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.............................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................................wf
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended SeptemberJune 30, 20222023
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 001-38785
STRYVE FOODS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware | 87-1760117 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
5801 Tennyson Parkway, Suite 275Post Office Box 864
PlanoFrisco, TX 7502475034
(Address of principal executive offices)
(972) 987-5130
(Issuer’s telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Class A common stock | SNAX | The NASDAQ Stock Market LLC | ||
Warrants, each exercisable for 1/15th of one share of Class A common stock at an exercise price of | SNAXW | The NASDAQ Stock Market LLC |
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☐ | Accelerated filer | ☐ |
Non-accelerated filer | ☒ | Smaller reporting company | ☒ |
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
At November 14, 2022,As of August 7, 2023, 25,010,6121,853,460 shares of the registrant’s Class A common stock, $0.0001 par value, and 7,093,711405,313 shares of the registrant’s Class V common stock, $0.0001 par value, were issued and outstanding.
STRYVE FOODS, INC.
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBERJUNE 30, 20222023
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
STRYVE FOODS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
|
| September 30, |
| December 31, |
|
| June 30, |
| December 31, |
| ||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
ASSETS |
| (Unaudited) |
|
|
|
| (Unaudited) |
|
|
| ||||||
CURRENT ASSETS |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash and cash equivalent |
| $ | 4,354,624 |
|
| $ | 2,217,191 |
| ||||||||
Cash and cash equivalents |
| $ | 320,182 |
|
| $ | 623,163 |
| ||||||||
Accounts receivable, net |
|
| 2,142,934 |
|
|
| 2,900,281 |
|
|
| 2,972,643 |
|
|
| 2,488,693 |
|
Inventory, net |
|
| 8,927,055 |
|
|
| 7,215,981 |
|
|
| 8,351,295 |
|
|
| 8,258,642 |
|
Prepaid media spend, net of reserve |
|
| — |
|
|
| 450,000 |
| ||||||||
Prepaid expenses and other current assets |
|
| 2,528,134 |
|
|
| 2,255,539 |
|
|
| 1,071,912 |
|
|
| 1,550,717 |
|
Total current assets |
|
| 17,952,747 |
|
|
| 15,038,992 |
|
|
| 12,716,032 |
|
|
| 12,921,215 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Property and equipment, net |
|
| 7,896,559 |
|
|
| 6,825,895 |
|
|
| 7,896,713 |
|
|
| 8,816,573 |
|
Right of use asset, net |
|
| 618,136 |
|
|
| 767,382 |
|
|
| 4,812,977 |
|
|
| 5,009,954 |
|
Goodwill |
|
| 8,450,000 |
|
|
| 8,450,000 |
|
|
| 8,450,000 |
|
|
| 8,450,000 |
|
Intangible asset, net |
|
| 4,422,608 |
|
|
| 4,604,359 |
|
|
| 4,240,857 |
|
|
| 4,362,024 |
|
Prepaid media spend, net of reserve and net of current portion |
|
| — |
|
|
| 1,084,548 |
| ||||||||
Other assets |
|
| — |
|
|
| 4,192 |
| ||||||||
TOTAL ASSETS |
| $ | 39,340,050 |
|
| $ | 36,775,368 |
|
| $ | 38,116,579 |
|
| $ | 39,559,766 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
LIABILITIES AND STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| ||||
CURRENT LIABILITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Accounts payable |
|
| 2,543,373 |
|
| $ | 3,097,516 |
|
| $ | 4,512,232 |
|
| $ | 3,009,875 |
|
Accrued expenses |
|
| 2,635,204 |
|
|
| 1,634,978 |
|
|
| 1,815,200 |
|
|
| 1,727,555 |
|
Current portion of lease liability |
|
| 215,127 |
|
|
| 168,482 |
|
|
| 337,829 |
|
|
| 327,915 |
|
Line of credit, net of debt issuance costs |
|
| 123,191 |
|
|
| 3,500,000 |
|
|
| 882,174 |
|
|
| 1,046,101 |
|
Current portion of long-term debt |
|
| 1,559,139 |
|
|
| 3,447,056 |
| ||||||||
Promissory notes payable, net of debt discount and debt issuance costs |
|
| 2,246,307 |
|
|
| — |
| ||||||||
Promissory notes payable due to related parties, net of debt discount and debt issuance costs |
|
| 854,678 |
|
|
| — |
| ||||||||
Current portion of long-term debt and other short-term borrowings |
|
| 273,359 |
|
|
| 969,421 |
| ||||||||
Total current liabilities |
|
| 7,076,034 |
|
|
| 11,848,032 |
|
|
| 10,921,779 |
|
|
| 7,080,867 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Long-term debt, net of current portion, net of debt issuance costs |
|
| 3,470,968 |
|
|
| 119,542 |
|
|
| 5,604,568 |
|
|
| 3,696,578 |
|
Lease liability, net of current portion |
|
| 436,351 |
|
|
| 598,900 |
|
|
| 4,558,100 |
|
|
| 4,734,128 |
|
Financing obligation - related party operating lease |
|
| 7,500,000 |
|
|
| 7,500,000 |
|
|
| 7,500,000 |
|
|
| 7,500,000 |
|
Deferred tax liability, net |
|
| 67,223 |
|
|
| 67,223 |
|
|
| 1,555 |
|
|
| 1,555 |
|
Deferred stock compensation liability |
|
| 602,605 |
|
|
| 71,197 |
|
|
| 167,883 |
|
|
| 89,828 |
|
Warrant liability |
|
| 28,421 |
|
|
| 128,375 |
|
|
| 1,975 |
|
|
| 20,625 |
|
TOTAL LIABILITIES |
|
| 19,181,602 |
|
|
| 20,333,269 |
|
|
| 28,755,860 |
|
|
| 23,123,581 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
STOCKHOLDERS' EQUITY |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Preferred stock - $0.0001 par value, 10,000,000 shares authorized, 0 shares issued and outstanding |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Class A common stock - $0.0001 par value, 400,000,000 shares authorized, 22,964,806 and 8,633,755 shares issued and outstanding, respectively |
|
| 2,296 |
|
|
| 863 |
| ||||||||
Class V common stock - $0.0001 par value, 200,000,000 shares authorized, 7,488,343 and 11,502,355 shares issued and outstanding |
|
| 749 |
|
|
| 1,150 |
| ||||||||
Class A common stock - $0.0001 par value, 400,000,000 shares authorized, 1,757,588 and 1,715,186 shares issued and outstanding, respectively |
|
| 176 |
|
|
| 171 |
| ||||||||
Class V common stock - $0.0001 par value, 15,000,000 shares authorized, 405,313 and 419,974 shares issued and outstanding |
|
| 41 |
|
|
| 42 |
| ||||||||
Additional paid-in-capital |
|
| 132,902,242 |
|
|
| 100,551,257 |
|
|
| 135,563,491 |
|
|
| 133,687,588 |
|
Accumulated deficit |
|
| (112,746,839 | ) |
|
| (84,111,171 | ) |
|
| (126,202,989 | ) |
|
| (117,251,616 | ) |
TOTAL STOCKHOLDERS' EQUITY |
|
| 20,158,448 |
|
|
| 16,442,099 |
|
|
| 9,360,719 |
|
|
| 16,436,185 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY |
| $ | 39,340,050 |
|
| $ | 36,775,368 |
|
| $ | 38,116,579 |
|
| $ | 39,559,766 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
STRYVE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
| For The Three Months |
|
| For The Nine Months |
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||
|
|
|
|
|
|
|
| Three Months |
| Six Months |
|
| |||||||||||||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| ||||||||
SALES, net |
| $ | 6,170,468 |
|
| $ | 9,061,770 |
|
| $ | 24,537,180 |
|
| $ | 23,247,568 |
|
| $ | 5,996,541 |
|
| $ | 10,946,158 |
|
| $ | 10,642,794 |
|
| $ | 18,366,712 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
COST OF GOODS SOLD (exclusive of depreciation shown separately below) |
|
| 4,786,054 |
|
|
| 5,807,924 |
|
|
| 26,453,793 |
|
|
| 13,734,845 |
|
|
| 4,945,856 |
|
|
| 15,371,112 |
|
|
| 8,628,859 |
|
|
| 21,667,739 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
GROSS (LOSS) MARGIN |
|
| 1,384,414 |
|
|
| 3,253,846 |
|
|
| (1,916,613 | ) |
|
| 9,512,723 |
| |||||||||||||||||
GROSS PROFIT |
|
| 1,050,685 |
|
|
| (4,424,954 | ) |
|
| 2,013,935 |
|
|
| (3,301,027 | ) |
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Selling expenses |
|
| 2,640,667 |
|
|
| 5,826,749 |
|
|
| 12,872,928 |
|
|
| 17,873,161 |
|
|
| 1,778,274 |
|
|
| 4,717,178 |
|
|
| 3,747,283 |
|
|
| 8,743,233 |
|
|
Operations expense |
|
| 1,084,596 |
|
|
| 1,234,002 |
|
|
| 3,664,135 |
|
|
| 3,264,087 |
|
|
| 625,289 |
|
|
| 1,349,157 |
|
|
| 1,138,878 |
|
|
| 2,579,540 |
|
|
Salaries and wages |
|
| 1,939,670 |
|
|
| 3,973,204 |
|
|
| 8,035,646 |
|
|
| 6,976,515 |
|
|
| 1,469,307 |
|
|
| 3,510,076 |
|
|
| 3,632,459 |
|
|
| 6,095,976 |
|
|
Depreciation and amortization expense |
|
| 518,240 |
|
|
| 402,290 |
|
|
| 1,465,966 |
|
|
| 1,193,846 |
|
|
| 552,224 |
|
|
| 503,360 |
|
|
| 1,103,880 |
|
|
| 947,725 |
|
|
Gain on disposal of fixed assets |
|
| (50,280 | ) |
|
| (13,250 | ) |
|
| (74,292 | ) |
|
| (21,828 | ) | |||||||||||||||||
Prepaid media reserve |
|
| — |
|
|
| 1,489,028 |
|
|
| — |
|
|
| 1,489,028 |
|
| ||||||||||||||||
(Gain) loss on disposal of fixed assets |
|
| 1,295 |
|
|
| (24,012 | ) |
|
| 1,295 |
|
|
| (24,012 | ) |
| ||||||||||||||||
Total operating expenses |
|
| 6,132,893 |
|
|
| 11,422,995 |
|
|
| 25,964,383 |
|
|
| 29,285,781 |
|
|
| 4,426,389 |
|
|
| 11,544,787 |
|
|
| 9,623,795 |
|
|
| 19,831,490 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
OPERATING LOSS |
|
| (4,748,479 | ) |
|
| (8,169,149 | ) |
|
| (27,880,996 | ) |
|
| (19,773,058 | ) |
|
| (3,375,704 | ) |
|
| (15,969,741 | ) |
|
| (7,609,860 | ) |
|
| (23,132,517 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
OTHER (EXPENSE) INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Interest expense |
|
| (189,794 | ) |
|
| (757,811 | ) |
|
| (558,825 | ) |
|
| (2,715,068 | ) |
|
| (963,784 | ) |
|
| (180,536 | ) |
|
| (1,362,729 | ) |
|
| (369,031 | ) |
|
PPP loan forgiveness |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,669,552 |
| |||||||||||||||||
Change in fair value of Private Warrants |
|
| 14,644 |
|
|
| 213,300 |
|
|
| 99,954 |
|
|
| 213,300 |
|
|
| 10,400 |
|
|
| 39,996 |
|
|
| 18,650 |
|
|
| 85,310 |
|
|
Gain on debt extinguishment |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 545,200 |
| |||||||||||||||||
Other (expense) income |
|
| (43,470 | ) |
|
| 2,577 | �� |
|
| (258,853 | ) |
|
| 27,124 |
| |||||||||||||||||
Other income (expense) |
|
| 7,417 |
|
|
| (215,383 | ) |
|
| (6,956 | ) |
|
| (215,383 | ) |
| ||||||||||||||||
Total other (expense) income |
|
| (218,620 | ) |
|
| (541,934 | ) |
|
| (717,724 | ) |
|
| (259,892 | ) |
|
| (945,967 | ) |
|
| (355,923 | ) |
|
| (1,351,035 | ) |
|
| (499,103 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NET LOSS BEFORE INCOME TAXES |
|
| (4,967,099 | ) |
|
| (8,711,083 | ) |
|
| (28,598,720 | ) |
|
| (20,032,950 | ) |
|
| (4,321,671 | ) |
|
| (16,325,664 | ) |
|
| (8,960,895 | ) |
|
| (23,631,620 | ) |
|
Income taxes |
|
| 507 |
|
|
| — |
|
|
| 36,948 |
|
|
| — |
| |||||||||||||||||
Income tax (benefit) expense |
|
| (12,854 | ) |
|
| 28,655 |
|
|
| (9,523 | ) |
|
| 36,441 |
|
| ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||
NET LOSS |
| $ | (4,967,606 | ) |
| $ | (8,711,083 | ) |
| $ | (28,635,668 | ) |
| $ | (20,032,950 | ) |
| $ | (4,308,817 | ) |
| $ | (16,354,319 | ) |
| $ | (8,951,372 | ) |
| $ | (23,668,061 | ) |
|
Loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Basic and diluted |
| $ | (0.16 | ) |
| $ | (0.48 | ) |
| $ | (0.94 | ) |
| $ | (1.56 | ) |
| $ | (2.05 | ) |
| $ | (7.93 | ) |
| $ | (4.27 | ) |
| $ | (11.70 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Weighted average shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Basic and diluted |
|
| 30,991,943 |
|
|
| 18,263,099 |
|
|
| 30,568,431 |
|
|
| 12,878,733 |
|
|
| 2,105,620 |
|
|
| 2,063,099 |
|
|
| 2,095,621 |
|
|
| 2,023,713 |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
STRYVE FOODS, INC.
THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20222023
(Unaudited)
|
|
|
| |||||||||||||||||||||||||||
|
|
|
| Common Stock Class A |
|
| Common Stock Class B/V |
|
| Additional |
|
| Accumulated |
|
|
|
| |||||||||||||
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in-Capital |
|
| Deficit |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE, JANUARY 1, 2022 |
|
|
|
| 8,633,755 |
|
| $ | 863 |
|
|
| 11,502,355 |
|
| $ | 1,150 |
|
| $ | 100,551,257 |
|
| $ | (84,111,171 | ) |
| $ | 16,442,099 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
PIPE Investment |
|
|
|
| 2,496,934 |
|
|
| 250 |
|
|
| — |
|
|
| — |
|
|
| 32,310,937 |
|
|
| — |
|
|
| 32,311,187 |
|
Prefunded Warrants converted into Common Stock Class A |
|
|
|
| 1,443,557 |
|
|
| 144 |
|
|
| — |
|
|
| — |
|
|
| (69 | ) |
|
| — |
|
|
| 75 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Post closing adjustment of BCA |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (238,089 | ) |
|
| — |
|
|
| (238,089 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of Restricted Stock Awards |
|
|
|
| 108,500 |
|
|
| 11 |
|
|
| — |
|
|
| — |
|
|
| 36,698 |
|
|
| — |
|
|
| 36,709 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,313,742 | ) |
|
| (7,313,742 | ) |
BALANCE, MARCH 31, 2022 |
|
|
|
| 12,682,746 |
|
|
| 1,268 |
|
|
| 11,502,355 |
|
|
| 1,150 |
|
|
| 132,660,734 |
|
|
| (91,424,913 | ) |
|
| 41,238,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Prefunded Warrant converted into Common Stock Class A |
|
|
|
| 3,553,589 |
|
|
| 356 |
|
|
| — |
|
|
| — |
|
|
| (96 | ) |
|
| — |
|
|
| 260 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Issuance of Restricted Stock Awards |
|
|
|
| 501,125 |
|
|
| 50 |
|
|
| — |
|
|
| — |
|
|
| 172,802 |
|
|
| — |
|
|
| 172,852 |
|
Issuance of Restricted Stock Units |
|
|
|
| 13,334 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 68,802 |
|
|
| — |
|
|
| 68,803 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net Loss |
|
|
|
| — |
|
|
| - |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,354,319 | ) |
|
| (16,354,319 | ) |
BALANCE, JUNE 30, 2022 |
|
|
|
| 16,750,794 |
|
|
| 1,675 |
|
|
| 11,502,355 |
|
|
| 1,150 |
|
|
| 132,902,242 |
|
|
| (107,779,232 | ) |
|
| 25,125,835 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Prefunded Warrant converted into Common Stock Class A |
|
|
|
| 2,200,000 |
|
|
| 220 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 220 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Exchanged BV for Class A shares |
|
|
|
| 4,014,012 |
|
|
| 401 |
|
|
| (4,014,012 | ) |
|
| (401 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net Loss |
|
|
|
| — |
|
|
| - |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,967,606 | ) |
|
| (4,967,606 | ) |
BALANCE, SEPTEMBER 30, 2022 |
|
|
|
| 22,964,806 |
|
|
| 2,296 |
|
|
| 7,488,343 |
|
|
| 749 |
|
|
| 132,902,242 |
|
|
| (112,746,839 | ) |
|
| 20,158,448 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
| Class A Common Stock |
|
| Class V Common Stock |
|
| Additional |
|
| Accumulated |
|
|
|
| |||||||||||||
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in-Capital |
|
| Deficit |
|
| Total |
| |||||||
BALANCE, JANUARY 1, 2023 |
|
|
|
| 1,714,973 |
|
| $ | 172 |
|
|
| 419,941 |
|
| $ | 42 |
|
| $ | 133,687,587 |
|
| $ | (117,251,616 | ) |
| $ | 16,436,185 |
|
Exchange of Class B units and Class V shares for Class A shares |
|
|
|
| 10,241 |
|
|
| 1 |
|
|
| (10,241 | ) |
|
| (1 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
Net loss |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,642,556 | ) |
|
| (4,642,556 | ) |
BALANCE, MARCH 31, 2023 |
|
|
|
| 1,725,214 |
|
| $ | 173 |
|
|
| 409,700 |
|
| $ | 41 |
|
| $ | 133,687,587 |
|
| $ | (121,894,172 | ) |
| $ | 11,793,629 |
|
Exchanged BV for Class A shares |
|
|
|
| 4,387 |
|
|
| — |
|
|
| (4,387 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Issuance of Restricted Stock Awards |
|
|
|
| 26,814 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 477,155 |
|
|
| — |
|
|
| 477,158 |
|
Issuance of Restricted Stock Units |
|
|
|
| 1,173 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 62,752 |
|
|
| — |
|
|
| 62,752 |
|
Issuance of Warrants in connection with Debt Instrument |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,335,997 |
|
|
| — |
|
|
| 1,335,997 |
|
Net loss |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (4,308,817 | ) |
|
| (4,308,817 | ) |
BALANCE, JUNE 30, 2023 |
|
|
|
| 1,757,588 |
|
| $ | 176 |
|
|
| 405,313 |
|
| $ | 41 |
|
| $ | 135,563,491 |
|
| $ | (126,202,989 | ) |
| $ | 9,360,719 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
STRYVE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
THREE AND NINESIX MONTHS ENDED SEPTEMBERJUNE 30, 20212022
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
|
|
|
| Common Stock Class A |
|
| Common Stock Class B/V |
|
| Additional |
|
| Retained |
|
|
|
| |||||||||||||
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in-Capital |
|
| Earnings |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE, JANUARY 1, 2021 |
|
|
|
| — |
|
|
| — |
|
|
| 10,152,020 |
|
| $ | 1,015 |
|
| $ | 42,783,367 |
|
| $ | (52,121,249 | ) |
| $ | (9,336,867 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Repurchase of member shares |
|
|
|
| — |
|
|
| — |
|
|
| (12,598 | ) |
|
| (1 | ) |
|
| (99,949 | ) |
|
| — |
|
|
| (99,950 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| (5,761,150 | ) |
|
| (5,761,150 | ) | |||
BALANCE, MARCH 31, 2021 |
|
|
|
| — |
|
|
| — |
|
|
| 10,139,422 |
|
|
| 1,014 |
|
|
| 42,683,418 |
|
|
| (57,882,399 | ) |
|
| (15,197,967 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| (5,560,717 | ) |
|
| (5,560,717 | ) | |||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE, JUNE 30, 2021 |
|
|
|
| — |
|
|
| — |
|
|
| 10,139,422 |
|
|
| 1,014 |
|
|
| 42,683,418 |
|
|
| (63,443,116 | ) |
|
| (20,758,684 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Conversion of Convertible Notes & interest to Class V common stock |
|
|
|
| — |
|
|
| — |
|
|
| 1,362,933 |
|
|
| 136 |
|
|
| 10,822,138 |
|
|
| — |
|
|
| 10,822,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Recapitalization |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Recapitalization with Andina |
|
|
|
| 3,409,949 |
|
|
| 341 |
|
|
|
|
|
|
|
|
| 11,571,705 |
|
|
| — |
|
|
| 11,572,046 |
| ||
PIPE raise |
|
|
|
| 5,607,372 |
|
|
| 561 |
|
|
|
|
|
|
|
|
| 35,062,867 |
|
|
| — |
|
|
| 35,063,428 |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Pre-Funded Warrant |
|
|
|
| (800,000 | ) |
|
| (80 | ) |
|
|
|
|
|
|
|
| 80 |
|
|
| — |
|
|
| — |
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net loss |
|
|
|
| — |
|
|
| — |
|
|
|
|
|
|
|
|
|
|
|
| (8,711,083 | ) |
|
| (8,711,083 | ) | |||
BALANCE, SEPTEMBER 30, 2021 |
|
|
|
| 8,217,321 |
|
| $ | 822 |
|
|
| 11,502,355 |
|
| $ | 1,150 |
|
| $ | 100,140,208 |
|
| $ | (72,154,199 | ) |
| $ | 27,987,981 |
|
|
|
|
| Class A Common Stock |
|
| Class V Common Stock |
|
| Additional |
|
| Accumulated |
|
|
|
| |||||||||||||
|
|
|
| Shares |
|
| Amount |
|
| Shares |
|
| Amount |
|
| Paid-in-Capital |
|
| Deficit |
|
| Total |
| |||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE, JANUARY 1, 2022 |
|
|
|
| 575,584 |
|
| $ | 58 |
|
|
| 766,824 |
|
| $ | 77 |
|
| $ | 100,553,135 |
|
| $ | (84,111,171 | ) |
| $ | 16,442,099 |
|
PIPE Investment |
|
|
|
| 166,462 |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| 32,311,170 |
|
|
| — |
|
|
| 32,311,187 |
|
Prefunded Warrants converted into Class A Common Stock |
|
|
|
| 96,237 |
|
|
| 10 |
|
|
| — |
|
|
| — |
|
|
| 65 |
|
|
| — |
|
|
| 75 |
|
Post closing adjustment of Business Combination Agreement |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (238,089 | ) |
|
| — |
|
|
| (238,089 | ) |
Issuance of restricted stock awards |
|
|
|
| 7,233 |
|
|
| 1 |
|
|
| — |
|
|
| — |
|
|
| 36,708 |
|
|
| — |
|
|
| 36,709 |
|
Net loss |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,313,742 | ) |
|
| (7,313,742 | ) |
BALANCE, MARCH 31, 2022 |
|
|
|
| 845,516 |
|
| $ | 86 |
|
|
| 766,824 |
|
| $ | 77 |
|
| $ | 132,662,989 |
|
| $ | (91,424,913 | ) |
| $ | 41,238,239 |
|
Prefunded Warrant converted into Common Stock Class A |
|
|
|
| 236,906 |
|
|
| 17 |
|
|
| — |
|
|
| — |
|
|
| 243 |
|
|
| — |
|
|
| 260 |
|
Issuance of Restricted Stock Awards |
|
|
|
| 33,408 |
|
|
| 3 |
|
|
| — |
|
|
| — |
|
|
| 172,849 |
|
|
| — |
|
|
| 172,852 |
|
Issuance of Restricted Stock Units |
|
|
|
| 889 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 68,803 |
|
|
| — |
|
|
| 68,803 |
|
Net Loss |
|
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16,354,319 | ) |
|
| (16,354,319 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
BALANCE, JUNE 30, 2022 |
|
|
|
| 1,116,719 |
|
| $ | 106 |
|
|
| 766,824 |
|
| $ | 77 |
|
| $ | 132,904,884 |
|
| $ | (107,779,232 | ) |
| $ | 25,125,835 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
STRYVE FOODS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
|
|
|
|
| |||||||||||
|
| For The Nine Months Ended September 30, |
|
| For The Nine Months Ended September 30, |
|
| Six Months Ended June 30, |
| |||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
CASH FLOWS FROM OPERATING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net loss |
| $ | (28,635,668 | ) |
| $ | (20,032,950 | ) |
| $ | (8,951,373 | ) |
| $ | (23,668,061 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Depreciation expense |
|
| 1,284,215 |
|
|
| 1,009,192 |
|
|
| 982,713 |
|
|
| 826,558 |
|
Amortization of intangible assets |
|
| 181,751 |
|
|
| 184,655 |
|
|
| 121,167 |
|
|
| 121,167 |
|
Amortization of debt issuance costs |
|
| — |
|
|
| 546,264 |
|
|
| 124,519 |
|
|
| — |
|
Amortization of debt discount |
|
| 386,615 |
|
|
| — |
| ||||||||
Amortization of right-of-use asset |
|
| 149,246 |
|
|
|
|
|
| 196,977 |
|
|
| 98,340 |
| |
Gain on disposal of fixed assets |
|
| (74,292 | ) |
|
| - |
| ||||||||
Gain on debt extinguishment |
|
| — |
|
|
| (545,200 | ) | ||||||||
(Gain) loss on disposal of fixed assets |
|
| 1,295 |
|
|
| (24,012 | ) | ||||||||
Prepaid media reserve |
|
| 1,489,028 |
|
|
| — |
|
|
| — |
|
|
| 1,489,028 |
|
Obsolete inventory reserve |
|
| 861,062 |
|
|
| — |
| ||||||||
Interest income on members loan receivable |
|
| — |
|
|
| (27,124 | ) | ||||||||
Bad debt expense |
|
| 322,946 |
|
|
| 513,661 |
|
|
| 80,206 |
|
|
| 288,623 |
|
Forgiveness on paycheck protection program loan |
|
| — |
|
|
| (1,669,552 | ) | ||||||||
Stock based compensation expense |
|
| 809,773 |
|
|
| — |
|
|
| 617,965 |
|
|
| 711,978 |
|
Change in fair value of Private Warrants |
|
| (99,954 | ) |
|
| (213,300 | ) |
|
| (18,650 | ) |
|
| (85,310 | ) |
Forgiveness of Notes Receivable |
|
| — |
|
|
| 1,700,869 |
| ||||||||
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
| — |
|
|
|
| |||
Accounts receivable |
|
| 434,401 |
|
|
| (4,331,314 | ) |
|
| (564,156 | ) |
|
| (1,644,144 | ) |
Inventory |
|
| (2,572,136 | ) |
|
| (2,141,497 | ) |
|
| (92,653 | ) |
|
| 563,454 |
|
Vendor deposits |
|
| 4,193 |
|
|
| — |
|
|
| — |
|
|
| 4,193 |
|
Prepaid media spend |
|
| 45,520 |
|
|
| (170,633 | ) |
|
| — |
|
|
| 45,520 |
|
Prepaid expenses and other current assets |
|
| (63,883 | ) |
|
| (2,236,168 | ) |
|
| 478,804 |
|
|
| 566,241 |
|
Accounts payable |
|
| (554,144 | ) |
|
| (357,214 | ) |
|
| 1,502,358 |
|
|
| (540,196 | ) |
Accrued liabilities |
|
| 1,000,225 |
|
|
| 146,773 |
|
|
| 87,646 |
|
|
| 933,077 |
|
Operating lease payments |
|
| (115,904 | ) |
|
| - |
| ||||||||
Operating lease obligations |
|
| (166,114 | ) |
|
| (65,083 | ) | ||||||||
Net cash used in operating activities |
|
| (25,533,621 | ) |
|
| (27,623,538 | ) |
|
| (5,212,681 | ) |
|
| (20,378,627 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CASH FLOWS FROM INVESTING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for purchase of equipment |
|
| (2,321,587 | ) |
|
| (897,837 | ) |
|
| (64,148 | ) |
|
| (2,033,174 | ) |
Cash received for sale of equipment |
|
| 41,000 |
|
|
| 65,102 |
|
|
| — |
|
|
| 41,000 |
|
Net cash used in investing activities |
|
| (2,280,587 | ) |
|
| (832,735 | ) |
|
| (64,148 | ) |
|
| (1,992,174 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
CASH FLOWS FROM FINANCING ACTIVITIES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Investment from Andina |
|
| — |
|
|
| 36,135,517 |
| ||||||||
PIPE capital raise |
|
| 32,311,187 |
|
|
| — |
|
|
| — |
|
|
| 32,311,187 |
|
Exercise of Prefunded Warrants |
|
| 555 |
|
|
| — |
|
|
| — |
|
|
| 334 |
|
Repurchase of member shares |
|
| — |
|
|
| (99,950 | ) | ||||||||
Post closing adjustment of BCA |
|
| (238,089 | ) |
|
| — |
| ||||||||
Borrowings on long-term debt |
|
| 3,940,035 |
|
|
| — |
| ||||||||
Post closing adjustment of Business Combination Agreement |
|
| — |
|
|
| (238,089 | ) | ||||||||
Repayments on long-term debt |
|
| (4,989,218 | ) |
|
| (4,230,928 | ) |
|
| (76,193 | ) |
|
| (4,908,745 | ) |
Borrowings on related party debt |
|
| — |
|
|
| 9,294,000 |
|
|
| 1,175,000 |
|
|
| — |
|
Repayments on related party debt |
|
| — |
|
|
| (7,889,681 | ) | ||||||||
Borrowings on short-term debt |
|
| 1,135,883 |
|
|
| 19,694,548 |
|
|
| 12,967,206 |
|
|
| — |
|
Repayments on short-term debt |
|
| (2,000,000 | ) |
|
| (11,142,130 | ) |
|
| (8,877,244 | ) |
|
| (2,000,000 | ) |
Debt issuance costs |
|
| (208,712 | ) |
|
| (507,166 | ) |
|
| (176,287 | ) |
|
| — |
|
Deferred offering costs |
|
| (38,634 | ) |
|
| — |
| ||||||||
Net cash provided by financing activities |
|
| 29,951,641 |
|
|
| 41,254,210 |
|
|
| 4,973,848 |
|
|
| 25,164,687 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net change in cash and cash equivalents |
|
| 2,137,433 |
|
|
| 12,797,937 |
|
|
| (302,981 | ) |
|
| 2,793,886 |
|
Cash and cash equivalents at beginning of period |
|
| 2,217,191 |
|
|
| 591,634 |
|
|
| 623,163 |
|
|
| 2,217,191 |
|
Cash and cash equivalents at end of period |
| $ | 4,354,624 |
|
|
| 13,389,571 |
|
| $ | 320,182 |
|
| $ | 5,011,077 |
|
|
|
|
|
|
|
| ||||||||||
SUPPLEMENTAL INFORMATION: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Cash paid for interest |
| $ | 401,862 |
|
| $ | 2,847,898 |
|
| $ | 755,024 |
|
| $ | 403,121 |
|
NON-CASH INVESTING AND FINANCING ACTIVITY: |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Non-cash retirement of Bridge Notes |
| $ | — |
|
| $ | 10,856,964 |
| ||||||||
Non-cash commercial premium finance borrowing |
| $ | 1,012,693 |
|
| $ | — |
|
| $ | 291,339 |
|
| $ | — |
|
Issuance of warrants in connection with debt instrument |
| $ | 1,374,631 |
|
| $ | — |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
STRYVE FOODS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBERJUNE 30, 20222023
(Unaudited)
Note 1 - Organization and Description of Business
Stryve Foods, Inc. (f/k/a Andina Acquisition Corp. III) (“Stryve” or the “Company”) is an emerging healthy snacking company which manufactures, markets and sells highly differentiated healthy snacking products. The Company offers convenient snacks that are lower in sugar and carbohydrates and higher in protein than other snacks. The Company is headquartered in Plano, Texas, withTX and recently changed its mailing address to a post office box while it navigates a potential office relocation for its corporate staff. The Company has manufacturing operations in Madill, Oklahoma.Oklahoma and fulfillment operations in Frisco, Texas.
Reverse Stock Split
On July 20, 2021The Company effected a 1-for-15 reverse stock split (the “Closing Date”“Reverse Stock Split”), the Company completed a business combination (the “Business Combination”) pursuant to that certain Business Combination Agreement (the “BCA”) by and among the Company, Andina Holdings LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Holdings”), B. Luke Weil, in the capacity fromCompany’s issued and after the closingoutstanding shares of Class A and Class V common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on July 14, 2023. As a result of the transactions contemplatedReverse Stock Split, every fifteen shares of common stock issued and outstanding were automatically reclassified into one share of common stock. The Reverse Stock Split reduced the number of authorized shares of Class V common stock from 200,000,000 to 15,000,000 while the number of authorized shares of Class A common stock and the par value for both Class A and Class V common stock remained unchanged. All outstanding options, warrants, restricted stock units and similar securities entitling their holders to receive or purchase shares of common stock were adjusted as a result of the Reverse Stock Split, as required by the Business Combination Agreement (the “Closing”) asterms of each security. All share and per share amounts were retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the representative for the shareholdersreduction in par value of the Company (other than the Seller), Stryve Foods, LLC, a Texas limited liability company, Stryve Foods Holdings, LLC, a Texas limited liability company (the “Seller”), and R. Alex Hawkins, in the capacity from and after the Closing as the representativeCompany’s common stock to additional paid-in capital. See Note 13 for the members of the Seller. Notwithstanding the legal form of the Business Combination, pursuant to the Business Combination Agreement, the Business Combination has been accounted for as a reverse recapitalizationadditional information.
Note 2 - Liquidity
The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the United States ("GAAP"). Under this methodnormal course of accounting, Stryve Foods, LLC is treated as the acquirer and the Company is treated as the acquired company for financial statement reporting purposes.
business. In connection with the completion of the Business Combination and as contemplated by the Business Combination Agreement, the Company: (i) issued 4,250,000 shares of Class A common stock to private placement investors for aggregate consideration of $42.5 million; (ii) issued 1,357,372 shares of Class A common stock, satisfied by the offset of $10.9 million of principal and accrued interest under outstanding unsecured promissory notes (the "Bridge Notes") issued by Stryve Foods, LLC to certain investors in a private placement on the closing date of the Business Combination, and (iii) 11,502,355 newly issued non-voting Class B common units of Holdings (the “Seller Consideration Units”) and voting (but non-economic) Class V common stock of the Company. In addition, the Company's ordinary shares outstanding prior to the Closing were converted into 3,409,949 shares of Class A common stock of the Company without any action of the holders. The Seller distributed the Seller Consideration Units to its members in accordance with its limited liability company agreement. On March 25, 2022, the Company finalized the post-closing adjustments under the Business Combination Agreement (the "Post-Closing Adjustment), which resulted in the releaseASU No. 2014-15, Disclosure of all Uncertainties about an Entity’s Ability to Continue as a Going concern (Subtopic 205-40)115,023 escrowed shares of Class V common stock, an equal number of Holdings Class B common units, and the net payment of approximately $238,000 by the Company to the Seller.
Prior to July 20, 2021, Stryve Foods, LLC was a “pass-through” (limited liability company) entity for income tax purposes and had no material income tax accounting reflected in its financial statements for financial reporting purposes since taxable income and deductions were “passed through” to its members. Following the consummation of the Business Combination, the combined company is organized in an “Up-C” structure and is now a taxable C corporation in which the business of Stryve Foods, LLC and its subsidiaries is held by Holdings, which is a subsidiary of the Company. By virtue of the Up-C structure, the Company's only direct assets consist of its equity interests in Holdings, an entity of which the Company maintains 100% voting control. As the member of Holdings with voting control,, the Company has full, exclusiveevaluated whether there are conditions and complete discretionevents, considered in the aggregate, that raise substantial doubt about its ability to manage and controlcontinue as a going concern within one year after the business of Stryve Foods, LLC and to take all actions it deems necessary, appropriate, advisable, incidental, or convenient to accomplishdate that the purposes of Stryve Foods, LLC and, accordingly, the financial statements are prepared on a consolidated basis. The financial statements of the Company now account for income taxes in accordance with Accounting Standards Codification (“ASC”) 740, Income taxes. Stryve Foods, LLC has four wholly owned subsidiaries, Biltong Acquisition Company LLC, Braaitime LLC, Protein Brothers, LLC, and Kalahari Snacks, LLC.
Thecondensed consolidated financial statements are under the name of the Company, the legal parent, but represent Stryve Foods, LLC, the legal subsidiary (accounting acquirer) with an adjustment to retrospectively adjust the legal capital to reflect the legal capital as earnings per share (“EPS”). EPS is calculated using the equity structure of the Company, including the equity interests issued to the Seller in the Business Combination. Prior to the Business Combination, EPS was based on Stryve Foods, LLC’s net income and weighted average common shares outstanding on an as exchanged basis that were received in the Business Combination. Subsequent to the Business Combination, EPS is based on the actual number of common shares on an as exchanged basis of the Company outstanding during that period. For any periods prior to the Closing, basic and diluted net income/loss per share have been retroactively adjusted to reflect the reverse recapitalization of the Company utilizing the number of Seller Consideration Units (adjusted as necessary to reflect the capital activity of Stryve Foods, LLC prior to the Closing) as the weighted average shares outstanding for those periods and the actual shares outstanding for any periods after the Closing, all on an as exchanged basis.
6
Note 2 - Liquidityissued.
The Company incurred net losses of approximately $28.6 million during the nine months ended September 30, 2022. Cash used in operating activities was approximately $25.5 million for the nine months ended September 30, 2022. We havehas historically funded ourits operations with cash flow from operations, equity capital raises, and note payable agreements from shareholders and private investors, in addition to bank loans. OurThe Company's principal uses of cash have been debt service, capital expenditures, working capital, and funding operations. The Company incurred net losses and investment in working capital. As of September 30, 2022, we have working capital ofapproximately $10.99.0 million which compares favorably toduring the $3.2 million working capital we maintained as of December 31, 2021 and havesix months ended June 30, 2023. Cash used in operating activities was approximately $5.2 million for the six months ended June 30, 2023. As of indebtedness.June 30, 2023, the Company has approximately $11.2 million of indebtedness and working capital excluding cash and debt of $5.8 million which compares to the $7.6 million as of December 31, 2022 .
Late inDuring the third quarter of 2022, wethe Company secured a term loan in the maximum amount of $216.0 million, with $4.0 million being advanced upon execution and up to two additional $1.0 million advances available to the Company subject to performance hurdles. Additionally, the Company secured an asset based line of non-dilutive, committed borrowing capacity throughcredit with a combination$15.0 million credit limit subject to accounts receivable and inventory balances. The term loan and asset based line of facilitiescredit were secured in order to augment ourthe Company's liquidity, as needed, through the execution of management's plan of whichplan. The Company had drawn $4.34.0 million had been drawn uponof the term loan and $3.0 million (net of repayments) of the asset based line of credit as of SeptemberJune 30, 2022.2023. See Note 5 for a description of the asset based line of credit and Note 6 for a description of the term loan.
The Company has experienced a slower sell-through of its rationalized slow-moving, and obsolete inventory than expected due to many other consumer packaged goods companies conducting similar inventory management and rationalization programs at the same time creating a surplus of goods in the channels commonly used to sell off this type of rationalized, slow-moving, or obsolete inventory. Additionally, as previously mentioned, in the fourth quarter of 2022 and during the first half of 2023, the Company experienced irregular order patterns from its retail and distribution customers due to what it believes to be working capital management activities not specific to the Company's products in which retailers and distributors may have sought to bring down their inventory levels broadly.
In 2023, the Company has had to make significant investments in its working capital to support increased distribution with marquee retailers coming online throughout the year. Many of these distribution resets have been secured in large part due to the new packaging design. Accordingly, the Company has had to build and project continuing to build net new inventories to support these upcoming resets.
6
The investment in inventory ahead of sales has put pressure on the Company's liquidity position given the structure and terms of its credit facilities and has required it to seek external financing. Ultimately, these conditions, events, and general uncertainty around the current state of the capital markets has raised substantial doubt about the Company's ability to continue as a going concern.
On April 19, 2023, the Company issued an aggregate of $4,089,000 in principal amount of secured promissory notes to select accredited investors carrying a 12% accrued interest rate to help support the working capital and growth needs of the business. The aggregate principal amount of the notes is inclusive of $1,175,000 from related parties. These notes have a maturity date of December 31, 2023.
In June 2023, the Company entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which they may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. No shares were sold under the at-the-market equity facility during the three months ended June 30, 2023.
WeWhile these most recent financings have provided the Company with liquidity to support its near-term goals, given the December 31, 2023 maturity date of the April 2023 debt financing, the Company is still evaluating several different strategies to enhance its liquidity position. These strategies may include, but are not limited to, pursuing additional actions under the Company's business reorganization plan, and seeking additional financing from both the public and private markets through the issuance of equity or debt securities. The outcome of these matters cannot be predicted with any certainty at this time. If capital is not available to the Company when, and in the amounts needed, it could be required to delay, scale back, or abandon some of its operations, which could materially harm its business, financial condition and results of operations.
Notwithstanding the foregoing, the Company has examined every area of spending throughout ourits business and believe we identifiedcontinues to identify ways to drive efficiencies, eliminate unnecessary expense, and focus on the highest and best use of each dollar. The resulting impact is a 46.3% reduction in total operating expenses leading to a $3.7 million improvement in our pre-tax net loss despite lower sales when comparing to the prior year quarter. Further, we have instituted a continuous price action review process in which we look to protect our unit economics in light of the inflationary environment. This processCompany has already resulted in two meaningful price increases this year. We have also sought to optimize ourits channel strategy and rationalize ourits customer and product portfolio to eliminate sales that detract from ourits profitability goals.
In the third quarter of 2022, we invested more heavily into our inventories than our sales volumes would indicate as being required. Given that prevailing beef prices are rising, this investment in inventory was driven in part by opportunistic commodity beef purchases made towards the end of the quarter to secure attractive pricing. We anticipate drawing down on these The Company also anticipates reducing its inventory levels in the coming quartersthroughout 2023 which would be a near-term source of liquidity.
The Company has prepared cash flow forecasts which indicate that based on its expected operating losses and cash consumption due to growth in working capital, it believes that cash from operations, our workingabsent an infusion of sufficient capital and our borrowingthere is substantial doubt about its ability should be sufficient to fund the Company’s base projectionscontinue as a going concern for at least the next twelve months fromafter the date thesethe condensed consolidated financial statements for the quarter ended June 30, 2023 are made available.issued. The Company's plan includes the items noted above as well as securing external financing which may include raising debt or equity capital. These plans are not entirely within the Company's control including its ability to raise sufficient capital on favorable terms, if at all.
Note 3 - Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information and in accordance with the rules and regulations of the Securities and Exchange Commission ("SEC"). Accordingly, these interim financial statements do not include all information and footnotes required under GAAP for complete financial statements. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of results of operations, balance sheet, cash flows, and shareholders' equity for the periods presented. The unaudited condensed consolidated results of operations for the interim periods presented are not necessarily indicative of results for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report filed on Form 10-K for the year ended December 31, 2021.2022. The Company’s condensed consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. Certain information and footnote disclosures normally included in the annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted.
Prior period reclassifications
Certain prior period amounts in the condensed consolidated financial statements have been reclassified to conform to the current period presentation. Specifically, the presentation of changes in inventory to conform with the current period presentation on the condensed consolidated statements of cash flows.
7
Use of Estimates
The preparation of the condensed consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Accounting estimates and assumptions discussed herein are those that management considers to be the most critical to an understanding of the condensed consolidated financial statements because they inherently involve significant judgments and uncertainties. Estimates are used for, but not limited to revenue recognition, allowance for doubtful accounts and customer allowances, useful lives for depreciation and amortization, standard costs of inventory, provisions for inventory obsolescence, impairments of goodwill and long-lived assets, incremental borrowing rate for leases, warrant liabilities and valuation allowances for deferred tax assets. All of these estimates reflect management’s judgment about current economic and market conditions and their effects based on information available as of the date of these consolidated financial statements. If such conditions persist longer or deteriorate further than expected, it is reasonably possible that the judgments and estimates could change, which may result in future impairments of assets among other effects.
Going Concern
7In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.
Determining the extent to which conditions or events raise substantial doubt about the Company's ability to continue as a going concern and the extent to which mitigating plans sufficiently alleviate any such substantial doubt requires significant judgment and estimation by us. The Company's significant estimates related to this analysis may include identifying business factors such as size, growth and profitability used in the forecasted financial results and liquidity. Further, the Company makes assumptions about the probability that management's plans will be effectively implemented and alleviate substantial doubt and its ability to continue as a going concern. The Company believes that the estimated values used in its going concern analysis are based on reasonable assumptions. However, such assumptions are inherently uncertain and actual results could differ materially from those estimates. See Note 2, Liquidity, for more information about the Company's going concern assessment.
Accounts Receivable and Allowance for Doubtful Accounts, Returns, and Deductions
Accounts receivable are customer obligations due under normal trade terms. The Company records accounts receivable at their net realizable value, which requires management to estimate the collectability of the Company’s receivables. Judgment is required in assessing the realization of these receivables, including the credit worthiness of each counterparty and the related aging of past due balances. Management provides for an allowance for doubtful accounts equal to the estimated uncollectable amounts, in addition to a general provision based on historical experience. Management provides for the customer accommodations based upon a general provision of a percentage of sales in addition to known deductions. As of SeptemberJune 30, 2022,2023, and December 31, 2021,2022, the allowance for doubtful accounts and returns and deductions totaled $104,815197,566 and $1,236,497117,360, respectively. Total bad debt expense for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, was $322,94680,206 and $513,661288,623, respectively.
Concentration of Credit Risk
The balance sheet items that potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable. The Company continuously evaluates the credit worthiness of its customers’ financial condition and generally does not require collateral. The Company maintains cash balances in bank accounts that may, at times, exceed Federal Deposit Insurance Corporation (“FDIC”) limits of $250,000 per institution. The Company incurred no losses from such accounts and management considers the risk of loss to be minimal.
For the ninesix months ended SeptemberJune 30, 2023 and 2022, the following customers and 2021, customer concentrations in excessvendors represented more than 10% of 10% consolidated sales are as follows:and purchases, respectively.
|
|
|
|
|
|
| 2023 |
| 2022 |
Customer A |
| 23% |
| — |
Customer B |
| 18% |
| — |
Customer C |
| 10% |
| — |
Customer D |
| — |
| 46% |
Vendor A |
| 36% |
| — |
Vendor B |
| 24% |
| 57% |
Vendor C |
| 21% |
|
|
Vendor D |
| — |
| 12% |
8
|
| Nine Months Ended Sept 30, |
| Period Ended September 30, | ||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 |
|
| Sales |
| Accounts | ||||
Customer A |
| 36% |
| — |
| — |
| — |
Customer B |
| — |
| 12% |
| 10% |
| 13% |
Customer C |
| 10% |
| 10% |
| 12% |
| 11% |
Customer D |
| — |
| — |
| 12% |
| 11% |
Customer E |
| — |
| — |
| 10% |
| — |
As of June 30, 2023 and 2022, the following customers and vendors represented more than 10% of accounts receivable and accounts payable balances, respectively.
|
|
|
|
|
|
| 2023 |
| 2022 |
Customer A |
| 23% |
| — |
Customer C |
| 10% |
| 10% |
Customer D |
| 10% |
| — |
Customer E |
| — |
| 29% |
Customer F |
| — |
| 22% |
Vendor E |
| — |
| 13% |
Revenue Recognition Policy
The Company manufactures and markets a broad range of protein snack products through multiple distribution channels. The products are offered through branded and private label items. Generally, the Company considers all revenues as arising from contracts with customers. Revenue is recognized based on the five-step process outlined in the Accounting Standards Codification (“ASC”("ASC") 606:606, Revenue from Contracts with Customers:
The Company’s revenue derived from the sale of branded and private label products is considered variable consideration as the contract includes discounts, rebates, incentives and other similar items. Generally, revenue is recognized at the point in time when the customer obtains control of the product, which may occur upon either shipment or delivery of the product. The payment terms of the Company’s contracts are generally net thirty30 to sixty60 days, although early pay discounts are offered to customers.
The Company regularly experiences customer deductions from amounts invoiced due to product returns, product shortages, and delivery nonperformance penalty fees. This variable consideration is estimated using the expected value approach based on the Company’s historical experience, and it is recognized as a reduction to the transaction price in the same period that the related product sale is recognized.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring products to customers. Revenue is recognized when the Company satisfies its performance obligations under the contract by transferring the promised product to its customer.
8
The Company’s contracts generally do not include any material significant financing components.
Performance Obligations
The Company has elected the following practical expedients provided for in TopicASC 606Revenue from Contracts with Customers::
Neither the type of good sold nor the location of sale significantly impacts the nature, amount, timing, or uncertainty of revenue and cash flows.
9
Inventory
Inventories consist of raw materials, work in process, and finished goods, are stated at lower of cost or net realizable value determined using the standard cost method. The Company reviews the value of items in inventory and provides write-downs and write-offs of inventory for obsolete, damaged, or expired inventory. Write-downs and write-offs are included in cost of goods sold.
Debt Issuance Costs
Debt issuance costs are costs incurred to obtain new debt financing. Debt issuance costs are presented in the accompanying condensed consolidated balance sheet as a reduction in the carrying value of the debt and are accreditedaccreted to interest expense using the effective interest method.
Leases
In accordance with FASB ASC Topic 842, Leases, the Company determines if an arrangement is a lease at inception. Operating leases are included in operating lease right-of-use (ROU) assets, current operating lease liabilities, and noncurrent operating lease liabilities in the consolidated balance sheets. Finance leases are included in property, plant and equipment, current maturities of long-term debt, and long-term debt, net of debt issuance costs and current maturities in the condensed consolidated balance sheets.
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. Variable payments are not included in ROU assets or lease liabilities and can vary from period to period based on asset usage or the Company's proportionate share of common costs. The implicit rate within the Company's leases is generally not determinable and, therefore, the incremental borrowing rate at lease commencement is utilized to determine the present value of lease payments. The Company estimates its incremental borrowing rate based on third-party lender quotes to obtain secured debt in a like currency for a similar asset over a timeframe similar to the term of the lease. The ROU asset also includes any lease prepayments made and any initial direct costs incurred and excludes lease incentives. The Company's lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. The Company has elected not to recognize ROU assets or lease liabilities for leases with a term of 12 months or less.
The Company has elected the “package of practical expedients” and as a result is not required to reassess its prior accounting conclusions about lease identification, lease classification and initial direct costs for lease contracts that exist as of the transition date. The Company accounts for each lease and any non-lease components associated with that lease as a single lease component for all asset classes.
Recognition, measurement and presentation of expenses and cash flows arising from a lease will depend on classification as a finance or operating lease. Operating lease expense is recognized on a straight-line basis over the lease term, whereas the amortization of finance lease assets is recognized on a straight-line basis over the shorter of the estimated useful life of the underlying asset or the lease term. Operating lease expense and finance lease amortization are presented in cost of goods sold or operations expense in the consolidated statements of operations depending on the nature of the leased item. Interest expense on finance lease obligations is recorded over the lease term and is presented in interest expense, based on the effective interest method. All operating lease cash payments and interest on finance leases are presented within cash flows from operating activities and all finance lease principal payments are presented within cash flows from financing activities in the consolidated statements of cash flows.
Stock Based Compensation
Stock-based compensation awards are accounted for in accordance with ASC Topic 718, Compensation –Stock Compensation(ASC 718). The Company expenses the fair value of stock awards granted to employees and members of the board of directors over the requisite service period, which is typically the vesting period. Compensation cost for stock-based awards issued to employees is measured using the estimated fair value at the grant date and is adjusted to reflect actual forfeitures.
Stock-based awards issued to non-employees, including directors for non-board-related services, are accounted for based on the fair value of such services received or the fair value of the awards granted on the grant date, whichever is more reliably measured. Stock-based awards subject to service-based vesting conditions are expensed on a straight-line basis over the vesting period.
Warrant Liability
The Company accounts for warrants as either equity-classified or liability-classified instruments based on an assessment of the warrant’s specific terms and applicable authoritative guidance in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”)ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) and ASC 815, Derivatives and Hedging (“ASC 815”). The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own common stock and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside
10
of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
For issued or modified warrants that meet all of the criteria for equity classification, the warrants are required to be recorded as a component of additional paid-in capital at the time of issuance. For issued or modified warrants that do not meet all the criteria for equity classification, the warrants are required to be recorded at their initial fair value on the date of issuance, and each balance sheet date thereafter.
9
Accordingly, the Company classifies the private warrants issued to Andina's original stockholders (the "Private Warrants") as liabilities at their fair value and adjusts the warrants to fair value at each reporting period. This liability is subject to re-measurement at each balance sheet date until exercised, and any change in fair value is recognized in the Company’s statementcondensed consolidated statements of operations.
EarningsNet Income (Loss) per Share
The Company reports both basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of shares of common stock outstanding and excludes the dilutive effect of warrants, stock options, and other types of convertible securities. However, for the six months ended June 30, 2022, certain pre-funded warrants are included in the calculation of basic earnings per share as the pre-funded warrants can be exercisedwere exercisable for nominal value. Diluted earnings per share is calculated based on the weighted average number of shares of common stock outstanding and the dilutive effect of stock options, warrants and other types of convertible securities are included in the calculation. Dilutive securities are excluded from the diluted earnings per share calculation if their effect is anti-dilutive, such as in periods where the Company would report a net loss. For any periods prior to the closing of the Business Combination (the "Closing"), basic and diluted net income/loss per share have been retroactively adjusted to reflect the reverse recapitalization of the Company utilizing the Seller Consideration Units (adjusted as necessary to reflect the capital activity of the Company prior to the Closing) as the weighted average shares outstanding for those periods and the actual shares outstanding for any periods after the Closing all on an as exchanged basis.
As of SeptemberJune 30, 2023 and 2022, the Company excluded the common stock equivalents summarized below, which entitle the holders thereof to ultimately acquire shares of common stock, from its calculation of earnings per share, as their effect would have been anti-dilutive.
|
| September 30, |
|
| June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Private Warrants |
|
| 197,500 |
|
|
| 197,500 |
|
|
| 197,500 |
|
|
| 197,500 |
|
Public Warrants |
|
| 10,800,000 |
|
|
| 10,800,000 |
|
|
| 10,800,000 |
|
|
| 10,800,000 |
|
Warrants - January Offering |
|
| 10,294,118 |
|
|
| — |
| ||||||||
Warrants - January 2022 Offering |
|
| 10,294,118 |
|
|
| 10,294,118 |
| ||||||||
Warrants - April 2023 Financing |
|
| 7,964,550 |
|
|
| — |
| ||||||||
Restricted Stock Awards - unvested |
|
| 825,750 |
|
|
| — |
|
|
| 41,511 |
|
|
| 26,700 |
|
|
|
| 22,117,368 |
|
|
| 10,997,500 |
|
|
| 29,297,679 |
|
|
| 21,318,318 |
|
The weighted average number of shares outstanding for purposes of per share calculations includes the pre-funded warrants as if they had been exercised as well as the BVClass B and Class V shares on as-exchanged basis.
The Company effected a 1-for-15 reverse stock split of the Company’s issued and outstanding shares of Class A and Class V common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on July 14, 2023. As a result of the Reverse Stock Split, every fifteen shares of common stock issued and outstanding were automatically reclassified into one share of common stock. All outstanding options, warrants, restricted stock units and similar securities entitling their holders to receive or purchase shares of common stock were adjusted as a result of the Reverse Stock Split, as required by the terms of each security. All share and per share amounts were retroactively adjusted for all periods presented to give effect to this reverse stock split.
Income Taxes
The Company accounts for income taxes pursuant to the asset and liability method of ASC 740, Income Taxes, which requires the Company to recognize current tax liabilities or receivables for the amount of taxes as estimated are payable or refundable for the current year, and deferred tax assets and liabilities for the expected future tax consequences attributable to temporary differences between the financial statement carrying amounts and their respective tax bases of assets and liabilities and the expected benefits of net operating loss and credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in operations in the period enacted. A valuation allowance is provided when it is more likely than not that a portion or all of a deferred tax asset will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and the reversal of deferred tax liabilities during the period in which related temporary differences become deductible.
11
Under the terms of a Tax Receivable Agreement (the “TRA”) as part of the Business Combination Agreement, the Company generally will be required to pay to the Seller 85% of the applicable cash savings, if any, in U.S. federal and state income tax based on its ownership in Andina Holdings, LLC that the Company is deemed to realize in certain circumstances as a result of the increases in tax basis and certain tax attributes resulting from the Business Combination as described below. This is accounted for in conjunction with the methods used to record income tax described above.
The Company follows the provisions of ASC 740-10 related to the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements. ASC 740-10 prescribes a comprehensive model for the financial statement recognition, measurement, presentation and disclosure of uncertain tax positions taken or expected to be taken in income tax returns.
The benefit of tax positions taken or expected to be taken in the Company income tax returns is recognized in the financial statements if such positions are more likely than not of being sustained upon examination by taxing authorities. Differences between tax positions taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to the interpretation are referred to as
10
“unrecognized “unrecognized benefits”. A liability is recognized (or amount of net operating loss carryover or amount of tax refundable is reduced) for an unrecognized tax benefit because it represents an enterprise’s potential future obligation to the taxing authority for a tax position that was not recognized as a result of applying the provisions of ASC 740-10. Interest costs and related penalties related to unrecognized tax benefits are required to be calculated, if applicable. The Company's policy is to classify assessments, if any, for tax related interest and penalties as a component of income tax expense. As of SeptemberJune 30, 2022,2023, no liability for unrecognized tax benefits was required to be reported. We doThe Company does not expect any significant changes in ourits unrecognized tax benefits in the next year.
Tax Receivable Agreement
In conjunction with the Business Combination, the Company entered into the TRA with Seller and Holdings. Pursuant to the TRA, the Company is required to pay Seller 85% of the amount of savings, if any, in U.S. federal, state, local and foreign income tax that the Company actually realizes as a result of (A)(a) tax basis adjustments resulting from taxable exchanges of Class B common units of Holdings and Class V common stock of the Company acquired by the Company in exchange for Class A common stock of the Company and (B)(b) tax deductions in respect of portions of certain payments made under the TRA. All such payments to the Seller are the obligations of the Company. As of SeptemberJune 30, 2022,2023, there have been361,477 shares of Class B common units of Holdings and Class V common stock of the Company exchanged for and equal number of shares of Class A common stock of the Company. The Company has not recognized any change to the deferred tax asset for changes in tax basis, as the asset is not more-likely-than-not to be realized. Additionally, the company has not recognized the TRA liability as it is not probablyprobable that the TRA payments would be paid based on the Company's historical loss position and would not be payable until the company realizes tax benefit.
Fair Value of Financial Instruments
The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, and accounts payable.a line of credit. The carrying amounts of cash, accounts receivable, and accounts payable approximate their respective fair values because of the short-term maturities or expected settlement date of these instruments. The line of credit has fixed interest rates the Company believes reflect current market rates for notes of this nature. The Company believes the current carrying value of long-term debt approximates its fair value because the terms are comparable to similar lending arrangements in the marketplace.
Derivative Financial Instruments
The Company evaluates its financial instruments to determine if such instruments are derivatives or contain features that qualify as embedded derivatives in accordance with ASC Topic 815, “Derivatives and Hedging”.815. For derivative financial instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value on the grant date and is then re-valued at each reporting date, with changes in the fair value reported in the statements of operations. The classification of derivative instruments, including whether such instruments should be recorded as liabilities or as equity, is evaluated at the end of each reporting period. Derivative liabilities are classified in the balance sheet as current or non-current based on whether or not net-cash settlement or conversion of the instrument could be required within 12 months of the balance sheet date.
Recently Adopted Accounting Standards
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock; (2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification; and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible
12
instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021 including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. For all other entities, ASU 2020-06 is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company adopted ASU 2020-06 as of January 1, 2023 using the modified retrospective method which did not result in any changes to the Company’s financial statements.
Note 4 - Inventory, net
As of SeptemberJune 30, 2022,2023, and December 31, 2021,2022, inventory consisted of the following:
|
| As of |
| As of |
| |||||||||||
|
| September 30, |
|
| December 31, |
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Raw materials |
| $ | 1,430,116 |
|
| $ | 2,188,284 |
|
| $ | 1,628,508 |
|
| $ | 1,614,712 |
|
Work in process |
|
| 1,342,963 |
|
|
| 2,128,894 |
|
|
| 1,286,417 |
|
|
| 308,569 |
|
Finished goods |
|
| 6,153,976 |
|
|
| 2,898,803 |
|
|
| 5,436,370 |
|
|
| 6,335,361 |
|
Total Inventory, net |
| $ | 8,927,055 |
|
| $ | 7,215,981 |
|
| $ | 8,351,295 |
|
| $ | 8,258,642 |
|
Reserves for inventory obsolescence are recorded as necessary to reduce obsolete inventory to estimated net realizable value or to specifically reserve for obsolete inventory. As of SeptemberJune 30, 20222023 and December 31, 20212022 the reserve for slow moving and obsolete inventory reserves were $1,031,544was $626,904 and $170,482$708,858 respectively.
Note 5 - Line of Credit
The Company's prior line of credit (the "Line of Credit") of $3,500,000 was paid off and terminated in January 2022.
On September 28, 2022, certain subsidiaries of the Company entered into an Invoice Purchase and Security Agreement (together with an Inventory Finance Rider thereto, the "PSA"“PSA”) with Alterna Capital Solutions LLC ("ACS"(the “Lender”). providing for (a) the purchase by the Lender of certain of the subsidiaries’ accounts receivable, and (b) financing based upon a percentage of the value of the subsidiaries’ inventory. Pursuant to the PSA, the subsidiaries agree to sell eligible accounts receivable to the Lender for an amount equal to the face amount of each account receivable less a reserve percentage. The ACS line of creditmaximum amount potentially available to be deployed by the Lender at any given time is for a term of 2 years, provides for borrowings of up to $1515,000,000 million,, which may be increased to an amount up to $2020,000,000 million.
11
. Pursuant to the Inventory Finance Rider to the RSA, the Companysubsidiaries may request advances from time to time based upon the value of the Company’ssubsidiaries’ inventory. Such advances bear interest ofat the current prime rate plus 2.25% and are required to be repaid at any time the aggregate outstanding amount of such advances exceed a designated percentage of the value of such inventory.
The Company hasPSA provides for the payment of fees by the subsidiaries and includes customary representations and warranties, indemnification provisions, covenants and events of default. Subject in some cases to cure periods, amounts outstanding under the PSA may be accelerated for typical defaults including, but not limited to, the failure to make when due payments, the failure to perform any covenant, the inaccuracy of representations and warranties, the occurrence of debtor-relief proceedings and the occurrence of liens against the purchased accounts receivable and collateral. The subsidiaries have granted the Lender a security interest in all of their respective personal property to secure their obligations under the PSA; provided that the Lender has a first priority security interest in the Company’sSubsidiaries’ accounts receivable, payment intangibles and inventory. A named executive officer of the Company granted the Lender a security interest in certain personal property owned by the named executive officer to further secure the Company's obligations under the PSA.
The PSA provides for an initial twenty-fourtwenty four (24) month term, followed by automatic annual renewal terms unless the Company providessubsidiaries provide written notice pursuant to the PSA prior to the end of any term. The foregoing summary
As of the PSAJune 30, 2023 and Inventory Finance Rider do not purport to be complete and are qualified in their entirety by reference to the text of the PSA. On September 30,December 31, 2022, $271,7493,030,057 and $1,257,301, respectively, was borrowed under the financing agreementagreement. The Company recognized approximately $124,032 and is shown net$211,631 in interest expense for the three and six months ended June 30, 2023, respectively. No amounts under the PSA were outstanding as of debt issuance costs of $June 30, 2022, therefore 148,558no. interest was recorded in the comparable period in prior year.
1213
Note 6 - Debt
As of SeptemberJune 30, 20222023 and December 31, 2021,2022, long-term debt consisted of the following:
|
| As of |
|
| As of |
| ||
|
| September 30 |
|
| December 31 |
| ||
|
| 2022 |
|
| 2021 |
| ||
Long-term debt |
| $ | 4,077,380 |
|
| $ | 1,566,598 |
|
Short-term debt |
|
| 1,012,692 |
|
|
| 2,000,000 |
|
Line of credit |
|
| 271,903 |
|
|
| 3,500,000 |
|
Total notes payable |
|
| 5,361,975 |
|
|
| 7,066,598 |
|
Less: current portion |
|
| (1,559,139 | ) |
|
| (3,447,056 | ) |
Less: debt issuance costs |
|
| (208,677 | ) |
|
| — |
|
Less: line of credit |
|
| (123,191 | ) |
|
| (3,500,000 | ) |
Total notes payable, net of current portion |
| $ | 3,470,968 |
|
| $ | 119,542 |
|
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Revenue Loan and Security Agreement |
| $ | 3,842,014 |
|
| $ | 3,889,442 |
|
Invoice Purchase and Security Agreement |
|
| 2,000,000 |
|
|
| — |
|
Broken Stone Agreement |
|
| 34,775 |
|
|
| 51,918 |
|
Less: current portion |
|
| (272,221 | ) |
|
| (244,782 | ) |
Total long-term debt, net of current portion |
| $ | 5,604,568 |
|
| $ | 3,696,578 |
|
As of June 30, 2023 and December 31, 2022, short-term borrowings and current portion of long-term debt consisted of the following:
|
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Invoice Purchase and Security Agreement |
| $ | 882,174 |
|
| $ | 1,046,101 |
|
Promissory Notes |
|
| 2,974,278 |
|
|
| — |
|
Commercial Premium Finance Agreement |
|
| 127,845 |
|
|
| 724,639 |
|
Current portion of long-term obligations |
|
| 272,221 |
|
|
| 244,782 |
|
Total short-term borrowings and current portion of long-term debt |
| $ | 4,256,518 |
|
| $ | 2,015,522 |
|
Outstanding as of SeptemberJune 30, 20222023
On March 12, 2021, the Company entered into a note payable agreement (“Broken Stone Agreement”) with Broken Stone Investments, LLC. for the principal amount of $200,000, bearing interest at 5% per annum, with all principal and accrued interest thereon due and payable at maturity of June 1, 2023. The Broken Stone Agreement calls for monthly principal and interest payments of $8,774 to commence on July 1, 2021, through maturity on June 1, 2023. As of SeptemberJune 30, 2022,2023, the balance on this loan was $77,38034,775.
In July 2022 theThe Company entered intotwo Commercial Premium Finance Agreements ("the Agreement") totaling $1.17 million for anwith terms less than eleven-monthone year termand with interest rates ofranging from 4.64% andto 5.257.50%. The proceeds from these transactions were used to partially fund the premiums due under some of the Company's insurance policies. The amounts payable are secured by the Company's rights under such policies. As of SeptemberJune 30, 2023 and December 31, 2022, the combined remaining balance totaled $1,037,942127,845 and $724,639, and therespectively. The Company recognized approximately $2,69613,261 and $22,938 in interest expense duringfor the three and six months ended SeptemberJune 30, 2023, respectively. No amounts under the Agreement were outstanding as of June 30, 2022, .therefore no interest was recorded in the comparable period in prior year.
Revenue Loan and Security Agreement
On September 28, 2022, the Company entered into a Revenue Loan and Security Agreement ("RLSA"(the “Loan Agreement”), in the amount of $4 million with Decathlon Alpha IV,V, L.P., ("Decathlon") providing for a loan facility for the Company in the maximum amount of $6,000,000, with $4,000,000 being advanced to the Company upon execution of the Loan Agreement and up to a maximum oftwo additional $61,000,000 million.advances available to the Company upon request, provided that the Company has satisfied all conditions with respect to such advance. The RLSALoan Agreement requires monthly payments, calculated as a percentage of the Company’s net revenue from the month preceding the immediately precedingprevious month (subject to an annual payment cap) with all outstanding advances and the Interestinterest (as defined in the Loan Agreement) being due at maturity on June 13, 2027 (unless accelerated upon a change of control or the occurrence of other events of default). There are no prepayment penalties underInterest does not accrue on advance(s) pursuant to the Loan Agreement, but any payoff would be subject to the Minimum Interestrather a minimum amount of interest (as defined in the Loan Agreement). is due pursuant to the terms of the Loan Agreement. The Loan Agreement further provides for the payment of fees by the Company and includes customary representations and warranties, indemnification provisions, covenants and events of default. Subject in some cases to cure periods, amounts outstanding and otherwise due under the Loan Agreement may be accelerated for typical defaults including, but not limited to, the failure to make when due payments, the failure to perform any covenant, the inaccuracy of representations and warranties, and the occurrence of debtor-relief proceedings. The advances are secured by all property of the Company and is guaranteed by the Company and certain of the Company’s Subsidiaries.
The Company has accounted for the loan facility as debt in accordance with ASC 470-10-25-2 and usesuse the effective interest rate method to estimate the timing and amount of future cash flows in accordance with ASC 835-30. Interest does not accrueThe current effective interest rate is 11.6%. As of June 30, 2023 and December 31, 2022, the balance on advance(s) pursuant tothis loan was $3,924,561 and $3,983,611, respectively. The Company recognized approximately $109,589 and $227,662 in interest expense for the three and six months ended June 30, 2023, respectively. No amounts under the Loan Agreement rather a minimumwere outstanding as of June 30, 2022, therefore no interest was recorded in the comparable period in prior year.
14
Promissory Notes
On April 19, 2023, the Company issued an aggregate of $4,089,000 in principal amount of Interest (as defined insecured promissory notes (the “Notes”) to select accredited investors (the “Lenders”). The aggregate principal amount of the Loan Agreement)Notes is dueinclusive of $1,175,000 from related parties (the "Related Party Notes"). The Notes accrue interest annually at a rate of 12% and will mature upon the earlier of (i) December 31, 2023, or (ii) the closing of the next sale (or series of related sales) by the Company of its equity securities (other than pursuant to warrants described below), following the termsdate of the Loan Agreement.Notes, from which the Company receives gross proceeds of not less than $3,000,000. The advancesNotes are secured by a security interest on substantially all propertythe assets of the Borrower and are guaranteed byCompany that is subordinate to the Company and certainsecurity interests of the Company’s Subsidiaries.existing first and second lien lenders.
Each Lender that purchased Notes received a warrant (the “Warrants”) to purchase 1/15th of one share of the Company’s Class A common stock for each $0.5134 of principal amount of the Notes, for an aggregate of 7,964,550 warrants convertible to 530,970 shares of Class A common stock. The aggregate amount of the Warrants is inclusive of 2,288,664 warrants convertible to 152,577 shares of Class A common stock associated with the Related Party Notes.
The Company has accounted for the Notes as debt in accordance with ASC 470-10-25 and use the effective interest rate method to estimate the timing and amount of future cash flows in accordance with ASC 835-30. The current effective interest rate is 66.1%. As of June 30, 2023 , the balance on the Notes was $4,089,000 of which $1,175,000 was due from related parties. In accordance with ASC 470-20-25-2, the Company allocated the proceeds between the Notes and Warrants based on their relative fair values. The allocation resulted in a discount to the Notes of $1,374,631 that is being amortized over the term of the Notes. The Company recognized approximately $532,988 in interest expense inclusive of debt discount amortization of $386,615 for the three and six months ended June 30, 2023.
Future minimum principal payments on the notes payable are, as of SeptemberJune 30, 2022:2023:
2022 (for the remainder of) |
| $ | 412,690 |
| ||||
2023 |
|
| 1,532,927 |
| ||||
2023 (for the remainder of) |
| $ | 5,399,649 |
| ||||
2024 |
|
| 730,398 |
|
|
| 332,010 |
|
2025 |
|
| 1,061,858 |
|
|
| 600,704 |
|
2026 |
|
| 1,624,102 |
|
|
| 1,178,663 |
|
2027 |
|
| 1,695,212 |
| ||||
Thereafter |
|
| 2,000,000 |
| ||||
|
| $ | 5,361,975 |
|
| $ | 11,206,237 |
|
Retired debt during the nine months ended September 30, 2022
The Company repaid approximately $6,842,000 debt with Origin bank on January 28, 2022 and $40,000 debt with First United Bank on May 6, 2022.
The Company held various vehicle financing and lease obligations which were paid off during the three months ended September 30, 2022.
1315
Note 7 - Income Taxes
The Company’s sole material asset is Andina Holdings, LLC, which is treated as a partnership for U.S. federal income tax purposes and for purposes of certain state and local income taxes. Andina Holdings, LLC owns 100% of Stryve Foods, LLC which is treated as a disregarded entity for the U.S. federal income tax purposes. Stryve Foods Holdings, LLC's net taxable income and any related tax credits are passed through to its members and are included in the members’ tax returns, even though such net taxable income or tax credits may not have actually been distributed. The income tax burden on the earnings taxed to the non- controllingnon-controlling interests is not reported by the Company in its condensed consolidated financial statements under GAAP. As a result, the Company’s effective tax rate is expected to differ materially from the statutory rate.
ASC Topic 740 prescribes a recognition threshold and a measurement attribute for the financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense. As of SeptemberJune 30, 20222023 and December 31, 2021,2022, no liability for unrecognized tax benefits was required to be reportreported and no amounts accrued for interest and penalties. The Company is currently not aware of any issues under review that could result in significant payments, accruals or material deviation from its position over the next twelve months.
The Company currently estimates its annual effective income tax rate to be -0.05550.025%, which differs from the federal rate of 21% primarily due to tax benefit related to income passed through to non-controlling interest, increase in valuation allowances, and state and local income taxes. The Company has reported income tax expensebenefit of $50712,854 and $36,9489,523 for the three and ninesix months ended SeptemberJune 30, 2023. For the three and six months ended June 30, 2022, and nothe Company has reported income tax expense in the threeof $28,655 and nine months ended September 30, 2021.$36,441.
Tax Receivable Agreement Liability
In conjunction with the BCA,Business Combination, the Company also entered into a TRA with the Seller and Holdings. Pursuant to the TRA, the Company is required to pay the Seller 85% of the amount of savings, if any, in United States federal, state, local and foreign income tax that the Company actually realizes as a result of (A)(a) tax basis adjustments resulting from taxable exchanges of Class B common units of Holdings and Class V common stock of the Company acquired by the Company in exchange for Class A common stock of the Company and (B)(b) tax deductions in respect of portions of certain payments made under the TRA. All such payments to the Seller are the obligations of the Company.
As of SeptemberJune 30, 2022,2023, there have been361,477 shares of Class B common units of Holdings and Class V common stock of the Company exchanged for an equal number of shares of Class A common stock of the Company. The estimation of liability under the TRA is by its nature imprecise and subject to significant assumptions regarding the amount and timing of future taxable income.
As of SeptemberJune 30, 2022,2023, the Company has recorded a full valuation allowance against its net deferred tax assets as the realizability of the tax benefit is not at the more likely than not threshold. Since the benefit has not been recorded, the Company has determined that the TRA liability is not probable and therefore no TRA liability existed as of SeptemberJune 30, 2022.2023.
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Note 8 - Shareholders’ Equity
The Company’s Amended and Restated Certificate of Incorporation (“Charter”) authorizes the issuance of 610,000,000425,000,000 shares, of which 400,000,000 shares are Class A common stock, par value $0.0001 per share, 200,000,00015,000,000 shares of Class V common stock, par value $0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001 per share. The Reverse Stock Split reduced the number of authorized shares of Class V common stock from 200,000,000 to 15,000,000 while the number of authorized shares of Class A common stock and the par value for both Class A and Class V common stock remained unchanged.
Warrants
Public Warrants
The Company has outstanding 10,997,500 warrants convertible into 733,166 shares of Class A common stock that were issued prior to the Business Combination, of which 10,800,000 convertible into 720,000 shares of Class A common stock are referred to as public warrants and 197,500 convertible into 13,166 shares of Class A common stock are Private Warrants. Each warrant represents the right to purchase an equal number1/15th of sharesa share of the Company’s Class A common stock. Each warrant entitles the registered holder to purchase one share of Class A common stock at a price of $11.50172.50. per whole share. The warrants expire on July 20, 2026.
The Company may call the public warrants for redemption (but not the Private Warrants), in whole and not in part, at a price of $.01.15 per Public Warrant:
● | at any time while the public warrants are exercisable, | |
● | upon not less than 30 days’ prior written notice of redemption to each public warrant holder, | |
● | if, and only if, the reported last sale price of shares of Class A common stock equals or exceeds $ | |
● | if, and only if, there is a current registration statement in effect with respect to shares of Class A common stock underlying such public warrants at the time of redemption and for the entire 30-day trading period referred to above and continuing each day thereafter until the date of redemption. |
15
The right to exercise will be forfeited unless the warrants are exercised prior to the date specified in the notice of redemption.
Private Warrants
The Company has agreed that so long as the Private Warrants are still held by ourits initial shareholders or their affiliates, it will not redeem such Private Warrants and will allow the holders to exercise such Private Warrants on a cashless basis (even if a registration statement covering shares of Class A common stock issuable upon exercise of such warrants is not effective). As of SeptemberJune 30, 2022,2023, there were 197,500 Private Warrants outstanding.
September 2021 Pre-Funded Warrants
On September 15, 2021, the Company entered into a Share Repurchase Agreement with various entities (collectively, the “Investors”) whereby the Company repurchased an aggregate of 800,00053,333 shares of Class A common stock (the “Repurchase Shares”) from the Investors. The purchase price for the Repurchase Shares was the issuance of an aggregate of 800,00053,333 pre-funded warrants to acquire an equal number of shares of Class A common stock (the “Pre-Funded Warrants”).
The Pre-Funded Warrants do not expire and are exercisable at any time after their original issuance. During May 2022, the Pre-Funded Warrants were exercised in full.
January 2022 Warrants
On January 6, 2022, the Company sold 2,496,934166,462 shares of the Company’s Class A common stock, and, in lieu of common stock, pre-funded warrants to purchase 7,797,184519,812 shares of common stock and accompanying warrants to purchase up to 10,294,118686,274 shares of common stock (the “January 2022 Offering”). The common stock and warrants were sold at a combined purchase price of $3.4051.00 per share (less $0.0001 per share for pre-funded warrants). Each warrant has an exercise price per share of common stock equal to $3.6054.00 and will expirefive years from the date of issuance and may be exercised on a cashless basis if a registration statement registering the shares issuable upon exercise is not effective. The Company received gross proceeds from the offering of approximately $35 million before deducting estimated offering expenses.
During As of December 31, 2022, the nine months ended September 30, 2022, 6,397,146 pre-funded warrants issued in the January 2022 Offering were exercised in full on a cashless basis.
On April 19, 2023, the Company issued certain lenders warrants (the “April 2023 Warrants”) to purchase 1/15th of a share of the Company’s Class A common stock for each $0.5134 of principal amount of the Notes, for an aggregate of 6,397,1467,964,550 warrants convertible
17
to 530,970 shares of Class A common stock. The aggregate amount of the April 2023 Warrants is inclusive of 2,288,664 warrants convertible to 152,577 shares of Class A common stock by virtueassociated with related parties. Each warrant is exercisable immediately, has an exercise price per share of a portionClass A common stock equal to $7.701 per whole share and will expire three years and three months from the date of the pre-funded warrants beingissuance and may be exercised on a cashless basis.basis if a registration statement registering the resale of the shares issuable upon exercise is not effective. The exercised pre-funded warrants dowarrant holder will be prohibited, subject to certain exceptions, from exercising the Warrants for shares of the Company’s Class A common stock to the extent that immediately prior to or after giving effect to such exercise, the warrant holder, together with its affiliates and other attribution parties, would own more than 4.99% or 9.99%, as applicable, of the total number of shares of the Company’s Class A common stock then issued and outstanding, which percentage may be changed at the warrant holders’ election to a higher or lower percentage not affectin excess of 9.99% upon 61 days’ notice to the weighted average share calculation as pre-funded warrants are already included inCompany. The Company agreed to use commercially reasonable efforts to register the weighted average share calculation as if theyshares of Class A common stock underlying the Warrants within 60 days and to have been exercised.the registration statement declared effective within 30 days thereafter. As of June 30, 2023, there were 7,964,550 April 2023 Warrants outstanding.
Stryve Foods, Inc. 2021 Omnibus Incentive Plan (the “Incentive Plan”)
The Incentive Plan allows the Company to grant stock options, restricted stock unit awards and other awards at levels determined appropriate by its board of directors and/or compensation committee. The Incentive Plan also allows the Company to use a broad array of equity incentives and performance cash incentives in order to secure and retain the services of its employees, directors and consultants, and to provide long-term incentives that align the interests of its employees, directors and consultants with the interests of its stockholders. The Incentive Plan is administered by the Company’s board of directors or its compensation committee, or any other committee or subcommittee or one or more of its officers to whom authority has been delegated (collectively, the “Administrator”). The Administrator has the authority to interpret the Incentive Plan and award agreements entered into with respect to the Incentive Plan; to make, change and rescind rules and regulations relating to the Incentive Plan; to make changes to, or reconcile any inconsistency in, the Incentive Plan or any award agreement covering an award; and to take any other actions needed to administer the Incentive Plan.
The Incentive Plan permits the Administrator to grant stock options, stock appreciation rights (“SARs”), performance shares, performance units, shares of Class A common stock, restricted stock, restricted stock units (“RSUs”), cash incentive awards, dividend equivalent units, or any other type of award permitted under the Incentive Plan. The Administrator may grant any type of award to any participant it selects, but only employees of the Company or its subsidiaries may receive grants of incentive stock options within the meaning of Section 422 of the Internal Revenue Code. Awards may be granted alone or in addition to, in tandem with, or (subject to the repricing prohibition described below) in substitution for any other award (or any other award granted under another plan of the Company or any affiliate, including the plan of an acquired entity).
The Company has reserved a total of 2,564,960457,664 shares of Class A common stock for issuance pursuant to the Incentive Plan. The number of shares reserved for issuance under the Incentive Plan will be reduced on the date of the grant of any award by the maximum number of shares, if any, with respect to which such award is granted. However, an award that may be settled solely in cash will not deplete the Incentive Plan’s share reserve at the time the award is granted. If (a) an award expires, is canceled, or terminates without issuance of shares or is settled in cash, (b) the Administrator determines that the shares granted under an award will not be issuable because the
16
conditions for issuance will not be satisfied, (c) shares are forfeited under an award, (d) shares are issued under any award and the Company reacquires them pursuant to its reserved rights upon the issuance of the shares, (e) shares are tendered or withheld in payment of the exercise price of an option or as a result of the net settlement of outstanding stock appreciation rights or (f) shares are tendered or withheld to satisfy federal, state or local tax withholding obligations, then those shares are added back to the reserve and may again be used for new awards under the Incentive Plan. However, shares added back to the reserve pursuant to clauses (d), (e) or (f) in the preceding sentence may not be issued pursuant to incentive stock options.
As of June 30, 2023, the Company had 335,002 shares of Class A common stock remain available for issuance under the Incentive Plan.
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Note 9 - Stock Based Compensation
The Company's stock-based awards that result in compensation expense consist of restricted stock units (RSUs) and restricted stock awards (RSAs). As of SeptemberJune 30, 2022,2023, the Company had 1,335,0675,025,025 shares available for grant under its stock plans. As of SeptemberJune 30, 2022,2023, the total unrecognized compensation cost related to all unvested stock-based compensation awards was $2.81,978,263 million and is expected to be recognized over the next four years. RSUs generally vest over three years and RSAs generally vest from one to four years.
Restricted Stock Units (RSUs)
The following table summarizes the Company's RSU activity:
Nonvested Restricted Stock Units |
|
|
|
|
|
| ||
|
|
|
|
| Weighted Average |
| ||
|
| Restricted Stock |
|
| Award Date Fair Value |
| ||
|
| Units |
|
| Per Share |
| ||
Restricted Stock at January 1, 2022 |
|
| 399,000 |
|
| $ | 5.20 |
|
Added |
|
| 95,000 |
|
|
| 0.68 |
|
Forfeiture |
|
| (195,166 | ) |
|
| 5.21 |
|
Vested |
|
| (13,334 | ) |
|
| 5.16 |
|
Restricted Stock at September 30, 2022 |
|
| 285,500 |
|
| $ | 3.69 |
|
Nonvested Restricted Stock Units |
|
|
|
|
|
| ||
|
|
|
|
| Weighted Average |
| ||
|
| Restricted Stock |
|
| Award Date Fair Value |
| ||
|
| Units |
|
| Per Share |
| ||
Restricted Stock at January 1, 2023 |
|
| 14,578 |
|
| $ | 48.47 |
|
Granted |
|
| 29,500 |
|
|
| 15.30 |
|
Forfeited |
|
| (1,811 | ) |
|
| 77.40 |
|
Vested |
|
| (1,667 | ) |
|
| 37.65 |
|
Restricted Stock at June 30, 2023 |
|
| 40,600 |
|
| $ | 23.53 |
|
The fair value of RSUs is determined based on the closing market price of the Company's stock on the grant date.
Restricted Stock Awards (RSAs)
The following table summarizes the Company's RSA activity:
Nonvested Restricted Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| Weighted Average |
|
|
|
|
| Weighted Average |
| ||||
|
| Restricted Stock |
|
| Award Date Fair Value |
|
| Director |
|
| Award Date Fair Value |
| ||||
|
| Awards |
|
| Per Share |
|
| Stock Awards |
|
| Per Share |
| ||||
Restricted Stock at January 1, 2022 |
|
| 328,500 |
|
| $ | 5.31 |
|
|
| - |
|
| $ | — |
|
Added |
|
| 550,000 |
|
| $ | 1.29 |
|
|
| 59,625 |
|
| $ | 2.48 |
|
Forfeiture |
|
| — |
|
|
| — |
|
|
| - |
|
| $ | — |
|
Vested |
|
| (65,625 | ) |
| $ | 5.43 |
|
|
| (46,750 | ) |
| $ | 2.47 |
|
Restricted Stock at September 30, 2022 |
|
| 812,875 |
|
| $ | 2.90 |
|
|
| 12,875 |
|
| $ | 2.51 |
|
Nonvested Restricted Stock Awards |
|
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
| Weighted Average |
|
|
|
|
| Weighted Average |
| ||||
|
| Restricted Stock |
|
| Award Date Fair Value |
|
| Director |
|
| Award Date Fair Value |
| ||||
|
| Awards |
|
| Per Share |
|
| Stock Awards |
|
| Per Share |
| ||||
Restricted Stock at January 1, 2023 |
|
| 42,200 |
|
| $ | 27.92 |
|
|
| 7,500 |
|
| $ | 12.45 |
|
Granted |
|
| — |
|
|
| — |
|
|
| 18,364 |
|
|
| 10.85 |
|
Forfeited |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Vested |
|
| (10,139 | ) |
|
| 25.89 |
|
|
| (16,414 | ) |
|
| 11.28 |
|
Restricted Stock at June 30, 2023 |
|
| 32,061 |
|
| $ | 28.56 |
|
|
| 9,450 |
|
| $ | 11.38 |
|
The fair value of RSAs is determined based on the closing market price of the Company's stock on the grant date.
Stock Based Compensation Expense
ShareThe Company has a long-term incentive plan under which the Compensation Committee of the Board of Directors has the authority to grant share-based awards to Company employees and non-employees. Stock based compensation costs associated with RSUsemployee RSU and RSAsRSA grants are recorded as a separate component of Selling Expensessalaries and wages on the condensed consolidated statements of income. Share-basedoperations. For the three and six months ended June 30, 2023, $245,525 and $397,214, respectively, were recorded in salaries and wages. For the three and six months ended June 30, 2022, $327,676 and $608,811, respectively, were recorded in salaries and wages. Stock based compensation costs associated with non-employee RSU and RSA grants are recorded as a separate component of selling expenses on the condensed consolidated statements of operations. For the three and six months ended June 30, 2023, $186,917 and $220,751, respectively, were recorded in selling expenses. For the three and six months ended June 30, 2022, $56,543 and $103,167, respectively, were recorded in selling expenses. Stock based compensation expense for service-based awards that contain a graded vesting schedule is recognized net of estimated forfeitures for plan participants on a straight-line basis. The Company accounts for forfeitures when they occur.
1719
Note 10 - Fair Value Measurements
The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period, and non-financial assets and liabilities that are re-measured and reported at fair value at least annually.
The fair value of the Company’s financial assets and liabilities reflects management’s estimate of amounts that the Company would have received in connection with the sale of the assets or paid in connection with the transfer of the liabilities in an orderly transaction between market participants at the measurement date. In connection with measuring the fair value of its assets and liabilities, the Company seeks to maximize the use of observable inputs (market data obtained from independent sources) and to minimize the use of unobservable inputs (internal assumptions about how market participants would price assets and liabilities). The following fair value hierarchy is used to classify assets and liabilities based on the observable inputs and unobservable inputs used in order to value the assets and liabilities:
Level 1: | Observable inputs such as quoted prices (unadjusted), for identical instruments in active markets. | |
Level 2: | Observable inputs other than Level 1 inputs. Examples of Level 2 inputs include quoted prices in active markets for similar assets or liabilities and quoted prices for identical assets or liabilities in markets that are not active. | |
Level 3: | Unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions, such as valuations derived from valuation techniques in which one or more significant inputs or significant value drivers are unobservable. In some circumstances, the inputs used to measure fair value might be categorized within different levels of the fair value hierarchy. In those instances, the fair value measurement is categorized in its entirety in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement. |
The following table presents information about the Company’s liability measured at fair value on a recurring basis at SeptemberJune 30, 20222023 and December 31, 20212022 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value:
Description |
| Level |
|
| September 30, 2022 |
|
| December 31, 2021 |
| |||
Liabilities: |
|
|
|
|
|
|
|
|
| |||
Warrant liability - Private Warrants |
|
| 3 |
|
| $ | 28,421 |
|
| $ | 128,375 |
|
18
Description |
| Level |
|
| June 30, 2023 |
|
| December 31, 2022 |
| |||
Liabilities: |
|
|
|
|
|
|
|
|
| |||
Warrant liability - Private Warrants |
|
| 3 |
|
| $ | 1,975 |
|
| $ | 20,625 |
|
Private Warrants
The Private Warrants were accounted for as liabilities in accordance with ASC 815-40 and are presented within warrant liabilities on the Company’s consolidated balance sheet. The warrant liabilities are measured at fair value at inception and on a recurring basis, with changes in fair value presented within change in fair value of warrant liabilities in the condensed consolidated statementstatements of operations.
On SeptemberJune 30, 2022,2023, the Private Warrants were determined to have a fair value of $0.060.15 per warrant for an aggregate fair value of $28,4211,975.
The following table presents the change in the fair value of warrant liabilities for the period:
Warrant Fair Values |
| Private |
|
| Private |
| ||
Fair value as of December 31, 2021 |
| $ | 128,375 |
| ||||
Fair value as of December 31, 2022 |
| $ | 20,625 |
| ||||
Change in fair value |
|
| (99,954 | ) |
|
| (18,650 | ) |
Fair value as of September 30, 2022 |
| $ | 28,421 |
| ||||
Fair value as of June 30, 2023 |
| $ | 1,975 |
|
Note 11 - Related Party Transactions
Sale and Leaseback. On May 26, 2021, the Company entered into a Purchase and Sale Agreement with OK Biltong Facility, LLC (“Buyer”), an entity controlled by a member of the Company’s board of directors, pursuant to which the parties consummated a sale and leaseback transaction (the “Sale and Leaseback Transaction”) of the Company’s manufacturing facility and the surrounding property in Madill, Oklahoma (the “Real Property”) for a total purchase price of $7,5007,500,000 thousand..
In connection with the consummation of the Sale and Leaseback Transaction, the Company entered into a lease agreement (the “Lease Agreement”) with Buyer pursuant to which the Company leased back the Real Property from Buyer for an initial term of twelve (12) years unless earlier terminated or extended in accordance with the terms of the Lease Agreement. Under the Lease Agreement, the Company’s financial obligations include base rent of approximately $60,000 per month, which rent will increase on an annual basis at two percent (2%) over the initial term and two-and-a-half percent (2.5%) during any extension term. The Company is also responsible for all monthly expenses related to the leased facility, including insurance premiums, taxes and other expenses, such as utilities. Under the Lease Agreement, the Company has three (3) options to extend the term of the lease by five (5) years for each such option and a
20
one-time right and option to purchase the Real Property at a price that escalates over time and, if Buyer decides to sell the Real Property, the Company has a right of first refusal to purchase the Real Property on the same terms offered to any third party.
ManagementThe Company determined that the sale and leaseback transaction contained continuing involvement and thus used the financing method consistent with ASC 842. The transfer did not qualify as a sale; hence it is considered a "failed" sale and both parties account for it as a financing transaction. Accordingly, a financing obligation related to the operating lease in the amount of the sale price ($7,5007,500,000 thousand)) has been booked and the corresponding assets on the balance sheet are maintained. Under the finance method, rental payments are applied as amortization and/or interest expense on the financing obligation as appropriate using an assumed interest rate. The Company is accounting for these as interest only payments because the Company's incremental cost to borrow when applied to the financing obligation is greater than the rental payments under the Lease Agreement. The Company recognized interest expense of $543,578183,593 and $367,185 during the ninethree and six months ended SeptemberJune 30, 2023, respectively. The Company recognized interest expense of $179,993 and $359,986 during the three and six months ended June 30, 2022, respectively.
Promissory Notes. On April 19, 2023, the Company issued an aggregate of $1,175,000 in Related Party Notes. The Related Party Notes accrue interest annually at a rate of 12% and will mature upon the earlier of (i) December 31, 2023, or (ii) the closing of the next sale (or series of related sales) by the Company of its equity securities (other than pursuant to warrants described below), following the date of the Related Party Notes, from which the Company receives gross proceeds of not less than $3,000,000. The Related Party Notes are secured by a security interest on substantially all the assets of the Company that is subordinate to the security interests of the Company’s existing first and second lien lenders. See Note 6 for further discussion on the Related Party Notes. Each related party lender that purchased Related Party Notes received a warrant (the “Related Party Warrants”) to purchase 1/15th of a share of the Company’s Class A common stock for each $0.5134 of principal amount of the Related Party Notes, for an aggregate of 2,288,664 Related Party Warrants convertible to 152,577 shares of Class A common stock. Each Warrant is exercisable immediately, has an exercise price per share of Class A common stock equal to $7.701 and will expire three years and three months from the date of issuance and may be exercised on a cashless basis if a registration statement registering the resale of the shares issuable upon exercise is not effective. See Note 8 for further discussion on the Related Party Warrants.
Other. During the three and six months ended June 30, 2022, the Company purchased approximately $9,620 and $143,420, respectively, in goods from an entity controlled by a member of the Company’s Board of Directors (the "Related Party Manufacturer"). No amounts were purchased during the three and six months ended June 30, 2023. There were no amounts owed to the Related Party Manufacturer as of June 30, 2023 and December 31, 2022.
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Note 12 - Commitments and Contingencies
Litigation
On March 29, 2022, one of the investors in Stryve’s January 2022 private offering sent the Company a letter alleging that the Company has breached “the representations and warranties the Company” made to investors in the definitive agreement. Although Stryve intends to vigorously defend itself against these allegations, Stryve cannot at this time predict whether any litigation will be filed, predict the likely outcome of any future litigation, reasonably determine either the probability of a material adverse result or any estimated range of potential exposure, or reasonably determine how this matter or any future matters might impact ourthe Company's business, ourits financial condition, or ourits results of operations, although such impact, including the costs of defense, as well as any judgments or indemnification obligations, among other things, could be materially adverse to us.
StryveThe Company has received a letter from a person purporting to be counsel to certain investors in Stryve LLC and the Seller, which letter alleges claims against Stryve,the Company, Stryve LLC, and the Seller concerning the distribution of Stryve’s equity by the Seller in connection with the Business Combination Agreement by which Stryve acquired Stryve LLC. StryveThe Company believes that such allegations are without merit and intends to defend against any claims that may be filed on account of such allegations. Stryve is not able at this time to quantify its exposure for any possible damages arising out of any such claims that may arise from these allegations.
The Company may be a party to routine claims brought against it in the ordinary course of business. After consulting with legal counsel, the Company does not believe that the outcome of any such pending or threatened litigation will have a material adverse effect on its financial condition or results of operations. However, as is inherent in legal proceedings, there is a risk that an unpredictable decision adverse to the Company could be reached. The Company records legal costs associated with loss contingencies as incurred. Settlements are accrued when, and if, they become probable and estimable.
Registration Rights Agreements
The Company is a party to various registration rights agreements with certain stockholders where it may be required to register securities for such stockholders in certain circumstances.
21
Note 13 - Subsequent Events
The Company evaluated subsequent events and transactions that occurred after the balance sheet date up to the date that the condensed financial statements were issued. Based upon this review, other than as described below, the Company did not identify any subsequent events that would have required adjustment or disclosure in the condensed financial statements.
On July 13, 2023, the Company filed with the Secretary of State of the State of Delaware a First Certificate of Amendment to its First Amended and Restated Certificate of Incorporation (the “Certificate”) to effect a 1-for-15 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding shares of common stock, par value $0.0001 per share, effective as of 12:01 p.m. Eastern Time on July 14, 2023. Beginning with the opening of trading on July 14, 2023, the Company’s common stock traded on NASDAQ on a split-adjusted basis under the new CUSIP number 863685202 and continues to trade under the symbol “SNAX.” The reverse stock split was intended for the Company to regain compliance with the minimum bid price requirement of $1.00 per share of common stock for continued listing on NASDAQ.
As a result of the Reverse Stock Split, every fifteen shares of common stock issued and outstanding were automatically reclassified into one share of common stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who otherwise would have been entitled to receive fractional shares because they held a number of shares of common stock not evenly divisible by the Reverse Stock Split ratio were automatically entitled to receive a cash payment equal to the value of such fractional share based on the closing price of the common stock as of the effective time of the Reverse Stock Split adjusted for the Reverse Stock Split.
The Reverse Stock Split reduced the number of authorized shares of Class V common stock from 200,000,000 to 15,000,000 while the number of authorized shares of Class A common stock and the par value for both Class A and Class V common stock remained unchanged. The Reverse Stock Split affected all stockholders uniformly and did not affect any stockholder’s ownership percentage of the Company’s shares of common stock.
All outstanding options, warrants, restricted stock units and similar securities entitling their holders to receive or purchase shares of common stock were adjusted as a result of the Reverse Stock Split, as required by the terms of each security. Prior to the Reverse Stock Split, the Company had outstanding issued warrants listed on NASDAQ to purchase a total of 10,800,000 shares of common stock, with each whole warrant being exercisable to purchase one share of common stock at $11.50 per share. After giving effect to the Reverse Stock Split, these warrants are now exercisable for a total of approximately 720,000 shares of common stock, resulting in each warrant becoming exercisable for 1/15th of a share of common stock with an exercise price of $172.50 per whole share.
2022
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has based these forward-looking statements on the Company’s current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. These risks, uncertainties, assumptions and other important factors, which could cause actual results to differ materially from those described in these forward-looking statements, include: (i) the inability to achieve profitability due to commodity prices, inflation, supply chain interruption, transportation costs and/or labor shortages; (ii) the ability to meet financial and strategic goals, which may be affected by, among other things, competition, supply chain interruptions, the ability to pursue a growth strategy and manage growth profitability, maintain relationships with customers, suppliers and retailers and retain its management and key employees; (iii) the risk that retailers will choose to limit or decrease the number of retail locations in which Stryve’s products are carried or will choose not to carry or not to continue to carry Stryve’s products; (iv) the possibility that Stryve may be adversely affected by other economic, business, and/or competitive factors; (v) the effect of the COVID-19 pandemic on Stryve; (vi) the possibility that Stryve may not achieve its financial outlook (vii)(vi) Stryve's ability to maintain its listing on the Nasdaq Capital market; (viii)(vii) Stryve's ability to maintain its liquidity position and implement cost savings measures; (viii) Stryve's ability to continue as a going concern, (ix) adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, and (ix)(x) other risks and uncertainties described herein and in other filings with the Securities and Exchange Commission (“SEC”) filings.
Unless the context otherwise requires, all references in this report to “Stryve,” the “Company,” “we,” “us” and “our” herein refer to the parent entity formerly named Andina Acquisition Corp. III, after givingStryve Foods, Inc..
We effected a 1-for-15 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding shares of Class A and Class V common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on July 14, 2023. All share and per share amounts were retroactively adjusted for all periods presented to give effect to the Business Combination, and as renamed Stryve Foods, Inc., and where appropriate, our consolidated subsidiaries, and references in this report to “Andina” refer to Andina Acquisition Corp. III before giving effectreverse stock split, including reclassifying an amount equal to the Business Combination.reduction in par value of the Company’s common stock to additional paid-in capital. See Note 13 for additional information.
The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this report. Due to rounding, certain totals and subtotals may not foot and certain percentages may not reconcile.
Overview
Stryve is an emerging healthy snacking company which manufactures, markets and sells highly differentiated healthy snacking products that Stryve believes can disrupt traditional snacking categories. Stryve’s mission is “to help Americans snack better and live happier, better lives.” Stryve offers convenient snacks that are lower in sugar and carbohydrates and higher in protein than other snacks. Stryve offers all-natural, delicious snacks which it believes are nutritious and offer consumers a convenient healthy snacking option for their on-the-go lives.
Stryve’s current product portfolio consists primarily of air-dried meat snack products marketed under the Stryve®, Kalahari®, Braaitime®, and Vacadillos® brand names. Biltong is a process for preserving meat through air drying that originated centuries ago in South Africa. Unlike beef jerky, Stryve’s all-natural air-dried meat snack products are made of beef and spices, are never cooked, most contain zero grams of sugar, and are free of monosodium glutamate (MSG), gluten, nitrates, nitrites, and preservatives. As a result, Stryve’s products are Keto and Paleo diet friendly. Further, based on protein density and sugar content, Stryve believes that its air-dried meat snack products are some of the healthiest shelf-stable snacks available today.
Stryve distributes its products in major retail channels, primarily in North America, including mass, convenience, grocery, club stores, e-retailers, and other retail outlets, as well as directly to consumers through its e-commerce websites.websites and through the Amazon platform.
Stryve believes increased consumer focus in the U.S. on health and wellness will continue to drive growth of the healthy snacking category and increase demand for Stryve’s products. Stryve has shown strong sales growth since its inception in 2017. Stryve has made substantial investments since its inception in product development, establishing its manufacturing facility, and building its marketing, sales and operations infrastructure to grow its business. As a result, Stryve has reported net losses since its inception. Stryve intends to continue to invest in productivity, product innovation, improving its supply chain, enhancing and expanding its manufacturing capabilities, and expanding its marketing and sales initiatives to drive continued growth. Additionally, moving forward management anticipates additional expenses not previously experienced related to internal controls, regulatory compliance, and other expenses relating to its go-forward operations as a public company.
21
23
Comparability of Financial Information
The Company's resultsNew Packaging & Retail Distribution Growth
A key piece of operationsour retail growth strategy is tied to making the product more available and statementsapproachable. To accomplish this we completed a strategic redesign of assetsour packaging with retail conversion at the forefront of design considerations. We collaborated with both consumers and liabilities may not be comparable between periodsretailers as we sought to optimize the packaging for retail conversion. We received a resultpositive response from many retail partners on the new designs, garnering additional distribution in the process. We began manufacturing select items in the new packaging throughout the second quarter of 2023 and towards the end of the Business Combinationsecond quarter, our new packaging began to ship to select retailers. Over the last two months, we have seen significant year-over-year gains in our retail distribution footprint, in-store dollar velocity, and becoming a public company.price-mix ultimately leading to increased retail sales and market share.
We are encouraged by the initial consumer and retailer response to our updated packaging and are excited to track what we believe will be attractive retail velocities across our portfolio as the new packaging continues to roll out over the balance of the year.
January
Improving Quality of Revenue
As an extension of the restructuring plans, we evaluated our revenue base in the second half of 2022 PIPEand have taken steps to improve or eliminate low-quality revenue sources in order to drive long-term value-creating growth. Key considerations in these rationalization decisions included assessments of strategic alignment, complexity, and profitability. And with respect to assessing the profitability of a particular revenue stream specifically, we evaluated our revenues on a gross margin basis, a net margin basis, and a cash conversion basis. Accordingly, we acknowledge that meaningful portion of net sales in the prior year first half came from products, customers, and/or channels that have been rationalized. Despite the negative impact to net sales that this rationalization has had, our most valuable revenues are growing meaningfully, and retail consumption of our products is strong and importantly, our net losses are significantly improved.
Optimizing Spend and Reducing Losses
Our second quarter results are a product of the progress we have made on our cost mitigation strategies. We examined every area of spending throughout our business and believe we identified ways to drive efficiencies, eliminate unnecessary expense, and focus on the highest and best use of each dollar. The resulting impact is a 61.6% year-over-year reduction in total operating expenses in the second quarter of 2023, resulting in a $12.0 million improvement in our pre-tax net loss despite lower sales when comparing to the prior year period. Moving forward, we believe our optimized spending plan will begin to materially benefit from portfolio-wide price increases taken in 2022 and productivity initiatives throughout our supply chain. While we intend to continue to invest to drive meaningful growth in net sales, we are doing so in a more disciplined manner that acknowledges the fundamental changes in direct-to-consumer advertising markets. By monitoring our unit economics closely, maintaining an optimized spending profile, and seeking to meaningfully grow net sales, we believe we will be able to drive further reductions in our net losses moving forward.
At-The-Market Equity Facility
In June 2023, the Company entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which they may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. No shares were sold under the at-the-market equity facility during the three months ended June 30, 2023.
April 2023 Financing Transaction
On January 6, 2022,April 19, 2023, the Company entered into a Securities Purchase Agreementwe issued an aggregate of $4.1 million in principal amount of secured promissory notes (the “Purchase Agreement”“Notes”) withto select accredited investors (including certain members of the Company’s management and Board of Directors) (the “2022 PIPE Investors”“Lenders”), relating. The Notes carry an interest rate of 12% and have a maturity December 31, 2023. Each Lender that purchased Notes received a warrant (the “Warrants”) to the issuance and salepurchase 1/15th of 2,496,934 sharesone share of the Company’s Class A common stock and, in lieufor each $0.5134 of Class A Common Stock, pre-funded warrantsprincipal amount of the Notes, for an aggregate of 7,964,550 Warrants convertible to purchase 7,797,184530,970 shares of Class A common stock (the “PIPE Pre-Funded Warrants”), and accompanying warrants (the “PIPE Warrants”) to purchase up to 10,294,118 sharesstock. Each Warrant is exercisable immediately, has an exercise price per share of Class A common stock with an exercise price equal to $3.60$7.701 per whole share and will expire three years and three months from the date of issuance and may be exercised on a cashless basis if a registration statement registering the resale of the shares issuable upon exercise is not effective. The Company accounted for the transaction by allocating the proceeds between the Notes and Warrants based on their relative fair values as of the closing date of the facility. The allocation resulted in the fair value of the warrants to be treated as a discount to the Notes of $1.4 million that is being amortized over the term of five years (the “Offering”). The Offering closed on January 11, 2022. The Class A common stock and PIPE Warrants were sold at a combined purchase price of $3.40 per share (less $0.0001 per share for PIPE Pre-Funded Warrants). The Company received net proceeds from the Offering of $32.3 million. The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder.
Business Combination
On July 20, 2021 (the “Closing Date”), Andina completed the business combination (the "Business Combination") pursuant to that certain Business Combination Agreement (the "Business Combination Agreement") by and amongNotes. Accordingly, the Company Andina Holdings LLC, a Delaware limited liability company and a wholly-owned subsidiaryrecognized non-cash interest expense of the Company (“Holdings”), B. Luke Weil, in the capacity from and after the closing of the transactions contemplated by the Business Combination Agreement (the “Closing”) as the representative for the shareholders of the Company (other than the Seller), Stryve Foods, LLC, a Texas limited liability company, Stryve Foods Holdings, LLC, a Texas limited liability company (the “Seller”), and R. Alex Hawkins, in the capacity from and after the Closing as the representative for the members of the Seller.
As contemplated by the Business Combination Agreement, on or before the Closing Date, the following occurred: (i) the Seller and Stryve Foods, LLC (“Stryve LLC”) conducted a reorganization via a merger pursuant to which the Seller became a holding company for Stryve LLC, the former owners of Stryve LLC became the owners of the Seller, and the former holders of convertible notes of Stryve LLC became holders of convertible notes of the Seller, and pursuant to which Stryve LLC retained all of its subsidiaries, business, assets and liabilities, and became a wholly-owned subsidiary of the Seller (the “Merger”), (ii) the Company was transferred by way of continuation out of the Cayman Islands and domesticated as a corporation in the State of Delaware, (iii) the Seller contributed to Holdings all of the issued and outstanding equity interests of Stryve LLC in exchange for 11,502,355 newly issued non-voting Class B common units of Holdings (the "Seller Consideration Units") and voting (but non-economic) Class V common stock of the Company (that was previously subject to a post-Closing working capital true-up), (iv) the Company contributed all of its cash and cash equivalents to Holdings, approximately $37.9$0.4 million after the payment of approximately $7.8 million to the Company’s shareholders that elected to have their shares redeemed in connection with the Closing (the “Redemption”) anddiscount for the payment of approximately $10.4 million of the Company’s expenses and other liabilities due at the Closing, in exchange for newly issued voting Class A common units of Holdings and (v) the Company issued $10.9 million of Class A common stock, satisfied by the offset of principal and accrued interest under $10.6 million of outstanding unsecured promissory notes (the "Bridge Notes") issued by Stryve LLC to certain investors in a private placement on the Closing Date (the "Bridge Investors"); and (vi) the Company changed its name to “Stryve Foods, Inc.” In addition, the Company’s ordinary shares converted into shares of Class A common stock, par value of $0.0001 per share, without any action of the holder. On March 25, 2022, the Company finalized the post-closing adjustments under the Business Combination Agreement (the "Post-Closing Adjustment"), which resulted in the release of all 115,023 escrowed shares of Class V common stock, an equal number of Holdings Class B common units, and the net payment of approximately $238,000 by the Company to the Seller. As a result, no additional Post-Closing Adjustment remains outstanding.quarter ended June 30, 2023.
Following the consummation of the Business Combination, the combined company is organized in an “Up-C” structure in which the business of Stryve LLC and its subsidiaries is held by Holdings, which is a subsidiary of the Company. By virtue of the “Up-C” structure, the Company’s only direct assets consist of its equity interests in Holdings, an entity of which the Company maintains 100% voting control. As the sole voting member of Holdings, the Company has full, exclusive and complete discretion to manage and control the business of Stryve LLC and to take all action it deems necessary, appropriate, advisable, incidental, or convenient to accomplish the purposes of Stryve LLC and, accordingly, the financial statements are prepared on a consolidated basis.
On July 20, 2021, in connection with the completion of the Business Combination and as contemplated by the Business Combination Agreement, the Company: (i) issued 4,250,000 shares of Class A common stock to private placement investors for aggregate consideration of $42.5 million; and (ii) the Company issued 1,357,372 shares of Class A common stock to the Bridge Investors satisfied by the offset of $10.9 million of principal and accrued interest under outstanding Bridge Notes issued by Stryve LLC, as part of the Business Combination.
22
The Business Combination is accounted for as a reverse capitalization in accordance with generally accepted accounting principles in the United States ("GAAP"). Under this method of accounting, Stryve LLC is treated as the acquirer and Andina is treated as the acquired company for financial statement reporting purposes. Because Stryve LLC was deemed the accounting acquirer, the historical financial statements of Stryve LLC became the historical financial statements of the combined company, upon the consummation of the Business Combination.
23
Supply Chain Challenges & Increased Cost Environment
Through the beginning of the COVID-19 pandemic, we had been successful at avoiding disruptions to our supply chain and operations through these measures and maintained continuity of supply for its customers. However, beginning in the second half of 2021,Throughout 2022, we experienced certain supply chain challenges that negatively affected our ability to supply the demands to all of our channels of trade and negatively impacted our gross margins. While ourhave made efforts to mitigate these challenges, are beginning to show positive signs, these challenges nonetheless continuedfactors may continue to have an impact on the first three quarters of 2022. our financial results in 2023.
24
We believe thatexpect many of the supply chain disruptions we experienced in our operations are temporary but maythese inflationary pressures to persist in the near term.
In the first three quarters of 2022, we experienced a more expensive operating environment throughout the business, including higher prices for raw materials, packaging, beef, transportation, storage, services, labor, and advertising than the comparable periods in 2021. We expect these inflationary pressures to continue throughout at least 2022,future, which may continue to negatively impact our gross margins.margins if we are unsuccessful in mitigating these through our procurement strategies and pricing initiatives. We continue to track new developments affecting these inflationary pressures as we execute on our mitigating strategies to lessen the impact of these challenges and cost increases including but not limited to, price increases, strategic sourcing, improving our manufacturing yields, through capacity enhancements, investing in further automation, and rationalizing and optimizing marketing spend to drive greater returns and retail velocities.
Strengthen Liquidity and Investments to Grow Asset Base
During the third quarter of 2022, we strengthened our liquidity position by closing on a combination of debt facilities with $21.0 million of committed capacity at closing and the ability to expand to committed capacity to up to $26.0 million. Not only do we believe these facilities will provide us with the near-term liquidity we need to execute against our plan, we are pleased with the flexibility they offer given their covenant-lite nature and flexible amortization. Since the consummation of the Business Combination in July 2021, we have made considerable investments to strengthen our balance sheet in light of the uncertain macroeconomic environment. Meaningful investments made to reduce debt, grow working capital, acquire capital equipment, and expand facilities. These investments have augmented our capacities so that we can more efficiently flex our run-rate production levels, if needed, to satisfy outsized new distribution lay-in orders and/or national programs without materially straining our ordinary course day-to-day production. Additionally, considerable investments have been made in our inventory and current assets to help service our expanded distribution base moving forward.
Strong Consumption Despite Prior Quarter's Execution Challenges
From a tonnage perspective, the second quarter of 2022 was by far the largest in the Company's history. These outsized production and fulfillment volumes in Q2 2022 were primarily attributable to a limited time retailer specific savings event which placed our products in chain-wide distribution for a limited period of time tied to the event.
We faced several challenges in our execution of this brief, yet outsized, demand spike which led to short-term supply gaps in our wider distribution network which resulted in lower than target in-stock percentages at other retailers. We believe that the out-of-stocks experienced in late Q2 created some delays affecting the ordering patterns of our customers in the third quarter as their distribution pipelines were refilled. While the deleterious effects of these execution challenges have been significant, we believe they are temporary in nature as our consumption data showed strong recovery on-shelf. With the non-normal demand spike behind us, we have been able to quickly return to a more normalized production cadence allowing for improved yields and quickly recovering in-stock percentages at retail.
Change in Management and Solidifying Strategy
Earlier this year,In May of 2022, Stryve announced a leadership change with Chris Boever stepping in as the new Chief Executive Officer of the Company. With this change in leadership, management has thoughtfully reviewed the business, strategy, near-term prospects, and its previously discussed path to profitability. From this, management has identified certain one-time write-downs for assets that arewere non-core to the go-forward plan as well as identified necessary accrualswrite-downs of inventory and incurring one-time employee costs related to actions to be taken to reorganize the business and its objectives in line with the strategic direction that Mr. Boever has for the enterprise. These charges began in the second quarter of 2022, and we anticipatecontinued with a tapering effect on these types of charges throughout the balance of the year. For comparability
Downstream Inventory Management
We experienced atypical order patterns from our retail and distribution customers in the first half of 2023, mostly in the first quarter as a continuation of what we experienced in the fourth quarter of 2022. Notwithstanding orders related to new distribution pipeline fills, typically retailer and distributor order patterns closely mirror consumers' consumption of a brand's product off of the financial statements,shelves. In the fourth quarter of 2022, we have identified many of these charges as non-GAAP pro-forma adjustments in calculating Adjusted EBITDAsaw orders and Adjusted Earnings per Share,consumption diverge which are reconciled to the nearest GAAP figure below.
24
Optimizing Spend and Reducing Losses
Our third quarter results are a testament to the progress we've made on our cost mitigation strategies. We have examined every area of spending throughout our business and believe we identified ways to drive efficiencies, eliminate unnecessary expense, and focus on the highest and best use of each dollar. The resulting impact is a 46.9% reduction in total operating expenses leading to a $4.5 million improvement in our pre-tax net loss despite lower sales when comparing to the prior year quarter. When compared to our second quarter results, the third quarter shows a $5.4 million reduction in total operating expenses and a $11.4 million improvement in our pre-tax net loss. Moving forward, we believe indicates that retailers and distributors have been managing down their inventory levels. The net effect of this dynamic is two-fold for our optimized spending plan will beginbusiness. First, there was a negative impact to materially benefit from portfolio-wide price increases and productivity initiatives throughout our supply chain. While we intend to continue to invest to drive meaningful growth in net sales, we are doing so in a more disciplined manner that acknowledges the fundamental changes in direct-to-consumer advertising markets. By monitoring our unit economics closely, maintaining an optimized spending profile, and seeking to meaningfully grow net sales, we believe we will be able to drive further reductions in our net losses moving forward.
Improving Quality of Revenue
As an extension of the restructuring plans, we have closely evaluated our revenue base and have taken steps to improve or eliminate low-quality revenue sources and drive long-term value-creating growth. Key considerations in these rationalization decisions included assessments of strategic alignment, complexity, and profitability. And with respect to assessing the profitability of a particular revenue stream specifically, we evaluated our revenues on a gross margin basis, a net margin basis, and a cash conversion basis. Accordingly, we acknowledge that meaningful portion of net sales in the prior year quarter came from products, customers, and/or channels that havefirst half as the rationalization occurred. Second, with so much industry-wide inventory rationalization, our ability to quickly monetize our slow moving and obsolete inventory has also been rationalized. Despiteimpacted throughout the pullback in net sales as seen on the face of the financials, our most valuable revenues are growing meaningfully,first and retail consumption of our products is strong.second quarter.
25
Results of Operations –Three Months Ended SeptemberJune 30, 20222023 Compared to Three Months Ended SeptemberJune 30, 20212022
The following table sets forth selected items in our consolidated financial data in dollar amounts and as a percentage of net sales for the three months ended SeptemberJune 30, 20222023 compared to the three months ended SeptemberJune 30, 2021.2022.
|
| Three Months Ended |
|
| Three Months Ended |
| ||||||||||
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
| ||||||||||
|
| (unaudited) |
|
| (unaudited) |
| ||||||||||
(In thousands) |
|
|
|
| % of sales |
|
|
|
|
| % of sales |
| ||||
Net sales |
| $ | 6,170 |
|
|
| 100.0 | % |
|
| 9,062 |
|
|
| 100.0 | % |
Cost of goods sold (exclusive of depreciation shown separately below) |
|
| 4,786 |
|
|
| 77.6 | % |
|
| 5,808 |
|
|
| 64.1 | % |
Gross profit (loss) |
| $ | 1,384 |
|
|
| 22.4 | % |
| $ | 3,254 |
|
|
| 35.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing expenses |
| $ | 2,641 |
|
|
| 42.8 | % |
| $ | 5,827 |
|
|
| 64.3 | % |
Operations expense |
|
| 1,084 |
|
|
| 17.6 | % |
|
| 1,234 |
|
|
| 13.6 | % |
Salaries and wages |
|
| 1,940 |
|
|
| 31.4 | % |
|
| 3,973 |
|
|
| 43.8 | % |
Depreciation and amortization expense |
|
| 518 |
|
|
| 8.4 | % |
|
| 402 |
|
|
| 4.4 | % |
Gain on disposal of fixed assets |
|
| (50 | ) |
|
| (0.8 | )% |
|
| (13 | ) |
|
| (0.1 | )% |
Total operating expenses |
|
| 6,133 |
|
|
| 99.4 | % |
|
| 11,423 |
|
|
| 126.1 | % |
Operating loss |
|
| (4,749 | ) |
|
| (77.0 | )% |
|
| (8,169 | ) |
|
| (90.1 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (190 | ) |
|
| (3.1 | )% |
|
| (758 | ) |
|
| (8.4 | )% |
Change in fair value of Private Warrants |
|
| 15 |
|
|
| 0.2 | % |
|
| 213 |
|
|
| 2.4 | % |
Other income |
|
| (43 | ) |
|
| (0.7 | )% |
|
| 3 |
|
|
| 0.0 | % |
Total other income (expense) |
|
| (218 | ) |
|
| (3.5 | )% |
|
| (542 | ) |
|
| (6.0 | )% |
Net loss before income taxes |
| $ | (4,967 | ) |
|
| (80.5 | )% |
| $ | (8,711 | ) |
|
| (96.1 | )% |
|
| Three Months Ended June 30, |
|
| |||||||||||||
|
| 2023 |
|
| 2022 |
|
| ||||||||||
|
| (unaudited) |
|
| (unaudited) | ||||||||||||
(In thousands) |
|
|
|
| % of sales |
|
|
|
|
| % of sales |
|
| ||||
SALES, net |
| $ | 5,997 |
|
|
| 100.0 | % |
| $ | 10,946 |
|
|
| 100.0 | % |
|
COST OF GOODS SOLD (exclusive of depreciation shown separately below) |
|
| 4,946 |
|
|
| 82.5 | % |
|
| 15,371 |
|
|
| 140.4 | % |
|
GROSS PROFIT |
|
| 1,051 |
|
|
| 17.5 | % |
|
| (4,425 | ) |
|
| (40.4 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling expenses |
|
| 1,778 |
|
|
| 29.7 | % |
|
| 4,717 |
|
|
| 43.1 | % |
|
Operations expense |
|
| 625 |
|
|
| 10.4 | % |
|
| 1,349 |
|
|
| 12.3 | % |
|
Salaries and wages |
|
| 1,469 |
|
|
| 24.5 | % |
|
| 3,510 |
|
|
| 32.1 | % |
|
Depreciation and amortization expense |
|
| 552 |
|
|
| 9.2 | % |
|
| 503 |
|
|
| 4.6 | % |
|
Prepaid media reserve |
|
| — |
|
|
| 0.0 | % |
|
| 1,489 |
|
|
| 13.6 | % |
|
(Gain) loss on disposal of fixed assets |
|
| 1 |
|
|
| 0.0 | % |
|
| (24 | ) |
|
| (0.2 | )% |
|
Total operating expenses |
|
| 4,426 |
|
|
| 73.8 | % |
|
| 11,545 |
|
|
| 105.5 | % |
|
OPERATING LOSS |
|
| (3,376 | ) |
|
| (56.3 | )% |
|
| (15,970 | ) |
|
| (145.9 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OTHER (EXPENSE) INCOME |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (964 | ) |
|
| (16.1 | )% |
|
| (181 | ) |
|
| (1.6 | )% |
|
Change in fair value of Private Warrants |
|
| 10 |
|
|
| 0.2 | % |
|
| 40 |
|
|
| 0.4 | % |
|
Other income (expense) |
|
| 7 |
|
|
| 0.1 | % |
|
| (215 | ) |
|
| (2.0 | )% |
|
Total other (expense) income |
|
| (946 | ) |
|
| (15.8 | )% |
|
| (356 | ) |
|
| (3.3 | )% |
|
NET LOSS BEFORE INCOME TAXES |
| $ | (4,322 | ) |
|
| (72.1 | )% |
| $ | (16,326 | ) |
|
| (149.1 | )% |
|
Net sales. Net sales decreased by $2.9$4.9 million from $9.1$10.9 million during the three months ended SeptemberJune 30, 20212022 to $6.2$6.0 million during the three months ended SeptemberJune 30, 2022,2023, representing a reduction of 31.9%45.2% for the comparable periods. The primary driver of the decrease in net sales was the rationalization of low-quality revenue that occurred in the prior year period.period was a chainwide limited-time savings event with the one of the nation's largest retailers in the second quarter of 2022. As an extension of our restructuring plans, this program, along with other rationalized revenue, was not repeated in the second quarter of 2023. The strategic rationalization of revenue was the largest contributor to the year-over-year decline.
Cost of Goods Sold. Cost of goods sold decreased by $1.0$10.5 million from $5.8$15.4 million in the three months ended SeptemberJune 30, 20212022 to $4.8$4.9 million in the three months ended SeptemberJune 30, 2022,2023, which was driven primarily by decreased sales volume.volume and productivity initiatives. However, inflationary pressures on inputs, primarily beef, have partially offset some of the productivity and production yieldsyield improvements we have negatively affectedmade to our cost of goods on a variable rate basis. Overall commodity
25
beef prices have trended unfavorably throughoutwere higher in the thirdsecond quarter of 2022,2023 compared to prior recent quarters, but are generally in line with what we experiencedthe second quarter of the prior year period.year.
Gross Profit (Loss).Profit. Gross profit (loss) decreased $1.9increased $5.5 million from $3.3$(4.4) million in the three months ended SeptemberJune 30, 20212022 to $1.4$1.1 million in the three months ended SeptemberJune 30, 2022.2023. As a percent of net sales, gross profit was 22.4%17.5% in the thirdsecond quarter of 2022,2023, compared to 35.9%a negative 40.4% in the thirdsecond quarter of 2021.2022. A few primary factors contribute to this performance:
26
Operating Expenses.
Operating Loss. Operating loss decreased by $3.5$12.6 million from $8.2$16.0 million in the three months ended SeptemberJune 30, 20212022 to $4.7$3.4 million in the three months ended SeptemberJune 30, 20222023 and is primarily attributable to a material decreaseour restructuring efforts resulting in improved gross margins and decreased total operating expenses.
Interest Expense. Interest expense decreasedincreased by $0.6 million from $0.8 million in the three months ended September 30, 2021 tofrom $0.2 million in the three months ended SeptemberJune 30, 2022. While we relied, in part, on debt capital2022 to support the business throughout 2021, we significantly deleveraged the business in the first half of 2022 as well as upon the consummation of the Business Combination in the third quarter of 2021 thus reducing the overall interest expense of the business year-over-year.
Net Loss. Net loss decreased $3.7 million from $8.7 million in three months ended September 30, 2021 to $5.0$1.0 million in the three months ended SeptemberJune 30, 2023. Interest expense includes non-cash interest of $0.4 million stemming from the accounting treatment of the warrants issued in connection the debt financing consummated in April 2023. In addition, interest expense increased by $0.1 million related to the Loan Agreement, $0.1 million related to the PSA, and $0.1 million related to the Notes which were not in place in the prior year period.
Net Loss Before Income Taxes. Net loss before income taxes decreased $12.0 million from $16.3 million in three months ended June 30, 2022 to $4.3 million in the three months ended June 30, 2023, with the decrease primarily attributable to a decreaseour restructuring efforts resulting in decreased operating expenses.expenses and improved gross margins and partially offset by an increase in interest expense.
26
27
Results of Operations –nine months ended September–Six Months Ended June 30, 20222023 Compared to nine months ended SeptemberSix Months Ended June 30, 20212022
The following table sets forth selected items in our consolidated financial data in dollar amounts and as a percentage of net sales for the ninesix months ended SeptemberJune 30, 20222023 compared to the ninesix months ended SeptemberJune 30, 2021.2022.
|
| Nine Months Ended |
|
| Nine Months Ended |
| ||||||||||
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
| ||||||||||
|
| (unaudited) |
|
| (unaudited) |
| ||||||||||
(In thousands) |
|
|
|
| % of sales |
|
|
|
|
| % of sales |
| ||||
Net sales |
| $ | 24,537 |
|
|
| 100.0 | % |
| $ | 23,248 |
|
|
| 100.0 | % |
Cost of goods sold (exclusive of depreciation shown separately below) |
|
| 26,454 |
|
|
| 107.8 | % |
|
| 13,735 |
|
|
| 59.1 | % |
Gross profit (loss) |
| $ | (1,917 | ) |
|
| (7.8 | )% |
| $ | 9,513 |
|
|
| 40.9 | % |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling and marketing expenses |
| $ | 12,873 |
|
|
| 52.5 | % |
| $ | 17,873 |
|
|
| 76.9 | % |
Operations expense |
|
| 3,664 |
|
|
| 14.9 | % |
|
| 3,264 |
|
|
| 14.0 | % |
Salaries and wages |
|
| 8,035 |
|
|
| 32.7 | % |
|
| 6,977 |
|
|
| 30.0 | % |
Depreciation and amortization expense |
|
| 1,466 |
|
|
| 6.0 | % |
|
| 1,194 |
|
|
| 5.1 | % |
Gain on disposal of fixed assets |
|
| (74 | ) |
|
| (0.3 | )% |
|
| (22 | ) |
|
| (0.1 | )% |
Total operating expenses |
|
| 25,964 |
|
|
| 105.8 | % |
|
| 29,286 |
|
|
| 126.0 | % |
Operating loss |
|
| (27,881 | ) |
|
| (113.6 | )% |
|
| (19,773 | ) |
|
| (85.1 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (559 | ) |
|
| (2.3 | )% |
|
| (2,715 | ) |
|
| (11.7 | )% |
PPP loan forgiveness |
|
| — |
|
|
| — |
|
|
| 1,670 |
|
|
| 7.2 | % |
Change in fair value of Private Warrants |
|
| 100 |
|
|
| 0.4 | % |
|
| 213 |
|
|
| 0.9 | % |
Gain on debt extinguishment |
|
| — |
|
|
| — |
|
|
| 545 |
|
|
| 2.3 | % |
Other income |
|
| (259 | ) |
|
| (1.1 | )% |
|
| 27 |
|
|
| 0.1 | % |
Other income (expense) |
|
| (718 | ) |
|
| (2.9 | )% |
|
| (260 | ) |
|
| (1.1 | )% |
Net loss before income taxes |
| $ | (28,599 | ) |
|
| (116.6 | )% |
| $ | (20,033 | ) |
|
| (86.2 | )% |
|
| Six Months Ended June 30, |
| |||||||||||||
|
| 2023 |
|
| 2022 |
| ||||||||||
|
| (unaudited) |
|
| (unaudited) |
| ||||||||||
(In thousands) |
|
|
|
| % of sales |
|
|
|
|
| % of sales |
| ||||
SALES, net |
| $ | 10,643 |
|
|
| 100.0 | % |
| $ | 18,367 |
|
|
| 100.0 | % |
COST OF GOODS SOLD (exclusive of depreciation shown separately below) |
|
| 8,629 |
|
|
| 81.1 | % |
|
| 21,668 |
|
|
| 118.0 | % |
GROSS PROFIT |
|
| 2,014 |
|
|
| 18.9 | % |
|
| (3,301 | ) |
|
| (18.0 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OPERATING EXPENSES |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Selling expenses |
|
| 3,747 |
|
|
| 35.2 | % |
|
| 8,743 |
|
|
| 47.6 | % |
Operations expense |
|
| 1,139 |
|
|
| 10.7 | % |
|
| 2,580 |
|
|
| 14.0 | % |
Salaries and wages |
|
| 3,632 |
|
|
| 34.1 | % |
|
| 6,096 |
|
|
| 33.2 | % |
Depreciation and amortization expense |
|
| 1,104 |
|
|
| 10.4 | % |
|
| 948 |
|
|
| 5.2 | % |
Prepaid media reserve |
|
| — |
|
|
| 0.0 | % |
|
| 1,489 |
|
|
| 8.1 | % |
(Gain) loss on disposal of fixed assets |
|
| 1 |
|
|
| 0.0 | % |
|
| (24 | ) |
|
| (0.1 | )% |
Total operating expenses |
|
| 9,624 |
|
|
| 90.4 | % |
|
| 19,831 |
|
|
| 108.0 | % |
OPERATING LOSS |
|
| (7,610 | ) |
|
| (71.5 | )% |
|
| (23,133 | ) |
|
| (125.9 | )% |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||
OTHER (EXPENSE) INCOME |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Interest expense |
|
| (1,363 | ) |
|
| (12.8 | )% |
|
| (369 | ) |
|
| (2.0 | )% |
Change in fair value of Private Warrants |
|
| 19 |
|
|
| 0.2 | % |
|
| 85 |
|
|
| 0.5 | % |
Other expense |
|
| (7 | ) |
|
| (0.1 | )% |
|
| (215 | ) |
|
| (1.2 | )% |
Total other (expense) income |
|
| (1,351 | ) |
|
| (12.7 | )% |
|
| (499 | ) |
|
| (2.7 | )% |
NET LOSS BEFORE INCOME TAXES |
| $ | (8,961 | ) |
|
| (84.2 | )% |
| $ | (23,632 | ) |
|
| (128.7 | )% |
Net sales. Net sales increaseddecreased by $1.3$7.8 million from $23.2$18.4 million during the ninesix months ended SeptemberJune 30, 20212022 to $24.5$10.6 million during the ninesix months ended SeptemberJune 30, 20222023, representing growtha reduction of 5.5%42.1% for the comparable periods. The primary driversdriver of net sales in the increased sales of Stryve’s products to existing accounts, and net new sales related to additional distribution secured by Stryve in 2021 atprior year period was a number of key retailers. Overall, the largest contributor of growth stems from thechainwide limited-time savings event which resulted in significant in-and-out sales volumewith the one of the nation's largest retailers in the second quarter of 2022. This growth has been partially offset by a pullback inAs an extension of our e-commerce sales stemming from our reduction in digital media spending. Further, supply chain and execution challengesrestructuring plans, this program, along with other rationalized revenue, was not repeated in the first half of 2022 have hindered our ability2023. The strategic rationalization of revenue was the largest contributor to effectively service several retail and private label accounts leaving unmet demand in the period.year-over-year decline.
|
| Nine Month |
|
| Nine Month |
|
| ||
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
|
| ||
|
| (unaudited) |
|
| (unaudited) |
|
| ||
(In thousands) |
|
|
|
|
|
|
| ||
Gross Sales |
| $ | 30,697 |
|
| $ | 25,332 |
|
|
Trade Promotions/Discounts & Credits |
|
| (6,159 | ) |
|
| (2,084 | ) |
|
Net Sales |
|
| 24,538 |
|
| $ | 23,248 |
|
|
27
Cost of Goods Sold.Cost of goods sold increaseddecreased by $12.8$13.1 million from $13.7$21.7 million in the ninesix months ended SeptemberJune 30, 2021,2022 to $26.5$8.6 million in the ninesix months ended SeptemberJune 30, 2022,2023, which was driven primarily driven by increaseddecreased sales volume followed by increased direct labor and commodity input costs,productivity initiatives. However, inflationary pressures on inputs, primarily beef. Onbeef, have partially offset some of the whole, overall commodity beef prices have increased significantly year-over-year. However, in the aggregateproductivity and yield improvements we have experienced favorable meat prices in the nine-month period ending September 30, 2022, relativemade to their peak in the second halfour cost of 2021. Notwithstanding this trend in beef pricing, the aforementioned execution related yield challenges largely muted the impact of this improvement.goods on a variable rate basis.
Gross Profit (Loss). Profit.Gross profit (loss) fell $11.4increased $5.3 million from a $9.5$(3.3) million profit in the ninesix months of 2021ended June 30, 2022 to a $(1.9)$2.0 million loss in the first ninesix months of 2022.ended June 30, 2023. As a percent of net sales, gross profit (loss) for the first nine months of 2022 was (7.8)% which represents a significant decline from 40.9%18.9% in the first nine monthshalf of 2021.2023, compared to a negative 18.0% in the first half of 2022. A few primary factors contribute to this performance:
28
Operating Expenses.
28
Operating Loss. Operating loss increaseddecreased by $8.1$15.5 million from ($19.8)$23.1 million throughin the first ninesix months of 2021ended June 30, 2022 to ($27.9)$7.6 million throughin the first ninesix months of 2022ended June 30, 2023 and is primarily attributable to our restructuring efforts resulting in improved gross margins and decreased gross profit on sales and certain significant one-time restructuring charges occurring in the first half of 2022, as described above.total operating expenses.
Interest Expense. Interest expense decreasedincreased by $2.1$1.0 million from ($2.7)$0.4 million through the first nine months of 2021 to ($0.6) million through the first nine months of 2022. While we relied, in part, on debt capital to support the business throughout 2021, we significantly deleveraged the business in the first quartersix months ended June 30, 2022 to $1.4 million in the six months ended June 30, 2023. Interest expense includes non-cash interest of 2022 as well as upon$0.4 million stemming from the consummationaccounting treatment of the Business Combinationwarrants issued in connection to the debt financing consummated in April 2023. In addition, interest expense increased by $0.2 million related to the Loan Agreement, $0.2 million related to the PSA, and $0.1 million related to the Notes which were not in place in the third quarter of 2021 thus reducing the overall interest expense of the business year-over-year for the comparable periods.prior year period.
Net Loss. Loss Before Income Taxes.Net loss increased $8.6before income taxes decreased $14.6 million from $20.0$23.6 million in six months ended June 30, 2022 to $9.0 million in the ninesix months ended SeptemberJune 30, 2021 to $28.6 million in2023, with the nine months ended September 30, 2022 and isdecrease primarily attributable to a decreaseour restructuring efforts resulting in decreased operating expenses and improved gross profit on salesmargins and certain significant one-time restructuring charges occurringpartially offset by an increase in the first half of 2022, as described above.interest expense.
Non-GAAP Financial Measures
We use non-GAAP financial measures and believe it isthey are useful to investors as it providesthey provide additional information to facilitate comparisons of historical operating results, identify trends in operating results, and provide additional insight on how the management team evaluates the business. Our management team uses EBITDA, Adjusted EBITDA, and Adjusted Earnings per Share to make operating and strategic decisions, evaluate performance and comply with indebtedness related reporting requirements. Below are details on these non-GAAP measures and the non-GAAP adjustments that the management team makes in the definition of EBITDA, Adjusted EBITDA, and Adjusted Earnings per Share. We believe these non-GAAP measuremeasures should be considered along with net income (loss),Net Loss Before Income Taxes, Net Loss and Net Loss per Share, the most closely related GAAP financial measure.measures. Reconciliations between EBITDA, Adjusted EBITDA, Adjusted Earnings per Share, Net Loss Before Income Taxes, Net Loss and net income (loss)Net Loss per Share are below, and discussion regarding underlying GAAP results throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
EBITDA. Stryve defines EBITDA as net income (loss)Net Loss before interest expense, income tax expense (benefit),Interest Expense, Income Tax Expense, and depreciationDepreciation and amortizationAmortization Expense.
29
Adjusted EBITDA. Stryve defines Adjusted EBITDA as EBITDA adjusted as necessary for certain items listed below in the table.
The table below provides a reconciliation of EBITDA and Adjusted EBITDA to their most directly comparable GAAP measure, which is net income (loss) before taxes,Net Loss Before Income Taxes, for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.
|
| Three Month |
|
| Three Month |
|
| Nine Month |
|
| Nine Month |
|
|
| Three Months Ended June 30, |
|
| Six Months Ended June 30, |
|
| ||||||||||||||
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| ||||||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
|
| (unaudited) |
| (unaudited) |
|
| |||||||||||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net loss before income taxes |
| $ | (4,967 | ) |
| $ | (8,711 | ) |
| $ | (28,599 | ) |
| $ | (20,033 | ) |
|
| $ | (4,322 | ) |
| $ | (16,326 | ) |
| $ | (8,961 | ) |
| $ | (23,632 | ) |
|
Interest expense |
|
| 190 |
|
|
| 758 |
|
|
| 559 |
|
|
| 2,715 |
|
|
|
| 964 |
|
|
| 181 |
|
|
| 1,363 |
|
|
| 369 |
|
|
Depreciation and amortization |
|
| 518 |
|
|
| 402 |
|
|
| 1,466 |
|
|
| 1,194 |
|
| |||||||||||||||||
Depreciation and amortization expense |
|
| 552 |
|
|
| 503 |
|
|
| 1,104 |
|
|
| 948 |
|
| |||||||||||||||||
EBITDA |
| $ | (4,259 | ) |
| $ | (7,551 | ) |
| $ | (26,574 | ) |
| $ | (16,124 | ) |
|
| $ | (2,806 | ) |
| $ | (15,642 | ) |
| $ | (6,494 | ) |
| $ | (22,315 | ) |
|
Additional Adjustments*: |
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||
PPP loan forgiveness |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,670 | ) |
| |||||||||||||||||
Additional Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||
Severances and One-Time Employee Related Costs |
|
| 285 |
|
|
| — |
|
|
| 1,631 |
|
|
| — |
|
|
|
| — |
|
|
| 1,346 |
|
|
| — |
|
|
| 1,425 |
|
|
One-Time Reserves and Write Downs |
|
| — |
|
|
| — |
|
|
| 2,562 |
|
|
| — |
|
|
|
| — |
|
|
| 2,562 |
|
|
| — |
|
|
| 2,562 |
|
|
Business combination expenses |
|
| — |
|
|
| (1,077 | ) |
|
| — |
|
|
| — |
|
| |||||||||||||||||
Stock based compensation expense |
|
| 98 |
|
|
| — |
|
|
| 810 |
|
|
| — |
|
| |||||||||||||||||
Non-cash compensation expense |
|
| — |
|
|
| 1,701 |
|
|
| — |
|
|
| 1,701 |
|
| |||||||||||||||||
Comparability adjustment - Public vs. Private |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,049 | ) |
| |||||||||||||||||
Stock Based Compensation Expense |
|
| 432 |
|
|
| 384 |
|
|
| 618 |
|
|
| 712 |
|
| |||||||||||||||||
Adjusted EBITDA |
| $ | (3,876 | ) |
| $ | (6,926 | ) |
| $ | (21,572 | ) |
| $ | (17,142 | ) |
|
| $ | (2,374 | ) |
| $ | (11,350 | ) |
| $ | (5,876 | ) |
| $ | (17,616 | ) |
|
Adjusted EBITDA. The Company reducedimproved its negative Adjusted EBITDA by 44%79.1% when comparing the three months ended SeptemberJune 30, 20222023 and 20212022 with a $3.1$9.0 million improvement year-over-year drivingdriven by the Company's improved gross margins and rationalized spending. Stryve increaseddecreased its negative Adjusted EBITDA during the ninesix months ended SeptemberJune 30, 2022.2023 from $(17.1)$(17.6) million to $(21.6)$(5.9) million. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
29
*Additional Adjustments to EBITDA:
PPP Loan Forgiveness: The Company secured a Paycheck Protection Program loan in April of 2020 which was fully forgiven in the first quarter of 2021. The forgiveness of $1.6 million of principal and interest resulted in a gain during the nine months ended September 30, 2021. This item is one-time and has been adjusted out of Other Income (Expense) to provide better comparability of results.
Severances and One-Time Employee Related Costs: The Company incurred certain one-time charges related to employees, including severances, one-time payments, and recruiting fees, in the second and third quarters of 2022.
One-Time Reserves and Write Downs: As part of management's go-forward plan, certain non-core assets have been written down or reserved against. This includes the write down of approximately $1.5M of pre-paid media, reserves for non-core SKUs, and other non-recurring items. These non-recurring expenses have been adjusted out to provide better comparability of results.
Business Combination Expenses: The Company signed the Business Combination Agreement on January 28, 2021. and prepared an S-4 and S-1 filing in furtherance of the Business Combination. In doing so, the Company incurred significant legal and professional services fees over the course of the year which were later capitalized to Additional Paid-in Capital upon the consummation of the Business Combination which was reflected in the three months ended September 30, 2021 financial results. The impact on the statement of operations that the capitalization of these expenses had during the three months ended September 30, 2021 has been adjusted out to show better comparability with the current year quarter.
Non-Cash Compensation Expense: The Company incurred significant one-time non-cash compensation expense in the three and nine months ended September 30, 2021 stemming from notes receivable which were forgiven in conjunction with the Business Combination. These charges have been adjusted out of the comparable periods to improve the comparability of results.
Comparability Adjustment - Public vs Private: For the duration of the six-month period ended June 30, 2021, Stryve was a private company. The Company consummated the Business Combination on July 20, 2021. As a public company, the Company incurs significant expenses by virtue of being public. These public company expenses affect the comparability of results between the periods shown. Accordingly, these public company expenses have been added to the nine months ended September 30, 2021, to adjust for comparative purposes. These expenses include public filing fees and preparation services, the extra cost of directors & officers insurance for public companies, and board fees.
Adjusted Earnings per Share. Stryve defines Adjusted Earnings per Share as its Basic/Diluted Net Income (Loss) per Share adjusted as necessary for certain items listed below in the table.
30
The table below provides a reconciliation of Adjusted Earnings per Share to its most directly comparable GAAP measure, which is Basic/Diluted Net Income (Loss)Loss per Share, for the three and ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.
|
| Three Month |
|
| Three Month |
|
| Nine Month |
|
| Nine Month |
|
|
| Three Months |
|
| Six Months |
|
| ||||||||||||||
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
|
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
|
| ||||||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
|
|
| (unaudited) |
| (unaudited) |
|
| |||||||||||||||
(In thousands except share and per share information) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
Net loss |
| $ | (4,968 | ) |
| $ | (8,711 | ) |
| $ | (28,636 | ) |
| $ | (20,033 | ) |
|
| $ | (4,309 | ) |
| $ | (16,354 | ) |
| $ | (8,951 | ) |
| $ | (23,668 | ) |
|
Weighted average shares outstanding |
|
| 30,991,943 |
|
|
| 18,263,099 |
|
|
| 30,568,431 |
|
|
| 12,878,733 |
|
|
|
| 2,105,620 |
|
|
| 2,063,099 |
|
|
| 2,095,621 |
|
|
| 2,023,713 |
|
|
Basic & Diluted Net Loss per Share |
| $ | (0.16 | ) |
| $ | (0.48 | ) |
| $ | (0.94 | ) |
| $ | (1.56 | ) |
|
| $ | (2.05 | ) |
| $ | (7.93 | ) |
| $ | (4.27 | ) |
| $ | (11.70 | ) |
|
Additional Adjustments*: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||
PPP loan forgiveness |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.13 | ) |
| |||||||||||||||||
Severances and One-Time Employee Related Costs |
|
| 0.01 |
|
|
| — |
|
|
| 0.05 |
|
|
| — |
|
|
|
| — |
|
|
| 0.65 |
|
|
| — |
|
|
| 0.70 |
|
|
One-Time Reserves and Write Downs |
|
| — |
|
|
| — |
|
|
| 0.08 |
|
|
| — |
|
|
|
| — |
|
|
| 1.24 |
|
|
| — |
|
|
| 1.27 |
|
|
Business combination expenses |
|
| — |
|
|
| (0.06 | ) |
|
| — |
|
|
| — |
|
| |||||||||||||||||
Stock based compensation expense |
|
| 0.00 |
|
|
| — |
|
|
| 0.03 |
|
|
| — |
|
| |||||||||||||||||
Non-cash compensation expense |
|
| — |
|
|
| 0.09 |
|
|
| — |
|
|
| 0.13 |
|
| |||||||||||||||||
Comparability adjustment - Public vs. Private |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (0.08 | ) |
| |||||||||||||||||
Stock Based Compensation Expense |
|
| 0.21 |
|
|
| 0.19 |
|
|
| 0.29 |
|
|
| 0.35 |
|
| |||||||||||||||||
Non-Cash Interest Attributable to Warrants Issued in Connection with Notes ** |
|
| 0.18 |
|
|
| — |
|
|
| 0.18 |
|
|
| — |
|
| |||||||||||||||||
Adjusted Earnings per Share |
| $ | (0.15 | ) |
| $ | (0.44 | ) |
| $ | (0.77 | ) |
| $ | (1.63 | ) |
|
| $ | (1.66 | ) |
| $ | (5.85 | ) |
| $ | (3.80 | ) |
| $ | (9.38 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||
* Information regarding these adjustments can be found in the Additional Adjustments to EBITDA section above. | * Information regarding these adjustments can be found in the Additional Adjustments to EBITDA section above. |
|
| * Information regarding these adjustments can be found in the Additional Adjustments to EBITDA section above. |
|
| ||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
** The Company allocated the proceeds from the April 2023 Financing transaction between the Notes and Warrants based on their relative fair values as of the closing date of the facility. The allocation resulted in the fair value of the warrants to be treated as a discount to the Notes of $1.4 million that is being amortized through December 31, 2023. Accordingly, the Company recognized non-cash interest expense of $0.4 million in connection with the discount for the three and six months ended June 30, 2023. | ** The Company allocated the proceeds from the April 2023 Financing transaction between the Notes and Warrants based on their relative fair values as of the closing date of the facility. The allocation resulted in the fair value of the warrants to be treated as a discount to the Notes of $1.4 million that is being amortized through December 31, 2023. Accordingly, the Company recognized non-cash interest expense of $0.4 million in connection with the discount for the three and six months ended June 30, 2023. |
|
|
30
Liquidity and Capital Resources
Overview. The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.
We have historically funded our operations with cash flow from operations, equity capital raises, and note payable agreements from shareholders and private investors, in addition to bank loans. Our principal uses of cash have been debt service, capital expenditures, net lossesworking capital, and investment in working capital.funding operations. For the ninesix months ended SeptemberJune 30, 2022,2023, we incurred an operating loss of $27.9$7.6 million and used cash in operations of $25.5$5.2 million. As of SeptemberJune 30, 2022, we have2023, the Company has approximately $11.2 million of indebtedness and working capital excluding cash and debt of $10.9$5.8 million which compares favorably to the $3.2$7.6 million working capital we maintained as of December 31, 2021, and have only approximately $5.2 million of indebtedness.2022.
Late inDuring the third quarter of 2022, we secured $21a term loan in the maximum amount of $6.0 million, with $4.0 million being advanced upon execution and up to two additional $1.0 million advances available to us subject to performance hurdles. Additionally, we secured an asset based line of non-dilutive, committed borrowing capacity throughcredit with a combination$15.0 million credit limit subject to accounts receivable and inventory balances. The term loan and asset based line of facilitiescredit were secured in order to augment our liquidity, as needed, through the execution of management's planplan. The Company had drawn $4.0 million of which $4.3the term loan and $3.0 million had been drawn upon(net of repayments) of the asset based line of credit as of September 30th, 2022.June 30, 2023. See Note 5 to our financial statements included herein for a description of the asset based line of credit and Note 6 for a description of the term loan.
We have experienced a slower sell-through of our rationalized slow-moving, and obsolete inventory than expected due to many other consumer packaged goods companies conducting similar inventory management and rationalization programs at the same time creating a surplus of goods in the channels commonly used to sell off this type of rationalized, slow-moving, or obsolete inventory. Additionally, as previously mentioned, in the fourth quarter of 2022 and during the first half of 2023, we experienced irregular order patterns from our retail and distribution customers due to what we believe to be working capital management activities not specific to our products in which retailers and distributors may have sought to bring down their inventory levels broadly.
WeIn 2023, we have had to make significant investments in our working capital to support increased distribution with marquee retailers coming online throughout the year. Many of these distribution resets have been secured in large part due to our new packaging design. Accordingly, we have had to build net new inventories to support these upcoming resets. This investment in inventory ahead of sales has put pressure on our liquidity position given the structure and terms of our credit facilities and has required us to seek external financing. While we anticipate the increased volumes will result in improved financial results and a significantly narrowed cash loss over time, we do anticipate continued growth which, depending on the rate of growth, may require more external financing.
On April 19, 2023, we issued an aggregate of $4.1 million in principal amount of secured promissory notes to select accredited investors carrying a 12% accrued interest rate to help support the working capital and growth needs of the business. The aggregate principal amount of the notes is inclusive of $1.2 million from related parties. These notes have a maturity date of December 31, 2023.
In June 2023, we entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which they may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. No shares were sold under the at-the-market equity facility during the three months ended June 30, 2023.
While these most recent financings have provided us with liquidity to support our near-term goals, given the December 31, 2023 maturity date of the April 2023 debt financing, we are still evaluating several different strategies to enhance our liquidity position. These strategies may include, but are not limited to, pursuing additional actions under our business reorganization plan, and seeking additional financing from both the public and private markets through the issuance of equity or debt securities. The outcome of these matters cannot be predicted with any certainty at this time. If capital is not available to us when, and in the amounts needed, we could be required to delay, scale back, or abandon some of our operations, which could materially harm our business, financial condition and results of operations.
Notwithstanding the foregoing, we have examined every area of spending throughout our business and believe we identified ways to drive efficiencies, eliminate unnecessary expense, and focus on the highest and best use of each dollar. The resulting impact iswas a 46.9%51.5% reduction in total operating expenses leading to a $4.5$15.5 million improvement in our pre-tax net loss in the first half of 2023 despite lower sales when comparing to the prior year quarter.first half of 2022. Further, we have instituted a continuous price action review process in which we look to protect our unit economics in light of the inflationary environment. This process has already resulted in two meaningful price increases this year.in 2022. We have also sought to optimize our channel strategy and rationalize our customer and product portfolio to eliminate sales that detract from our profitability goals.
In the third quarter of 2022, we invested more heavily into We also anticipate reducing our inventories than our sales volumes would indicate as being required. Given that prevailing beef prices are rising, this investment in inventory was driven in part by opportunistic commodity beef purchases made towards the end of the quarter to secure attractive pricing. We anticipate drawing down on these inventory levels in the coming quartersthroughout 2023 which would be a near-term source of liquidity.liquidity
The Company believes that cash from operations, our working capital, and our borrowing ability should be sufficient to fund the Company’s base projections for at least the next twelve months from the date these financial statements are made available.
31
We have prepared cash flow forecasts which indicate that based on our expected operating losses and cash consumption due to growth in working capital, we believe that absent an infusion of sufficient capital there is substantial doubt about our ability to continue as a going concern for twelve months after the date the condensed consolidated financial statements for the three months ended June 30, 2023 are issued. The Company's plan includes the items noted above as well as securing additional external financing which may include raising debt or equity capital. While we believe our plan, if successfully executed, will alleviate the conditions that raise substantial doubt, these plans are not entirely within the Company's control including our ability to raise sufficient capital on favorable terms.
Cash Flows. The following tables show summary cash flows information for the ninesix months ended SeptemberJune 30, 20222023 and 2021.2022.
|
| Nine Months |
|
| Nine Months |
|
| Six Months |
| |||||||
|
| Sept 30, 2022 |
|
| Sept 30, 2021 |
|
| 2023 |
|
| 2022 |
| ||||
|
| (unaudited) |
|
| (unaudited) |
|
| (unaudited) |
| |||||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Net cash used in operating activities |
| $ | (25,534 | ) |
| $ | (27,624 | ) |
| $ | (5,213 | ) |
| $ | (20,379 | ) |
Net cash used in investing activities |
|
| (2,281 | ) |
|
| (833 | ) |
|
| (64 | ) |
|
| (1,992 | ) |
Net cash provided by financing activities |
|
| 29,952 |
|
|
| 41,254 |
|
|
| 4,974 |
|
|
| 25,165 |
|
Net increase in cash and cash equivalents |
| $ | 2,137 |
|
| $ | 12,797 |
| ||||||||
Net (decrease) increase in cash and cash equivalents |
| $ | (303 | ) |
| $ | 2,794 |
|
Net Cash used in Operating Activities. Net cash used in operating activities increased $(2.1)decreased $15.1 million from $27.6$20.4 million in the six months ended June 30, 2022 compared to $5.2 million through the ninesix months ended SeptemberJune 30, 2021 compared to $25.5 million through the nine months ended September 30, 2022.2023. This increasedecrease is primarily attributable to the increasedecrease in net losses paired with an investment in net working capital during the ninesix months ended SeptemberJune 30, 2022 ,as2023, as compared to the prior year period.
Net Cash used in Investing Activities. Net cash used in investing activities increaseddecreased from $0.8$2.0 million in the ninesix months ended SeptemberJune 30, 2021,2022, to $2.3$0.1 million in the ninesix months ended SeptemberJune 30, 2022,2023, representing a $1.5$1.9 million increasedecrease when comparing the same period year over year. We anticipate increased investment inbelieve our current manufacturing and fulfillment assets moving forward, in order to ensure we have adequate run rate capacitiesare generally sufficient to meet the near-term potential demand for our products.products and don't foresee the need for significant capital expenditures to facilitate growth in the coming quarters.
Net Cash provided by Financing Activities. Net cash provided by financing activities generated $(11.3)$20.2 million moreless in cash for the Company in the ninesix months ended SeptemberJune 30, 2022,2023, compared to the comparable period a year ago.ago due the January 2022 PIPE transaction. In the ninesix months ended SeptemberJune 30, 2022,2023, we generated cash from financing activities of $30.0 million.$5.0 million primarily driven by the proceeds from the $4.1 million in secured promissory notes.
Debt and credit facilities. The information below represents an overview of the Company’s debt and prior credit facilities. The Company’s outstanding indebtedness as
As of SeptemberJune 30, 2022,2023 and December 31, 2021, is as follows:2022, long-term debt consisted of the following:
|
| As of Sept 30, |
|
| As of |
| ||
(In thousands) |
| 2022 |
|
| 2021 |
| ||
Long term debt |
| $ | 4,077 |
|
| $ | 1,567 |
|
Short term debt |
|
| 1,013 |
|
|
| 2,000 |
|
Line of credit (Note 5) |
|
| 272 |
|
|
| 3,500 |
|
Total notes payable |
|
| 5,362 |
|
|
| 7,067 |
|
Less: current portion |
|
| (1,559 | ) |
|
| (3,447 | ) |
Less: debt issuance costs |
|
| (209 | ) |
|
| — |
|
Less: line of credit |
|
| (123 | ) |
|
| — |
|
Total notes payable, net of current portion |
| $ | 3,471 |
|
| $ | 3,620 |
|
(In thousands) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Revenue Loan and Security Agreement |
| $ | 3,842 |
|
| $ | 3,889 |
|
Invoice Purchase and Security Agreement |
|
| 2,000 |
|
|
| — |
|
Broken Stone Agreement |
|
| 35 |
|
|
| 52 |
|
Less: current portion |
|
| (272 | ) |
|
| (245 | ) |
Total long-term debt, net of current portion |
| $ | 5,605 |
|
| $ | 3,697 |
|
As of June 30, 2023 and December 31, 2022, short-term borrowings and current portion of long-term debt consisted of the following:
(In thousands) |
| June 30, 2023 |
|
| December 31, 2022 |
| ||
Invoice Purchase and Security Agreement |
| $ | 882 |
|
| $ | 1,046 |
|
Promissory Notes |
|
| 2,974 |
|
|
| — |
|
Commercial Premium Finance Agreement |
|
| 128 |
|
|
| 725 |
|
Current portion of long-term obligations |
|
| 272 |
|
|
| 245 |
|
Total short-term borrowings and current portion of long-term debt |
| $ | 4,257 |
|
| $ | 2,016 |
|
32
Future minimum principal payments on the notes payable as of SeptemberJune 30, 2022,2023, are as follows:
(In thousands) |
|
|
| |||||
2022 (for the remainder of) |
| $ | 413 |
| ||||
2023 |
|
| 1,533 |
| ||||
2023 (for the remainder of) |
| $ | 5,400 |
| ||||
2024 |
|
| 730 |
|
|
| 332 |
|
2025 |
|
| 1,062 |
|
|
| 601 |
|
2026 |
|
| 1,624 |
|
|
| 1,179 |
|
2027 |
|
| 1,695 |
| ||||
Thereafter |
|
| 2,000 |
| ||||
|
| $ | 5,362 |
|
| $ | 11,206 |
|
On January 28, 2022, we paid off approximately $6.8 million of outstanding principal and interest owed to Origin.
On April 19, 2023, we issued an aggregate of $4.1 million in principal amount of secured promissory notes to select accredited investors carrying a 12% accrued interest rate to help support the working capital and growth needs of the business. The aggregate principal amount of the notes is inclusive of $1.2 million from related parties. These notes have a maturity date of December 31, 2023.
Certain Factors Affecting Our Performance
Stryve’s management believes that the Company’s future performance will depend on many factors, including the following:
32
Ability to Expand Distribution in both Online and Traditional Retail Channels. Stryve’s products are sold through a growing number of traditional retail channels where the Company has an opportunity to acquire new consumers. Traditional retail channels include mass stores, grocery chains, natural food outlets, club stores, convenience stores, and drug stores, all either direct or through distribution partners. Stryve works closely with retailers to establish plans for distribution expansion and promotional opportunities. Stryve is currentlyalso growing its consumer base through both paid and organic means both online as well as by expanding its presence in a variety of physical retail distribution channels.well. Online consumer acquisitions typically occur through the Company’s portfolio of DTC e-commerce websites and Amazon.com. The Company’s online consumer acquisition program includes paid and unpaid social media, search, and display media. Stryve’s products are also sold through a growing number of traditional retail channels where the Company has an opportunity to acquire new consumers. Traditional retail channels include grocery chains, natural food outlets, club stores, convenience stores, and drug stores, all either direct or through distribution partners.
Ability to Acquire and Retain Consumers at a Reasonable Cost. Stryve’s management believes an ability to consistently acquire and retain consumers at a reasonable cost relative to projected life-time value will be a key factor affecting future performance. To accomplish this goal, Stryve intends to strategically allocate advertising spend between online and offline channels favoring digital media, as well as emphasizing more targeted and measurable “direct response” digital marketing spend with advertising focused on increasing consumer awareness and driving trial of our products. Further, we acknowledge that changes to third-party algorithms that may be utilized directly, or indirectly, by Stryve in its advertising efforts may impact the effectiveness of Stryve's advertising which may increase its overall cost to acquire and retain consumers.
Ability to Drive Repeat Usage of Our Products. Stryve accrues substantial economic value from repeat consumers who consistently purchase its products either online or in traditional retail. The pace of Stryve’s growth rate will be affected by the repeat usage dynamics of existing and newly acquired customers. The Company utilizes a number of methods to drive repeat behavior including intelligent e-mail and text campaigns, targeted digital media, and subscribe and save incentives.
Ability to Expand Gross Margins. Stryve’s overall profitability will be impacted by its ability to expand gross margins through effective sourcing of raw materials, managing production yields and drying times, controlling labor and shipping costs, as well as spreading other production-related costs over greater manufacturing volumes. Additionally, Stryve's ability to expand gross margins will be influenced by its revenue channel and customer mix as well as by Stryve's ability to pass price increases to its customers.
Ability to Expand Operating Margins. The Company’s ability to expand operating margins will be impacted by its ability to effectively manage its fixed and variable operating expenses as net sales increase.
Ability to Manage Supply Chain and Expand Production In-line with Demand. Stryve’s ability to grow and meet future demand will be affected by its ability to effectively plan for and source inventory from a variety of suppliers located inside and outside the United States. Additionally, efficiently scaling production capacity ahead of growth in net sales will be critical to the Company’s ability to meet future demand without disruption.
Ability to Optimize Key Components of Working Capital. Stryve’s ability to reduce cash burn in the near-term and eventually generate positive cash flow will be partially impacted by the Company’s ability to effectively manage the key components of working capital which have a direct impact on the cash conversion cycle.
33
Seasonality. Because Stryve is so early in its lifecycle of growth, it is difficult to discern the exact magnitude of seasonality affecting its business. Any evidence of seasonality is not clearly discernablediscernible from the Company’s historical growth. However, understanding potential trends in seasonality will be key in Stryve’s management of its expenses, liquidity, and working capital.
Off-Balance Sheet Arrangements
We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of SeptemberJune 30, 2022.2023. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.
Critical Accounting Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements which have been prepared in accordance with GAAP. In preparing our financial statements, we make estimates, assumptions, and judgments that can have a significant impact on our reported revenue, results of operations, and comprehensive net income or loss, as well as on the value of certain assets and liabilities on our balance sheet during, and as of, the reporting periods. These estimates, assumptions, and judgments are necessary and are made based on our historical experience, market trends and on other assumptions and factors that we believe to be reasonable under the circumstances because future events and their effects on our results of operations and value of our assets cannot be determined with certainty. These estimates may change as new events occur or additional information is obtained. We may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for
33
a prolonged period of time. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates or assumptions.
The critical accounting estimates, assumptions, and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Our significant accounting policies are more fully described in Note 3 of Part I, Item 1 of this Quarterly Report on Form 10-Q and in Note 3 of Part II, Item 8, “Significant Accounting Policies” in our Annual Report on Form 10-K. There have been no changes to our consolidated financial statements.
Accounts Receivablecritical accounting policies and Allowance for Doubtful Accounts, Returns, and Deductions. Accounts receivable are customer obligations due under normal trade terms. The Company records accounts receivable at their net realizable value, which requires management to estimate the collectability of the Company’s receivables. Judgment is required in assessing the realization of these receivables, including the credit worthiness of each counterparty and the related aging of past due balances. Management provides for an allowance for doubtful accounts equal to the estimated uncollectable amounts, in addition to a general provision basedestimates since our Annual Report on historical experience. Management providesForm 10-K for the customer accommodations based upon a general provision of sales in addition to known deductions. The estimates are based on collection experience and a review of trade accounts. As of September 30, 2022 andyear ended December 31, 2021, the allowance for doubtful accounts and returns and deductions totaled $104,815 and $1,236,497, respectively. Total bad debt expense for the three months ended September 30, 2022 and 2021 was $322,946 and $513,661, respectively.2022.
|
| As of Sept 30, |
|
| As of December 31, |
| ||||||||||
(In thousands) |
| 2022 |
|
| 2021 |
|
| 2021 |
|
| 2020 |
| ||||
Beginning balance |
| $ | 1,236 |
|
| $ | 1,603 |
|
| $ | 1,603 |
|
| $ | 688 |
|
Provisions |
|
| 703 |
|
|
| 420 |
|
| $ | 1,154 |
|
| $ | 915 |
|
Write-offs/ reversals |
|
| (1,835 | ) |
|
| (1,087 | ) |
| $ | (1,521 | ) |
| $ | — |
|
Ending balance |
| $ | 104 |
|
| $ | 936 |
|
| $ | 1,236 |
|
| $ | 1,603 |
|
34
Reporting Unit Analysis
The Company presents a single segment for purposes of financial reporting and prepared its consolidated financial statements upon that basis. The Company considered ASC 350-20-35-35 related to reporting unit determination and the aggregation of components into one reporting unit.
The economic characteristics considered were whether:
1) The nature of the products and services are similar
2) The type of class of customer for products and services are similar
3) The methods used to distribute the products or provide the services are similar
4) The manner in which an entity operates, and the nature of those operations is similar
Currently, the Company has one reporting unit due to the similarity of its components when evaluated against the aforementioned economic characteristics.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Stryve’s future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.
Concentration of credit risk. The balance sheet items that potentially subject the Company to concentrations of credit risk are primarily cash accounts receivable, and accounts payable.receivable. The Company continuously evaluates the credit worthiness of its customers’ financial condition and generally does not require collateral. The Company maintains cash balances in bank accounts that may, at times, exceed Federal Deposit Insurance Corporation (“FDIC”) limits of $250,000 per institution. The Company incurred no losses from such accounts and management considers the risk of loss to be minimal.
As of and for the ninesix months ended SeptemberJune 30, 2022,2023, customer and vendor concentrations in excess of 10% consolidated sales, purchases accounts receivable, and accounts payable are as follows:
|
| Sales |
| Purchases |
| Accounts |
| Accounts |
| Sales |
| Purchases |
| Accounts |
| Accounts |
Customer A |
| 36% |
| — |
| — |
| — |
| 23% |
| — |
| 23% |
| — |
Customer B |
| — |
| — |
| 10% |
| — |
| 18% |
| — |
| — |
| — |
Customer C |
| 10% |
|
|
| 12% |
|
|
| 10% |
| — |
| 10% |
| — |
Customer D |
| — |
|
|
| 12% |
|
|
| — |
| — |
| 10% |
| — |
Customer E |
| — |
|
|
| 10% |
|
| ||||||||
Vendor A |
| — |
| 10% |
| — |
| — |
| — |
| 36% |
| — |
| — |
Vendor B |
| — |
| 10% |
| — |
| — |
| — |
| 24% |
| — |
| — |
Vendor C |
| — |
| — |
| — |
| 13% |
| — |
| 21% |
| — |
| — |
Interest rate risk. Stryve is subject to interest rate risk in connection with borrowing based on a variable interest rate. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, are not currently but may be used for the purpose of managing fluctuating interest rate exposures that exist from Stryve’s variable rate debt obligations that are expected to remain outstanding. Interest rate changes do not affect the market value of such debt, but could impact the amount of Stryve’s interest payments, and accordingly, Stryve’s future earnings and cash flows, assuming other factors are held constant. Additionally, changes in prevailing market interest rates may affect Stryve’s ability to refinance existing debt or secure new debt financing. Notwithstanding the foregoing,
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management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia's recent invasion of Ukraine, may have unpredictable effects on the Company's exposure to interest rate risk either directly or indirectly.
Foreign currency risk. Stryve is exposed to changes in currency rates as a result of its revenue generated in currencies other than U.S. dollars. Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. However, the operations that are impacted by foreign currency risk are less than 5% of Stryve’s net income (loss)loss for the ninesix months ended SeptemberJune 30, 20222023 and the 52-week periodyear ended December 31, 20212022 and therefore, the risk of this is insignificant.not significant. Notwithstanding the foregoing, management acknowledges that both foreign and domestic
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central bank actions as well as geopolitical uncertainty and conflict, such as Russia's recent invasion of Ukraine, may have unpredictable effects on the Company's exposure to foreign currency risk either directly or indirectly.
Raw material risk. Stryve’s profitability depends, among other things, on its ability to anticipate and react to raw material costs, primarily beef. The price of beef and other raw materials are subject to many factors beyond Stryve’s control, including general economic conditions, inflation, processing labor shortages, cost of feed, demand, natural disasters, weather and other factors that may affect beef supply chain participants. Changes in the prices of beef and other raw materials have already negatively affected Stryve's results of operations, and any continued or further changes could have a material impact on Stryve’s business, financial condition and results of operations. Notwithstanding the foregoing, management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia’s recent invasion of Ukraine, may have unpredictable effects on the Company's exposure to raw material commodity risks.
Inflation risk. Inflation may impact Stryve’s revenue and cost of services and products, Stryve believes the effects of inflation if any, on its business, financial condition and results of operations have been material to date which management hopes to alleviate through mitigating strategies. However, there can be no assurance that any mitigation strategies management employs will be effective or that its business, financial condition and results of operations will not be materially impacted by continued inflation in the future. Notwithstanding the foregoing, management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia’s recent invasion of Ukraine, may have unpredictable effects on the Company's exposure to inflation risk either directly or indirectly.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
The Company maintains a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") designed to ensure that the information required to be disclosed by the Company in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.
The Company's management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures under the Exchange Act as of SeptemberJune 30, 2022,2023, the end of the period covered by this report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting, as identified in connection with the evaluation required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act, that occurred during the three months ended SeptemberJune 30, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. WeExcept as set forth in Note 12 to our condensed consolidated financial statements, we are not currently a party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable outcomes will be obtained.
Item 1A. Risk Factors
There have been no material changes to the factors disclosed in Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
DuringLender Warrants
On April 19, 2023, we issued an aggregate of $4.1 million in principal amount of secured promissory notes (the “Notes”) to select accredited investors (including certain members of the three-months ended September 30, 2022, 2,200,000 pre-fundedCompany’s management and Board of Directors) (the “Lenders”). The Notes accrue interest annually at a rate of 12% and will mature upon the earlier of (i) December 31, 2023, or (ii) the closing of the next sale (or series of related sales) by the Company of its equity securities (other than pursuant to warrants were exerciseddescribed below), following the date of the Notes, from which the Company receives gross proceeds of not less than $3.0 million. The Notes are secured by a security interest on substantially all the assets of the Company that is subordinate to the security interests of the Company’s existing first and second lien lenders.
Each Lender that purchased Notes received a warrant (the “Warrants”) to purchase 1/15th of a share of the Company’s Class A common stock for each $0.5134 of principal amount of the Notes, for an aggregate of 2,200,000 shares7,964,550 Warrants. Each Warrant is exercisable immediately, has an exercise price per share of Class A common stock. Thestock equal to $7.701 per whole share and will expire three years and three months from the date of issuance and may be exercised pre-funded warrants doon a cashless basis if a registration statement registering the resale of the shares issuable upon exercise is not affect the EPS calculation as pre-funded warrants are included in the weighted EPS calculation.
During the three-months ended September 30, 2022, 4,014,012 share of Class V common stock and 4,014,012 B units of Andina Holdings, LLC were exchanged for 4,014,012 shares of Class A common stock. This exchange has no impact on the EPS calculation as it already included and presented on an as-exchanged basis.effective.
The securities were issued in reliance on the exemption from registration provided by Section 4(a)(2) under the Securities Act of 1933, as amended, and/or Regulation D promulgated thereunder. Each Lender has represented that it is an accredited investor, as defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended.
At-The-Market Facility
In June 2023, the Company entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which they may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. No shares were sold under the at-the-market equity facility during the three months ended June 30, 2023.
Item 3. Defaults Upon Senior Securities.Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.Information.
None.During the three months ended June 30, 2023, there were no modifications, adoptions or terminations by any directors or officers to any contract, instruction or written plan for the purchase or sale of securities of the Company that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or non-Rule 10b5-1 trading agreements.
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Item 6. Exhibits
The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.
Exhibit No. | Document | |
3.1 | ||
4.1 | ||
10.1 | ||
31.1* | ||
31.2* | ||
32.1* | ||
101.INS* | Inline XBRL Instance Document | |
101.CAL* | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.SCH* | Inline XBRL Taxonomy Extension Schema Document | |
101.DEF* | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB* | Inline XBRL Taxonomy Extension Labels Linkbase Document | |
101.PRE* | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104* | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
* Furnished.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
STRYVE FOODS, INC. | ||
Date: | By: | /s/ Christopher Boever |
Name: | Christopher Boever | |
Title: | Chief Executive Officer | |
(Principal Executive Officer) | ||
By: | /s/ R. Alex Hawkins | |
Name: | R. Alex Hawkins | |
Title: | Chief Financial Officer | |
(Principal Financial Officer) |
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