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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 AND EXCHANGE ACT OF 1934
For the quarterly period ended September 28, 2019
OR
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: 001-38879
 
http://api.tenkwizard.com/cgi/image?quest=1&rid=23&ipage=13196309&doc=12
BEYOND MEAT, INC.
(Exact name of registrant as specified in its charter)
 
Delaware
26-4087597
(State or other jurisdiction of
Incorporation or organization)
(I.R.S. Employer
Identification No.)
119 Standard Street
El Segundo, CA 90245
(Address, including zip code, of principal executive offices)

(866) 756-4112
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 
Trading
Symbol(s)
 
Name of each exchange on which registered
Common Stock, $0.0001 par value
 
BYND
 
The Nasdaq Stock Market, LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 11, 2019, the registrant had 61,521,912 shares of common stock, $0.0001 par value per share, outstanding.
 




 
TABLE OF CONTENTS
 
Page
 
 
 
 


i



Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of the federal securities laws. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting the operating results and financial condition of our business. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved. Forward-looking statements are based on information available at the time those statements are made and/or management’s good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause such differences include, but are not limited to:
estimates of our expenses, future revenues, capital requirements and our needs for additional financing;
our estimates of the size of our market opportunities;
our ability to effectively manage our growth;
our ability to effectively expand our manufacturing and production capacity;
our ability to successfully enter new markets, manage our international expansion and comply with any applicable laws and regulations;
the effects of increased competition from our market competitors;
the success of our marketing efforts and the ability to grow brand awareness and maintain, protect and enhance our brand;
our ability to maintain and effectively expand our relationships with key strategic restaurant and foodservice partners;
our ability to attract and retain our suppliers, distributors, co-manufacturers and customers;
our ability to procure sufficient high quality, raw materials to manufacture our products;
the availability of pea protein that meets our standards;
real or perceived quality or health issues with our products or other issues that adversely affect our brand and reputation;
changes in the tastes and preferences of our consumers;
significant disruption in, or breach in security of our information technology systems and resultant interruptions in service and any related impact on our reputation;
the attraction and retention of qualified employees and key personnel;
the effects of natural or man-made catastrophic events particularly involving our or any of our co-manufacturers’ manufacturing facilities or our suppliers’ facilities;
the effectiveness of our internal controls;
changes in laws and government regulation affecting our business, including Food and Drug Administration (“FDA”) governmental regulation and state regulation;
changes in laws, regulations or policies of governmental agencies or regulators relating to the labeling of our products;
the impact of adverse economic conditions;

ii



the financial condition of, and our relationships with our suppliers, co-manufacturers, distributors, retailers and foodservice customers;
the ability of our suppliers and co-manufacturers to comply with food safety, environmental or other laws or regulations;
seasonality;
the sufficiency of our cash and cash equivalents to meet our liquidity needs and service our indebtedness;
economic conditions and their impact on consumer spending;
outcomes of legal or administrative proceedings; and
our, our suppliers’ and our co-manufacturers’ ability to protect our proprietary technology and intellectual property adequately.
Forward-looking statements generally can be identified by words such as “believe,” “may,” “will,” “will continue,” “could,” “will likely result,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “predict,” “project,” “expect,” “potential” and similar expressions, as they relate to our company, our business and our management and include statements regarding our future operations, financial condition and prospects, and business strategies. These forward-looking statements are based on our current expectations and assumptions that are subject to risks and uncertainties, which could cause our actual results to differ materially from those anticipated or implied in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Quarterly Report on Form 10-Q, including, without limitation, the risks discussed in Part II, Item 1A, "Risk Factors," and those discussed in other documents we file from time to time with the Securities and Exchange Commission (“SEC”).
Forward-looking statements speak only as of the date of this report. You should not put undue reliance on any forward-looking statements. We assume no obligation to update forward-looking statements to reflect actual results, changes in assumptions or changes in other factors affecting forward-looking information, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements.
As used herein, the terms “Beyond Meat,” “we,” “us,” “our” and “the Company” refer to Beyond Meat, Inc., a Delaware corporation.
“Beyond Burger,” “Beyond Beef,” “Beyond Chicken,” “Beyond Meat,” “Beyond Sausage,” “Beyond Breakfast Sausage,” “The Cookout Classic,” “The Future of Protein” and “The Future of Protein Beyond Meat” and design are registered trademarks of Beyond Meat, Inc. in the United States and, in some cases, in certain other countries. All other brand names or trademarks appearing in this Quarterly Report on Form 10-Q are the property of their respective holders. Solely for convenience, the trademarks and trade names contained herein are referred to without the ® and TM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto.


iii



Part I. Financial Information
ITEM I. FINANCIAL STATEMENTS
BEYOND MEAT, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(unaudited)
 
September 28,
2019
 
December 31,
2018
Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
312,451

 
$
54,271

Accounts receivable
34,482

 
12,626

Inventory
60,270

 
30,257

Prepaid expenses and other current assets
11,742

 
5,672

Total current assets
418,945

 
102,826

Property, plant, and equipment, net
35,050

 
30,527

Other non-current assets, net
846

 
396

Total assets
$
454,841

 
$
133,749

Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit):
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
38,348

 
$
17,247

Wages payable
1,433

 
1,255

Accrued bonus
3,181

 
2,312

Accrued expenses and other current liabilities
4,113

 
2,391

Short-term borrowings under revolving credit line and bank term loan
9,087

 

Short-term capital lease liabilities
30

 
44

Stock warrant liability

 
1,918

Total current liabilities
$
56,192

 
$
25,167

Long-term liabilities:
 
 
 
Revolving credit line
$

 
$
6,000

Long-term portion of bank term loan, net
16,503

 
19,388

Equipment loan, net
4,922

 
5,000

Capital lease obligations and other long-term liabilities
396

 
404

Total long-term liabilities
$
21,821

 
$
30,792

Commitments and Contingencies (Note 9)


 



1



 
September 28,
2019
 
December 31,
2018
Convertible preferred stock:
 
 
 
Series A convertible preferred stock, par value $0.0001 per share—no shares and 3,333,500 shares authorized, issued and outstanding as of September 28, 2019 and December 31, 2018
$

 
$
2,000

Series B convertible preferred stock, par value $0.0001 per share—no shares and 4,802,260 shares authorized; no shares and 4,680,565 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
4,999

Series C convertible preferred stock, par value $0.0001 per share—no shares and 8,076,643 shares authorized; no shares and 8,076,636 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
14,882

Series D convertible preferred stock, par value $0.0001 per share—no shares and 8,713,207 shares authorized; no shares and 8,713,201 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
24,948

Series E convertible preferred stock, par value $0.0001 per share—no shares and 4,740,531 shares authorized; no shares and 4,701,449 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
17,214

Series F convertible preferred stock, par value $0.0001 per share—no shares and 4,866,776 shares authorized; no shares and 4,866,758 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
29,840

Series G convertible preferred stock, par value $0.0001 per share—no shares and 5,140,257 shares authorized; no shares and 5,114,786 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
55,658

Series H convertible preferred stock, par value $0.0001 per share—no shares and 4,209,693 shares authorized; no shares and 2,075,216 shares issued and outstanding as of September 28, 2019 and December 31, 2018

 
49,999

Stockholders’ equity (deficit):
 
 
 
Preferred stock, par value $0.0001 per share—500,000 shares authorized, none issued and outstanding

 

Common stock, par value $0.0001 per share—500,000,000 shares and 58,669,600 shares authorized at September 28, 2019 and December 31, 2018, respectively; 60,565,840 and 6,951,350 shares issued and outstanding at September 28, 2019 and December 31, 2018, respectively
6

 
1

Additional paid-in capital
518,485

 
7,921

Accumulated deficit
(141,663
)
 
(129,672
)
Total stockholders’ equity (deficit)
$
376,828

 
$
(121,750
)
Total liabilities, convertible preferred stock and stockholders’ equity (deficit)
$
454,841

 
$
133,749

 
 
 
 

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

2



BEYOND MEAT, INC.
Condensed Statements of Operations
(In thousands, except share and per share data)
(unaudited)
 
 
Three Months Ended
 
Nine Months Ended
 
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net revenues
 
$
91,961

 
$
26,277

 
$
199,418

 
$
56,420

Cost of goods sold
 
59,178

 
21,235

 
133,123

 
46,709

Gross profit
 
32,783

 
5,042

 
66,295

 
9,711

 
 
 
 
 
 
 
 
 
Research and development expenses
 
5,951

 
2,165

 
14,661

 
6,267

Selling, general and administrative expenses
 
20,944

 
10,353

 
47,636

 
23,133

Restructuring expenses
 
2,319

 
528

 
3,560

 
1,170

Total operating expenses
 
29,214

 
13,046

 
65,857

 
30,570

Income (loss) from operations
 
3,569

 
(8,004
)
 
438

 
(20,859
)
 
 
 
 
 
 
 
 
 
Other income (expense), net:
 
 
 
 
 
 
 
 
Interest expense
 
(855
)
 
(313
)
 
(2,329
)
 
(388
)
Remeasurement of warrant liability
 

 
(994
)
 
(12,503
)
 
(1,253
)
Other income (expense), net
 
1,385

 
(31
)
 
2,424

 
66

Total other income (expense), net
 
530

 
(1,338
)
 
(12,408
)
 
(1,575
)
 
 
 
 
 
 
 
 
 
Income (loss) before taxes
 
4,099

 
(9,342
)
 
(11,970
)
 
(22,434
)
Income tax expense
 

 

 
21

 

Net income (loss)
 
$
4,099

 
$
(9,342
)
 
$
(11,991
)
 
$
(22,434
)
Net income (loss) per share available to common stockholders—basic
 
$
0.07

 
$
(1.45
)
 
$
(0.33
)
 
$
(3.68
)
Weighted average common shares outstanding—basic
 
60,415,866

 
6,441,838

 
35,806,520

 
6,103,756

Net income (loss) per share available to common stockholders—diluted
 
$
0.06

 
$
(1.45
)
 
$
(0.33
)
 
$
(3.68
)
Weighted average common shares outstanding—diluted
 
66,026,490

 
6,441,838

 
35,806,520

 
6,103,756

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

3



BEYOND MEAT, INC.
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands, except share data)
(unaudited)

 
Preferred Stock
 
 
Common Stock
 
Additional Paid-in Capital
 
Accumulated Deficit
 
Total
 
Shares
 
Amount
 
 
Shares
 
Amount
 
Balance at December 31, 2018
41,562,111

 
$
199,540

 
 
6,951,350

 
$
1

 
$
7,921

 
$
(129,672
)
 
$
(121,750
)
  Net loss

 

 
 

 

 

 
(6,649
)
 
(6,649
)
  Issuance of common stock through equity incentive plans

 

 
 
169,583

 

 
366

 

 
366

  Share-based compensation

 

 
 

 

 
855

 

 
855

Balance March 30, 2019
41,562,111

 
$
199,540

 
 
7,120,933

 
$
1

 
$
9,142

 
$
(136,321
)
 
$
(127,178
)
  Net loss

 

 
 

 

 

 
(9,441
)
 
(9,441
)
  Issuance of common stock pursuant to the initial public offering, net of issuance costs of $4.9 million

 

 
 
11,068,750

 
1

 
252,452

 

 
252,453

  Issuance of common stock upon conversion of convertible preferred stock
(41,562,111
)
 
(199,540
)
 
 
41,562,111

 
4

 
199,536

 

 
199,540

  Issuance of common stock upon exercise of common stock warrants

 

 
 
214,875

 

 

 

 

  Reclassification of warrant liability to additional paid-in capital in connection with the initial public offering

 

 
 

 

 
14,421

 

 
14,421

  Issuance of common stock through equity incentive plans

 

 
 
200,852

 

 
167

 

 
167

  Share-based compensation

 

 
 

 

 
1,823

 

 
1,823

Balance at June 29, 2019

 
$

 
 
60,167,521

 
$
6

 
$
477,541

 
$
(145,762
)
 
$
331,785

  Net income

 

 
 

 

 

 
4,099

 
4,099

  Issuance of common stock pursuant to the secondary public offering, net of issuance costs of $2.5 million

 

 
 
250,000

 

 
37,450

 

 
37,450

  Issuance of common stock through equity incentive plans

 

 
 
148,319

 

 
365

 

 
365

  Share-based compensation

 

 
 

 

 
3,129

 

 
3,129

Balance at September 28, 2019

 
$

 
 
60,565,840

 
$
6

 
$
518,485

 
$
(141,663
)
 
$
376,828


4



BEYOND MEAT, INC.
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
(In thousands, except share data)
(unaudited)
 
Preferred Stock
 
 
Common Stock
 
Additional Paid-in Capital
 
Loans to Related Parties
 
Accumulated Deficit
 
Total
 
Shares
 
Amount
 
 
Shares
 
Amount
 
Balance at December 31, 2017
39,361,211

 
$
148,194

 
 
5,724,506

 
$
1

 
$
4,823

 
$
(951
)
 
$
(99,786
)
 
$
(95,913
)
  Net loss

 

 
 

 

 

 

 
(5,696
)
 
(5,696
)
  Issuance of common stock through equity incentive plans

 

 
 
92,310

 

 
88

 

 

 
88

  Share-based compensation

 

 
 

 

 
260

 

 

 
260

  Issuance of Series G preferred stock, net of issuance costs of $7
112,945

 
1,228

 
 

 

 

 

 

 

Balance at March 31, 2018
39,474,156

 
$
149,422

 
 
5,816,816

 
$
1

 
$
5,171

 
$
(951
)
 
$
(105,482
)
 
$
(101,261
)
  Net loss

 

 
 

 

 

 

 
(7,396
)
 
(7,396
)
  Issuance of common stock through equity incentive plans

 

 
 
624,411

 

 
783

 

 

 
783

  Share-based compensation

 

 
 

 

 
450

 

 

 
450

  Issuance of Series G preferred stock, net of issuance costs of $19
12,739

 
121

 
 

 

 

 

 

 

Balance at June 30, 2018
39,486,895

 
$
149,543

 
 
6,441,227

 
$
1

 
$
6,404

 
$
(951
)
 
$
(112,878
)
 
$
(107,424
)
  Net loss

 

 
 

 

 

 

 
(9,342
)
 
(9,342
)
  Issuance of common stock through equity incentive plans

 

 
 
224,387

 

 
257

 

 

 
257

  Re-purchase of common stock

 

 
 
(48,909
)
 

 
(514
)
 

 

 
(514
)
  Share-based compensation

 

 
 

 

 
380

 

 

 
380

  Issuance of Series G preferred stock, net of issuance costs

 
(2
)
 
 

 

 

 

 

 

   Payoff of promissory notes receivable for restricted stock purchase

 

 
 

 

 

 
951

 

 
951

Balance at September 29, 2018
39,486,895

 
$
149,541

 
 
6,616,705

 
$
1

 
$
6,527

 
$

 
$
(122,220
)
 
$
(115,692
)
The accompanying notes are an integral part of these unaudited condensed financial statements.

5



BEYOND MEAT, INC.
Condensed Statements of Cash Flows
(In thousands)
(unaudited)
 
 
Nine Months Ended
 
 
September 28,
2019
 
September 29,
2018
Cash flows from operating activities:
 
 
 
 
Net loss
 
$
(11,991
)
 
$
(22,434
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
 
Depreciation and amortization
 
5,980

 
3,046

Share-based compensation expense
 
5,807

 
1,090

Loss on sale of fixed assets
 

 
76

Amortization of debt issuance costs
 
124

 
51

Change in preferred and common stock warrant liabilities
 
12,503

 
1,253

 
 
 
 
 
Net change in operating assets and liabilities:
 
 
 
 
Accounts receivable
 
(21,856
)
 
(8,499
)
Inventories
 
(30,013
)
 
(9,627
)
Prepaid expenses and other assets
 
(1,878
)
 
(615
)
Accounts payable
 
20,206

 
7,670

Accrued expenses and other current liabilities
 
2,768

 
3,573

Long-term liabilities
 
11

 
39

Net cash used in operating activities
 
$
(18,339
)
 
$
(24,377
)
 
 
 
 
 
Cash flows used in investing activities:
 
 
 
 
Purchases of property, plant and equipment
 
$
(9,515
)
 
$
(18,250
)
Proceeds from sale of fixed assets
 
307

 
104

Purchases of property, plant and equipment held for sale
 
(7,403
)
 

Payment of security deposits
 
(542
)
 
(59
)
Net cash used in investing activities
 
$
(17,153
)
 
$
(18,205
)
 
 
 
 
 
Cash flows from financing activities:
 
 
 
 
Proceeds from issuance of common stock pursuant to the initial public offering, net of issuance costs
 
$
254,868

 
$

Proceeds from issuance of common stock pursuant to the secondary public offering, net of issuance costs
 
37,937

 

Proceeds from advance deposit for Series H preferred stock offering
 

 
25,000

Proceeds from Series G preferred stock offering, net of offering costs
 

 
1,347

Proceeds from bank term loan borrowing
 

 
20,000

Repayments on revolving credit line
 

 
(2,500
)
Repayment on term loan
 

 
(1,000
)
Proceeds from payoff of notes receivable for restricted stock purchase
 

 
951

(continued on the next page)

6



BEYOND MEAT, INC.
Condensed Statements of Cash Flows
(In thousands)
(unaudited)
 
 
Nine Months Ended
 
 
September 28,
2019
 
September 29,
2018
Proceeds from revolving credit line
 

 
6,000

Proceeds from equipment loan borrowing
 

 
5,000

Repayment of Missouri Note
 

 
(1,450
)
Payments of capital lease obligations
 
(31
)
 
(143
)
Proceeds from exercise of stock options
 
898

 
1,128

Payments of deferred offering costs
 

 
(492
)
Payment for repurchase of common stock
 

 
(514
)
Net cash provided by financing activities
 
$
293,672

 
$
53,327

Net increase in cash and cash equivalents
 
$
258,180

 
$
10,745

Cash and cash equivalents at the beginning of the period
 
54,271

 
39,035

Cash and cash equivalents at the end of the period
 
$
312,451

 
$
49,780

 
 
 
 
 
Supplemental disclosures of cash flow information:
 
 
 
 
Cash paid during the period for:
 
 
 
 
Interest
 
$
2,261

 
$
356

Taxes
 
$
21

 
$
3

Non-cash investing and financing activities:
 
 
 
 
Capital lease obligations for the purchase of property, plant and equipment
 
$

 
$
85

Issuance of convertible preferred stock warrants in connection with debt
 
$

 
$
248

Non-cash additions to property, plant and equipment
 
$
1,280

 
$
730

Offering costs, accrued not yet paid
 
$
487

 
$
1,301

    Non-cash additions to property, plant and equipment held for sale
 
$
1,019

 
$

    Reclassification of warrant liability to additional paid-in capital in connection with the initial public offering
 
$
14,421

 
$

Conversion of convertible preferred stock to common stock upon initial public offering
 
$
199,540

 
$

(concluded)
The accompanying notes are an integral part of these unaudited condensed financial statements.

7


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements
Note 1. Introduction
The Company
Beyond Meat, Inc., a Delaware corporation (the “Company”), is one of the fastest growing food companies in the United States, offering a portfolio of revolutionary plant-based meats. The Company builds meat directly from plants, an innovation that enables consumers to experience the taste, texture and other sensory attributes of popular animal-based meat products while enjoying the nutritional and environmental benefits of eating the Company’s plant-based meat products. The Company’s brand commitment, “Eat What You Love,” represents a strong belief that by eating the Company’s plant-based meats, consumers can enjoy more, not less, of their favorite meals, and by doing so, help address concerns related to human health, climate change, resource conservation and animal welfare.
The Company’s primary production facilities are located in Columbia, Missouri, and research and development and administrative offices are located in El Segundo, California. In addition to its own production facilities, the Company uses co-manufacturers in various locations in the United States to manufacture its products. In May 2019, the Company partnered with one of its distributors to co-manufacture the Company’s products at a new manufacturing facility being constructed by this distributor in the Netherlands for estimated completion in 2020.
The Company sells to a variety of customers in the retail and foodservice channels throughout the United States and internationally through brokers and distributors. All of the Company’s long-lived assets are located in the United States.
Initial Public Offering
On May 6, 2019, the Company completed its initial public offering (“IPO”) of common stock, in which it sold 11,068,750 shares, including 1,443,750 shares pursuant to the underwriters’ over-allotment option. The shares began trading on the Nasdaq Global Select Market on May 2, 2019. The shares were sold at an IPO price of $25.00 per share for net proceeds of approximately $252.4 million, after deducting underwriting discounts and commissions of $19.4 million and offering expenses of approximately $4.9 million payable by the Company. Upon the closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 41,562,111 shares of common stock on a one-for-one basis, and warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for a total of 160,767 shares of common stock.
Secondary Public Offering
On August 5, 2019, the Company completed a secondary public offering (“Secondary Offering”) of common stock, in which it sold 250,000 shares and the selling stockholders sold 3,487,500 shares, including 487,500 shares pursuant to the underwriters’ over-allotment option. The shares were sold at a price of $160.00 per share for net proceeds to the Company of approximately $37.5 million, after deducting underwriting discounts and commissions of $1.5 million and offering expenses of approximately $1.0 million payable by the Company. The Company did not receive any proceeds from the sale of common stock by the selling stockholders.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation
The unaudited condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. In the opinion of management, the condensed financial statements include all adjustments necessary, which are

8


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

of a normal and recurring nature, for the fair presentation of the Company’s financial position and of the results of operations and cash flows for the periods presented. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2019 or for any other interim period or for any other future fiscal year. These condensed financial statements should be read in conjunction with the Company's audited financial statements and notes thereto included in the prospectus dated May 1, 2019 filed with the SEC on May 3, 2019 (the “Prospectus”). The condensed balance sheet as of December 31, 2018 has been derived from the audited financial statements at that date. There have been no material changes in the Company’s significant accounting policies from those that were disclosed in the Prospectus, except as noted below.
Fiscal Year
The Company operates on a fiscal calendar year, and each interim quarter is comprised of one 5-week period and two 4-week periods, with each week ending on a Saturday. The Company’s fiscal year always begins on January 1 and ends on December 31. As a result, the Company’s first and fourth fiscal quarters may have more or fewer days included than a traditional 91-day fiscal quarter.
Management’s Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates made by the Company include trade promotion accruals; useful lives of property, plant and equipment; valuation of deferred tax assets; valuation of inventory; and the valuation of the fair value of common stock and preferred stock used to determine stock compensation expense and in the remeasurement of warrants and liabilities. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates and such differences may be material to the condensed financial statements.
Reverse Stock Split
On January 2, 2019, the Company effected a 3-to-2 reverse stock split of its outstanding common stock and convertible preferred stock, including outstanding stock options and common and convertible preferred stock warrants. The reverse stock split did not result in an adjustment to par value. All references in the accompanying condensed financial statements and related notes to the number of shares of common stock, convertible preferred stock, warrants and options to purchase common stock and per share data reflect the effect of the reverse stock split.
Cash and Cash Equivalents
The Company maintains cash balances at one financial institution in the United States. The cash balances may, at times, exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation or FDIC up to $250,000. The Company considers all highly liquid investments with original maturity dates of 90 days or less to be cash equivalents. Cash equivalents consist primarily of amounts invested in money market accounts.
Deferred Offering Costs
Offering costs, consisting primarily of legal, accounting, printing and filing services, and other direct fees and costs related to the IPO, were capitalized and offset against proceeds upon the consummation of the IPO. Total IPO issuance costs were $4.9 million, of which $2.4 million was incurred and paid as of December 31, 2018 and an additional $2.5 million was incurred and paid during the nine months ended

9


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

September 28, 2019. There were no unpaid IPO issuance costs in accounts payable as of September 28, 2019.
Stock Warrant Liability
The Company accounts for freestanding warrants to purchase shares of its convertible preferred stock or common stock as a liability, as the underlying shares of convertible preferred stock and common stock are contingently redeemable and, therefore, may obligate the Company to transfer assets at some point in the future. The warrants were recorded at fair value upon issuance and are subject to remeasurement at each balance sheet date. Any change in fair value is recognized in the condensed statements of operations in Total other income (expense), net.
Prior to the IPO, the Company had outstanding warrants to purchase an aggregate of 60,002 shares of its common stock at an exercise price of $3.00 per share, 121,694 shares of its Series B convertible preferred stock at an exercise price of $1.07 per share and 39,073 shares of its Series E convertible preferred stock at an exercise price of $3.68 per share. On May 6, 2019, in connection with the IPO, the warrants exercisable for convertible preferred stock were automatically converted into warrants exercisable for a total of 160,767 shares of common stock at the same respective exercise price per share. Subsequent to the closing of the IPO, all outstanding warrants to purchase shares of common stock were cashless exercised.
Fair Value of Financial Instruments
The fair value measurement accounting guidance creates a fair value hierarchy to prioritize the inputs used to measure fair value into three categories. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest and Level 3 is the lowest.
The three levels are defined as follows:
Level 1—Unadjusted quoted prices in active markets accessible by the reporting entity for identical assets or liabilities. Active markets are those in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2—Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant value drivers are observable.
Level 3—Valuations derived from valuation techniques in which significant value drivers are unobservable.
The Company’s financial instruments include cash equivalents, accounts receivable, accounts payable, and accrued expenses, for which the carrying amounts approximate fair value due to the short-term maturity of these financial instruments. Based on the borrowing rates currently available to the Company for debt with similar terms, the carrying value of the line of credit, term debt with its bank, and equipment loan approximate fair value as well.
The Company had no financial instruments measured at fair value on a recurring basis as of September 28, 2019. Prior to the IPO, the stock warrant liability was measured at fair value using Level 3 inputs upon issuance and at each reporting date. Inputs used to determine the estimated fair value of the warrant liability as of the valuation date included expected term of the warrants, the risk-free interest rate, volatility, and the fair value of underlying shares.

10


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis based on the fair value hierarchy as of December 31, 2018 (in thousands):
 
December 31, 2018
 
Level 1
 
Level 2
 
Level 3
 
Total
Financial Liabilities:
 
 
 
 
 
 
 
Preferred stock warrant liability
$

 
$

 
$
1,441

 
$
1,441

Common stock warrant liability

 

 
477

 
477

Total
$

 
$

 
$
1,918

 
$
1,918


The following table sets forth a summary of the changes in the fair value of the preferred and common stock warrant liabilities:
 
 
For the Nine Months Ended
(in thousands)
 
September 28, 2019
 
September 29, 2018
Beginning balance
 
$
1,918

 
$
550

Fair value of warrants issued during the period
 

 
248

Change in fair value of warrant liability
 
12,503

 
1,253

Reclassification of warrant liability to additional paid-in capital in connection with the IPO
 
(14,421
)
 

Ending balance
 
$

 
$
2,051


The Company remeasured and reclassified the common stock warrant liability to additional paid-in-capital in connection with the IPO. Subsequent to the closing of the IPO, all outstanding warrants to purchase shares of common stock were cashless exercised and no warrants were outstanding as of September 28, 2019.
Revenue Recognition
In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers” (“ASU 2014-09”), which, along with subsequent ASUs, amends the existing accounting standards for revenue recognition (“Topic 606”). This guidance is based on principles that govern the recognition of revenue at an amount an entity expects to be entitled to receive when products are transferred to customers. ASU 2014-09 was effective for the Company beginning January 1, 2019. The majority of the Company’s contracts with customers generally consist of a single performance obligation to transfer promised goods. Based on the Company’s evaluation process and review of its contracts with customers, the timing and amount of revenue recognized based on ASU 2014-09 is consistent with the Company’s revenue recognition policy under previous guidance. The Company has therefore concluded that the adoption of ASU 2014-09 did not have a material impact on its financial position, results of operations, or cash flows.
Revenue is recognized at the point in which the performance obligation under the terms of a contract with the customer have been satisfied and control has transferred. The Company’s performance obligation is typically defined as the accepted purchase order, or the contract, with the customer which requires the Company to deliver the requested products at agreed upon prices at the time and location of the customer’s choice. The Company does not offer warranties or a right to return on the products it sells except in the instance of a product recall.
Revenue is measured as the amount of consideration the Company expects to receive in exchange for fulfilling the performance obligation. Sales and other taxes the Company collects concurrent with the sale of products are excluded from revenue. The Company's normal payment terms vary by the type and

11


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

location of its customers and the products offered. The time between invoicing and when payment is due is not significant. None of the Company's customer contracts as of September 28, 2019 contains a significant financing component.
The Company routinely offers sales discounts and promotions through various programs to its customers and consumers. These programs include rebates, temporary on shelf price reductions, off invoice discounts, retailer advertisements, and other trade activities. Provision for discounts and incentives are recorded in the same period in which the related revenues are recognized. At the end of each accounting period, the Company recognizes a liability for estimated sales discounts that have been incurred but not paid which totaled $2.2 million and $0.8 million as of September 28, 2019 and December 31, 2018, respectively. The offsetting charge is recorded as a reduction of revenues in the same period when the expense is incurred.
The Company recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the Company otherwise would have recognized is one year or less. The incremental cost to obtain contracts was not material.
The Company’s net revenues by platform and channel are included in the tables below:
 
 
For the Three Months Ended
 
For the Nine Months Ended
(in thousands)
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net revenues:
 
 
 
 
 
 
 
 
Gross Fresh Platform
 
$
97,995

 
$
26,815

 
$
204,523

 
$
51,530

Gross Frozen Platform
 
4,007

 
2,295

 
14,158

 
11,549

Less: Discounts
 
(10,041
)
 
(2,833
)
 
(19,263
)
 
(6,659
)
Net revenues
 
$
91,961

 
$
26,277

 
$
199,418

 
$
56,420

 
 
For the Three Months Ended
 
For the Nine Months Ended
(in thousands)
 
September 28,
2019
 
September 29,
2018
 
September 28,
2019
 
September 29,
2018
Net revenues:
 
 
 
 
 
 
 
 
Retail
 
$
50,465

 
$
16,201

 
$
104,164

 
$
37,173

Restaurant and Foodservice
 
41,496

 
10,076

 
95,254

 
19,247

Net revenues
 
$
91,961

 
$
26,277

 
$
199,418

 
$
56,420


Two distributors accounted for approximately 17% and 15%, respectively, of the Company’s gross revenues in the three months ended September 28, 2019; and three distributors accounted for approximately 39%, 22% and 13%, respectively, of the Company’s gross revenues in the three months ended September 29, 2018. Two distributors accounted for approximately 19% and 18%, respectively, of the Company’s gross revenues in the nine months ended September 28, 2019; and three distributors accounted for approximately 38%, 17% and 14%, respectively, of the Company’s gross revenues in the nine months ended September 29, 2018.
Approximately 14% of the Company’s net revenues in the three months ended September 28, 2019 was from international sales, excluding sales in Canada, as compared to approximately 4% in the three months ended September 29, 2018. Approximately 12% of the Company’s net revenues in the nine months ended September 28, 2019 was from international sales, excluding sales in Canada, as compared to approximately 3% in the nine months ended September 29, 2018. Net revenues from sales to the Canadian market are included with net revenues from sales to the United States market.

12


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

Shipping and Handling Costs
Outbound shipping and handling costs included in selling, general and administrative (“SG&A”) expenses in the three months ended September 28, 2019 and September 29, 2018 were $3.4 million and $2.1 million, respectively, and in the nine months ended September 28, 2019 and September 29, 2018 were $7.4 million and $4.9 million, respectively.
Earnings (Loss) Per Share
Earnings (loss) per share (“EPS”) represents net income available to common stockholders divided by the weighted average number of common shares outstanding for the period. Diluted EPS represents net income available to common stockholders divided by the weighted-average number of common shares outstanding, inclusive of the dilutive impact of potential common shares outstanding during the period. Such potential common shares include options, unvested restricted stock, restricted stock units (“RSUs”), warrants and convertible preferred stock.
The Company calculates basic and diluted EPS available to common stockholders in conformity with the two-class method required for companies with participating securities. The Company considers all series of convertible preferred stock issued and outstanding prior to the IPO to be participating securities. Under the two-class method, the net loss available to common stockholders is not allocated to the convertible preferred stock as the holders of convertible preferred stock issued and outstanding prior to the IPO did not have a contractual obligation to share in losses.
Nonvested restricted stock awards (referred to as participating securities) are excluded from the dilutive impact of common equivalent shares outstanding in accordance with authoritative guidance under the two-class method. The nonvested restricted stockholders are entitled to participate in dividends declared on common stock as if the shares were fully vested and hence nonvested restricted stock shares are deemed to be participating securities. Under the two-class method, net income, but not net loss, available to nonvested restricted stockholders is excluded from net income available to common stockholders for purposes of calculating basic and diluted EPS. Net loss available to common stockholders is not allocated to unvested restricted stock as the holders of unvested restricted stock do not have a contractual obligation to share in losses.
In periods when the Company records net loss, all potential common shares are excluded in the computation of EPS because their inclusion would be anti-dilutive. See Note 11.
Related-Party Transactions
Seth Goldman
The Company entered into a consulting agreement with Seth Goldman, the Company’s Executive Chair, on March 2, 2016, which was amended and restated on November 15, 2018 and further amended on April 8, 2019. Pursuant to the consulting agreement, the Company will pay Mr. Goldman $20,210.33 per month for services rendered under the consulting agreement and, on the date of each annual meeting of the Company’s stockholders after which Mr. Goldman’s non-employee service on the board of directors will continue, the Company has agreed to grant Mr. Goldman a restricted stock unit award under the 2018 Equity Incentive Plan (the “Plan”), having a grant date fair value of $105,000. Each restricted stock unit grant will vest based on continued service in equal monthly installments over the 12-month period following the grant date, provided it will vest in full immediately prior to, and contingent upon, a change in control of the Company.
The consulting agreement may be terminated by either party at any time upon 120 business days’ written notice. In the event of a default in the performance of the consulting agreement or material breach of any obligations under the consulting agreement, the non-breaching party may terminate the consulting agreement immediately if the breaching party fails to cure the breach within 30 business days after having received written notice by the non-breaching party of the default or breach.

13


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

Bernhard van Lengerich
The Company first entered into an advisor agreement with Food System Strategies, LLC in October 2015. Bernhard van Lengerich. Ph.D., a member of the Company’s Board of Directors, is the Chief Executive Officer of Food System Strategies, LLC. Pursuant to this advisor agreement, the Company paid Food System Strategies, LLC $4,000 for each day Dr. van Lengerich provided services, provided the Company paid Food System Strategies, LLC for at least two days of services per month. In February 2016, the Company entered into a new advisor agreement with Food System Strategies, LLC, which superseded the original agreement and provided for a $25,000 monthly retainer and a non-qualified stock option covering 798,848 shares, which vested in equal monthly installments over three years in consideration of Dr. van Lengerich providing services as the Company’s interim Chief Technical Officer and head of research and development, and the increased time commitment associated with these roles. In December 2016, the advisor agreement was amended to provide for a $10,000 monthly retainer to reflect the fact that Dr. van Lengerich would only be providing advisory services five to six days a month going forward. The advisor agreement may be terminated at any time upon written notice to the other party.
Donald Thompson
In the nine months ended September 29, 2018, the Company incurred consulting costs payable to a company associated with Donald Thompson, a member of the Company’s Board of Directors, in the amount of $47,162. The Company did not incur any such consulting costs in the nine months ended September 28, 2019.
Recently Adopted Accounting Pronouncements
In June 2018, the FASB issued ASU No. 2018-07, “Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting (“ASU 2018-07”). Under ASU 2018-07, the measurement of equity-classified nonemployee awards will be fixed at the grant date, and nonpublic entities are allowed to account for nonemployee awards using certain practical expedients that are already available for employee awards. The amendments in ASU 2018-07 are effective for nonpublic business entities for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than the Company’s adoption date of Topic 606. The Company early adopted ASU 2018-07 beginning January 1, 2019 along with its adoption of ASU 2014-09. Pursuant to ASU 2018-07, the measurement of equity classified nonemployee awards will be fixed at the grant date, as compared to the previous requirement to remeasure the awards through the performance completion date.
New Accounting Pronouncements
As an “emerging growth company,” the Jumpstart Our Business Startups Act, or the JOBS Act, allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use the adoption dates applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public companies.
In January 2016, the FASB issued ASU No. 2016-01, “Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities” (“ASU 2016-01”), which makes amendments to the guidance in GAAP on the classification and measurement of financial instruments. ASU 2016-01 significantly revises an entity’s accounting related to (1) the classification and measurement of investments in equity securities and (2) the presentation of certain fair value changes for financial liabilities measured at fair value. It also amends certain disclosure requirements associated with the fair value of financial instruments. For all entities other than public entities, ASU 2016-01 is effective for fiscal years beginning after December 15, 2018, including interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted. The Company expects to adopt and implement

14


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

ASU 2016-01 for the year ending December 31, 2019 and for interim periods beginning January 1, 2020. The Company does not expect that adoption of ASU 2016-01 will have a material impact on the Company’s financial position, results of operations, or cash flows.
In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842)” (“ASU 2016-02”). ASU 2016-02 requires lessees to generally recognize most operating leases on the balance sheets but record expenses on the income statements in a manner similar to current accounting. ASU 2016-02 along with subsequent ASU’s on Topic 842 is effective for nonpublic companies for the annual reporting period beginning after December 15, 2019, and, therefore, effective for the Company beginning January 1, 2020. Early application is permitted. The Company is currently evaluating the impact ASU 2016-02 will have on its financial statements and currently expects that most operating lease commitments will be subject to ASU 2016-02 and will be recognized as operating lease liabilities and right-of-use assets upon adoption. While the Company has not yet quantified the impact, adjustments resulting from the adoption of ASU 2016-02 will materially increase total assets and total liabilities relative to such amounts reported prior to adoption.
Note 3. Restructuring
In May 2017, management approved a plan to terminate the Company’s exclusive supply agreement (the “Agreement”) with one of its co-manufacturers, due to non-performance under the Agreement and on May 23, 2017, the Company notified the co-manufacturer of its decision to terminate the Agreement. In the three months ended September 28, 2019 and September 29, 2018, the Company recorded $2.3 million and $0.5 million, respectively, in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses. In the nine months ended September 28, 2019 and September 29, 2018, the Company recorded $3.6 million and $1.2 million, respectively, in restructuring expenses related to this dispute, which consisted primarily of legal and other expenses. See Note 9 for further information. As of September 28, 2019 and December 31, 2018, the Company had $0.7 million and $0, respectively, in accrued unpaid liabilities associated with this contract termination.
Note 4. Inventories
Major classes of inventory were as follows:
(in thousands)
September 28,
2019
 
December 31,
2018
Raw materials and packaging
$
32,429

 
$
13,756

Work in process
4,439

 
2,517

Finished goods
23,402

 
13,984

Total
$
60,270

 
$
30,257



15


BEYOND MEAT, INC.
Notes to Unaudited Condensed Financial Statements (continued)
 
 
 

Note 5. Property, Plant and Equipment
Property, plant, and equipment are stated at cost and capital lease assets are included. A summary of property, plant, and equipment as of September 28, 2019 and December 31, 2018, is as follows:
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