Reed's, Inc. (REED) on Q1 2022 Results - Earnings Call Transcript
Operator: Good afternoon, and welcome to Reed’s First Quarter 2022 Earnings Conference Call for the period ending March 31, 2022. My name is Gary, and I will be your conference call operator for today. We will have prepared remarks from Norman Snyder, Reed’s Chief Executive Officer; and Tom Spisak, Reed’s Chief Financial Officer. Following their remarks, they will take your questions. I would like to remind listeners that this conference call will include forward-looking statements. Forward-looking statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause actual results, levels or activity, performance or achievements to be materially different from those anticipated by such statements. These factors include, but are not limited to, Reed’s ability to manage growth, manage debt and meet development goals; Reed’s ability to protect its supply chain in light of disruption caused by elevated freight costs and other impediments, the availability and cost of capital to finance our working capital needs and growth plans; reduction in demand for products; dependence on third-party manufacturers and distributors; changes in the competitive environment; future business outlook, including the potential impact of COVID-19 on Reed’s business and results of operations; and other information detailed from time to time in Reed’s filings with the United States Securities and Exchange Commission. These statements, including financial guidance, involve risks and uncertainties that may cause actual results or trends to differ materially from the company’s forecast. The achievement or success of the matters covered by such forward-looking statements, including future financial guidance, involves risks, uncertainties and assumptions, many of which involve factors or circumstances that are beyond Reed’s control. Fiscal 2022 guidance reflects year-to-date business trends, including the ongoing operating environment related to COVID-19. The COVID-19 pandemic and its related impacts could continue to create many incremental potential business risks, including potential impacts to Reed’s ability to access raw materials, production, transportation and/or other logistics needs as well as potential inflation related to all aspects of supply chain and logistics, which cannot be reasonably estimated and may not be completely factored into current fiscal 2022 guidance. Gross margin guidance assumes our known pricing for ingredients, packaging and production costs, each of which has been and could continue to be impacted by factors related to COVID-19. Financial guidance should not be viewed as a substitute for full financial statements prepared in accordance with GAAP. For more information, please refer to the risk factors discussed in Reed’s most recently filed Annual Report on Form 10-K and the Form 10-Q to be filed with the SEC today. Although management believes that the expectations reflected in forward-looking statements are reasonable, management cannot guarantee future results, levels of activity, performance or achievements. In addition, any projections as to the company’s future performance represents management’s estimates as of today, May 16, 2022. Reed’s assumes no obligation to update any forward-looking statements or information, which speaks as of their respective dates. Additionally, please note non-GAAP financial measures referenced during the call are reconciled to the comparable GAAP financial measures in the press release and supplemental materials filed with the SEC and is posted on Reed’s investor website at investor.reedsinc.com. Modified EBITDA is presented because management believes it assists investors and analysts in comparing our performance across reporting periods on a consistent basis by excluding items that we do not believe are indicative of core operating performance. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP. And Reed’s non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliations of non-GAAP measures to GAAP measures, as well as the definition of each measure, their limitations and our rationale for using them can be found in this afternoon’s press release and in Reed’s SEC filings. Please note this event is being recorded. I will now turn the call over to Mr. Snyder. Please go ahead.
Norman Snyder: Thank you, and good afternoon, everyone. We appreciate you joining us today to discuss our first quarter 2022 results. Since our last corporate update was about six weeks ago, we will keep our comments relatively brief and focused on recent updates. As we discussed on our March 31 conference call, our Q1 results were impacted by residual supply chain headwinds at the start of the year. Order volumes are up approximately 20% in Q1, but we simply couldn’t satisfy the demand in a cost efficient manner. Those supply chain challenges have since been resolved and our sales in April were up approximately 45% year-over-year with order volume up 23% over the prior year. As mentioned on our last earnings call, we have two primary goals to drive our growth, which we will continue to focus on throughout the balance of the year. Distribution expansion and brand launches as a result of innovation with an emphasis on new, larger, and faster growing categories. Regarding our distribution, we increased our retail coverage footprint by 5% over the prior year with Reed’s products sold in approximately 45,000 locations nationwide. At quarter end, MULO measured retail sales were up approximately 14% year-to-date and up 16% over the last four weeks, with corresponding volume up 14% year-to-date and 20% the last four weeks. While the natural and enhanced category measured retail sales grew by 52% year-to-date, 53% over the last four weeks with volume up 38% year-to-date and 36% the last four weeks. MULO retail growth was noted for Reed’s Ginger Beer, Ginger Ale, Virgil’s Full Sugar and Flying Cauldron. Virgil Zero Sugar experienced a decline as a result of resets in converting from standard to sleek cans. For the natural and enhanced category, retail growth was visible in all product lines. Moving onto our DSD network. We have added approximately 12 new DSD distributors as we continue to build out our network. All of these additional distributors will sell products from both our non-alcohol and alcohol portfolios. We are also in discussions with several more distributors and expect to have executed contracts completed in the second quarter. Moving onto our various brand and product initiative starting with Ginger Ale. We continue to see strong momentum for our Ginger Ale line. At quarter end MULO measured retail sales for Full Sugar Ginger Ale were up 66% with velocity of 14%. MULO sales were Zero Sugar Ginger Ale were up 57% with velocity up 21%. And in the natural and enhanced channel Full Sugar was up 88% with velocity up 6%, Zero Sugar was up 97% with a velocity up 23%. All of this to say, our Ginger Ale is clearly taking market share. Up next, our RTD alcohol beverages. For classic ginger mule, we added seven distributors on the East Coast and seven on the West Coast with eight additional distributors spending. Shortly, we will be launching our Stormy Mule, our RTD version of the classic, dark and stormy. We continue to anticipate increasing doors that carry our RTD alcohol lines to approximately 5,000 outlets by the end of 2022. For Hard Ginger Ale, we have recently completed our initial production run and are extremely pleased with the results. Additional production is scheduled for next week and we start shipping product June 1. To-date, we have authorizations from 20 retailers totaling over 2,000 stores and anticipate rolling out products to our first retailer during Q2. New Virgil’s sleek sugar – new Virgil’s Zero Sugar sleek 12 ounce scans, we rolled out this new package and branding in Sprouts in April, followed by HEB and initial reports indicate consumer acceptance with increasing velocity that exceeds prior trends with the old packaging. We expect to have our new sleek cans available in all stores that sell Virgil’s by year end. Moving on to our supply chain initiatives. The benefits for our various supply chain initiatives are taking hold. Q1 transportation and warehouse costs were down 14% year-over-year as a result of eliminating out of network shipments and focus on direct shipments to eliminate multiple touch points. In addition, we focus on increasing payloads and are organically increasing the sale of cans over bottles. As we mentioned last quarter, we have our entire can supply secured for 2022. Brake costs have also begun to improve from peak levels experience last year. We have locked in rates with heavily traveled lanes and are more disciplined in how we are handling our freight. For example, we could have driven more volume in Q1, but what it would have been at very high freight rates to push these orders into Q2. Managing our cash burn is just as important to us as revenue and volume growth. In addition, we have begun to see the benefits of our purchasing efficiencies, ingredient and label optimization initiatives, reduced towing fees and inbound freight as a result of taking advantage of economies of scale. Our recent price increase, which has been communicated and accepted by our retail partners will result in an anticipated 8% lift in gross revenue, but will not be reflected in our financial results until late Q2 or early Q3. We are expecting a 4% to 5% margin benefit in 2022 as a result. Despite our price increase, most of our products are still priced in the middle of pack relative to competition on a cost pronounced basis. So we feel good about where we stand with the consumer and our competitiveness for wallet share, especially at a time when inflation is impacting the consumer while at more than a half in a very long time. While we continue to face supply chain issues in the first quarter that it lingered from last year, our business is in a much better place today. The sustained demand for our products is robust and with our supply chain constraints easing, we expect our results to materially improve each quarter from here on out. Before passing it to Tom, I'd like to touch on the financing we announced last week, where we closed on an $11.25 million private placement with Whitebox Advisors. Tom will provide more details on the terms of the financing, but the most important take away from my perspective as what this financing represents. For the first time, I now believe we have the capital we need to execute on our growth objective and turn cash flow positive in the second half of 2023. As most of you are aware that capital markets have been under severe pressure this year. So our ability to take down the largest financing to date since I was appointed CEO at a time when the markets have been closed to most operators and all while doing so in the least dilutive way we could to our shareholders makes me incredibly pleased with the outcome. With that, I'll pass the call to Tom to walk through our financial results before returning for Q&A and closing remarks.
Tom Spisak: Thanks, Norm. Turning to our results. All variances referenced are on a year-on-year basis, unless otherwise noted. Net revenue for Q1 increased to $12.2 million compared to $12.1 million in the year ago quarter. As Norm mentioned, our growth would've been stronger as reflected by the 20% increase in order volume for the quarter. However, we did not fulfill the order demand due to supply chain challenges at the start of the quarter. In addition, we adopted a more disciplined approach to manage our order fulfillment to eliminate incremental freight costs that would adversely impact cash burn. Gross profit during the first quarter of 2022 was $2.9 million compared to $3.9 million. Gross margin was 24.1% compared to 31.7% in the first quarter of 2021, reflecting the increased supply chain, input and inflationary costs. Sequentially, we grew 370 basis points from 20.4% in Q4 of 2021. Delivery and handling fees in Q1 decreased 14% to $2.8 million from $3.3 million, driven by the implementation of lower contracted freight lanes at a more disciplined approach to shipment scheduling by reducing out of network shipments. Delivery and handling expenses were approximately 23% of net sales or $3.90 per case compared to 27% of net sales or $4.43 per case in the year ago quarter. Selling and marketing costs were $2.2 million, which remain in line with the first quarter of 2021, as a percentage of revenue, selling and marketing costs remain flat at 18%. Our general and administrative expenses reduced 19% year-over-year to $2.1 million from $2.6 million, driven by lower stock compensation and legal settlements recorded in the prior year. Total operating costs were reduced by approximately $1 million or 12% from the prior year. As Norm stated earlier, we believe this trend will continue for the balance of the year. Operating loss during the quarter was $4.2 million or $0.04 per share compared the operating loss of $4.3 million or $0.05 per share. Modified EBITDA in Q1 was $3.8 million compared to $3.4 million in the year ago quarter. Turing to our balance sheet and liquidity. Cash used in operating activities was approximately $2.2 million for the first quarter of 2022 compared to $5.1 million for the same period in 2021. As of March 31, we had approximately $122,000 of cash and $5.1 million available on our revolving line of credit. The total facility has a borrowing capacity of $13 million with $7.9 million outstanding. As Norm mentioned, we recently closed the private placement of convertible notes for aggregate proceeds of $11.25 million. The principle amount of the notes carries a 10% coupon of which 5% is payable in cash and 5% is payable in kind. The notes are convertible in the shares of common stock at a price of approximately $0.24 per share, reflecting a 10% premium from the closing price. And the notes will mature in May of 2025. The purchasers have the exclusive option to buy up to an additional $12 million of notes on the same terms that expire at 180 days, 270 days and 360 day intervals. Looking to our guidance for 2022, we continue to expect net sales to range between approximately $59 million and $62 million reflecting growth of approximately 20% to 25% from 2021. We also continue to expect gross margins for 2022 to be approximately 30% compared to 27.4% in 2021. And finally, we expect modified EBITDA to improve in 2022, as a result of our revenue growth, margin expansion and cost savings initiatives. I will now turn the call back to Norm for closing remarks.
Norman Snyder: Thanks, Tom. I would like to take this time to again acknowledge all the hard work and dedication from the Reed's team throughout this challenging period. We are guardedly optimistic that we are through the turbulent period of supply chain impediments and have elevated input pricing. Our various cost mitigation initiatives are flowing through to our results. And for the first time, we believe that we have the capital we need to fully execute our plan to turn cash flow positive in 2023. We look forward to carrying this momentum through 2022 and into next year. Operator, we will now open up the call for Q&A. Before we start, I would like to apologize for abruptly ending the Q&A session during our last earnings call. I will be happy to answer all questions this afternoon.
Operator: We will now begin the question-and-answer session. Our first question comes from Sean McGowan with ROTH Capital Partners. Please go ahead.
Sean McGowan: Hi, thanks for taking the questions. And I'm juggling a couple of conference calls, so I apologize if I ask something that's already been touched on. But can you talk a little bit about what we would expect to see on a quarterly basis in terms of total interest? The convert is pretty easy to calculate. But in terms of the credit line, we’ll the cash raise from the convert, reduce the amount that you have to borrow at least for a while? Or should we just kind of take what you had in the first quarter and use that as a kind of going rate plus the convert.
Tom Spisak: So the first quarter, Sean – thanks for your question. The first quarter is overstated, because that first quarter has a financing charge in there related to the prior – related to our note that we had outstanding with Rosenthal. So I wouldn't include that, because the number you'll see is a little over 800,000. So it will be the ABL will be paid down based on the money that we have raised. So yes, you should expect that to be lower. So I think it's roughly $400 million for the year, $400 million should be the number you should expect on a quarterly basis.
Sean McGowan: Okay. And then second, on the guidance, sounds like there's really no change. And just wondering, how to look into the confidence level, given that you kind of – a couple things that maybe were worse than expected in the first quarter. Maybe they weren't, maybe you expected them, but do you still have the same level of confidence of getting to those same numbers?
Norman Snyder: Yes. Sean, this is Norm. Absolutely. I think there's a lot of factors going on. One, the demand is still very strong and robust. So we believe that will continue and only grow. The second half of the year, we'll experience the impact of pricing that I touched on will really start to feel the impact of our entry into the RTD alcohol sector. And then, obviously, as we get into Q3 and Q4, those are really our big seasons. So I think all three of those plus, there's some new incremental business that we're working on that I'm fairly confident will come to fruition. So I think with all four of those factors, we will recover what we missed in Q1 and so that overall number.
Sean McGowan: Okay. All right. Thank you very much.
Operator: The next question is from Anthony Vendetti with Maxim Group. Please go ahead.
Anthony Vendetti: Thanks. Good evening. Why don't just touch on two things. One is the DSD network. I know you're expanding that. Can you give us an estimate of how far along that expansion is into your network of stores? And what kind of increased velocity of sales or what's the increase that you're seeing when you switch to DSD in a particular channel?
Norman Snyder: Anthony, hi, it’s Norm. Thanks for joining us. I'm looking at like – and I wish I could put this up looking at a map of white space. So I look at it not what we've covered, but what's left. And there's probably two or three major metropolitan areas that we really need to tackle, the rest of its really areas with low population and applicable volume. So we're probably, I want to say, 70% through where we'd like to be and our goal. And we do like, I think Illinois and the Greater Chicago land area, Virginia are the two big areas that kind of jump to mind. I mean, we're right now in the process of closing out Texas, which is a big area. So those are what's really what's left and obviously the other stuff will be, I think although nice to have will be lower in terms of volume and velocity. Now, in terms of your question, how does it impact? It's really difficult to measure, although, I'll point out a great example of something that exceeded our expectations. And I believe it has a lot to do with not just the brand, but with our DSD partners is our first promo that we did at Publix, where we had like a seven to eight times lift over our normal volume, which we were very excited about and obviously public's kind of shared that excitement with us. So we haven't really analyzed area by area, although I think that's a great thing to focus on. I'm kind of look at some of these big events like this, the Publix promo that we did, which was our first one. And obviously we believe very successful. So I think I'd have to go back and look, but what it does is it allows us coverage from both an alcohol and non-alcohol portfolio, which obviously that will more than double our chances in terms of volume. But we're real pleased with what we're seeing so far and the big items, like, I just touched on, we saw a bigger than expected impact on velocity.
Anthony Vendetti: Okay. No, that's quite the lift. And I'm just curious, was that in all Publix that you're in? Or was that in one particular store? How many Publix are you in right now? And then I had one just quick follow-up.
Norman Snyder: We're in the majority of the Publix network. So it's not – I mean, that was the big authorization lift that we had last year is we went from about – we were in 300 to 400 Publix to now we're in the majority of them.
Anthony Vendetti: Great. And then just the last question is on the decision not to ship orders that were at a network. How much revenue did you think or ballpark of how much revenue you think was sacrificed at this quarter based on that decision?
Norman Snyder: I estimate about $2 million.
Anthony Vendetti: Okay. That's helpful.
Tom Spisak: I want to go back to the DSD network, the other thing is really the quality. I mean, we're setting up majority are both AB and MillerCoors houses. So we're generally getting the top distributor in that area for some of the strongest and it tends to be network like the Florida, we have the entire AB group and in other areas, we're talking to big groups. So I think we get more synergy there. So it's not just about setting up DFD guys to sign them up. It's really about quality and the ability to impact the marketplace. So I think that's real important. The other thing talk about, and this goes back to Sean's question that I didn't mention. Our revenue multiple for our alcohol portfolio is like three times the non-alcohol portfolio. So if we sell a truck of our ginger beer and then we sell a truck of our hard ginger ale, the revenue is like three times greater. So that's the other thing we're excited about and obviously, with very strong margin contribution that adds up pretty quickly.
Anthony Vendetti: Okay. So then just the last follow-up on the DSD. Because I do think that's an important point. How much more green space or white space do you think you have in terms of switching to more of your customers over to the DSD? Is there still a 50% opportunity, a 30% opportunity, where does that stand approximately?
Norman Snyder: I'd say more or like 30%,
Anthony Vendetti: 30% more. Okay. All right. Thanks so much. I'll hop back in the queue.
Norman Snyder: Thank you.
Operator: The next question is from Will Bandujo , a Private Investor. Please go ahead.
Unidentified Analyst: Hey, Norm. Thanks for taking my question. Two just quick questions. One on the inventory on the balance sheet is that finished goods or raw materials.
Norman Snyder: It's both. And actually, you're one of the people we cut off last time. So I'm glad that you got a chance to go through. So Will, that's a great question. It's both. We grew finished goods this quarter, which we need to be able to service our customers. One of the things that I did talk about that's really important and something I'm really proud of, because it translates into higher sales is, we are finally some of our top tier retailers, we're shipping 100% in full and approximately 90% – 95% on time, which is numbers we've never hit previously. So that goes hand in hand with trying to ship efficiently, but it's something that we're real proud of and to be able to accomplish that, you have to have inventory now. So that's gone up and then ingredients and packaging materials stay static. But what you'll see over the next three quarters is we will gradually work those down and turned that into cash. So we built up, we got ahead of ourselves with primarily packaging materials, but our focus is really to bring that number down. So overall, our inventory numbers will come down, you might see finished goods go up a little bit, but you're going to see ingredients and packaging materials come down significantly.
Unidentified Analyst: Okay, thanks. And then kind of switching gears to what you're just talking about with Anthony, the three times revenue with the alcohol, how much of that do you guys have baked in to the revenue this year?
Norman Snyder: Very little. That's what – that goes back to my question with the Sean's question about confidence. We have very little revenue baked in and we see a big opportunity with both of those product lines.
Unidentified Analyst: Okay. And then last quick question. So with another de-listing notice kind of looming here in August, before we have another conference call. Can you provide some color on how many extensions you – think you guys can get. And then sitting here with the share price, what do we close out today, $0.22, using your words that this is the first time, the management team really feels like they've got the opportunity to achieve their goals. Can we anticipate the management team buying stock in the open market?
Norman Snyder: Well, I can tell you our Chairman and myself and other members have bought a lot of stock, both in our offerings and in the open market. We will continue to be opportunistic obviously and support the company. And I can only speak for myself and I will continue to buy stock. Look, right now, it's almost like a luxury that for the first time in a long time, this team is focusing on driving the business. And it’s fun and we’re incredibly optimistic. We believe the results will speak for themselves and drive the stock price up. We will work as hard as we can to try to get additional extensions to do the right thing. The preferred solution is have the stock price reach over $1. Unfortunately, the micro caps and beverage – in the beverage space are being hammered. So we’re not the only ones. But we need to focus on what we’re doing and we’ll continue to put up better results, drive the stock price up and work as hard as we can to do that. And when it comes to be, if we have to make a decision later on, we’ll make that decision, but right now it’s full focus on driving Reed’s.
Unidentified Analyst: Right. Understand. All right. Well, I appreciate all the hard work and look forward to the future. Thanks, guys.
Norman Snyder: Thank you.
Operator: The next question is from Wally Jamal, a Private Investor. Please go ahead.
Wally Jamal: Hi Norman, how you’re doing?
Norman Snyder: Good, Wally. How are you?
Wally Jamal: I’m doing well. Just a go back to one or two things, actually, one thing specifically you have a little bit of the alcohol guidance. I said revenue baked into the guidance. If those 2,000 stores, if you had a mildly successful sell through, I mean, what would you extrapolate that as far as dollar amount?
Norman Snyder: Give me a second on that.
Wally Jamal: I guess maybe even give it make a more specific, say let’s consider say like a 70% sell through, what would those 2,000 doors based on the product you’re shipping? What would that equate to dollar amount?
Norman Snyder: Well, what I’ll do is I’ll take 2,000 stores and there’s 26 weeks left on the year, right. And I’ll take, I’ll say 18 weeks, 18 or 19, I’ll say 19 weeks, right. So if there’s 2,000 stores times 19 weeks, and I’m going to say be conservative, say three units a store, right?
Wally Jamal: Sure.
Norman Snyder: That’s about 32,000 cases at 30 – say around $30 a case, that could be $1 million – revenue.
Wally Jamal: All right. $1 million. And do kind of lightly circle back to the last call about do you know if Reed’s has any more extension options available to it under the current compliance guideline?
Norman Snyder: We’re – our legal counsel is talking to NASDAQ right now to find out what additional extensions are available to us. What we don’t have an answer.
Wally Jamal: I see. Do we have an idea of when Reed’s will have the answer to this question?
Norman Snyder: We will have an answer by the next call.
Wally Jamal: By the next call, okay. I see. And I guess that be that, that was a pretty good question. Okay guys, listen, I really appreciate the hard work and keep it up guys. We’re all looking for you and we know you guys can do it.
Norman Snyder: Thank you, Wally.
Tom Spisak: Thank you.
Operator: The next question is from Matthew Zukowski , a Private Investor. Please go ahead.
Unidentified Analyst: Hi everybody, I’ve been a long time investor in Reed’s since 2009. Believe in the brand, the current management team’s been executing. You mentioned that you’re expecting to reach cash flow breakeven in 2023 and current capital available will be sufficient to get Reed’s to profitability. Could you elaborate on that plan? Are there any risks and what are the keys to it and how confident is the team is getting there? And so also curious, what do you think the annual sales will be at that point? And if at that point if somebody wanted to make an offer for the company, would they go at 2, 3, 4x? Thanks.
Norman Snyder: I’ll go backwards. I hope they go for 10x. It’s hard to say, it’s really driven by market conditions, but let’s get back to the path to cash flow breakeven. It’s been – we haven’t hit our strategy from the beginning. It’s continued top line growth and for the items that I mentioned with Sean’s question about what’s going on in the second half of the year that we’ll continue over for a full year in 2023. And the robust demand for our products, that, that million dollars that I threw out for Wally’s question was just Hard Ginger Ale, obviously, we’re talking about 5,000 doors for mules, so that could be – if you could just kind of extrapolate another $2.5 million to $3 million. So we think it’s not inconceivable for our alcohol portfolio to get up to $5 million. So again, top line growth for the reasons of which I outlined, margin enhancement, which we are working extremely hard on. And we believe we can continue to grow that now the added benefit with the alcohol products as the margins are very strong. So every time that margin creeps up higher, it throws off more cash to offset operating costs. So obviously, if the top line gets bigger and the margin gets bigger, you have a doubling effect of gross margin dollars. And then we are watching and I’m watching every $0.01 that we spend. The big opportunity is on transportation. And one of the things that we didn’t talk about that we’ll see in the second half of the year is moving into co-packer/distribution centers. So we really reduce the amount of times we touch in our product. There’s a big opportunity there. We’ve spend north of $3.5 million to $4 million on interplant transfers from co-packer to warehouse, and we’re working hard to eliminate that. So you’ll start to see for Phase 1, which will include two locations and the second half of the year, you’ll see continued downward movement on our transportation cost both in the aggregate on a cost per case basis. So we believe with all three of those measures, the lines will converge and we’ll get to cash flow breakeven. And in terms of top line, it depends on the margin, but it’s probably in a range of $75 million to $85 million and that’s gross revenue, net, net revenue. My goal is – my near-term goal is to really drive the top line north of a $100 million. And now that I’m not – we’re not raising money. We can focus on that and really drive and expedite what our success is. So again, that’s what gives me the confidence and quite frankly what I want to be doing and having the time to do it now is like a luxury. So that’s really the plan and it’s just watching everything we do. And one of the other things we haven’t talked about is the availability of information that we have at available to the senior team on a daily basis. So we’re able to make smarter decisions. And that’s a big factor in evaluating deals, evaluating do we do this or do we not do it? And we’re looking at both with the balance – balancing of top line growth obviously and then what we spent. And the fact that we’re all aligned and everyone in the company understands the objectives very clearly, gives me confidence that we can merge all those different factors together and produce the results that we all desire.
Unidentified Analyst: Great. Thanks.
Norman Snyder: You’re welcome.
Operator: Excuse me. The next question is from Jack Hyre , a Private Investor. Please go ahead.
Unidentified Analyst: Hey guys, appreciate you taking the time. So just question for you about the two new influxes of cash from both the private placement and the note purchase agreement, is it – suffice it to say that we’ve for the time being satisfied sort of all of our cash problems in terms of like the going concern statement that was in the most recent filing?
Norman Snyder: Yes. Most definitely on the going concern.
Unidentified Analyst: Okay. And based on the amount that we’ve brought in is it enough to like what’s the runway on it? Is it enough for the rest of this year? Can it extend into next year? Is it just going to like get us to that next threshold? Where do you guys see like the roughly what $16 million like pushing us through?
Norman Snyder: Well, I believe it’s going to get us through next year at least I’ve really looked at points past that, but the – when we put the plan together to determine what really makes sense, we really targeted how to get the cash flow breakeven in 2023 is what got us there. And that amount of cash was sufficient to take us to 2023. Now, once we get to that point the company starts throwing off cash. Now the question is, what do we do with that? So I think that’s something we evaluate, but this isn’t, this fund – the recent fundraising activity wasn’t just to get us through 2022, it’s really to get us to cash flow breakeven. This – right now the markets are tough. So for us to get this accomplished, I think was pretty incredible. And two, it’s not fun to do this. So obviously, we really wanted to consider what it would take to get to cash breakeven. And that’s how we put this plan together.
Unidentified Analyst: Okay. That’s great insight. Yes. I think to your point all of us as investors are pretty excited to see you take a step back from being investment banker and do what we’re really here to get done.
Norman Snyder: Yes.
Unidentified Analyst: So I appreciate it and good luck and we’re excited for the future.
Norman Snyder: Thank you, Jack.
Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Norman Snyder for any closing remarks.
Norman Snyder: Again, I’d like to thank everybody for participating in today’s call. We remain excited and confident of our opportunities. And we like to thank all of our business partners that have worked through this trying period while we are raising funds, but really strengthen who we are as a company and all our – all of our employees that I think are working extremely hard and are committed to get to cash flow breakeven. We look forward to the future. We look forward to next quarter’s call. And again, thank you, everyone for taking the time to participate today.
Operator: The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.
