Stryve Foods(SNAX) - 2022 Q3 - Quarterly Report

Part I. Financial Information This section presents the company's unaudited condensed consolidated financial statements, management's discussion and analysis of financial performance, market risk disclosures, and an assessment of internal controls Unaudited Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements present Stryve Foods, Inc.'s financial position as of September 30, 2022, and its performance for the three and nine months then ended Condensed Consolidated Balance Sheets As of September 30, 2022, total assets increased to $39.3 million, liabilities decreased to $19.2 million, and stockholders' equity rose to $20.2 million Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2022 (Unaudited) | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalent | $4,355 | $2,217 | | Inventory, net | $8,927 | $7,216 | | Total current assets | $17,953 | $15,039 | | Total Assets | $39,340 | $36,775 | | Liabilities & Equity | | | | Total current liabilities | $7,076 | $11,848 | | Total Liabilities | $19,182 | $20,333 | | Total Stockholders' Equity | $20,158 | $16,442 | | Total Liabilities and Stockholders' Equity | $39,340 | $36,775 | Condensed Consolidated Statements of Operations Net sales decreased in Q3 2022 but net loss improved, while nine-month net sales increased slightly but gross and net losses significantly widened Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Sales, net | $6,170 | $9,062 | $24,537 | $23,248 | | Gross (Loss) Margin | $1,384 | $3,254 | $(1,917) | $9,513 | | Operating Loss | $(4,748) | $(8,169) | $(27,881) | $(19,773) | | Net Loss | $(4,968) | $(8,711) | $(28,636) | $(20,033) | | Basic and diluted loss per share | $(0.16) | $(0.48) | $(0.94) | $(1.56) | Condensed Consolidated Statements of Changes in Stockholders' Equity Stockholders' equity increased to $20.2 million by September 30, 2022, primarily due to a $32.3 million PIPE investment, offset by a $28.6 million net loss - A PIPE investment added $32.3 million to additional paid-in capital in the first quarter of 2022[12] - The accumulated deficit grew from $84.1 million at the beginning of the year to $112.7 million by September 30, 2022, reflecting the net losses incurred during the period[12] Condensed Consolidated Statements of Cash Flows Operating activities used $25.5 million in cash for the nine months ended September 30, 2022, while financing activities provided $30.0 million, resulting in a $2.1 million increase in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(25,534) | $(27,624) | | Net cash used in investing activities | $(2,281) | $(833) | | Net cash provided by financing activities | $29,952 | $41,254 | | Net change in cash and cash equivalents | $2,137 | $12,798 | | Cash at end of period | $4,355 | $13,390 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail liquidity challenges, new borrowing capacity, significant accounting policies, debt structures, shareholder equity changes, related-party transactions, and potential litigation - The company incurred a net loss of approximately $28.6 million and used $25.5 million in cash from operating activities during the nine months ended September 30, 2022[23] - In late Q3 2022, the company secured $21 million in non-dilutive, committed borrowing capacity to improve liquidity, with $4.3 million drawn as of September 30, 2022[24] - For the nine months ended September 30, 2022, one customer (Customer A) accounted for 36% of consolidated sales[32] - The company entered into a sale and leaseback transaction for its manufacturing facility with a related party, accounted for as a financing obligation of $7.5 million[94][96] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic shifts to optimize spending and improve profitability, addressing supply chain issues and inflation, while securing new debt facilities to bolster liquidity - The company is an emerging healthy snacking company manufacturing and marketing air-dried meat snack products under brands like Stryve®, Kalahari®, Braaitime®, and Vacadillos®[106][107] - The company experienced supply chain challenges and significant inflationary pressures on raw materials, packaging, transportation, and labor throughout the first three quarters of 2022[117][118] - Under new CEO Chris Boever, management has reviewed the business to drive efficiencies, eliminate unnecessary expenses, and rationalize its customer and product portfolio to improve profitability[122][125] - In Q3 2022, the company secured $21 million in committed borrowing capacity through new debt facilities to strengthen its liquidity position[119][156] Results of Operations – Three Months Ended September 30, 2022 vs 2021 Q3 2022 net sales fell 31.9% to $6.2 million, but operating loss improved significantly to $4.7 million due to a $5.3 million reduction in operating expenses Q3 2022 vs Q3 2021 Financial Performance (in thousands) | Metric | Q3 2022 | Q3 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $6,170 | $9,062 | $(2,892) | -31.9% | | Gross profit | $1,384 | $3,254 | $(1,870) | -57.5% | | Gross Margin % | 22.4% | 35.9% | - | - | | Total operating expenses | $6,133 | $11,423 | $(5,290) | -46.3% | | Operating loss | $(4,749) | $(8,169) | $3,420 | 41.9% | | Net loss | $(4,967) | $(8,711) | $3,744 | 43.0% | - The decrease in net sales was primarily driven by the rationalization of low-quality revenue streams that were present in the prior year period[127] - Selling and marketing expenses decreased by $3.2 million due to reduced spending on digital media advertising and paid search[133] Results of Operations – Nine Months Ended September 30, 2022 vs 2021 Nine-month net sales grew 5.5% to $24.5 million, but gross profit turned to a $(1.9) million loss, and net loss widened to $28.6 million due to unfavorable product mix and promotions Nine Months 2022 vs 2021 Financial Performance (in thousands) | Metric | Nine Months 2022 | Nine Months 2021 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $24,537 | $23,248 | $1,289 | 5.5% | | Gross profit (loss) | $(1,917) | $9,513 | $(11,430) | -120.1% | | Gross Margin % | (7.8)% | 40.9% | - | - | | Operating loss | $(27,881) | $(19,773) | $(8,108) | -41.0% | | Net loss | $(28,636) | $(20,033) | $(8,603) | -43.0% | - Gross-to-net dilution from promotions and discounts increased to 20.1% of gross sales, up from 8.2% in the prior year, largely due to a limited-time event that contributed over $3.0 million in coupons and deductions[136][139] - Selling and marketing expenses fell by $5.0 million as the company reduced digital media and advertising spend[139] Non-GAAP Financial Measures The company uses non-GAAP measures like Adjusted EBITDA, which improved in Q3 2022 but worsened for the nine-month period, with adjustments for severance, write-downs, and stock-based compensation Adjusted EBITDA Reconciliation (in thousands) | Metric | Q3 2022 | Q3 2021 | Nine Months 2022 | Nine Months 2021 | | :--- | :--- | :--- | :--- | :--- | | Net loss before income taxes | $(4,967) | $(8,711) | $(28,599) | $(20,033) | | EBITDA | $(4,259) | $(7,551) | $(26,574) | $(16,124) | | Adjusted EBITDA | $(3,876) | $(6,926) | $(21,572) | $(17,142) | - Key adjustments for the nine months of 2022 include $1.6 million for severances, $2.6 million for one-time reserves and write-downs, and $0.8 million for stock-based compensation[145][147][148] Liquidity and Capital Resources The company's working capital was $10.9 million as of September 30, 2022, with $25.5 million cash used in operations, and new borrowing capacity secured to fund future operations - As of September 30, 2022, the company had working capital of $10.9 million and approximately $5.2 million of indebtedness[155] - Net cash used in operating activities was $25.5 million for the nine months ended September 30, 2022[155][162] - The company believes cash from operations, working capital, and borrowing ability will be sufficient to fund projections for at least the next twelve months[159] Quantitative and Qualitative Disclosures Regarding Market Risk The company faces market risks including high customer concentration, interest rate exposure, significant raw material price volatility, and inflationary impacts on costs - Customer concentration risk is high, with Customer A representing 36% of sales for the nine months ended September 30, 2022[183] - The company is subject to raw material risk, as its profitability depends on its ability to react to costs, primarily for beef, which are subject to factors beyond its control[186] - Inflation has had a material impact on the company's revenues and costs, and there is no assurance that mitigation strategies will be effective[187] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2022, with no material changes to internal control over financial reporting during Q3 2022 - The CEO and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective[189] - No changes occurred during Q3 2022 that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[190] Part II. Other Information This section details legal proceedings, updates on risk factors, unregistered equity sales, and other miscellaneous disclosures Legal Proceedings The company is not currently a party to any material legal proceedings but may be involved in claims arising in the ordinary course of business - The company is not currently a party to any material legal proceedings[193] Risk Factors There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - No material changes have been made to the risk factors from the company's 2021 Form 10-K[194] Unregistered Sales of Equity Securities and Use of Proceeds During Q3 2022, the company issued 2.2 million Class A common stock shares from pre-funded warrant exercises and exchanged over 4 million Class V for Class A shares, exempt from registration - In Q3 2022, 2,200,000 pre-funded warrants were exercised for 2,200,000 shares of Class A common stock[195] - In Q3 2022, 4,014,012 shares of Class V common stock were exchanged for 4,014,012 shares of Class A common stock[196] Defaults Upon Senior Securities None - None[197] Mine Safety Disclosures Not applicable - Not applicable[198] Other Information None - None[199] Exhibits This section lists the exhibits filed with the quarterly report, including CEO and CFO certifications and Inline XBRL data files