combined financial statements), and except as noted below, has not identified subsequent significant events:

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

On February 11, 2022, a dividend payment of Ps. 350,000, paid on March 3, 2022, was approved at the Ordinary General Shareholders’ Meeting.

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On March 28, 2022, the Ordinary General Assembly of Shareholders of GurúComm, S.A.P.I. approved the retirement of Betterware as a shareholder. Then, 55,514 subscribed and paid shares were reimbursed, and 37,693 subscribed and unpaid shares were canceled. Betterware retired its investment because the business was not growing according to shareholder expectations, and the return on investment would take more years than anticipated. The financial effect that this transaction had at consolidated level was a loss of Ps.14,648.

As of the date of the consolidated and combined financial statements, the Company has repurchased 72,626 shares amounted Ps. 25,321, according to the program approved on September 10, 2021, by the Board, which states that it would be possible to repurchase up to US$ 50,000 until December 31, 2022.

29.Authorization to issue the consolidated and combined financial statements

On April 28, 2022, the issuance of the Group’s consolidated and combined financial statements was authorized by Andrés Campos, Chief Executive Officer, and Diana Jones, Chief Financial Officer.

* * * * * *

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Positive
Negative
Uncertain
Constraining
Legalese
Litigous
Readability	H.S. freshman Avg

December 31,

January 03,

Selling Expenses