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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 March 31, 2022

 

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 275

Plano, TX 75024

(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 one share of Class A common stock at an exercise price of $11.50 per share

 

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 May 16, 2022, 13,646,335 shares of the registrant’s Class A common stock, $0.0001 par value, and 11,502,355 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 MARCH 31, 2022

TABLE OF CONTENTS

 

 

Page

Part I. Financial Information

1

Item 1. Condensed Consolidated Financial Statements

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations

2

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

3

Condensed Consolidated Statements of Cash Flows

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3. Quantitative and Qualitative Disclosures Regarding Market Risk

29

Item 4. Controls and Procedures

30

Part II. Other Information

31

Item 1. Legal Proceedings

31

Item 1A. Risk Factors

31

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

31

Item 3. Defaults Upon Senior Securities

31

Item 4. Mine Safety Disclosures

31

Item 5. Other Information

31

Item 6. Exhibits

32

Part III. Signatures

33

 

i


 

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

 

March 31,

 

 

December 31,

 

 

 

2022

 

 

2021

 

ASSETS

 

(Unaudited)

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalent

 

$

12,626,468

 

 

$

2,217,191

 

Accounts receivable, net

 

 

3,602,604

 

 

 

2,900,281

 

Inventory, net

 

 

13,246,692

 

 

 

7,215,981

 

Prepaid media spend

 

 

450,000

 

 

 

450,000

 

Prepaid expenses and other current assets

 

 

2,186,685

 

 

 

2,255,539

 

Total current assets

 

 

32,112,449

 

 

 

15,038,992

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

7,135,441

 

 

 

6,825,895

 

Right of use asset, net

 

 

718,784

 

 

 

767,382

 

Goodwill

 

 

8,450,000

 

 

 

8,450,000

 

Intangible asset, net

 

 

4,543,775

 

 

 

4,604,359

 

Prepaid media spend, net of current portion

 

 

1,084,548

 

 

 

1,084,548

 

Other assets

 

 

 

 

 

4,192

 

TOTAL ASSETS

 

$

54,044,997

 

 

$

36,775,368

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

 

2,763,003

 

 

$

3,097,516

 

Accrued expenses

 

 

1,089,245

 

 

 

1,634,978

 

Current portion of lease liability

 

 

152,195

 

 

 

168,482

 

Line of credit

 

 

 

 

 

3,500,000

 

Current portion of long-term debt

 

 

139,534

 

 

 

3,447,056

 

Total current liabilities

 

 

4,143,977

 

 

 

11,848,032

 

 

 

 

 

 

 

 

Long-term debt, net of current portion

 

 

83,661

 

 

 

119,542

 

Lease liability, net of current portion

 

 

566,589

 

 

 

598,900

 

Financing obligation - related party operating lease

 

 

7,500,000

 

 

 

7,500,000

 

Deferred tax liability, net

 

 

67,223

 

 

 

67,223

 

Deferred stock compensation liability

 

 

362,247

 

 

 

71,197

 

Warrant liability

 

 

83,061

 

 

 

128,375

 

TOTAL LIABILITIES

 

 

12,806,758

 

 

 

20,333,269

 

 

 

 

 

 

 

 

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, 12,682,746 and 8,633,755 shares issued and outstanding, respectively

 

 

1,268

 

 

 

863

 

Class V common stock - $0.0001 par value, 200,000,000 shares authorized, 11,502,355 shares issued and outstanding

 

 

1,150

 

 

 

1,150

 

Additional paid-in-capital

 

 

132,660,734

 

 

 

100,551,257

 

Accumulated deficit

 

 

(91,424,913

)

 

 

(84,111,171

)

TOTAL STOCKHOLDERS' EQUITY

 

 

41,238,239

 

 

 

16,442,099

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY

 

$

54,044,997

 

 

$

36,775,368

 

 

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

 

 

 

 

Ended March 31,

 

 

 

 

2022

 

 

2021

 

 

SALES, net

 

 

7,420,554

 

 

$

6,834,475

 

 

 

 

 

 

 

 

 

 

COST OF GOODS SOLD (exclusive of depreciation shown separately below)

 

 

6,296,626

 

 

 

4,156,649

 

 

 

 

 

 

 

 

 

 

GROSS MARGIN

 

 

1,123,928

 

 

 

2,677,826

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

Selling expenses

 

 

4,026,055

 

 

 

6,453,292

 

 

Operations expense

 

 

1,230,384

 

 

 

1,059,785

 

 

Salaries and wages

 

 

2,585,899

 

 

 

1,401,646

 

 

Depreciation and amortization expense

 

 

444,366

 

 

 

394,848

 

 

Loss on disposal of fixed assets

 

 

-

 

 

 

1,076

 

 

Total operating expenses

 

 

8,286,704

 

 

 

9,310,647

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

 

(7,162,776

)

 

 

(6,632,821

)

 

 

 

 

 

 

 

 

 

OTHER (EXPENSE) INCOME

 

 

 

 

 

 

 

Interest expense

 

 

(188,494

)

 

 

(810,088

)

 

PPP loan forgiveness

 

 

-

 

 

 

1,669,552

 

 

Change in fair value of Private Warrants

 

 

45,314

 

 

 

 

 

Other income

 

 

-

 

 

 

12,206

 

 

Total other (expense) income

 

 

(143,180

)

 

 

871,670

 

 

 

 

 

 

 

 

 

 

NET LOSS BEFORE INCOME TAXES

 

 

(7,305,956

)

 

 

(5,761,151

)

 

Income taxes

 

 

7,786

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

 

(7,313,742

)

 

$

(5,761,151

)

 

Loss per common share:

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.25

)

 

$

(0.57

)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic and diluted

 

 

29,758,343

 

 

 

10,144,461

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

THREE MONTHS ENDED MARCH 31, 2022

(Unaudited)

 

 

 

 

 

 

 

 

 

Common Stock Class A

 

 

Common Stock Class B/V

 

 

Additional

 

 

Retained

 

 

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-in-Capital

 

 

Earnings

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Condensed Statement of Changes in Stockholders' Deficit

 

FOR THE THREE MONTHS ENDED MARCH 31, 2021

 

 

 

 

 

 

 

 

Common Stock Class B/V

 

 

Additional

 

 

Retained

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

(5,761,151

)

 

$

(5,761,151

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE, MARCH 31, 2021

 

 

10,139,422

 

 

$

1,014

 

 

$

42,683,418

 

 

$

(57,882,400

)

 

$

(15,197,968

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31,

 

 

March 31,

 

 

 

2022

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(7,313,742

)

 

 

(5,761,151

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation expense

 

 

383,782

 

 

 

332,813

 

Loss on disposal of fixed assets

 

 

 

 

 

1,076

 

Amortization of intangible assets

 

 

60,584

 

 

 

62,035

 

Amortization of debt issuance costs

 

 

 

 

 

4,861

 

Net change in right-of-use assets and liabilities

 

 

727

 

 

 

 

Interest income on members loan receivable

 

 

 

 

 

(12,205

)

Bad debt expense

 

 

55,309

 

 

 

85,598

 

Forgiveness on paycheck protection program loan

 

 

-

 

 

 

(1,669,552

)

Stock based compensation expense

 

 

327,759

 

 

 

 

Change in fair value of Private Warrants

 

 

(45,314

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(757,632

)

 

 

(1,370,076

)

Inventory

 

 

(6,030,711

)

 

 

(872,950

)

Vendor deposits

 

 

4,193

 

 

 

 

Prepaid expenses and other current assets

 

 

68,854

 

 

 

(650,030

)

Accounts payable

 

 

(334,513

)

 

 

822,830

 

Accrued liabilities

 

 

(546,460

)

 

 

726,117

 

Net cash used in operating activities

 

 

(14,127,164

)

 

 

(8,300,635

)

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Cash paid for purchase of equipment

 

 

(693,329

)

 

 

(193,456

)

Cash received for sale of equipment

 

 

 

 

 

66,750

 

Net cash used in investing activities

 

 

(693,329

)

 

 

(126,706

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

PIPE capital raise

 

 

32,311,187

 

 

 

 

Exercise of Prefunded Warrants

 

 

75

 

 

 

 

Repurchase of member shares

 

 

 

 

 

(99,950

)

Post closing adjustment of BCA

 

 

(238,089

)

 

 

 

Repayments on long-term debt

 

 

(4,843,403

)

 

 

(527,593

)

Borrowings on related party debt

 

 

 

 

 

1,794,000

 

Repayments on related party debt

 

 

 

 

 

(3,001,366

)

Borrowings on short-term debt

 

 

 

 

 

11,601,216

 

Repayments on short-term debt

 

 

(2,000,000

)

 

 

-

 

Debt issuance costs

 

 

 

 

 

(50,000

)

 

 

 

 

 

 

 

Net cash provided by financing activities

 

 

25,229,771

 

 

 

9,716,308

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

10,409,278

 

 

 

1,288,967

 

Cash and cash equivalents at beginning of period

 

 

2,217,191

 

 

 

591,634

 

Cash and cash equivalents at end of period

 

$

12,626,469

 

 

$

1,880,601

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

 

222,458

 

 

 

347,120

 

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

STRYVE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2022

(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, with manufacturing operations in Madill, Oklahoma.

 

On July 20, 2021 (the “Closing Date”), 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 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. Notwithstanding the legal form of the Business Combination, pursuant to the Business Combination Agreement, the Business Combination has been accounted for as a reverse recapitalization in accordance with generally accepted accounting principles in the United States ("GAAP"). Under this method of accounting, Stryve Foods, LLC is treated as the acquirer and the Company is treated as the acquired company for financial statement reporting purposes.

 

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 will distribute 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 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.

 

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, exclusive and complete discretion to manage and control the business of Stryve Foods, LLC and to take all actions it deems necessary, appropriate, advisable, incidental, or convenient to accomplish 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.

 

The 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 is 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.

5


 

Note 2 - Liquidity

 

The Company incurred net losses of approximately $7.3 million during the three months ended March 31, 2022. Cash used in operating activities was approximately $14.1 million for the three months ended March 31, 2022. The Company has historically funded its operations with cash flow from operations, equity capital raises, and note payable agreements from shareholders and private investors, in addition to bank loans. Its principal uses of cash have been debt service, capital expenditures, and investment in working capital to fund operations.

 

At March 31, 2022, the Company had total current assets of $32.1 million and current liabilities of $4.1 million resulting in working capital of $28 million.

 

The Company's operating plans are primarily focused on expanding its distribution base and increasing awareness of its products and brands while improving and expanding its manufacturing and distribution capabilities. Debt financing may require the Company to pledge assets and enter into covenants that could restrict certain business activities or its ability to incur further indebtedness; and may contain other terms that are not favorable to the Company or its stockholders.

 

On January 6, 2022, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”) with select accredited investors (the “2022 PIPE Investors”), relating to the issuance and sale of 2,496,934 shares of the Company’s Class A common stock and, in lieu of Class A Common Stock, pre-funded warrants to purchase 7,797,184 shares of Class A common stock (the “PIPE Pre-Funded Warrants”), and accompanying warrants (the “PIPE Warrants”) to purchase up to 10,294,118 shares of Class A common stock with an exercise price equal to $3.60 and a 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 approximately $32.3 million.

 

On January 28, 2022, the Company repaid approximately $6,841,000 of principal and interest to Origin Bank (the "Origin") under the Line of Credit and the outstanding notes, which represented all of the outstanding indebtedness to Origin.

 

While Stryve has materially improved its liquidity position through the Business Combination and the Offering, the unpredictable nature of the current COVID-19 pandemic may put the current manufacturing facility at risk, as it may relate to the supply chain and the welfare of the Company’s labor. Additionally, the uncertainty of current market conditions could also adversely impact capital markets, with the risk of significant contraction occurring. This risk still is apparent and constantly considered by management, as it relates to external capital availability.

 

Based on the Company's cash balance of approximately $12.6 million as of March 31, 2022, its significantly deleveraged balance sheet, and its expected cash flows, the Company believes that its available cash and working capital should be sufficient to fund its operations for at least the next 12 months from the issuance date of these financials as management has greater latitude over expenses with its improved cash position.

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. 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.

6


 

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 judgements 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, 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 judgements and estimates could change, which may result in future impairments of assets among other effects.

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. As of March 31, 2022 and December 31, 2021, the allowance for doubtful accounts and returns and deductions totaled $1,191,552 and $1,236,497, respectively. Total bad debt expense for the three months ended March 31, 2022 and 2021 was $55,309 and $85,598 respectively.

 

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”) 606:

(1)
Identification of the contract with a customer
(2)
Identification of the performance obligations in the contract
(3)
Determination of the transaction price
(4)
Allocation of the transaction price to the performance obligations in the contract
(5)
Recognition of revenue when, or as, the Company satisfies a performance obligation

 

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 thirty to sixty 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.

 

The Company’s contracts generally do not include any material significant financing components.

 

7


 

Performance Obligations

 

The Company has elected the following practical expedients provided for in Topic 606, Revenue from Contracts with Customers:

(1)
The Company has excluded from its transaction price all sales and similar taxes collected from its customers.
(2)
The Company has elected to recognize the incremental costs of obtaining a contract as an expense when incurred if the amortization period of the asset that the entity otherwise would have recognized is one year or less.
(3)
The Company has elected to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations.
(4)
The portfolio approach has been elected by the Company as it expects any effects would not be materially different in application at the portfolio level compared with the application at an individual contract level.
(5)
The Company has elected not to disclose information about its remaining performance obligations for any contract that has an original expected duration of one year or less.

 

Neither the type of good sold nor the location of sale significantly impacts the nature, amount, timing, or uncertainty of revenue and cash flows.

 

Disaggregation of Net Sales

The following table shows the net sales of the Company disaggregated by channel for the three months ended March 31, 2022 and 2021:

 

 

 

For the Three Months

 

 

 

ended March 31,

 

 

 

2022

 

 

2021

 

e-Commerce

 

$

1,445,809

 

 

$

2,946,393

 

Wholesale

 

 

4,936,343

 

 

 

2,661,560

 

Private label

 

 

1,038,402

 

 

 

1,226,522

 

Ending balance

 

$

7,420,554

 

 

$

6,834,475

 

 

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.

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”) 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 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.

8


 

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.

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 statement of operations.

 

Net 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, certain pre-funded warrants are included in the calculation of basic earnings per share as the pre-funded warrants can be exercised 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 March 31, 2022 there were 21,291,618 dilutive common stock equivalents, consisting of warrants, which were anti-dilutive.

 

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.

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 “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 March 31, 2022, no liability for unrecognized tax benefits was required to be reported. We do not expect any significant changes in our unrecognized tax benefits in the next year.

 

9


 

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) 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) 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 March 31, 2022, there have been no exchanges of Class B common units of Holdings and Class V common stock of the Company for Class A common stock of the Company and, accordingly, no TRA liabilities currently exist.

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash, accounts receivable, accounts payable, and vehicle notes payable. 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 vehicle notes payable have 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”. 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.

 

Note 4 - Inventory