BENSON HILL, INC. Unless otherwise indicated or the context otherwise requires, references in this section to "we," "us," "our" and other similar terms refer to LegacyBenson Hill (as defined below) and its consolidated subsidiaries prior to the Merger (as defined below) and toBenson Hill, Inc. and its consolidated subsidiaries after giving effect to the Merger.
Cautionary Note Regarding Forward-Looking Statements
Some of the statements contained in this report and documents incorporated by reference herein are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Generally, statements that are not historical facts, including statements concerning possible or assumed future actions, business strategies, events or results of operations, are forward-looking statements. These statements may be preceded by, followed by or include the words "believe," "estimate," "expect," "intend," "project," "forecast," "may," "will," "should," "could," "would," "seek," "plan," "scheduled," "anticipate," "intend," or similar expressions. Forward-looking statements contained in this report include, but are not limited to, statements about our ability to: •execute our business strategy, including monetization of products and services provided and expansions in and into existing and new lines of business; •meet future liquidity requirements and comply with restrictive covenants related to long-term indebtedness; •consummate favorable transactions and successfully integrate acquired businesses; •obtain additional capital, including use of the debt and equity markets; •anticipate the impact of the COVID-19 pandemic and its effect on our business and financial conditions, and manage the associated operational risks; •anticipate the uncertainties inherent in the development of new business lines and business strategies; •increase brand awareness; •attract, train and retain effective employees, officers, and directors; •upgrade and maintain information technology systems; •acquire and protect intellectual property; •effectively respond to general economic and business conditions; •maintain our listing on theNew York Stock Exchange (the "NYSE"); •enhance future operating and financial results; •anticipate technological changes; •comply with laws and regulations applicable to our business; •stay abreast of changes to applicable laws and regulations applying to our business; •anticipate the impact of and effectively respond to applicable new accounting standards; •respond to fluctuations in commodity prices and foreign currency exchange rates and political unrest and regulatory changes in international markets from various events, such as the current conflict inUkraine ; •anticipate and adjust to any increases in interest rates that increase the cost of capital; •anticipate the significance and timing of contractual obligations; •maintain key strategic relationships with partners, suppliers and distributors; •respond to uncertainties associated with product and service development and market acceptance; •finance our operations on an economically viable basis; •anticipate the impact of newU.S. federal income tax laws, including the impact on deferred tax assets; •successfully defend litigation; and •successfully deploy the proceeds from thePIPE Investment and the Merger (each as defined below). Forward-looking statements represent our estimates and assumptions only as of the date of this report. You should understand that the following important factors, in addition to those discussed under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 , could affect our future results, and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements in this report: •litigation, complaints, product liability claims and/or adverse publicity; •the impact of changes in consumer spending patterns, consumer preferences, local, regional and national economic conditions, crime, weather, demographic trends and employee availability; •privacy and data protection laws, privacy or data breaches, or the loss of data; and •the impact of the COVID-19 pandemic and its effect on our business, financial condition and results of operations. 38
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These and other factors that could cause actual results to differ from those implied by the forward-looking statements in this report are more fully described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 . Other sections of this report describe additional factors that could adversely affect our business, financial condition or results of operations. New risk factors emerge from time to time and it is not possible to predict all such risk factors, nor can we assess the impact of all such risk factors on our business, or the extent to which any factor or combination of factors may cause actual results to differ materially from those contained in any forward-looking statements. Except as otherwise required by law, we expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained in this report to reflect any change in our expectations or any change in events, conditions or circumstances on which any of our forward-looking statements are based. We qualify all of our forward-looking statements by these cautionary statements. Overview We are an integrated food technology company that uniquely combines data science, plant science and food science to unlock nature's genetic diversity in the development of more nutritious, sustainable, affordable, great-tasting food and ingredients. We are headquartered inSt. Louis, Missouri , where the majority of our research and development activities are managed. We operate a soy crushing and food-grade white flake and soy flour manufacturing operation inCreston, Iowa and a soy crushing facility inSeymour, Indiana to sell our proprietary products and non-proprietary products inNorth America and in select international markets. We also process yellow peas inNorth Dakota , which we sell throughoutNorth America , and supply fresh produce through packing, distribution, and growing locations in the southeastern states ofthe United States . Our purpose is to catalyze and broadly empower innovation from plant to plate so great tasting, more nutritious, affordable, and sustainable food choices are available to everyone. We combine cutting-edge technology with an innovative business approach to bring product innovations to customers and consumers. Our CropOS® technology platform uniquely combines data science, plant science, and food science to leverage the natural genetic diversity of plants to develop more innovative food, ingredient, and feed products - starting with a better seed. Our business is comprised of two reportable segments: our Ingredients segment and our Fresh segment. Our Ingredients segment is currently focused on the production and commercialization of our proprietary soy-based ingredients. In addition, the segment produces and sells non-proprietary soy-based products and non-proprietary yellow pea ingredient products. Our proprietary products include soy-based vegetable oils, animal feed ingredients, aquaculture ingredients, and food ingredients derived from our ultra-high protein soybeans, which have the potential to reduce or eliminate costly water- and energy-intensive processing steps associated with producing products for the food and feed markets, alleviating supply constraints to help bring plant-based proteins and other sustainable ingredient products to scale. Our Fresh segment, which primarily includes our wholly-owned subsidiary,J&J Produce, Inc. , is focused on growing, packing, and selling fresh produce products to major retail and food service customers. COVID-19 As a result of the COVID-19 pandemic, governmental authorities have implemented numerous and rapidly evolving measures to try to contain the virus, such as travel bans and restrictions, limits on gatherings, quarantines, shelter-in-place orders, and business shutdowns. In response to the COVID-19 pandemic and in accordance with governmental orders, we have also modified our business practices and implemented proactive measures to protect the health and safety of employees, including limiting employee travel, requiring, at times, remote work arrangements for non-laboratory employees, implementing social distancing and enhanced sanitary measures in our headquarters, and canceling in-person attendance at certain events and conferences. Many of the suppliers, vendors, and service providers on which we rely have made similar modifications. To date, with the exception of modifying certain of our physical business practices, including decreased travel, and managing delays in the receipt of certain laboratory supplies and the performance of related services, we have not experienced a material impact on business operations from the effects of the COVID-19 pandemic. However, there is no certainty that the protective measures implemented by government authorities will be sufficient to mitigate the risks posed by, or the impacts and disruptions of, the COVID-19 pandemic.
OnMarch 24, 2022 , the Company entered into definitive subscription agreements with certain investors providing for the private placement of an aggregate of 26,150 units at a price of$3.25 per unit (the "PIPE Investment "). Each unit consists of (i) one share of the Company's common stock, par value$0.0001 per share, and (ii) a warrant to purchase one-third of one share of common stock, for an aggregate purchase price of approximately$85.0 million . In connection with thePIPE Investment , the Company incurred transactions costs of$4.2 million . The net proceeds of$80.8 million provided the Company additional liquidity to fund the business. 39
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Convertible Notes Payable Draw
OnJune 30, 2022 , the Company and certain of its directly or indirectly wholly-owned subsidiaries amended the Convertible Loan and Security Agreement and borrowed the aggregate sum of$20.0 million under the second tranche (see Note 11 - Debt in the notes to the condensed consolidated financial statements for further discussion). Thus, pursuant to the Convertible Loan and Security Agreement the Company and its directly or indirectly wholly-owned subsidiaries have borrowed an aggregate principal sum of$100.0 million . The additional proceeds from the Convertible Loan and Security Agreement provided the Company additional liquidity to fund the business.
OnAugust 5, 2022 , the Company entered into an exclusive collaboration and marketing rights agreement (the "Collaboration Agreement") with Archer-Daniels-Midland Company ("ADM") to collaborate on an exclusive basis in the commercialization of certain high-protein soy ingredients for the human food and nutrition market inNorth America based on certain of the Company's proprietary commercial soybean seed genetics ("Proprietary Soy Genetics"). Pursuant to the terms of the Collaboration Agreement, the Company will, among other things, collaborate withADM to engage soybean growers in certain parts ofthe United States to source production and supply of grain grown from Proprietary Soy Genetics ("Proprietary Soy Grain") for processing byADM into soy protein ingredients. The Company will receive an upfront cash payment, annual technology access fees, and value sharing payments on all soy protein ingredients sold byADM that are processed from the Proprietary Soy Grain supplied by the Company, and the Company is eligible to receive milestone payments upon achievement of certain objectives. Unless earlier terminated, the Collaboration Agreement will remain in effect untilDecember 31, 2027 , or untilDecember 31, 2030 if extended pursuant to its terms. See the Current Report on Form 8-K filed with theSEC onAugust 8, 2022 for additional information.
Merger with Star Peak Corp II
OnSeptember 29, 2021 (the "Closing Date"), Star Peak Corp II ("STPC"), a special purpose acquisition company, consummated a merger (the "Closing") pursuant to that certain Agreement and Plan of Merger, datedMay 8, 2021 (the "Merger Agreement"), by and among STPC,STPC Merger Sub Corp. , aDelaware corporation and wholly-owned subsidiary of STPC ("Merger Sub"), andBenson Hill, Inc. , aDelaware corporation ("Legacy Benson Hill"). Pursuant to the terms of the Merger Agreement, a business combination between STPC and Legacy Benson Hill was effected through the merger of Merger Sub with and into Legacy Benson Hill, with Legacy Benson Hill surviving the transaction as a wholly-owned subsidiary of STPC (the "Merger"). On the Closing Date, STPC changed its name toBenson Hill, Inc. and Legacy Benson Hill changed its name toBenson Hill Holdings, Inc. As a consequence of the Merger, we became the successor to a company registered with theSecurities and Exchange Commission (the "SEC") and listed on the NYSE. Accordingly, we were and are required to hire additional personnel and implement procedures and processes to address public company regulatory requirements and customary practices. We have and will continue to incur significant expenses as a public company in order to pay for, among other things: directors' and officers' liability insurance; director fees; internal and external accounting fees, including audit fees and costs associated with readiness to comply with provisions of the Sarbanes-Oxley Act; and legal and administrative resources, including increased external legal fees. We are classified as an "emerging growth company," as defined in Section 2(a) of the Securities Act as modified by the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). As such, we are eligible for and intend to take advantage of certain exemptions from various reporting requirements applicable to other public companies that are not emerging growth companies for as long as we continue to be an emerging growth company.
Our future results of consolidated operations and financial position may not be comparable to historical results as a result of the Merger.
Key Components of Statement of Operations
Revenue
We generate revenue from product sales and commissions earned on product sales.
Product sales consist primarily of sales of processed yellow pea, soybean grain,
soybean oil, soybean meal, soybean flakes and soybean flour, sales of seed, and
sales of harvested produce, both farmed by us and purchased from growers in
non-exclusive arrangements.
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In addition to selling our owned farmed produce, we enter into consignment arrangements with produce growers of certain perishable products. In these arrangements, we act as an agent, earn a commission on the sale, and report the revenue and cost of the product on a net basis.
We use exchange-traded futures to manage the price risk of fluctuating prices related to forecasted sales of soybean oil and soybean meal with the gains and losses on these instruments recorded in revenue. All of the Company's soybean oil and soybean meal futures have not been designated as cash flow hedges and, as such, changes in fair value of these derivatives are recognized in earnings immediately.
See Note 2 - Summary of Significant Accounting Policies in the notes to our
audited consolidated financial statements in our Annual Report on Form 10-K for
the year ended
Cost of Sales
Our cost of sales includes all costs incurred to purchase, process and provide products and services to our customers. The cost of sales on processed yellow pea, soybean grain, soybean oil, soybean meal, soybean flakes and soybean flour includes the cost of the crop, inclusive of the grower contracting premiums, as well as the crush, refining and transportation costs necessary to prepare the product for sale. For harvested produce farmed by us, cost of sales includes the direct cost of land preparation, seed, planting, growing, maintenance, packaging and distribution of product sales. For produce we purchase from growers in non-exclusive arrangements and, hence, do not farm, cost of sales includes the acquisition, warehousing, packaging and distribution of the purchased inventory. We use exchange-traded futures to manage the price risk of fluctuating prices related to forecasted purchases of soybeans with the gains and losses on these instruments recorded in cost of sales. All of the Company's soybean futures have not been designated as cash flow hedges and, as such, changes in fair value of these derivatives are recognized in earnings immediately.
Research and Development
Research and Development expenses consist of the costs of performing activities to discover and develop products and to advance our intellectual property. These costs consist primarily of employee-related expenses for personnel who research and develop our products, fees for contractors who support product development and breeding activities, expenses for trait validation, greenhouse and field trial expenses, purchasing material and supplies for our laboratories, licensing, information technology expenses, and other costs associated with operating our own laboratories.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist of employee-related expenses for selling our products, and costs related to business development to commercialize our product offerings along with our executive, legal, intellectual property, finance and human resources functions. Selling, general and administrative expenses also include facility and information technology expenses not otherwise allocated to research and development or cost of sales, professional fees for auditing, tax and legal services, expenses associated with maintaining patents, and consulting costs.
Total Other (Income) Expense, Net
Total other (income) expense, net consists primarily of interest expense per the
terms of our various financing obligations, amortization of debt discount and
commitment fees, remeasurements of our warrant and conversion option
liabilities, and interest related to finance leases as reduced by interest
earned on cash and marketable securities.
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Results of Operations
Comparison of the Three Months Ended
The following table shows the amounts from our condensed consolidated statements of operations for the periods presented:
Three Months
Ended June 30,
(in thousands) 2022 2021
Revenues $ 110,747 $ 39,692
Cost of sales 105,171 39,722
Gross profit (loss) 5,576 (30)
Operating expenses:
Research and development 12,017 8,818
Selling, general and administrative expenses 22,494 15,761
Total operating expenses 34,511 24,579
Loss from operations (28,935) (24,609)
Other (income) expense:
Interest expense, net 3,524 1,277
Change in fair value of warrants and conversion option (5,899) 1,703
Other expense (income), net 938
(170)
Total other (income) expense, net (1,437) 2,810 Net loss before income tax (27,498) (27,419) Income tax expense 56 - Net loss$ (27,554) $ (27,419) Revenues Revenues for the three months endedJune 30, 2022 were$110.7 million , an increase of$71.1 million or 179%, as compared to the same period in 2021. Included within revenues are the results of exchange-traded futures used to manage the risk of fluctuating CBOT prices related to forecasted ingredient sales entered into in the normal course of business. These economic hedges resulted in gains of$0.5 million for the three months endedJune 30, 2022 . For the three months endedJune 30, 2021 , revenues include gains of$0.3 million associated with hedging activities. After accounting for all hedging activity, the year-over-year increase in revenues was primarily driven by higher sales volumes and prices of our proprietary and non-proprietary soybean ingredient products. Higher sales volumes were the result of the acquisition of ourSeymour, Indiana andCreston, Iowa facilities in the third and fourth quarters of 2021, respectively, which secured ingredient manufacturing capabilities for both our proprietary and non-proprietary offerings and grew our customer base.
Cost of Sales and Gross Profit (Loss)
Cost of sales for the three months endedJune 30, 2022 of$105.2 million represented an increase of$65.4 million as compared to the same period in 2021. Included within cost of sales are the results of exchange-traded futures used to manage the risk of fluctuating CBOT prices related to forecasted ingredient purchases entered into in the normal course of business. These economic hedges resulted in gains of$0.3 million for the three months endedJune 30, 2022 . For the three months endedJune 30, 2021 , cost of sales includes losses of$0.3 million associated with hedging activities. After accounting for all hedging activities, the increase in cost of sales was primarily attributable to the acquisition of ourSeymour, Indiana andCreston, Iowa facilities in the third and fourth quarters of 2021, respectively.
For the three months ended
For the three months endedJune 30, 2022 , our Ingredients segment reported a gross profit of$5.7 million as compared to a gross loss of$2.6 million for the same period in 2021. The increase in profitability was driven by an increase in sales volumes and our customer base resulting from the acquisition of two soy facilities in the prior year as well as higher sales prices on proprietary soy products and non-proprietary soy and yellow pea products. 42
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For the three months endedJune 30, 2022 , our Fresh segment reported a gross loss of$0.2 million as compared to a gross profit of$2.6 million for the same period in 2021. The decrease in profitability was primarily driven by a loss of$1.6 million in the current year as a result of a significant crop failure on our farmed peppers due to a weevil infestation. The decrease in profitability was also driven by lower volumes and higher input costs.
Research and Development Expenses
Research and development expenses for the three months endedJune 30, 2022 of$12.0 million increased$3.2 million as compared to the same period in 2021. The increase was primarily driven by higher payroll and related expenses, including non-cash stock-based compensation expense, from increases in staffing, as well as technology costs and facilities expenses. Higher facility costs are primarily related to the costs associated with our Crop Accelerator facility, which opened during the fourth quarter of 2021.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months endedJune 30, 2022 of$22.5 million increased$6.7 million as compared to the same period in 2021. The increase was primarily driven by increased staffing and related expenses, including non-cash stock-based compensation expense and increased insurance costs as a result of expanded operations and operating as a public company. The increase in staff and related expenses was primarily driven by the increase in personnel necessary to support the scale of our business operations and the requirements associated with being a public company.
Total Other (Income) Expense, Net
Total other (income) expense, net for the three months endedJune 30, 2022 of$1.4 million increased$4.2 million as compared to the same period in 2021. The increase in other income was primarily driven by income of$5.9 million resulting from the change in fair value of the Company's warrant and conversion option liabilities, which was primarily driven by the decrease in the Company's share price in the current period, as compared to expense of$1.7 million in the same period in 2021. The increase in other income was partially offset by an increase in interest expense, including the amortization of debt discounts and commitment assets, of$2.2 million driven by an increase in outstanding debt as well as an increase in financing lease obligations as a result of the commencement of the Crop Accelerator facility lease in the fourth quarter of 2021. Additionally, the increase was partially offset by a decrease of$1.1 million in other income based on realized losses on our marketable securities.
Income Tax (Benefit) Expense
No net income tax benefit for net operating losses incurred in theU.S. has been recorded due to uncertainty in realizing a benefit from these items. The tax expense recorded for the three months endedJune 30, 2022 relates to minor foreign deferred tax liabilities and the impacts of tax amortization of indefinite-lived intangibles. 43
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Comparison of the Six Months Ended
The following table shows the amounts from our consolidated statements of operations for the periods presented:
Six Months
Ended June 30,
(in thousands) 2022 2021
Revenues $ 203,192 $ 71,494
Cost of sales 202,838 70,955
Gross profit 354 539
Operating expenses:
Research and development 24,323 15,945
Selling, general and administrative expenses 45,618 29,494
Total operating expenses 69,941 45,439
Loss from operations (69,587) (44,900)
Other (income) expense:
Interest expense, net 9,912 2,535Change in fair value of warrants and conversion option (37,640)
2,719
Other expense (income), net 2,254
(388)
Total other (income) expense, net (25,474)
4,866
Net loss before income tax (44,113)
(49,766)
Income tax (benefit) expense 17 - Net loss$ (44,130) $ (49,766) Revenues Revenues for the six months endedJune 30, 2022 were$203.2 million , an increase of$131.7 million or 184% as compared to the same period in 2021. Included within revenues are the results of exchange-traded futures used to manage the risk of fluctuating CBOT prices related to forecasted ingredient sales entered into in the normal course of business. These economic hedges resulted in losses of$6.7 million for the six months endedJune 30, 2022 , of which$1.0 million is attributable to future transactions and operations, which we expect to be economically offset in future periods upon physical delivery. For the six months endedJune 30, 2021 , revenues include gains of$0.9 million associated with hedging activities. After accounting for all hedging activity, the year-over-year increase in revenues was primarily driven by higher sales volumes of our proprietary and non-proprietary soybean ingredient products. A primary driver of higher sales volumes was the acquisition of ourSeymour, Indiana andCreston, Iowa facilities in the third and fourth quarters of 2021, respectively, which secured ingredient manufacturing capabilities for both our proprietary and non-proprietary offerings and grew our customer base. The increase was also driven by higher volumes and average selling prices of fresh produce. Higher volumes were primarily the result of expanded farming operations at ourVero Beach, Florida facility, while pricing increases were driven by market conditions.
Cost of Sales and Gross Profit
Cost of sales for the six months endedJune 30, 2022 of$202.8 million represented an increase in cost of sales of$131.9 million as compared to the same period in 2021. Included within cost of sales are the results of exchange-traded futures used to manage the risk of fluctuating CBOT prices related to forecasted ingredient purchases entered into in the normal course of business. These economic hedges resulted in losses of$5.0 million for the six months endedJune 30, 2022 , of which$1.5 million is attributable to forecasted transactions and operations. For the six months endedJune 30, 2021 , cost of sales includes losses of$1.4 million associated with hedging activities. After accounting for all hedging activity, a primary driver of the increase in cost of sales was attributable to the acquisition of ourSeymour, Indiana andCreston, Iowa facilities in the third and fourth quarters of 2021, respectively. For the six months endedJune 30, 2022 , we reported a gross profit of$0.4 million , which was flat as compared to the same period in 2021. Included within gross profit in 2022 are$11.7 million in losses associated with hedging activities, of which$2.5 million are tied to future period transactions and operations, which we expect to be economically offset in future periods upon physical delivery. For the six months endedJune 30, 2022 , our Ingredients segment reported a gross loss of$3.2 million as compared to$3.5 million for the same period in 2021. The current year loss was driven by losses associated with hedging activities of$11.7 44
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million, of which$2.5 million are tied to future period transactions and operations, which we expect to be economically offset in future periods upon physical delivery. After accounting for all hedging activity, gross profit increased year-over-year. The increase was primarily driven by an increase in volume resulting from the two acquisitions in the prior year as well as an increase in market prices for both soybean ingredient products and yellow pea. For the six months endedJune 30, 2022 , our Fresh segment reported a gross profit of$3.5 million as compared to$4.1 million for the same period in 2021. The decrease in gross profit in the Fresh segment was driven by a loss of$1.6 million in the current year as a result of significant crop failure on our farmed peppers due to a weevil infestation. Excluding the impact of the crop failure, gross profit increased as a result of higher pricing on farmed produce, primarily during Q1 2022.
Research and Development Expenses
Research and development expenses for the six months endedJune 30, 2022 of$24.3 million increased$8.4 million as compared to the same period in 2021. The increase was primarily driven by higher payroll and related expenses, including non-cash stock-based compensation expense, increases in staffing, as well as higher technology costs and facilities expenses. Higher facility costs are primarily related to the costs associated with our Crop Accelerator facility, which opened during the fourth quarter of 2021.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the six months endedJune 30, 2022 of$45.6 million increased$16.1 million as compared to the same period in 2021. The increase was primarily driven by increased staffing and related expenses, including non-cash stock-based compensation expense, increased insurance costs as a result of expanded operations and operating as a public company, andPIPE Investment transaction costs of$0.7 million . The increase in staff and related expenses resulted from the increase in personnel necessary to support the scale of our business operations and the requirements associated with being a public company.
Total Other (Income) Expense, Net
Total other income, net for the six months endedJune 30, 2022 of$25.5 million increased$30.3 million as compared to the same period in 2021. The increase in other income was primarily driven by income of$37.6 million resulting from the change in fair value of the Company's warrant and conversion option liabilities, primarily driven by the decrease in the Company's share price in the current period, as compared to expense of$2.7 million in the same period in 2021. The increase in other income was partially offset by an increase in interest expense, including the amortization of debt discounts and commitment assets, of$7.4 million driven by an increase in outstanding debt as well as an increase in financing lease obligations as a result of the commencement of the Crop Accelerator facility lease in the fourth quarter of 2021. Additionally, the increase was partially offset by a decrease of$2.6 million in other income based on realized losses on our marketable securities.
Income Tax (Benefit) Expense
No net income tax benefit for net operating losses incurred in theU.S. has been recorded due to uncertainty in realizing a benefit from these items. The tax expense recorded for the six month period endingJune 30, 2022 relates to minor foreign deferred tax liabilities and the impacts of tax amortization of indefinite-lived intangibles.
Comparison for the Three Months and Six Months Ended
Segment Revenues
Segment revenues for the three and six month periods endedJune 30, 2022 and 2021 are presented below: Three Months Six Months Ended June 30, Ended June 30, (in thousands) 2022 2021 2022 2021 Revenues Ingredients$ 93,545 $ 22,724 $ 159,618 $ 36,919 Fresh 17,116 16,906 43,435 34,470 Unallocated and Other 86 62 139 105 Total Revenues$ 110,747 $ 39,692 $ 203,192 $ 71,494 45
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Ingredients revenues for the three and six months endedJune 30, 2022 were$93.5 million and$159.6 million , respectively, which represents an increase of$70.8 million and$122.7 million , respectively, as compared to the same periods in 2021. The increases were predominantly driven by higher sales volumes of our proprietary and non-proprietary soybean ingredients products attributable to the growth of our customer base and the acquisition of two soy processing plants in the prior year. The increases were also driven by higher sales prices in the current year. Fresh revenues for the three and six months endedJune 30, 2022 were$17.1 million and$43.4 million , respectively, which represents an increase of$0.2 million and$9.0 million , respectively, as compared to the same periods in 2021. The increases were predominantly driven by an increase in pricing during Q1 2022 on farmed produce and an increase in volume from our expanded farming operations at ourVero Beach, Florida facility.
Segment (Loss) Profit
Adjusted EBITDA is a non-GAAP financial measure of performance. Among other financial metrics, our management reviews segment profit based upon Adjusted EBITDA. We define Adjusted EBITDA as consolidated net loss before net interest expense, income tax provision and depreciation and amortization, further adjusted to exclude stock-based compensation, other income and expense, and the impact of significant non-recurring items.
We believe that Adjusted EBITDA is useful in comparing our financial performance with the performance of other companies for the following reasons:
•Adjusted EBITDA is widely used by investors and securities analysts to measure a company's operating performance without regard to items such as stock-based compensation expense, depreciation and interest expense, that can vary substantially from company to company depending upon their financing and capital structures, and the method by which assets were acquired; and •Adjusted EBITDA provides consistency and comparability with our past financial performance, and facilitates comparisons with other companies, many of which use similar non-GAAP financial measures to supplement their GAAP results. Our use of Adjusted EBITDA has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our financial results as reported under GAAP. Some of these limitations are as follows: •Although depreciation expense is a non-cash charge, the assets being depreciated may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; •Adjusted EBITDA excludes stock-based compensation expense, which has been, and will continue to be for the foreseeable future, a significant recurring non-cash expense for our business and an important part of our compensation strategy;
•Adjusted EBITDA excludes other material non-recurring items;
•Adjusted EBITDA does not reflect: (1) recurring changes in, or cash requirements for, our working capital needs; (2) interest expense, or the cash requirements necessary to service interest or principal payments on our debt, which reduces cash available to us; or (3) tax payments that may represent a reduction in cash available to us; and
•the expenses and other items that we exclude in our calculation of Adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from Adjusted EBITDA when they report their operating results.
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Because of these limitations, Adjusted EBITDA should be considered along with other operating and financial performance measures presented in accordance with GAAP. Adjusted EBITDA for the three and six month periods endedJune 30, 2022 and 2021, are presented below. A reconciliation of our consolidated net loss to Adjusted EBITDA is also presented below. Three Months Six Months Ended June 30, Ended June 30, (in thousands) 2022 2021 2022 2021 Adjusted EBITDA Ingredients$ (1,145) $ (6,409) $ (16,040) $ (13,197) Fresh (304) 165 1,925 (172) Unallocated and other (14,217) (9,530) (29,083) (17,252) Total Adjusted EBITDA$ (15,666) $ (15,774) $ (43,198) $ (30,621) Adjustments to reconcile consolidated net loss to Adjusted EBITDA: Consolidated net loss$ (27,554) $ (27,419) $ (44,130) $ (49,766) Interest expense, net 3,524 1,277 9,912 2,535 Income tax expense (benefit) 56 - 17 - Depreciation and amortization 5,538 2,839 10,942 5,430 Stock-based compensation 5,676 709 11,359 1,356 Other expense (income), net 938 (170) 2,254 (388) Change in fair value of warrants and conversion options (5,899) 1,703 (37,640) 2,719 Other nonrecurring items, including acquisition, transaction, and integration costs 294 527 312 527 Non-recurring SOX readiness costs 70 - 282 - PIPE Investment transaction costs - - 705 - Severance expense 124 - 289 - Fresh segment restructuring expenses - - 933 - Fresh segment crop failure costs 1,567 - 1,567 - Non-recurring public company readiness costs - 1,955 - 4,161 South America seed production costs - 2,805 - 2,805 Total Adjusted EBITDA$ (15,666) $
(15,774)
Ingredients Adjusted EBITDA was a loss of$1.1 million and$16.0 million for the three and six months endedJune 30, 2022 , respectively, which represents an increase in segment Adjusted EBITDA of$5.3 million for the three months endedJune 30, 2022 and a decrease in segment Adjusted EBITDA of$2.8 million for the six months endedJune 30, 2022 , as compared to the same periods in 2021. The increase for the three months endedJune 30, 2022 was driven by higher sales prices of our proprietary and non-proprietary soybean ingredient products. The decrease for the six months endedJune 30, 2022 was impacted by losses incurred on our portfolio of derivatives of$11.7 million ,$2.5 million of which is attributable to economic hedges on future transactions and operations, compared to losses of$0.5 million for the six months endedJune 30, 2021 . The derivative losses in the current period were the result of significant increases in commodity pricing of soybeans and soybean-related products. Excluding the impact of our derivative losses, the Adjusted EBITDA loss improved year over year. The improvement in the loss was primarily driven by higher volumes resulting from the two acquisitions in the prior year as well as an increase in market prices for both proprietary and non-proprietary soybean ingredient products. Fresh Adjusted EBITDA was a loss of$0.3 million and income of$1.9 million for the three and six months endedJune 30, 2022 , respectively, which represents a decrease in segment Adjusted EBITDA of$0.5 million for the three months endedJune 30, 2022 and an increase in segment Adjusted EBITDA of$2.1 million for the six months endedJune 30, 2022 , respectively, as compared to the same periods in 2021. The decrease for the three months endedJune 30, 2022 was driven by lower sales volumes. The increase for the six months endedJune 30, 2022 was predominantly driven by an increase in pricing during Q1 2022 on farmed produce, including our expanded farming operations at ourVero Beach, Florida facility. Unallocated and other Adjusted EBITDA was a loss of$14.2 million and$29.1 million for the three and six months endedJune 30, 2022 , respectively, which represents a decrease in segment Adjusted EBITDA of$4.7 million for the three months endedJune 30, 2022 and$11.8 million for the six months endedJune 30, 2022 , as compared to the same periods in 2021. These decreases were driven by increases in centralized operations costs primarily driven by increased staffing and related expenses as 47
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we expanded our legal, finance and human resources departments to prepare for and operate as a public company. The decrease was also driven by an increase in research and development expenses resulting from an increase in staffing and facility expenses.
Liquidity and Capital Resources
Liquidity describes our ability to access sufficient cash flows to meet the cash requirements of our business operations, including working capital needs, debt service, acquisitions, contractual obligations and other commitments. We assess liquidity in terms of our ability to access cash flows from operations, marketable securities and available credit facilities and their sufficiency to fund our operating, investing and financing activities. To meet our payment service obligations, we must have sufficient highly liquid assets and be able to move funds on a timely basis. Since inception, our primary sources of liquidity have been equity and debt financings. OnJune 30, 2022 , our liquidity was comprised of cash and marketable securities of$209.9 million , and access to a revolving credit facility of up to$6.0 million , which is subject to renewal inNovember 2022 , as capped by a defined borrowing base that could result in availability that is less than this amount. As ofJune 30, 2022 , our commitments include term debt and notes payable outstanding of$109.2 million , lease liabilities of$82.6 million , capital expenditures associated with expansion of farming operations, including distribution, within our Fresh segment, expected to be completed in the third quarter of 2022, and operating costs supporting the sale of products, research and development expenses, and selling, general and administrative expenses. For the six months endedJune 30, 2022 , we incurred a net loss of$44.1 million and had negative cash flows from operating activities of$58.7 million . We believe that our cash and cash equivalents and marketable securities on hand as ofJune 30, 2022 are sufficient to meet the needs of operations, including working capital requirements, debt requirements and our currently planned capital expenditure requirements for a period of at least 12 months from the date of this filing. See Note 1 - Description of Business in the notes to the condensed consolidated financial statements for further discussion. Our business prospects are subject to risks, expenses, and uncertainties frequently encountered by companies in the early stages of commercial operations. As ofJune 30, 2022 , we had multiple debt instruments (see Note 11 - Debt in the notes to the condensed consolidated financial statements), including term loans, notes payable and a revolving line of credit, certain of which require adherence to financial covenants, including maintaining minimum liquidity and maintenance of a minimum cash balance. If we breach these covenants, the holder of the debt may declare all amounts immediately due and payable. If the covenants are breached, we plan to attempt to secure a waiver of the covenants or an amendment that modifies the covenants, but there are no assurances that we will be able to comply with our future covenants without such a waiver or that we would be successful in obtaining a waiver or an amendment during 2022 or 2023. Our attainment of profitable operations is also dependent upon future events, including obtaining adequate financing to complete and commercialize our research and development activities, obtaining adequate grower relationships, building our customer base, successfully executing our business and marketing strategy, and hiring appropriate personnel. Our failure to generate sufficient revenues, achieve planned gross margins and operating profitability, control operating costs, maintain existing debt arrangements or secure additional funding may require us to modify, delay, or abandon some of our planned future expansion or development, or to otherwise enact operating cost reductions available to management, which could have a material adverse effect on our business, operating results, financial condition, and our ability to achieve our intended business objectives. We expect to require additional financing over and above our current liquidity position to continue to grow our business. We may also require additional capital in the future to fund capital expenditures, acquisitions or other investments. These capital requirements could be substantial. The amount and timing of our future funding requirements will depend on many factors, including the success of the commercialization of certain of our products, our ability to continue to satisfy our financial covenants under our financing facilities, and the ability to repay or refinance such indebtedness as it becomes due. We could potentially use our available financial resources sooner than we currently expect and may need to incur additional indebtedness to meet future financing needs. Although we anticipate being able to obtain additional financing through non-dilutive means, we may be unable to do so. Our failure to raise capital as and when needed could have significant negative consequences for our business, financial condition and results of consolidated operations. We cannot guarantee that we will be able to meet existing financial covenants or obtain new financing on favorable terms, if at all. Our future capital requirements and the adequacy of available funds will depend on many factors, including those more fully described under the heading "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
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