Partnership with GO-TO and Equity Raising Presentation
Key risks
Go To business risk
The negotiations between BWX and Go To were conducted on the basis of the information that was publicly available to BWX and on certain disclosures by Go To. While BWX considers the due diligence investigations to have been adequate and consistent with market practice for a transaction of this type, the
investigations were undertaken within a limited timeframe and BWX has not been able to verify the accuracy, reliability or completeness of all of the information provided by Go To against independent data.
As a result, following the implementation of the Partnership, unknown or unquantified risks and liabilities of Go To may arise, or expected types of risks and liabilities may be greater than anticipated, and this may impact negatively on profitability, results of operations, financial position or market value of Go To,
which in turn will affect the value and performance of BWX's investment in this business.
Reliance on Key Distributor
A substantial portion of the Partnership's revenue is derived from a major distributor of its products in Australia through a distribution agreement. The loss or impairment of that relationship for any reason, including the closure of that distributors store due to new or ongoing COVID-19 restrictions, a material
reduction in prices or deterioration in trading terms would have an adverse affect on the Partnership's financial performance which in turn will affect the value and performance of BWX's investment in this business.
More generally, there is a risk that the Partnership may fail to retain customers through its key distributor for a number of reasons, including pricing, competition or a failure to meet consumer expectations of its products.
Partnership Key Woman Risk
The operation of the Partnership's business is reliant on the founder and brand ambassador of Go To. The loss of the founder and brand ambassador due to reduction in brand integrity or disputes with BWX regarding the management of Go To's operations or the creative control or direction of the Partnership,
could have a materially adverse impact on Go To and its activities and financial performance, which in turn will affect the value and performance of BWX's investment in this business.
Given the personal brand of founder and brand ambassador and its impact on the promotion and marketing of the Go To business, the termination of the licence deed between the founder and brand ambassador and Go To would have an adverse affect on the financial performance, which in turn would impact
on the value and performance of BWX's investment in this business.
Failure to acquire
If for any reason the acquisition of the Go To business does not proceed, including because of a failure to satisfy conditions precedent or other breach of the share purchase agreement between BWX and the sellers of a majority stake in the Go To business, BWX will need to redirect the use of the majority of the
funds raised under the Placement and SPP from the purchase of the majority stake in Go To, to working capital, another acquisition, a potential return of capital to Shareholders or other uses to be determined by the board of BWX.
Product Safety and Liability
Product safety or quality failures, actual or perceived, or allegations of product contamination, even when false or unfounded, could tarnish the image of BWX's brands and could cause consumers to choose other products. Allegations of contamination or other adverse commentary on product safety or
suitability for use by a particular consumer, even untrue, may require BWX to recall a product from all of the markets in which the affected product was distributed. Such issues or recalls could negatively affect the Company's profitability and reputation.
If BWX's products are perceived to be defective or unsafe, or if they otherwise fail to meet consumers' expectations, the Company's relationships with consumers could suffer, the appeal of one or more of its brands could be diminished, and the Company could lose sales or become subject to liability claims. In
addition, safety or other defects in BWX's competitors' products could reduce consumer demand for the Company's products if consumers view them to be similar. Any of these outcomes could result in a material adverse effect on BWX's business, financial condition and results of operations.
Counterparty Risk
As a manufacturing and distribution company, BWX is heavily reliant on its main customers, suppliers and strategic partners, including its distribution partners.
In Australia BWX is reliant on its retail partners who are responsible for a majority of the sales and distribution of BWX's products to Australian pharmacies, grocery, mass market and health stores and other retailers. In the US, BWX is reliant on its distribution partners who are responsible for a majority of sales
and distribution of BWX's products to health stores and other retailers. These distribution partners each purchase and carry in their store networks a broad variety of BWX's product range. Each of them are large commercial entities with significant bargaining leverage in contractual negotiation. As is customary
in the beauty and personal care market, BWX and/or its distributors are a party to each of their pharmacy customers' or grocery customers' standard trading terms which do not contain minimum purchase volumes. The US business of BWX has a substantial amount of direct to consumer sales which mitigates
the risk of reliance on its health store customers. The Australian business of BWX has some capacity to undertake direct to consumer sales but not as much capacity as the US business. The ability to move to direct to consumer sales in the Australian business of BWX may also be hindered by the inability of
Australia Post to cope with dramatic increases in demand for delivery of goods across Australia due to the COVID-19 pandemic.
Accordingly if underlying consumer demand for BWX's products diminishes then the distributors and direct customers will reduce the volume of their orders for BWX's products.
STRICTLY CONFIDENTIAL
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