SEC Form 10-Q filed by Stryve Foods Inc.

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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, 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 May 8, 2024, 2,904,117 shares of the registrant’s Class A common stock, $0.0001 par value, and 382,892 shares of the registrant’s Class V common stock, $0.0001 par value, were issued and outstanding.

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STRYVE FOODS, INC.

FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 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	22
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
Item 4. Controls and Procedures	33
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	35
Item 5. Other Information	36
Item 6. Exhibits	37
Part III. Signatures	38

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PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

STRYVE FOODS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

 

		March 31,				December 31,
		2024				2023
		(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents		$	280,101			$	369,114
Accounts receivable, net			2,319,579				2,091,926
Inventory			5,020,749				5,199,979
Prepaid expenses and other current assets			537,466				720,682
Total current assets			8,157,895				8,381,701
Property and equipment, net			6,765,185				7,150,775
Right of use assets, net			4,505,530				4,609,666
Goodwill			8,450,000				8,450,000
Intangible assets, net			4,059,106				4,119,690
TOTAL ASSETS		$	31,937,716			$	32,711,832
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES
Accounts payable		$	6,334,487			$	4,459,787
Accrued expenses			2,446,692				2,687,508
Current portion of lease liability			376,347				362,165
Line of credit, net of debt issuance costs			3,795,669				3,568,295
Promissory notes payable, net of debt discount and debt issuance costs			2,914,000				2,914,000
Promissory notes payable due to related parties, net of debt discount and debt issuance costs			1,175,000				1,175,000
Current portion of long-term debt and other short-term borrowings			478,577				605,530
Total current liabilities			17,520,772				15,772,285
Long-term debt, net of current portion, net of debt issuance costs			3,420,818				3,476,089
Lease liability, net of current portion			4,269,941				4,371,963
Financing obligation - related party operating lease			7,500,000				7,500,000
Deferred tax liability, net			35				35
TOTAL LIABILITIES			32,711,566				31,120,372
COMMITMENTS AND CONTINGENCIES (Note 12)
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, 2,898,194 and 2,249,189 shares issued and outstanding (net of 53,333 and 53,333 treasury shares), respectively			289				224
Class V common stock - $0.0001 par value, 15,000,000 shares authorized, 382,892 and 382,892 shares issued and outstanding			38				38
Additional paid-in-capital			139,446,938				137,883,798
Accumulated deficit			(140,221,115	)			(136,292,600	)
TOTAL STOCKHOLDERS' (DEFICIT) EQUITY			(773,850	)			1,591,460
TOTAL LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY		$	31,937,716			$	32,711,832

 

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

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STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

		Three Months Ended March 31,
		2024				2023
SALES, net		$	4,598,159			$	4,646,253
COST OF GOODS SOLD (exclusive of depreciation shown separately below)			3,581,775				3,683,002
GROSS PROFIT			1,016,384				963,251
OPERATING EXPENSES
Selling expenses			1,596,537				1,969,010
Operations expense			352,749				513,589
Salaries and wages			1,607,013				2,163,152
Depreciation and amortization expense			462,531				551,656
Total operating expenses			4,018,830				5,197,407
OPERATING LOSS			(3,002,446	)			(4,234,156	)
OTHER (EXPENSE) INCOME
Interest expense			(582,567	)			(398,945	)
Loss on extinguishment of debt			(334,511	)			—
Change in fair value of Private Warrants			—				8,250
Other income (expense)			7				(14,373	)
Total other (expense) income			(917,071	)			(405,069	)
NET LOSS BEFORE INCOME TAXES			(3,919,517	)			(4,639,225	)
Income tax expense			8,998				3,331
NET LOSS		$	(3,928,515	)		$	(4,642,556	)
Loss per common share:
Basic and diluted		$	(1.42	)		$	(2.23	)
Weighted average shares outstanding:
Basic and diluted			2,775,259				2,085,514

 

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

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STRYVE FOODS, INC.

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

THREE MONTHS ENDED MARCH 31, 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			—				—				—				—				—				(3,928,515	)			(3,928,515	)
BALANCE, MARCH 31, 2024			2,898,194			$	289				382,892			$	38			$	139,446,938			$	(140,221,115	)		$	(773,850	)

 

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

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STRYVE FOODS, INC.

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

THREE MONTHS ENDED MARCH 31, 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

 

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

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STRYVE FOODS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		Three Months Ended March 31,
		2024				2023
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss		$	(3,928,515	)		$	(4,642,556	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense			401,947				491,072
Amortization of intangible assets			60,584				60,584
Amortization of debt issuance costs			54,793				40,145
Amortization of right-of-use asset			104,137				98,826
Loss on extinguishment of debt			334,511				—
Reserve for credit losses			153,609				73,219
Stock based compensation expense			270,376				185,524
Change in fair value of Private Warrants			—				(8,250	)
Changes in operating assets and liabilities:
Accounts receivable			(381,263	)			(562,872	)
Inventory			179,230				7,664
Income tax receivables and payables, net			2,029				—
Prepaid expenses and other current assets			183,216				74,068
Accounts payable			1,858,343				1,344,535
Accrued liabilities			4,443				300,881
Operating lease obligations			(87,841	)			(89,610	)
Net cash used in operating activities			(790,401	)			(2,626,771	)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for purchase of equipment			—				(48,635	)
Net cash used in investing activities			—				(48,635	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from the issuance of common stock, net			711,031				—
Borrowings on long-term debt			—				2,000,000
Repayments on long-term debt			(21,665	)			(30,125	)
Borrowings on short-term debt			3,923,333				3,360,187
Repayments on short-term debt			(3,911,311	)			(2,900,947	)
Net cash provided by financing activities			701,388				2,429,115
Net change in cash and cash equivalents			(89,013	)			(246,291	)
Cash and cash equivalents at beginning of period			369,114				623,163
Cash and cash equivalents at end of period		$	280,101			$	376,872
SUPPLEMENTAL INFORMATION:
Cash paid for interest		$	405,439			$	398,945
NON-CASH INVESTING AND FINANCING ACTIVITY:
Non-cash commercial premium finance borrowing		$	—			$	291,339
Common stock issued for accrued expenses		$	147,287			$	—
Common stock issued for accrued expenses - related party		$	100,000			$	—
Accrued fixed assets		$	16,357			$	—

 

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

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STRYVE FOODS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2024

(Unaudited)

 

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

Forward-Looking Statements

This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The Company has based these forward-looking statements on the Company’s current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. These risks, uncertainties, assumptions and other important factors, which could cause actual results to differ materially from those described in these forward-looking statements, include: (i) the inability to achieve profitability due to commodity prices, inflation, supply chain interruption, transportation costs and/or labor shortages; (ii) the ability to meet financial and strategic goals, which may be affected by, among other things, competition, supply chain interruptions, the ability to pursue a growth strategy and manage growth profitability, maintain relationships with customers, suppliers and retailers and retain its management and key employees; (iii) the risk that retailers will choose to limit or decrease the number of retail locations in which Stryve’s products are carried or will choose not to carry or not to continue to carry Stryve’s products; (iv) the possibility that Stryve may be adversely affected by other economic, business, and/or competitive factors; (v) the possibility that Stryve may not achieve its financial outlook (vi) Stryve's ability to maintain its listing on the Nasdaq Capital market; (vii) Stryve's ability to maintain its liquidity position and implement cost savings measures; (viii) Stryve's ability to continue as a going concern, (ix) adverse developments affecting the financial services industry, including events or concerns involving liquidity, defaults or non-performance by financial institutions or transactional counterparties, and (x) other risks and uncertainties described herein and in other filings with the Securities and Exchange Commission (“SEC”) filings.

Unless the context otherwise requires, all references in this report to “Stryve,” the “Company,” “we,” “us” and “our” herein refer to Stryve Foods, Inc..

 

We effected a 1-for-15 reverse stock split (the “Reverse Stock Split”) of our issued and outstanding shares of Class A and Class V common stock, par value $0.0001 per share, effective as of 12:01 a.m. Eastern Time on July 14, 2023. All share and per share amounts were retroactively adjusted for all periods presented to give effect to this reverse stock split, including reclassifying an amount equal to the reduction in par value of the Company’s common stock to additional paid-in capital. See Note 1 to our condensed consolidated financial statements for additional information.

The following discussion should be read in conjunction with our condensed consolidated financial statements and related notes thereto included elsewhere in this report. Due to rounding, certain totals and subtotals may not foot and certain percentages may not reconcile.

Overview

Stryve is an emerging healthy snacking company which manufactures, markets and sells highly differentiated healthy snacking products that Stryve believes can disrupt traditional snacking categories. Stryve’s mission is “to help Americans snack better and live happier, better lives.” Stryve offers convenient snacks that are lower in sugar and carbohydrates and higher in protein than other snacks. Stryve offers all-natural, delicious snacks which it believes are nutritious and offer consumers a convenient healthy snacking option for their on-the-go lives.

Stryve’s current product portfolio consists primarily of air-dried meat snack products marketed under the Stryve®, Kalahari®, Braaitime®, and Vacadillos® brand names. Unlike beef jerky, Stryve’s all-natural air-dried meat snack products are made of beef and spices, are never cooked, most contain zero grams of sugar, and are free of monosodium glutamate (MSG), gluten, nitrates, nitrites, and preservatives. As a result, Stryve’s products are Keto and Paleo diet friendly. Further, based on protein density and sugar content, Stryve believes that its air-dried meat snack products are some of the healthiest shelf-stable snacks available today.

Stryve distributes its products in major retail channels, primarily in North America, including mass, convenience, grocery, club stores, and other retail outlets, as well as directly to consumers through its e-commerce websites, as well as direct to consumer through the Amazon platform.

Stryve believes increased consumer focus in the U.S. on health and wellness will continue to drive growth of the healthy snacking category and increase demand for Stryve’s products. Stryve has made substantial investments since its inception in product development, establishing its manufacturing facility, and building its marketing, sales and operations infrastructure to grow its business. As a result, Stryve has reported net losses since its inception. Stryve intends to continue to invest in productivity, product innovation, improving its supply chain, enhancing and expanding its manufacturing capabilities, and expanding its marketing and sales initiatives to drive continued growth.

 

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Transformation Strategy

In May of 2022, Stryve announced a leadership change with Chris Boever stepping in as the new Chief Executive Officer of the Company. With this change in leadership, management thoughtfully reviewed the business, strategy, near-term prospects, and its path to profitability. From this, management began executing on a three-phase transformation plan to drive the Company towards a profitable, self-sustaining model. The first phase of the transition began in immediately and is focused on cost reduction, revenue rationalization, pricing, and organizational design. The second phase began later in 2022 and is focused on improvements in quality, talent, and maximizing value through productivity. Management believes the benefits of the efforts within each of these phases will be compounding as the changes and improvements are been built into the Company's ongoing operating model.

As part of the transformation, Management has identified certain one-time write-downs for assets that were non-core to the go-forward plan as well as identified necessary write-downs of inventory and incurring one-time employee costs related to actions taken to reorganize the business and its objectives in line with the strategic direction that Mr. Boever has for the enterprise. These charges began in the second quarter of 2022, and continued to a lesser extent throughout 2023.

In 2024, the final phase of the transformation is now underway. It is focused on accelerating quality growth through brand reinvigoration, enhanced sales strategies, disciplined promotional activity, and new partnerships to help expand the reach of our brands. We expect to continue to garner new retail distribution in both measured and non-measured channels and build upon the increases we've seen in our retail consumption metrics, ultimately increasing our market share within the category while seeking to maintain an optimized spending profile across the business.

New Packaging & Retail Distribution Growth

A key piece of our retail growth strategy is tied to making the product more available and approachable. To accomplish this we completed a strategic redesign of our packaging with retail conversion at the forefront of design considerations. We collaborated with both consumers and retailers as we sought to optimize the packaging for retail conversion. We received a positive response from many retail partners on the new designs, garnering additional distribution in the process. We began manufacturing select items in the new packaging during the second quarter of 2023 and transitioned the rest of our production over to the new packing throughout the balance of 2023. By the middle of 2023, our new packaging began to ship to select retailers and distributors and as of the first quarter of 2024, we estimate that approximately half of retailer shelves have transitioned to the new packaging. We have begun to see year-over-year gains in our retail distribution footprint, and price-mix ultimately leading to increased retail sales and market share within measured distribution channels.

We are encouraged by the initial consumer and retailer response to our updated packaging and are excited to share that as the new packaging has made its way through distribution and onto shelves for consumers that the impact on our retail consumption data has been significant. The Stryve brand's retail dollar velocity, which represents the amount of sales retailers generate per store per week of the brand across all of our distribution footprint in measured channels, has increased 51.0% year-over-year since the introduction of the new-look packaging. While the Stryve brand received the most significant redesign, we enhanced our other brands as well. In the aggregate, all of our retail brands showed a similar improvement with retail dollar velocity up 37.5% on a combined basis across all measured channels in the same period. The retail data mentioned above is sourced from SPINS and represents the 4-weeks prior to March 24, 2024. We expect similar but accelerating trends in the 12-week and 24-week data, which we believe reflects the gradual roll out of the new packaging through distribution over the time period.

Improving Quality of Revenue

As an extension of the restructuring plans, we evaluated our revenue base in the second half of 2022 and have taken steps to improve or eliminate low-quality revenue sources in order to drive long-term value-creating growth. Key considerations in these rationalization decisions included assessments of strategic alignment, complexity, and profitability. And with respect to assessing the profitability of a particular revenue stream specifically, we evaluated our revenues on a gross margin basis, a net margin basis, and a cash conversion basis. Accordingly, a meaningful portion of net sales in the early part of 2023 came from products, customers, and/or channels that have been rationalized. Further, this strategic rationalization, in some cases, required us to sell inventory through discount or liquidation channels during 2023 and the first quarter of 2024 which affected our gross margin. Despite the negative impact on to net sales that this rationalization has had, our most valuable revenues are supported by improved trends in the retail consumption of our products.

Additionally, we took actions to improve the quality of our revenue in 2023 through improving our price-mix by working strategically with of some of our large retail partners to introduce new products that improved our unit economics while creating a more attractive consumer offering.

Optimizing Spend and Reducing Losses

Our first quarter of 2024 results are a product of the progress we have made on our cost mitigation strategies. We examined every area of spending throughout our business and identified ways to drive efficiencies, eliminate unnecessary expense, and focus on the highest and best use of each dollar. The resulting impact is a 22.2% year-over-year reduction in total operating expenses for the quarter ended

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March 31, 2024, resulting in a 35.2% year-over-year improvement in our Adjusted EBITDA Loss (a non-GAAP financial measure) for the same period.

We believe that our optimized spending plan has benefited from portfolio-wide price increases taken in 2022 and productivity initiatives throughout our supply chain. While we intend to continue to invest to drive meaningful growth in net sales, we are doing so in a disciplined manner that acknowledges the fundamental changes in direct-to-consumer advertising markets and shopper behavior. By monitoring our unit economics closely, maintaining an optimized spending profile, and seeking to meaningfully grow net sales, we believe we will be able to drive further reductions in our net losses moving forward.

We believe that we have entered the final phase of our planned transformation. The first two phases focused on reducing expenses while improving the quality of our revenues through rationalization and price actions to recover our unit economics paired with productivity an quality initiatives. The last phase is about accelerating quality growth and reaping the benefits of operating leverage through a redesigned cost structure.

 

At-The-Market Equity Facility

In June 2023, the Company entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which we may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. During March 2024, we terminated the at-the-market equity offering sales agreement. As of March 31, 2024, the following shares were sold during the first quarter of 2024:

		Three Months Ended March 31,
		2024
(In thousands, except share and per share information)
Number of common shares sold			558,873
Weighted average sale price per share		$	1.31
Gross proceeds		$	733
Net proceeds		$	711

 

April 2023 Financing Transaction

On April 19, 2023, we issued an aggregate of $4.1 million in principal amount of secured promissory notes (the “Notes”) to select accredited investors (including certain members of the Company’s management and Board of Directors) (the “Lenders”). The Notes carry an interest rate of 12% and have a maturity December 31, 2023. Each Lender that purchased Notes received a warrant (the “Warrants”) to purchase 1/15th of one share of the Company’s Class A common stock for each $0.5134 of principal amount of the Notes, for an aggregate of 7,964,550 Warrants convertible to 530,970 shares of Class A common stock. Each Warrant is exercisable immediately, has an exercise price per share of Class A common stock equal to $7.701 per whole share and will expire three years and three months from the date of issuance and may be exercised on a cashless basis if a registration statement registering the resale of the shares issuable upon exercise is not effective. The Company accounted for the transaction by allocating the proceeds between the Notes and Warrants based on their relative fair values as of the closing date of the facility. The allocation resulted in the fair value of the warrants to be treated as a discount to the Notes of $1.4 million that is being amortized over the term of the Notes. Accordingly, the Company recognized non-cash interest expense of $1.4 million in connection with the discount for the year ended December 31, 2023.

In January 2024, the Notes were amended to extend the maturity date of the Notes from December 31, 2023 to the earlier of (i) December 31, 2024, or (ii) the closing of the next sale or series of related sales by the Company of its equity securities from which the Company receives gross proceeds of not less than $3.0 million, excluding proceeds from the warrants held by the Lenders and the Company’s existing at the market equity facility with Craig-Hallum Capital Group LLC. As consideration, the Company (i) reduced the exercise price on the outstanding warrants issued to the lenders in April 2023 from $7.701 per split-adjusted share to $2.75 per split-adjusted share and (ii) agreed to issue 53,559 shares of Class A common stock to certain electing lenders as payment in full for interest accrued on the Notes held by those electing lenders through December 31, 2023 (at a value of $2.75 per share). The value of the accrued interest satisfied by the payment of 53,559 shares of Class A common stock to the electing lenders was $147,288.

 

April 2024 Convertible Bridge Notes

On April 3, 2024, we issued an aggregate of $1.6 million in principal amount of unsecured promissory notes (the “April 2024 Convertible Notes”) to select accredited investors to fund inventory growth, growth in working capital, and general operations. The aggregate principal amount of the April 2024 Convertible Notes is inclusive of $1.1 million from related parties. The April Convertible 2024 Notes were issued with an original issue discount of 1%, accrue interest annually at a rate of 12% and will mature on December 31, 2024. The April 2024 Convertible Notes will automatically convert in the securities issued in the next sale (or series of related sales) by the

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Company of its equity securities, following the date of the April 2024 Convertible Notes, from which the Company receives gross proceeds of not less than $3.0 million.

 

 

 

 

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Results of Operations –Three Months Ended March 31, 2024 Compared to Three Months Ended March 31, 2023

The following table sets forth selected items in our consolidated financial data in dollar amounts and as a percentage of net sales for the three months ended March 31, 2024 compared to the three months ended March 31, 2023.

 

		Three Months Ended March 31,
		2024								2023
		(unaudited)								(unaudited)
(In thousands)						% of sales								% of sales
SALES, net		$	4,598				100.0	%		$	4,646				100.0	%
COST OF GOODS SOLD (exclusive of depreciation shown separately below)			3,582				77.9	%			3,683				79.3	%
GROSS PROFIT			1,016				22.1	%			963				20.7	%
OPERATING EXPENSES
Selling expenses			1,597				34.7	%			1,969				42.4	%
Operations expense			353				7.7	%			514				11.1	%
Salaries and wages			1,607				34.9	%			2,163				46.6	%
Depreciation and amortization expense			462				10.1	%			552				11.9	%
Total operating expenses			4,019				87.4	%			5,197				111.9	%
OPERATING LOSS			(3,003	)			(65.3	)%			(4,234	)			(91.1	)%
OTHER (EXPENSE) INCOME
Interest expense			(583	)			(12.7	)%			(399	)			(8.6	)%
Loss on extinguishment of debt			(334	)			(7.3	)%			—				—
Change in fair value of Private Warrants			—				—				8				0.2	%
Other income (expense)			0				0.0	%			(14	)			(0.3	)%
Total other (expense) income			(917	)			(19.9	)%			(405	)			(8.7	)%
NET LOSS BEFORE INCOME TAXES		$	(3,920	)			(85.2	)%		$	(4,639	)			(99.8	)%

 

Net sales. Net sales remained largely flat during the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The prior year period was significantly benefited by shipments related to a promoted display program with a large retailer which we elected not to repeat in 2024. However, in the first quarter of 2024, significant increases in our brands' sell-through velocities throughout our base distribution contributed to an increase in orders and shipments which served to offset the prior year's display program. If increases in retail velocity that our brands are experiencing continues throughout 2024, we anticipate not only a net sales benefit due to increased replenishment orders, but sustained improvements in our retail consumption data may also assist us in securing additional points of distribution to further drive net sales over time.

 

Cost of Goods Sold. Cost of goods sold decreased by $0.1 million from $3.7 million in the three months ended March 31, 2023 to $3.6 million in the three months ended March 31, 2024. Productivity and yield improvements we have made to our cost of goods on a variable rate basis have partially offset some of the inflationary pressures on inputs, primarily beef. Overall commodity beef prices were higher in the first quarter of 2024 compared to the first quarter of the prior year while our productivity and yield enhancement strategies significantly mitigated the impact these increased beef prices could have had during the quarter.

Gross Profit. Gross profit increased $0.1 million in the three months ended March 31, 2024. As a percent of net sales, gross profit was 22.1% in the first quarter of 2024, compared to a 20.7% in the first quarter of 2023. A few primary factors contribute to this performance:

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Operating Expenses.

Operating Loss. Operating loss decreased by $1.2 million from $4.2 million in the three months ended March 31, 2023 to $3.0 million in the three months ended March 31, 2024 and is primarily attributable to decreased total operating expenses.

Interest Expense. Interest expense increased by $0.2 million from $0.4 million in the three months ended March 31, 2023 to $0.6 million in the three months ended March 31, 2024. Interest expense increased by $0.1 million related to the Invoice Purchase and Security Agreement (the "PSA"), and $0.1 million related to the Notes which were not in place in prior year quarter.

Loss on Extinguishment of Debt. We recorded a $0.3 million non-cash loss on extinguishment of debt related to the extension of the Notes the associated repricing of the related Warrants in consideration of the extension.

Net Loss Before Income Taxes. Net loss before income taxes decreased $0.7 million from $4.6 million in three months ended March 31, 2023 to $3.9 million in the three months ended March 31, 2024, with the decrease primarily attributable to our restructuring efforts resulting in decreased operating expenses offset by an increase in interest expense and loss on extinguishment of debt.

 

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Non-GAAP Financial Measures

 

We use non-GAAP financial measures and believe it is useful to investors as it provides additional information to facilitate comparisons of historical operating results, identify trends in operating results, and provide additional insight on how the management team evaluates the business. Our management team uses EBITDA, Adjusted EBITDA, and Adjusted Earnings per Share to make operating and strategic decisions, evaluate performance and comply with indebtedness related reporting requirements. Below are details on these non-GAAP measures and the non-GAAP adjustments that the management team makes in the definition of EBITDA, Adjusted EBITDA, and Adjusted Earnings per Share. We believe these non-GAAP measures should be considered along with Net Loss Before Income Taxes, Net Loss and Net Loss per Share, the most closely related GAAP financial measures. Reconciliations between EBITDA, Adjusted EBITDA, Adjusted Earnings per Share, Net Loss Before Income Taxes, Net Loss and Net Loss per Share are below, and discussion regarding underlying GAAP results throughout this Management’s Discussion and Analysis of Financial Condition and Results of Operations. The presentation of non-GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

EBITDA. Stryve defines EBITDA as Net Loss before Interest Expense, Income Tax Expense (Benefit), and Depreciation and Amortization Expense.

Adjusted EBITDA. Stryve defines Adjusted EBITDA as EBITDA adjusted as necessary for certain items listed below in the table.

The table below provides a reconciliation of EBITDA and Adjusted EBITDA to their most directly comparable GAAP measure, which is Net Loss Before Income Taxes, for the three months ended March 31, 2024 and 2023.

 

		Three Months Ended March 31,
		2024				2023
		(unaudited)				(unaudited)
(In thousands)
Net loss before income taxes		$	(3,920	)		$	(4,639	)
Interest expense			583				399
Depreciation and amortization expense			462				552
EBITDA		$	(2,875	)		$	(3,689	)
Additional Adjustments:
Loss on Extinguishment of Debt			334				—
Stock Based Compensation Expense			270				186
Adjusted EBITDA		$	(2,271	)		$	(3,503	)

 

Adjusted EBITDA. The Company improved its negative Adjusted EBITDA by 35.2% when comparing the three months ended March 31, 2024 and 2023 with a $1.2 million improvement year-over-year driven by the Company's transformational initiatives and rationalized spending.

 

Adjusted Earnings per Share. Stryve defines Adjusted Earnings per Share as its Basic/Diluted Net Income (Loss) per Share adjusted as necessary for certain items listed in the table below.

The table below provides a reconciliation of Adjusted Earnings per Share to Basic/Diluted Net Loss per Share, for the three months ended March 31, 2024 and 2023.

 

		Three Months Ended March 31,
		2024				2023
		(unaudited)				(unaudited)
(In thousands except share and per share information)
Net loss		$	(3,929	)		$	(4,643	)
Weighted average shares outstanding			2,775,259				2,085,514
Basic & Diluted Net Loss per Share		$	(1.42	)		$	(2.23	)
Additional Adjustments:
Loss on Extinguishment of Debt			0.12				—
Stock Based Compensation Expense			0.10				0.09
Adjusted Earnings per Share		$	(1.20	)		$	(2.14	)

 

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Liquidity and Capital Resources

Overview. The accompanying condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going concern (Subtopic 205-40), we have evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

We have historically funded our operations with cash flow from operations, equity capital raises, and note payable agreements from shareholders and private investors, in addition to institutional loans. Our principal uses of cash have been debt service, capital expenditures, working capital, and funding operations. For the three months ended March 31, 2024, we incurred an operating loss of $3.0 million and used cash in operations of $0.8 million. As of March 31, 2024, the Company has approximately $11.8 million of indebtedness.

 

During the third quarter of 2022, we secured a term loan in the amount of $4.0 million. Additionally, we 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 our liquidity, as needed, through the execution of management's plan. The Company had drawn $4.0 million of the term loan and $3.9 million (net of repayments) of the asset based line of credit as of March 31, 2024. The amount remaining available under the asset based line of credit is $4.1 million. No amount remained available under the term loan. During March 2024, the asset based line of credit was amended to extend the initial term twenty four (24) months after the date of the amendment, followed by automatic annual renewal terms unless the Company or the Lender provide written notice pursuant to the PSA prior to the end of any term. See Note 5 to our financial statements included herein for a description of the asset based line of credit and Note 6 for a description of the term loan.

 

Since the beginning of our transformation initiatives, we have experienced a slower sell-through of our rationalized slow-moving, and obsolete inventory than expected due to many factors, including other consumer packaged goods companies conducting similar inventory management and rationalization programs throughout 2022 and early in 2023 creating a surplus of goods in the channels commonly used to sell off this type of rationalized slow-moving, or obsolete inventory. However, in the latter half of 2023, we were able to reduce our inventory levels significantly through scaled back production, ordinary course sales of inventory, and accelerated by liquidation sales and or write-off of slow-moving and obsolete inventory. Over the course of 2023, we largely held inventory steady through the first half and then accelerated our draw down in the second half bringing our total reduction in inventory to $3.1 million year-over-year.

 

On April 19, 2023, we issued an aggregate of $4.1 million in principal amount of secured promissory notes to select accredited investors carrying a 12% accrued interest rate to help support the working capital and growth needs of the business. The aggregate principal amount of the notes is inclusive of $1.2 million from related parties. We amended the terms in January 2024 to extend the maturity date from December 31, 2023 to the earlier of (i) December 31, 2024, or (ii) the closing of the next sale or series of related sales by the Company of its equity securities from which the Company receives gross proceeds of not less than $3.0 million.

 

In June 2023, we entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which we may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. The Company sold an aggregate of 960,639 shares under the at-the-market equity facility for gross proceeds of $2.4 million as of December 31, 2023. During March 2024, the Company terminated the at-the-market equity offering sales agreement.

 

On April 3, 2024, we issued an aggregate of $1.6 million in principal amount of unsecured promissory notes (the “April 2024 Convertible Notes”) for proceeds of $1.6 million to select accredited investors to fund operations. The aggregate principal amount of the April 2024 Convertible Notes is inclusive of $1.1 million from related parties. The April 2024 Convertible Notes were issued with an original issue discount of 1%, accrue interest annually at a rate of 12% and will mature on December 31, 2024. The April 2024 Convertible Notes will automatically convert in the securities issued in the next sale (or series of related sales) by the Company of its equity securities, following the date of the April 2024 Convertible Notes, from which the Company receives gross proceeds of not less than $3.0 million.

 

While these most recent financings have provided us with liquidity to support our near-term goals, we are still evaluating several different strategies to enhance our liquidity position. These strategies may include, but are not limited to, pursuing additional actions under our business transformation plan, seeking to refinance or extend the term of such debt and seeking additional financing from both the public and private markets through the issuance of equity or debt securities. The outcome of these matters cannot be predicted with any certainty at this time. We need additional funding to execute our business plan and continue operations. If capital is not available to us when, and in the amounts needed, we could be required to liquidate our inventory and assets, cease or curtail operations, which could materially harm our business, financial condition and results of operations, or seek protection under applicable bankruptcy laws or similar state proceedings. There can be no assurance that we will be able to raise the capital we need to continue our operations.

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In 2024, as we focus on accelerating quality growth, we will likely have to make investments in our working capital to support increased distribution with new and existing retailers coming online throughout the year. Many of these distribution resets have been secured in large part due to our new packaging design, improved product quality, and the resulting improvements in our retail consumption metrics. Accordingly, we will have to build net new inventories to support these upcoming resets. This investment in inventory ahead of sales has and may continue to put pressure on our liquidity position given the structure and terms of our credit facilities and has required us to seek external financing. While we anticipate the increased volumes will result in improved financial results and a significantly narrowed cash loss over time, we do anticipate continued growth which, depending on the rate of growth, may require more external financing.

 

We have prepared cash flow forecasts which indicate that based on our expected operating losses and cash consumption in order to fund inventory growth, we believe that absent an infusion of sufficient capital there is substantial doubt about our ability to continue as a going concern for twelve months after the date our condensed consolidated financial statements for the three months ended March 31, 2024 are issued. The Company's plan includes the items noted above as well as securing additional external financing which likely includes raising debt or equity capital assuming it is available to us. While we believe our plan, if successfully executed, will alleviate the conditions that raise substantial doubt, these plans are not entirely within the Company's control including our ability to raise sufficient capital on favorable terms, if at all.

 

Cash Flows. The following tables show summary cash flows information for the three months ended March 31, 2024 and 2023.

 

		Three Months Ended March 31,
		2024				2023
		(unaudited)				(unaudited)
(In thousands)
Net cash used in operating activities		$	(790	)		$	(2,627	)
Net cash used in investing activities			—				(49	)
Net cash provided by financing activities			701				2,429
Net decrease in cash and cash equivalents		$	(89	)		$	(246	)

Net Cash used in Operating Activities. Net cash used in operating activities decreased $1.8 million from $2.6 million in the three months ended March 31, 2023 compared to $0.8 million through the three months ended March 31, 2024. This decrease is primarily attributable to the decrease in net losses of $0.7 million during the three months ended March 31, 2024, as compared to the prior year period, a net change in operating assets and liabilities of $0.7 million and the loss on extinguishment of debt of $0.3 million. The change in operating assets and liabilities that impacted our use of cash in operations include an increase in inventory of $0.2 million, and increase in accounts receivable of $0.2 million, and an increase of $0.2 million in accounts payable and accrued liabilities due to timing of payments.

Net Cash used in Investing Activities. Net cash used in investing activities was minimal in the three months ended March 31, 2023, compared to the three months ended March 31, 2024. We believe our current manufacturing and fulfillment assets are generally sufficient to meet the near-term potential demand for our products and don't foresee the need for significant capital expenditures to facilitate growth in the coming quarters.

Net Cash provided by Financing Activities. Net cash provided by financing activities generated $1.7 million less in cash for the Company in the three months ended March 31, 2024, compared to the comparable period a year ago due borrowings on the asset based line of credit offset by proceeds from the at-the-market equity facility. In the three months ended March 31, 2024, we generated cash from financing activities of $0.7 million primarily driven by $0.7 million in proceeds from the at-the-market equity facility.

Debt and credit facilities. The information below represents an overview of the Company’s debt and prior credit facilities.

As of March 31, 2024 and December 31, 2023, long-term debt consisted of the following:

 

		March 31,				December 31,
		2024				2023
		(unaudited)				(audited)
(In thousands)
Revenue Loan and Security Agreement, net of debt issuance costs		$	3,775			$	3,792
Broken Stone Agreement			20				20
Less: current portion			(374	)			(336	)
Total long-term debt, net of current portion		$	3,421			$	3,476

 

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As of March 31, 2024 and December 31, 2023, short-term borrowings and current portion of long-term debt consisted of the following:

 

		March 31,				December 31,
		2024				2023
		(unaudited)				(audited)
(In thousands)
Invoice Purchase and Security Agreement, net of debt issuance costs		$	3,796			$	3,568
Promissory Notes, net of debt discount and debt issuance costs			4,089				4,089
Commercial Premium Finance Agreement			104				270
Current portion of long-term obligations			374				336
Total short-term borrowings and current portion of long-term debt		$	8,363			$	8,263

 

Future minimum principal payments, exclusive of debt discounts, on debt as of March 31, 2024 are as follows:

 

2024		$	8,354
2025			552
2026			1,084
2027			1,960
		$	11,950

On April 19, 2023, we issued an aggregate of $4.1 million in principal amount of secured promissory notes to select accredited investors carrying a 12% accrued interest rate to help support the working capital and growth needs of the business. The aggregate principal amount of the notes is inclusive of $1.2 million from related parties. We amended the terms in January 2024 to extend the maturity date from December 31, 2023 to December 31, 2024.

Certain Factors Affecting Our Performance

 

Stryve’s management believes that the Company’s future performance will depend on many factors, including the following:

Ability to Expand Distribution in both Online and Traditional Retail Channels. Stryve’s products are sold through a growing number of traditional retail channels where the Company has an opportunity to acquire new consumers. Traditional retail channels include mass stores, grocery chains, natural food outlets, club stores, convenience stores, and drug stores, all either direct or through distribution partners. Stryve works closely with retailers to establish plans for distribution expansion and promotional opportunities. Stryve is also growing its consumer base through both paid and organic means both online as well. Online consumer acquisitions typically occur through the Company’s portfolio of DTC e-commerce websites and Amazon.com. The Company’s online consumer acquisition program includes paid and unpaid social media, search, and display media.

Ability to Acquire and Retain Consumers at a Reasonable Cost. Stryve’s management believes an ability to consistently acquire and retain consumers at a reasonable cost relative to projected life-time value will be a key factor affecting future performance. To accomplish this goal, Stryve intends to strategically allocate advertising and promotional spend between online and offline channels, including shopper marketing and trade promotions in partnership with is retail customers. Stryve's promotional activities will mostly be focused on increasing consumer awareness and driving trial of our products. Further, we acknowledge that changes to third-party algorithms or the ability to leverage retailer programs that may be utilized directly, or indirectly, by Stryve in its advertising efforts may impact the effectiveness of Stryve's advertising which may increase its overall cost to acquire and retain consumers. Further, management believes the performance of its packaging designs on shelf at retail will be key in driving trial with new consumers.

Ability to Drive Repeat Usage of Our Products. Stryve accrues substantial economic value from repeat consumers who consistently purchase its products either online or in traditional retail. The pace of Stryve’s growth rate will be affected by the repeat usage dynamics of existing and newly acquired customers. The Company utilizes a number of methods to drive repeat behavior including intelligent e-mail and text campaigns, targeted digital media, and subscribe and save incentives as well as in-store trade promotion strategies.

Ability to Expand Gross Margins. Stryve’s overall profitability will be impacted by its ability to expand gross margins through effective sourcing of raw materials, managing production yields and drying times, controlling labor and shipping costs, as well as spreading other production-related costs over greater manufacturing volumes. Additionally, Stryve's ability to expand gross margins will be influenced by its revenue channel and customer mix as well as by Stryve's ability to pass price increases to its customers.

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Ability to Expand Operating Margins. The Company’s ability to expand operating margins will be impacted by its ability to effectively manage its fixed and variable operating expenses as net sales increase.

Ability to Manage Supply Chain and Expand Production In-line with Demand. Stryve’s ability to grow and meet future demand will be affected by its ability to effectively plan for and source inventory from a variety of suppliers located inside and outside the United States. Additionally, efficiently scaling production capacity ahead of growth in net sales will be critical to the Company’s ability to meet future demand without disruption.

Ability to Optimize Key Components of Working Capital. Stryve’s ability to reduce cash burn in the near-term and eventually generate positive cash flow will be partially impacted by the Company’s ability to effectively manage the key components of working capital which have a direct impact on the cash conversion cycle. Maintaining and securing sufficient liquidity to support ongoing investments in working capital required to facilitate growth will be key as Stryve seeks to optimize its components working capital and supply chain.

Seasonality. Because Stryve is so early in its lifecycle of growth, it is difficult to discern the exact magnitude of seasonality affecting its business. Any evidence of seasonality in the Company's revenue is not clearly discernible from the Company’s historical growth. However, there does seem to be seasonal factors affecting its commodity inputs, primarily beef, that has developed since the pandemic. Understanding potential trends in seasonality will be key in Stryve’s management of its expenses, liquidity, and working capital.

Off-Balance Sheet Arrangements

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements as of March 31, 2024. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

Critical Accounting Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our condensed consolidated financial statements which have been prepared in accordance with GAAP. In preparing our financial statements, we make estimates, assumptions, and judgments that can have a significant impact on our reported revenue, results of operations, and comprehensive net income or loss, as well as on the value of certain assets and liabilities on our balance sheet during, and as of, the reporting periods. These estimates, assumptions, and judgments are necessary and are made based on our historical experience, market trends and on other assumptions and factors that we believe to be reasonable under the circumstances because future events and their effects on our results of operations and value of our assets cannot be determined with certainty. These estimates may change as new events occur or additional information is obtained. We may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a prolonged period of time. Because the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates or assumptions.

Our significant accounting policies are described in Note 3 of Part I, Item 1 of this Quarterly Report on Form 10-Q and in Note 3 of Part II, Item 8, “Significant Accounting Policies” in our Annual Report on Form 10-K. There have been no changes to our critical accounting policies and estimates since our Annual Report on Form 10-K for the year ended December 31, 2023.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Stryve’s future income, cash flows and fair values relevant to financial instruments are dependent upon prevalent market interest rates. Market risk refers to the risk of loss from adverse changes in market prices and interest rates.

Concentration of credit risk. The balance sheet items that potentially subject the Company to concentrations of credit risk are primarily cash 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.

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As of and for the three months ended March 31, 2024, customer concentrations in excess of 10% consolidated sales and accounts receivable are below. No vendors represented more than 10% of purchases or accounts payable.

 

		Sales		Purchases		Accounts Receivable		Accounts Payable
Customer A		24%		—		27%		—
Customer B		11%		—		—		—
Customer C		19%		—		10%		—

 

Interest rate risk. Stryve is subject to interest rate risk in connection with borrowing based on a variable interest rate. Derivative financial instruments, such as interest rate swap agreements and interest rate cap agreements, are not currently but may be used for the purpose of managing fluctuating interest rate exposures that exist from Stryve’s variable rate debt obligations that are expected to remain outstanding. Interest rate changes do not affect the market value of such debt, but could impact the amount of Stryve’s interest payments, and accordingly, Stryve’s future earnings and cash flows, assuming other factors are held constant. Additionally, changes in prevailing market interest rates may affect Stryve’s ability to refinance existing debt or secure new debt financing. Notwithstanding the foregoing, management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia's invasion of Ukraine, may have unpredictable effects on the Company's exposure to interest rate risk either directly or indirectly.

Foreign currency risk. Stryve is exposed to changes in currency rates as a result of its revenue generated in currencies other than U.S. dollars. Revenue and profit generated by international operations will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. However, the operations that are impacted by foreign currency risk are less than 5% of Stryve’s net loss for the three months ended March 31, 2024 and the year ended December 31, 2023 and therefore, the risk of this is not significant. Notwithstanding the foregoing, management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia's invasion of Ukraine, may have unpredictable effects on the Company's exposure to foreign currency risk either directly or indirectly.

Raw material risk. Stryve’s profitability depends, among other things, on its ability to anticipate and react to raw material costs, primarily beef. The price of beef and other raw materials are subject to many factors beyond Stryve’s control, including general economic conditions, inflation, processing labor shortages, cost of feed, demand, natural disasters, weather and other factors that may affect beef supply chain participants. Changes in the prices of beef and other raw materials have already negatively affected Stryve's results of operations, and any continued or further changes could have a material impact on Stryve’s business, financial condition and results of operations. Notwithstanding the foregoing, management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia’s invasion of Ukraine and the conflicts in the Middle East, may have unpredictable effects on the Company's exposure to risks in its procurement of raw material.

Inflation risk. Inflation may impact Stryve’s revenue and cost of services and products, Stryve believes the effects of inflation on its business, financial condition and results of operations have been material to date which management hopes to alleviate through mitigating strategies. However, there can be no assurance that any mitigation strategies management employs will be effective or that its business, financial condition and results of operations will not be materially impacted by continued inflation in the future. Notwithstanding the foregoing, management acknowledges that both foreign and domestic central bank actions as well as geopolitical uncertainty and conflict, such as Russia’s invasion of Ukraine and the conflicts in the Middle East, may have unpredictable effects on the Company's exposure to inflation risk either directly or indirectly.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

 

The Company maintains a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the "Exchange Act") designed to ensure that the information required to be disclosed by the Company in the reports that are filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission, and is accumulated and communicated to our management, including our Chief Executive Officer (our principal executive officer) and Chief Financial Officer (our principal financial officer), as appropriate, to allow timely decisions regarding required disclosure.

 

The Company's management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures under the Exchange Act as of March 31, 2024, the end of the period covered by this report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective.

 

Changes in Internal Control over Financial Reporting

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There were no changes in our internal control over financial reporting, as identified in connection with the evaluation required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act, that occurred during the three months ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of its business. We are not currently a party to any material legal proceedings. Regardless of outcome, such proceedings or claims can have an adverse impact on us because of defense and settlement costs, diversion of resources and other factors and there can be no assurances that favorable outcomes will be obtained.

Item 1A. Risk Factors

 

Except as set forth below, there have been no material changes to the factors disclosed in Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

 

Nasdaq may delist our securities from trading on its exchange which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.

Our securities are currently listed on the Nasdaq. If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:

On April 9, 2024, we received a deficiency letter from the Nasdaq Listing Qualifications Department indicating that we were not in compliance with Nasdaq’s Listing Rule 5550(b)(1) because our stockholders’ equity for the year ended December 31, 2023, as reported in our Form 10-K, was below the minimum stockholders’ equity requirement of $2,500,000 (the “Stockholders’ Equity Requirement”). In accordance with Nasdaq rules, we have been provided 45 calendar days to submit a plan to regain compliance with the Stockholders’ Equity Requirement (the “Compliance Plan”). If the Compliance Plan is accepted, Nasdaq may grant up to 180 calendar days from the date of the notice for us to regain compliance with the Stockholders’ Equity Requirement.

We intend to timely submit a Compliance Plan to Nasdaq to regain compliance with the Stockholders’ Equity Requirement. There can be no assurance that Nasdaq will accept our plan or that we will be able to regain compliance with Listing Rule 5550(b)(1) or maintain compliance with any other Nasdaq requirement in the future. If our securities are delisted from Nasdaq due to non-compliance with Rule 5550(b)(1) or the failure to satisfy another applicable Nasdaq rule, such delisting would have a material adverse impact on the trading price and ability to transfer our securities.

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

 

At-The-Market Facility

In June 2023, the Company entered into an at-the-market equity offering sales agreement with Craig-Hallum Capital Group LLC, that established a program pursuant to which they may offer and sell up to $5.7 million of our Class A common stock from time to time in at-the-market transactions. The Company sold an aggregate of 558,873 shares under the at-the-market equity facility for gross proceeds of $0.7 million during the three months ended March 31, 2024. During March 2024, the Company terminated the at-the-market equity offering sales agreement.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

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Item 5. Other Information.

During the three months ended March 31, 2024, there were no modifications, adoptions or terminations by any directors or officers to any contract, instruction or written plan for the purchase or sale of securities of the Company that is intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or non-Rule 10b5-1 trading agreements.

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Item 6. Exhibits

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

 

Exhibit No.		Document
10.1		Form of Note dated April 3, 2024 (filed herewith)
31.1*		Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*		Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a) and 15(d)-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*		Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*		Inline XBRL Instance Document
101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document
101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*		Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document
104*		Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).

 

* Furnished.

 

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

	STRYVE FOODS, INC.
Date: May 14, 2024	By:	/s/ Christopher Boever
	Name:	Christopher Boever
	Title:	Chief Executive Officer
		(Principal Executive Officer)
	By:	/s/ R. Alex Hawkins
	Name:	R. Alex Hawkins
	Title:	Chief Financial Officer
		(Principal Financial Officer)

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