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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 September 30, 2024

 

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.)

 

Post Office Box 864

Frisco, TX 75034

(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 $172.50 per whole 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

 

As of November 13, 2024, 3,736,952 shares of the registrant’s Class A common stock, $0.0001 par value, and 309,850 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 SEPTEMBER 30, 2024

TABLE OF CONTENTS

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

34

Part II. Other Information

35

Item 1. Legal Proceedings

35

Item 1A. Risk Factors

35

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

35

Item 3. Defaults Upon Senior Securities

35

Item 4. Mine Safety Disclosures

36

Item 5. Other Information

36

Item 6. Exhibits

37

Part III. Signatures

38

i


 

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

 

 

September 30,

 

 

December 31,

 

 

 

2024

 

 

2023

 

 

 

(Unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

CURRENT ASSETS

 

 

 

 

 

 

Cash and cash equivalents

 

$

183,362

 

 

$

369,114

 

Accounts receivable, net

 

 

2,855,650

 

 

 

2,091,926

 

Inventory

 

 

4,880,331

 

 

 

5,199,979

 

Prepaid expenses and other current assets

 

 

782,975

 

 

 

720,682

 

Total current assets

 

 

8,702,318

 

 

 

8,381,701

 

 

 

 

 

 

 

 

Property and equipment, net

 

 

6,179,453

 

 

 

7,150,775

 

Right of use assets, net

 

 

4,187,412

 

 

 

4,609,666

 

Goodwill

 

 

8,450,000

 

 

 

8,450,000

 

Intangible assets, net

 

 

3,937,939

 

 

 

4,119,690

 

TOTAL ASSETS

 

$

31,457,122

 

 

$

32,711,832

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

 

 

 

 

 

 

CURRENT LIABILITIES

 

 

 

 

 

 

Accounts payable

 

$

6,577,044

 

 

$

4,459,787

 

Accrued expenses

 

 

3,144,033

 

 

 

2,687,508

 

Current portion of lease liability

 

 

243,451

 

 

 

362,165

 

Line of credit, net of debt issuance costs

 

 

4,008,018

 

 

 

3,568,295

 

Promissory notes payable, net of debt discount and debt issuance costs

 

 

4,598,011

 

 

 

2,914,000

 

Promissory notes payable due to related parties, net of debt discount and debt issuance costs

 

 

3,621,193

 

 

 

1,175,000

 

Current portion of long-term debt and other short-term borrowings

 

 

795,091

 

 

 

605,530

 

Total current liabilities

 

 

22,986,841

 

 

 

15,772,285

 

 

 

 

 

 

 

 

Long-term debt, net of current portion, net of debt issuance costs

 

 

3,236,119

 

 

 

3,476,089

 

Lease liability, net of current portion

 

 

4,111,841

 

 

 

4,371,963

 

Financing obligation - related party operating lease

 

 

7,500,000

 

 

 

7,500,000

 

Deferred tax liability, net

 

 

35

 

 

 

35

 

TOTAL LIABILITIES

 

 

37,834,836

 

 

 

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 as of September 30, 2024 and December 31, 2023

 

 

 

 

 

 

Class A common stock - $0.0001 par value, 400,000,000 shares authorized, 3,365,871 and 2,249,189 shares issued and outstanding (net of 53,333 and 53,333 treasury shares) as of September 30, 2024 and December 31, 2023, respectively

 

 

335

 

 

 

224

 

Class V common stock - $0.0001 par value, 15,000,000 shares authorized, 309,850 and 382,892 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

 

 

31

 

 

 

38

 

Additional paid-in-capital

 

 

139,914,858

 

 

 

137,883,798

 

Accumulated deficit

 

 

(146,292,938

)

 

 

(136,292,600

)

TOTAL STOCKHOLDERS' (DEFICIT) EQUITY

 

 

(6,377,714

)

 

 

1,591,460

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY

 

$

31,457,122

 

 

$

32,711,832

 

 

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

1


 

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

 

2024

 

 

2023

 

 

2024

 

 

2023

 

 

SALES, net

 

$

5,701,422

 

 

$

4,180,193

 

 

$

16,477,482

 

 

$

14,822,987

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

4,466,064

 

 

 

3,624,236

 

 

 

12,532,149

 

 

 

12,253,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

GROSS PROFIT

 

 

1,235,358

 

 

 

555,957

 

 

 

3,945,333

 

 

 

2,569,893

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING EXPENSES

 

 

 

 

 

 

 

 

 

 

 

 

 

Selling expenses

 

 

1,244,488

 

 

 

1,771,042

 

 

 

4,418,173

 

 

 

5,518,325

 

 

Operations expense

 

 

451,086

 

 

 

325,829

 

 

 

1,215,495

 

 

 

1,464,708

 

 

Salaries and wages

 

 

1,456,915

 

 

 

1,572,177

 

 

 

4,593,879

 

 

 

5,204,637

 

 

Depreciation and amortization expense

 

 

388,504

 

 

 

552,169

 

 

 

1,258,821

 

 

 

1,656,049

 

 

Gain on disposal of fixed assets

 

 

 

 

 

(11,000

)

 

 

 

 

 

(9,705

)

 

Total operating expenses

 

 

3,540,993

 

 

 

4,210,217

 

 

 

11,486,368

 

 

 

13,834,013

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OPERATING LOSS

 

 

(2,305,635

)

 

 

(3,654,260

)

 

 

(7,541,035

)

 

 

(11,264,120

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

OTHER (EXPENSE) INCOME

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(804,942

)

 

 

(1,121,274

)

 

 

(2,115,402

)

 

 

(2,484,004

)

 

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(334,511

)

 

 

 

 

Change in fair value of Private Warrants

 

 

 

 

 

1,185

 

 

 

 

 

 

19,835

 

 

Other income (expense)

 

 

500

 

 

 

2,423

 

 

 

507

 

 

 

(4,533

)

 

Total other (expense) income

 

 

(804,442

)

 

 

(1,117,666

)

 

 

(2,449,406

)

 

 

(2,468,702

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS BEFORE INCOME TAXES

 

 

(3,110,077

)

 

 

(4,771,926

)

 

 

(9,990,441

)

 

 

(13,732,822

)

 

Income tax expense (benefit)

 

 

 

 

 

7,281

 

 

 

9,898

 

 

 

(2,242

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NET LOSS

 

$

(3,110,077

)

 

$

(4,779,207

)

 

$

(10,000,339

)

 

$

(13,730,580

)

 

Loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.95

)

 

$

(2.14

)

 

$

(3.22

)

 

$

(6.41

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

3,279,054

 

 

 

2,237,211

 

 

 

3,103,442

 

 

 

2,143,336

 

 

 

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

2


 

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2024

(Unaudited)

 

 

 

Class A Common Stock

 

 

Class V Common Stock

 

 

Additional

 

 

Accumulated

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-in-Capital

 

 

Deficit

 

 

Total

 

BALANCE, JANUARY 1, 2024

 

 

2,249,189

 

 

$

224

 

 

 

382,892

 

 

$

38

 

 

$

137,883,798

 

 

$

(136,292,600

)

 

$

1,591,460

 

Cancellation of Restricted Stock Awards

 

 

(350

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Restricted Stock Units

 

 

691

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

270,376

 

 

 

 

 

 

270,376

 

Issuance of Class A Shares in connection with At-The-Market Offerings, net

 

 

558,873

 

 

 

56

 

 

 

 

 

 

 

 

 

710,975

 

 

 

 

 

 

711,031

 

Change in Fair Value of Warrants on Extinguishment of Debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

334,511

 

 

 

 

 

 

334,511

 

Common Stock Issued for Accrued Expenses

 

 

53,559

 

 

 

5

 

 

 

 

 

 

 

 

 

147,282

 

 

 

 

 

 

147,287

 

Common Stock Issued for Accrued Expenses - Related Party

 

 

36,232

 

 

 

4

 

 

 

 

 

 

 

 

 

99,996

 

 

 

 

 

 

100,000

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,928,514

)

 

 

(3,928,514

)

BALANCE, MARCH 31, 2024

 

 

2,898,194

 

 

 

289

 

 

 

382,892

 

 

 

38

 

 

 

139,446,938

 

 

 

(140,221,114

)

 

 

(773,849

)

Exchanged BV for Class A shares

 

 

2,632

 

 

 

 

 

 

(2,632

)

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of Restricted Stock Awards

 

 

50,832

 

 

 

5

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

 

Issuance of Restricted Stock Units

 

 

12,995

 

 

 

1

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

276,425

 

 

 

 

 

 

276,425

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,961,747

)

 

 

(2,961,747

)

BALANCE, JUNE 30, 2024

 

 

2,964,653

 

 

 

295

 

 

 

380,260

 

 

 

38

 

 

 

139,723,357

 

 

 

(143,182,861

)

 

 

(3,459,171

)

Exchanged BV for Class A shares

 

 

70,410

 

 

 

7

 

 

 

(70,410

)

 

 

(7

)

 

 

 

 

 

 

 

 

 

Issuance of Restricted Stock Awards

 

 

326,079

 

 

 

33

 

 

 

 

 

 

 

 

 

(33

)

 

 

 

 

 

 

Issuance of Restricted Stock Units

 

 

4,729

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

191,534

 

 

 

 

 

 

191,534

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,110,077

)

 

 

(3,110,077

)

BALANCE, SEPTEMBER 30, 2024

 

 

3,365,871

 

 

$

335

 

 

 

309,850

 

 

$

31

 

 

$

139,914,858

 

 

$

(146,292,938

)

 

$

(6,377,714

)

 

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

3


 

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY

NINE MONTHS ENDED SEPTEMBER 30, 2023

(Unaudited)

 

 

 

 

 

 

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

 

Issuance of Restricted Stock Awards

 

 

 

 

14,329

 

 

 

1

 

 

 

 

 

 

 

 

 

117,797

 

 

 

 

 

 

117,798

 

Issuance of Restricted Stock Units

 

 

 

 

1,616

 

 

 

 

 

 

 

 

 

 

 

 

21,500

 

 

 

 

 

 

21,500

 

Payments in Lieu of Fractional Shares in connection with the Reverse Stock Split

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,318

)

 

 

 

 

 

(2,318

)

Issuance of Class A Shares in connection with At-The-Market Offerings, net

 

 

 

 

194,949

 

 

 

19

 

 

 

 

 

 

 

 

 

1,016,069

 

 

 

 

 

 

1,016,088

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,779,207

)

 

 

(4,779,207

)

BALANCE, SEPTEMBER 30, 2023

 

 

 

 

1,968,482

 

 

$

196

 

 

 

405,313

 

 

$

41

 

 

$

136,716,539

 

 

$

(130,982,196

)

 

$

5,734,580

 

 

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

4


 

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

 

 

 

2024

 

 

2023

 

CASH FLOWS FROM OPERATING ACTIVITIES

 

 

 

 

 

 

Net loss

 

$

(10,000,339

)

 

$

(13,730,580

)

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

 

 

 

 

 

 

Depreciation expense

 

 

1,077,070

 

 

 

1,474,298

 

Amortization of intangible assets

 

 

181,751

 

 

 

181,751

 

Amortization of debt issuance costs

 

 

164,103

 

 

 

222,666

 

Amortization of debt discount

 

 

 

 

 

880,623

 

Amortization of debt premium

 

 

20,834

 

 

 

 

Amortization of right-of-use asset

 

 

422,254

 

 

 

297,129

 

Loss on extinguishment of debt

 

 

334,511

 

 

 

 

Gain on disposal of fixed assets

 

 

 

 

 

(9,705

)

Reserve for credit losses

 

 

179,071

 

 

 

199,145

 

Stock based compensation expense

 

 

738,336

 

 

 

947,757

 

Change in fair value of Private Warrants

 

 

 

 

 

(19,835

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable

 

 

(942,795

)

 

 

(756,175

)

Inventory

 

 

319,648

 

 

 

1,985,275

 

Prepaid expenses and other current assets

 

 

6,873

 

 

 

533,386

 

Accounts payable

 

 

2,038,755

 

 

 

961,482

 

Accrued liabilities

 

 

703,813

 

 

 

679,693

 

Operating lease obligations

 

 

(378,836

)

 

 

(244,302

)

Net cash used in operating activities

 

 

(5,134,951

)

 

 

(6,397,391

)

 

 

 

 

 

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

Cash paid for purchase of equipment

 

 

(27,246

)

 

 

(150,297

)

Cash received for sale of equipment

 

 

 

 

 

11,000

 

Net cash used in investing activities

 

 

(27,246

)

 

 

(139,297

)

 

 

 

 

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

Proceeds from the issuance of common stock, net

 

 

711,031

 

 

 

1,016,088

 

Repayments on long-term debt

 

 

(116,084

)

 

 

(120,643

)

Borrowings on related party debt

 

 

2,435,000

 

 

 

1,175,000

 

Borrowings on short-term debt

 

 

16,257,558

 

 

 

16,555,768

 

Repayments on short-term debt

 

 

(14,186,264

)

 

 

(12,268,986

)

Debt issuance costs

 

 

(55,630

)

 

 

(176,287

)

Deferred offering costs

 

 

(69,166

)

 

 

(38,622

)

Payments in lieu of fractional shares in connection with the reverse stock split

 

 

 

 

 

(2,318

)

Net cash provided by financing activities

 

 

4,976,445

 

 

 

6,140,000

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

 

(185,752

)

 

 

(396,688

)

Cash and cash equivalents at beginning of period

 

 

369,114

 

 

 

623,163

 

Cash and cash equivalents at end of period

 

$

183,362

 

 

$

226,475

 

 

 

 

 

 

 

 

SUPPLEMENTAL INFORMATION:

 

 

 

 

 

 

Cash paid for interest

 

$

1,363,648

 

 

$

1,160,466

 

NON-CASH INVESTING AND FINANCING ACTIVITY:

 

 

 

 

 

 

Non-cash commercial premium finance borrowing

 

$

394,145

 

 

$

843,127

 

Issuance of warrants in connection with debt instrument

 

$

 

 

$

1,374,631

 

Common stock issued for accrued expenses

 

$

147,287

 

 

$

 

Common stock issued for accrued expenses - related party

 

$

100,000

 

 

$

 

Accrued fixed assets

 

$

78,501

 

 

$

 

 

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

5


 

STRYVE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2024

(Unaudited)

Note 1 - Organization and Description of Business

 

Stryve Foods, Inc. (“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, TX. The Company has manufacturing operations in Madill, Oklahoma and fulfillment operations in Frisco, Texas.

 

Note 2 - Liquidity and Going Concern

 

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), 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.

 

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 institutional loans. The Company's principal uses of cash have been debt service, capital expenditures, working capital, and funding operations. The Company incurred net losses of approximately $10.0 million during the nine months ended September 30, 2024. Cash used in operating activities was approximately $5.1 million for the nine months ended September 30, 2024. As of September 30, 2024, the Company has a working capital deficit of $14.3 million which compares to $7.4 million as of December 31, 2023.

 

Late in the third quarter of 2022, the Company secured a term loan in the amount of $4.0 million. Additionally, the Company secured an asset based line of credit with a $8.0 million credit limit subject to accounts receivable and inventory balances. The term loan and asset based line of credit were secured in order to augment the Company's liquidity, as needed, through the execution of management's transformation plan. The Company's initial draw on the term loan was $4.0 million taken in 2022 and as of September 30, 2024, $4.0 million (net of repayments) has been drawn on the asset based line of credit. The unused committed capacity under the asset based line of credit is approximately $4.0 million as of September 30, 2024, however, actual borrowing availability at any time is subject to advance rates on accounts receivable and inventory balances. No amount remained available to draw under the term loan as of September 30, 2024. See Note 5 for a description of the asset based line of credit and Note 6 for a description of the term loan.

 

During the nine months ended September 30, 2024, the Company issued an aggregate of $3.4 million in principal amount of unsecured convertible promissory notes (the “Convertible Notes”) to select accredited investors to fund operations. The aggregate principal amount of the Convertible Notes is inclusive of $1.7 million from related parties. During the third quarter of 2024, the Company issued $0.8 million in principal amount of an unsecured promissory note (the “Nonconvertible Note”) to a related party to fund operations. See Note 6 for further discussion.

 

The Company is currently evaluating several different strategies to enhance our liquidity position. These strategies may include, but are not limited to, pursuing additional actions under our business transformation plan, seeking additional financing from both the public and private markets through the issuance of equity securities and seeking to extend the term of outstanding debt. The outcome of these matters cannot be predicted with any certainty at this time. There can be no assurance that the Company will be able to raise the capital it needs to continue its operations on satisfactory terms or at all. In November 2024, the Company closed on a public offering receiving gross proceeds of approximately $2.9 million before deducting estimated offering expenses; however, the Company needs additional funding to execute its business plan and continue operations. If capital is not available to the Company when, and in the amounts needed, the Company could be required to liquidate our inventory and assets, cease or curtail operations, which could materially harm its business, financial condition and results of operations, or seek protection under applicable bankruptcy laws or similar state proceedings.

 

The Company has prepared cash flow forecasts which indicate that based on its expected operating losses and cash consumption in order to fund working capital growth, the Company believes that absent an infusion of sufficient capital there is substantial doubt about its ability to continue as a going concern for twelve months after the date the condensed consolidated financial statements for the quarter ended September 30, 2024 are 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 our ability to raise sufficient capital on favorable terms, if at all.

6


 

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 September 30, 2024, and December 31, 2023, the allowance for credit losses, returns and deductions totaled $1,416,898 and $1,638,039, respectively.

For the three months ended September 30, 2024, the allowance for credit losses, returns, and deductions consisted of the following:

7


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2024

 

 

2023

 

 

 

Credit Losses Allowance

 

 

Returns & Deductions Allowance

 

 

Total

 

 

Credit Losses Allowance

 

 

Returns & Deductions Allowance

 

 

Total

 

Beginning balance, July 1

 

$

705,311

 

 

$

653,562

 

 

$

1,358,873

 

 

$

197,566

 

 

$

833,270

 

 

$