10-Q

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

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

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.

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 ☒

As of August 7, 2024, 2,964,692 shares of the registrant’s Class A common stock, $0.0001 par value, and 380,260 shares of the registrant’s Class V common stock, $0.0001 par value, were issued and outstanding.

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

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, 2023. 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.

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 credit losses and customer allowances, inventory valuation, impairments of goodwill and long-lived assets, incremental borrowing rate for leases, 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

In 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 and Going Concern, for more information about the Company's going concern assessment.

Accounts Receivable and Allowance for Credit Losses, Returns, and Deductions

Accounts receivable are customer obligations due under normal trade terms. Accounts receivables, less credit losses, reflects the net realizable value of receivables and approximates fair value. The Company accounts for accounts receivable, less credit losses, under ASU 2016-13, Financial Instruments – Credit Losses. The Company evaluated our accounts receivable and establish an allowance for credit loss based on a combination of factors. When aware that a specific customer has been impacted by circumstances such as bankruptcy filings or deterioration in the customer’s operating results or financial position, potentially making it unable to meet its financial obligations, the Company records a specific allowance for credit losses to reduce the related receivable to the amount the

Company reasonably believes is collectible. The Company also records allowances for credit loss for all other customers based on a variety of factors, including the length of time the receivables are past due, historical collection experience, and an evaluation of current and projected economic conditions at the balance sheet date. Accounts receivables are charged off against the allowance for credit losses after we determine that the potential for recovery is remote. As of June 30, 2024, and December 31, 2023, the allowance for credit losses, returns and deductions totaled $1,358,874 and $1,638,039, respectively.

For the three months ended June 30, the allowance for credit losses, returns, and deductions consisted of the following:



	2024								2023
	Credit Losses Allowance			Returns & Deductions Allowance		Total			Credit Losses Allowance		Returns & Deductions Allowance		Total
Beginning balance, April 1	$	968,845		$	559,303	$	1,528,148		$	190,579	$	364,193	$	554,772
Provisions		68,311			94,259		162,570			6,987		469,078		476,065
Write-offs		(331,844	)		—		(331,844	)		—		—		—
Ending balance, June 30	$	705,312		$	653,562	$	1,358,874		$	197,566	$	833,271	$	1,030,837

For the six months ended June 30, the allowance for credit losses, returns, and deductions consisted of the following:



	2024									2023
	Credit Losses Allowance			Returns & Deductions Allowance			Total			Credit Losses Allowance		Returns & Deductions Allowance		Total
Beginning balance, January 1	$	815,236		$	822,803		$	1,638,039		$	117,360	$	—	$	117,360
Provisions		221,920			(169,241	)		52,679			80,206		833,271		913,477
Write-offs		(331,844	)		—			(331,844	)		—		—		—
Ending balance, June 30	$	705,312		$	653,562		$	1,358,874		$	197,566	$	833,271	$	1,030,837

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 six months ended June 30, 2024 and 2023, the following customers represented more than 10% of consolidated sales. No vendors represented more than 10% of purchases.



	2024	2023
Customer A	18%	23%
Customer B	11%	10%
Customer C	17%	—
Customer F	—	18%

As of June 30, 2024 and 2023, the following customers represented more than 10% of accounts receivable. No vendors represented more than 10% of the accounts payable balance.



	2024	2023
Customer A	13%	23%
Customer B	11%	10%
Customer C	17%	—
Customer D	14%	—
Customer E	—	10%

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 Accounting Standards Codification ("ASC") 606, Revenue from Contracts with Customers:

(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 30 to 60 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.

Performance Obligations

The Company has elected the following practical expedients provided for in ASC 606:

(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.

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. 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.

As of June 30, 2024 and 2023, 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.


	June 30,
	2024				2023
	Warrants/ Awards		Number of Underlying Shares of Common Stock		Warrants/ Awards		Number of Underlying Shares of Common Stock
Private Warrants		197,500		13,167		197,500		13,167
Public Warrants		10,800,000		720,000		10,800,000		720,000
Warrants - January 2022 Offering		10,294,118		686,275


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 $172.50 per whole share	SNAXW	The NASDAQ Stock Market LLC


	Page
Part I. Financial Information	1
Item 1. Unaudited Condensed Consolidated Financial Statements	1
Condensed Consolidated Balance Sheets	1
Condensed Consolidated Statements of Operations	2
Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity	3
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
Item 4. Controls and Procedures	33
Part II. Other Information	34
Item 1. Legal Proceedings	34
Item 1A. Risk Factors	34
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36
Part III. Signatures	37


	June 30,			December 31,
	2024			2023
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	447,342		$	369,114
Accounts receivable, net		2,953,106			2,091,926
Inventory		4,801,372			5,199,979
Prepaid expenses and other current assets		396,035			720,682
Total current assets		8,597,855			8,381,701

Property and equipment, net		6,447,865			7,150,775
Right of use assets, net		4,401,214			4,609,666
Goodwill		8,450,000			8,450,000
Intangible assets, net		3,998,523			4,119,690
TOTAL ASSETS	$	31,895,457		$	32,711,832

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable	$	5,670,082		$	4,459,787
Accrued expenses		2,683,185			2,687,508
Current portion of lease liability		326,374			362,165
Line of credit, net of debt issuance costs		4,168,800			3,568,295
Promissory notes payable, net of debt discount and debt issuance costs		4,156,982			2,914,000
Promissory notes payable due to related parties, net of debt discount and debt issuance costs		2,863,751			1,175,000
Current portion of long-term debt and other short-term borrowings		422,615			605,530
Total current liabilities		20,291,789			15,772,285

Long-term debt, net of current portion, net of debt issuance costs		3,331,078			3,476,089
Lease liability, net of current portion		4,231,726			4,371,963
Financing obligation - related party operating lease		7,500,000			7,500,000
Deferred tax liability, net		35			35
TOTAL LIABILITIES		35,354,628			31,120,372

COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' (DEFICIT) 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, 2,964,653 and 2,249,189 shares issued and outstanding (net of 53,333 and 53,333 treasury shares), respectively		295			224
Class V common stock - $0.0001 par value, 15,000,000 shares authorized, 380,260 and 382,892 shares issued and outstanding		38			38
Additional paid-in-capital		139,723,357			137,883,798
Accumulated deficit		(143,182,861	)		(136,292,600	)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY		(3,459,171	)		1,591,460

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY	$	31,895,457		$	32,711,832



	Three Months Ended June 30,						Six Months Ended June 30,
	2024			2023			2024			2023
SALES, net	$	6,177,902		$	5,996,541		$	10,776,061		$	10,642,794

COST OF GOODS SOLD (exclusive of depreciation shown separately below)		4,484,309			4,945,856			8,066,084			8,628,859

GROSS PROFIT		1,693,593			1,050,685			2,709,977			2,013,935

OPERATING EXPENSES
Selling expenses		1,577,148			1,778,274			3,173,685			3,747,283
Operations expense		411,661			625,289			764,409			1,138,878
Salaries and wages		1,529,951			1,469,307			3,136,964			3,632,459
Depreciation and amortization expense		407,786			552,224			870,317			1,103,880
Gain on disposal of fixed assets		—			1,295			—			1,295
Total operating expenses		3,926,546			4,426,389			7,945,375			9,623,795

OPERATING LOSS		(2,232,953	)		(3,375,704	)		(5,235,398	)		(7,609,860	)

OTHER (EXPENSE) INCOME
Interest expense		(727,894	)		(963,784	)		(1,310,460	)		(1,362,729	)
Loss on extinguishment of debt		—			—			(334,511	)		—
Change in fair value of Private Warrants		—			10,400			—			18,650
Other income (expense)		—			7,417			6			(6,956	)
Total other (expense) income		(727,894	)		(945,967	)		(1,644,965	)		(1,351,035	)

NET LOSS BEFORE INCOME TAXES		(2,960,847	)		(4,321,671	)		(6,880,363	)		(8,960,895	)
Income tax expense (benefit)		900			(12,854	)		9,898			(9,523	)

NET LOSS	$	(2,961,747	)	$	(4,308,817	)	$	(6,890,261	)	$	(8,951,372	)
Loss per common share:
Basic and diluted	$	(0.91	)	$	(2.05	)	$	(2.29	)	$	(4.27	)

Weighted average shares outstanding:
Basic and diluted		3,254,028			2,105,620			3,014,671			2,095,621


	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
Exchanged BV 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


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