SEC Filing | Beyond Meat, 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 AND EXCHANGE ACT OF 1934

For the quarterly period ended September 28, 2019



☐	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

https://cdn.kscope.io/d09d51e0109f908a81cc1b704e3e2909-beyondmeat2crgb01.jpg

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
Part I. Financial Information
Item 1. Financial Statements (Unaudited):	1
Condensed Balance Sheets	1
Condensed Statements of Operations	3
Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)	4
Condensed Statements of Cash Flows	6
Notes to Unaudited Condensed Financial Statements	8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3. Quantitative and Qualitative Disclosures About Market Risk	40
Item 4. Controls and Procedures	41
Part II. Other Information
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	65
Item 3. Defaults Upon Senior Securities	66
Item 4. Mine Safety Disclosures	66
Item 5. Other Information	66
Item 6. Exhibits	67
Exhibit Index	67
Signatures	68

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;


•	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)



	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.

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.

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		Additional Paid-in Capital		Accumulated Deficit			Total
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

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		Additional Paid-in Capital			Loans to Related Parties			Accumulated Deficit			Total
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.



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)



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.

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

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

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.

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

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.

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.

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