Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes, which are included elsewhere in this Quarterly Report on Form 10-Q and with our 2020 Form 10-K, including the Consolidated Financial Statements and Notes incorporated therein.
EXECUTIVE OVERVIEW
We are a plant-based biotechnology platform company focused on delivering innovations that revolutionize how the world uses plants. We use our advanced plant-based technology platform to generate innovative, high-value, and sustainable materials and products. With our world-class and industry leading customers and partners, we became the first company to successfully commercialize a gene edited food product in the United States. We leverage a number of technologies to accomplish these objectives, including tools and capabilities we have developed internally and our exclusive rights to use the TALEN® gene-editing technology and other intellectual property that we have licensed in from the University of Minnesota, Cellectis, and others. These technologies are supported by a proprietary information technology platform and lab automation tools.
Our strategy is based on focusing on our core strengths in research and development, including gene editing, plant breeding, and trait development. We will continue to advance our technologies toward developing high value, sustainable, and plant-based innovations with substantial disruption potential.
We are experts at engineering plant metabolism. We have engineered plant metabolism into products including soybeans with improved fatty-acid profiles, an alfalfa able to be better digested by livestock to be commercialized by S&W Seed Company (Nasdaq: SANW), and wheat with a higher level of fiber content than traditionally bred varieties for which we are actively seeking partners. Among our other successes in engineering are a soybean with improved flavor to help enable wider adoption for plant-based protein applications, and controlling the production of storage sugars in potatoes to improve fry quality and reduce acrylamide.
We are also developing products which focus primarily on improving climate resilience and reducing greenhouse gas emissions during food and energy production. These product candidates include:
Hemp with improved characteristics for protein and oil production and for use in advanced materials. Hemp is a very high-quality protein and offers production benefits when compared to other protein or oil crops like soy, peas, or canola. Hemp can also service a wide variety of materials science needs including strengthening plastics, reducing petroleum-based content, and providing greater strength and longevity compared to other plant-based fabrics like linen or cotton. Our platform of traits and breeding advancements reduce hemp production risk, improve agronomics and yield, and drive quality protein and oil production as well as crop processing efficiency.
Winter Oats. Oat production depends on mild temperatures during a critical period called grain fill. Today, quality food-grade oats are only grown in northern latitudes like the Canadian prairies and northern Europe. As temperatures become more variable there, the production quality is expected to come into risk. We are working to winterize oats and shorten their growing season, so that they would grow in lower latitudes during the winter season. This has several benefits that include transitioning grain fill to the temperate spring, increasing the likelihood of high-quality harvests and enabling the production of oats in the winter season following a summer crop, creating a crop value-driven incentive for growers to practice winter cover. Winter cover practices sequester more carbon and prevent soil erosion and runoff.
High saturated fat soybeans are another trait we have under development, which could potentially be used as a U.S.-grown alternative to palm oil. There are significant sustainability and supply chain reliability challenges with palm oil, certain of which we believe could be overcome with this prospective oil alternative. We believe our innovation can be a replacement for palm oil which is today used as a food ingredient, in frying, in cosmetics and personal goods, in animal feed, and as an industrial ingredient. We intend to optimize the saturated to unsaturated fat ratio, which gives soy a palm oil-like quality while maintaining agronomics and yield as well as delivering taste and performance improvements.
Our baseline go-to-market strategies include product development agreements, product license arrangements, and technology licensing agreements.
Under these go-to-market strategies, we expect that our customers will primarily be seed companies, biotechnology companies, germplasm providers, large agricultural processors, others in the relevant crop’s supply chain, and growers, who would, in each case, utilize our technology and know-how for their own trait development in specified crops. We will seek to develop relationships with strategic customers where our product are most likely to benefit from the counterparty’s deep agronomy, product management, and
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Table of Contents
commercialization expertise. Placing our products with such strategic customers will reduce our expenses and downstream risk exposure, while allowing us to pursue diversified growth across multiple revenue streams.
We are well positioned to efficiently develop plant-based input solutions for specific downstream issues, including consumer preferences, sustainability, cost, quality, and regulatory compliance. We have seven publicly disclosed products in development that have a target commercial planting year, and for which we are actively seeking partners in all cases but alfalfa, where we have executed a commercialization agreement with S&W Seed Company. A summary as of June 30, 2021, is as follows:
|
|
|
|
|
CROP
|
PRODUCT1
|
TARGET COMMERCIAL PLANTING YEAR
|
|
Alfalfa
|
Improved Digestibility
|
2022
|
|
Wheat
|
High Fiber
|
2023
|
|
Soybean
|
High Oleic, Low Linolenic (HOLL)
|
2023
|
|
Hemp
|
"Pollen-Proof" (Seedless)
|
2023
|
|
Hemp
|
Stability for Food, Oil & Fiber
|
2024
|
|
Oat
|
Winter
|
2026
|
|
Soybean
|
High Saturated Fat (Palm Alternative)
|
2026
|
1 The agronomic and functional quality of our product candidates and the timing of development are subject to a variety of factors and risks, which are described in Part I, Item 1A, “Risk Factors” of our 2020 Form 10-K.
We intend to move our current soybean product from seed sales to a product license go-to-market strategy in 2022 and are currently in discussions with potential licensors.
We will selectively continue to develop the products in the table above to enable development and commercial agreements to be reached, and our baseline go-to-market strategies support modest capital requirements for these products. When commercialized by the licensors, the products are expected to deliver high margin royalty revenue streams.
We are also pursuing strategic product development opportunities. In these cases, our core strengths of research and product development are aligned with the commercialization and downstream execution capabilities of a potential partner. We anticipate that these partnerships will reduce our capital requirements for research and development, result in near-term cash inflow, and provide opportunities for additional revenue streams over time, including high margin milestone and royalty or license payments.
Select Recent Achievements and Developments:
Appointed Michael A. Carr as our President, Chief Executive Officer, and member of our Board of Directors effective July 27, 2021. Mr. Carr brings more than 20 years of business, financial and operational leadership experience to our enterprise and will focus on advancing and monetizing our technologies. Most recently, he served as Vice President of M&A, Strategy, and Innovation at Darling Ingredients, Inc. Mr. Carr will assume the principal executive officer function for Calyxt as of August 6, 2021, upon the resignation of Dr. Ribeill as our Executive Chair.
With the expansion of our hemp breeding platform, we are demonstrating industry leadership in modernizing the species. We have successfully transformed the genome and produced "pollen-proof" (seedless) hemp with our triploid breeding technology. Combined, our hemp advancements offer significant advantages in innovation, crop management, and harvest potential. More broadly, we can now deliver hemp traits that benefit both growers and consumers who are increasingly looking for plant-based and sustainable foods, materials, cosmeceuticals, nutraceuticals, and more.
Completed the sale of more than 75% percent of the 2020 grain crop to date to Archer Daniels Midland (ADM), with the remaining grain projected to be sold throughout 2021. This series of transactions, which began in the third quarter of 2020, has generated $27 million in total cash since sales commenced.
Net cash used by operating activities improved by $11.6 million from the same period a year ago driven primarily by an improvement in our working capital investment associated with the change in our go-to-market strategy for our soybean product line and a lower net loss in the period driven by a reduction in our operating expenses following that change in go-to-market strategy.
Promoted Sarah Reiter to the newly created role of Chief Business Officer, effective May 1, 2021. In this role Ms. Reiter is responsible for all of our commercial activities, including securing strategic partners for the development and commercialization of our products. She is also responsible for our corporate communications and product marketing.
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We are an early-stage company and have incurred net losses since our inception. As of June 30, 2021, we had an accumulated deficit of $181.7 million. Our net losses were $14.8 million for the six months ended June 30, 2021. We expect to continue to incur significant expenses and operating losses for the next several years. Those expenses and losses may fluctuate significantly from quarter-to-quarter and year-to-year. We expect that our expenses will be primarily driven by:
R&D expenses to develop innovative, sustainable and high-value products for our partners and customers as well as to advance and protect all aspects of our technological platform;
conducting additional breeding and field trials of our current and future products;
acquiring or in-licensing other products, technologies, germplasm, or other biological material;
maintaining, protecting, expanding, and defending our intellectual property portfolio;
making royalty and other payments under any in-license agreements;
seeking to attract and retain new and existing skilled personnel;
identifying strategic partners and licensees and negotiating agreements under the applicable go-to-market strategy; and
experiencing any delays or encountering issues with any of the above, including due to the COVID-19 pandemic and its impacts.
OUR RELATIONSHIP WITH CELLECTIS AND COMPARABILITY OF OUR RESULTS
We are a majority-owned subsidiary of Cellectis. As of June 30, 2021, Cellectis owned 64.4% of our issued and outstanding common stock. Cellectis has certain contractual rights as well as rights pursuant to our certificate of incorporation and bylaws, in each case, as long as it maintains threshold beneficial ownership levels in our shares.
We hold an exclusive license from Cellectis that broadly covers the use of engineered nucleases for plant gene editing. This intellectual property covers methods to edit plant genes using “chimeric restriction endonucleases,” which include TALEN®, CRISPR/Cas9, zinc finger nucleases, and some types of meganucleases.
Cellectis has also guaranteed the lease of our headquarters facility.
FINANCIAL OPERATIONS OVERVIEW
Revenue
For the three and six months ended June 30, 2021, we recognized revenue from the sales of high oleic soybean grain and seed.
Cost of Goods Sold and Inventory
Certain grain costs, net of the benefit from our seed activity, are capitalized to inventory. Additional costs or benefits are recognized as incurred. Any valuation adjustments to inventory are recognized as incurred. Until the fourth quarter of 2020, cost of goods sold included crush and refining losses that are expensed as incurred since they do not add to the value of the finished products. Gains and losses resulting from commodity derivative contracts sold to convert our fixed price grain inventories and fixed price Forward Purchase Contracts to floating prices are recorded in current period cost of goods sold. Because we expect to sell grain at market prices, the economic effects of the hedges being recognized currently are expected to be fully offset when we sell the grain in a future period.
Research and Development Expense
Research and development (R&D) expenses consist of the costs of performing activities to discover and develop products and advance our intellectual property. We recognize R&D expenses as they are incurred.
Our R&D expenses consist primarily of employee-related costs for personnel who research and develop our product candidates, fees for contractors who support product development and breeding activities, expenses for trait validation, purchasing material and supplies for our laboratories, licensing, an allocation of facility and information technology expenses, and other costs associated with owning and operating our own laboratories. R&D expenses also include costs to write and support the research for filing patents.
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Table of Contents
Selling, General, and Administrative Expense
Selling, general, and administrative (SG&A) expenses consist primarily of employee-related expenses for selling and licensing our products and employee-related expenses for our executive, legal, intellectual property, information technology, finance, and human resources functions. In periods prior to 2021, these expenses also included employee-related and other expenses for selling soybean oil and meal, soybean acreage acquisition, and managing the soybean product supply chain. Other SG&A expenses include facility and information technology expenses not otherwise allocated to R&D expenses, professional fees for auditing, tax and legal services, expenses associated with maintaining patents, consulting costs and other costs of our information systems, and costs to market our products.
Interest, net
Interest, net is comprised of interest income resulting from investments of cash and cash equivalents, short-term investments, unrealized gains and losses on short-term investments, and interest expense on our financing lease obligations. It is also driven by balances, yields, and timing of financing and other capital raising activities.
Non-operating expenses
Non-operating expenses are expenses that are not directly related to our ongoing operations and are primarily comprised of gains and losses from foreign exchange-related transactions and disposals of land, buildings, and equipment.
Anticipated Changes Between Revenues and Costs
As we execute upon our product development and licensing business model, we expect the composition of our revenues and costs to evolve. Product-related revenues from selling soybean grain, seed, oil, and meal will decline, and negative margins we experienced selling those products will no longer occur. The significant working capital investment to support those activities will also decline.
Future cash and revenue-generating opportunities are expected to primarily arise from up-front, annual or milestone, and royalty payments upon the licensees’ commercial sale of products. These revenues are anticipated to have high margins over time.
Recent Developments – COVID-19 Update
As previously reported, our operations in Minnesota are classified as critical sector work under the State of Minnesota’s COVID-19 executive orders. Accordingly, most of our laboratory workers have continued to work onsite at our headquarters throughout the pandemic, and our programs and activities have not experienced material delays. In accordance with our COVID-19 Preparedness Plan, Minnesota executive order requirements, and guidelines promoted by the Centers for Disease Control and Prevention, we implemented health and safety measures for the protection of our onsite workers, maintained remote work arrangements for our non-laboratory personnel, and implemented, as necessary, appropriate self-quarantine precautions for potentially affected laboratory personnel. On May 28, 2021, nearly all Minnesota COVID-19 restrictions came to an end, including all capacity limits and distancing requirements - both indoors and outdoors. Our non-laboratory personnel returned to working onsite in mid-July 2021.
During the six months ended June 30, 2021, the COVID-19 pandemic did not have a material impact on our operations. However, a resurgence or prolonging of the COVID-19 pandemic, governmental response measures, and resulting disruptions could rapidly offset such improvements. Moreover, the effects of the COVID-19 pandemic on the financial markets remain substantial and broader economic uncertainties persist, which may make obtaining capital challenging and have exacerbated the risk that such capital, if available, may not be available on terms acceptable to us. There continues to be significant uncertainty relating to the COVID-19 pandemic and its impact, and many factors could affect our results and operations, including, but not limited to, those described in Part I, Item 1A, “Risk Factors” of our 2020 Form 10-K.
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Table of Contents
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED JUNE 30, 2021 COMPARED TO THE THREE MONTHS ENDED JUNE 30, 2020
A summary of our results of operations for the three months ended June 30, 2021, and 2020 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
$ Change
|
|
|
% Change
|
|
|
Revenue
|
$
|
11,880
|
|
|
$
|
2,307
|
|
|
$
|
9,573
|
|
|
|
415
|
%
|
|
Cost of goods sold
|
|
11,527
|
|
|
|
5,321
|
|
|
|
6,206
|
|
|
|
117
|
%
|
|
Gross margin
|
|
353
|
|
|
|
(3,014
|
)
|
|
|
3,367
|
|
|
|
112
|
%
|
|
Research and development expense
|
|
2,844
|
|
|
|
2,825
|
|
|
|
19
|
|
|
|
1
|
%
|
|
Selling, general, and administrative expense
|
|
3,478
|
|
|
|
5,167
|
|
|
|
(1,689
|
)
|
|
|
(33
|
)%
|
|
Management fees
|
|
15
|
|
|
|
42
|
|
|
|
(27
|
)
|
|
|
(64
|
)%
|
|
Gain upon extinguishment of Payroll Protection Program loan
|
|
1,528
|
|
|
|
—
|
|
|
|
1,528
|
|
|
NM
|
|
|
Interest, net
|
|
(357
|
)
|
|
|
154
|
|
|
|
(511
|
)
|
|
|
(332
|
)%
|
|
Non-operating expenses
|
|
6
|
|
|
|
(8
|
)
|
|
|
14
|
|
|
|
175
|
%
|
|
Net loss
|
$
|
(4,807
|
)
|
|
$
|
(10,902
|
)
|
|
$
|
6,095
|
|
|
|
56
|
%
|
|
Basic and diluted net loss per share
|
$
|
(0.13
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
0.20
|
|
|
|
61
|
%
|
|
Adjusted EBITDA 1
|
$
|
(5,814
|
)
|
|
$
|
(6,501
|
)
|
|
$
|
687
|
|
|
|
11
|
%
|
1 See “Use of Non-GAAP Financial Information” elsewhere in this report for a discussion of Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and a reconciliation of Adjusted EBITDA to Net loss, the most comparable GAAP measure.
NM - not meaningful
Revenue
Revenue was $11.9 million in the second quarter of 2021, an increase of $9.6 million, or 415 percent, from the second quarter of 2020. The increase was driven by the volume and mix of product sold in the quarter, as we sold seed and 25 percent of the 2020 grain crop in the second quarter of 2021 as compared to the second quarter of 2020, when we were selling soybean oil and meal.
Cost of Goods Sold
Cost of goods sold was $11.5 million in the second quarter of 2021, an increase of $6.2 million, or 117 percent, from the second quarter of 2020. The increase was driven by higher volumes of product sold and higher average prices paid for grain due to increases in commodity market prices for soybeans. These increases were partially offset by the benefits resulting from the move to sell grain compared to selling oil and meal, as well as a $2.9 million year-over-year decrease in net realizable value adjustments to inventory as the year ago period included costs to write down excess seed inventory and also reflected the margin profile of selling soybean oil and meal compared to selling grain, and $0.5 million of unrealized commodity derivative gains from hedging contracts sold to convert our fixed price grain inventory and fixed price Forward Purchase Contracts to floating prices to link them to market, consistent with how we expect to sell the grain.
Gross Margin and Adjusted Gross Margin
Gross margin was $0.4 million, or 3 percent, in the second quarter of 2021, an increase of $3.4 million or 112% percent from the second quarter of 2020. The improvement was primarily driven by the benefits resulting from the move to sell grain compared to selling oil and meal, as well as a $2.9 million year-over-year decrease in net realizable value adjustments to inventory as the year ago period included costs to write down excess seed inventory and also reflected the margin profile of selling soybean oil and meal compared to selling grain, and $0.5 million of unrealized commodity derivative gains from hedging contracts sold to convert our fixed price grain inventory and fixed price Forward Purchase Contracts to floating prices to link them to market, consistent with how we expect to sell the grain.
Adjusted gross margin, a non-GAAP measure, was negative $1.2 million, or negative 10 percent, in the second quarter of 2021, compared to negative $0.8 million, or negative 34 percent, in the second quarter of 2020. The improvement on a percentage basis was driven by benefits resulting from the move to sell grain compared to selling oil and meal.
- 19 -
Table of Contents
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted gross margin and a reconciliation of gross margin, the most comparable GAAP measure, to adjusted gross margin.
Research and Development Expense
R&D expense was $2.8 million in the second quarter of 2021, essentially flat compared to the second quarter of 2020.
Selling, General, and Administrative Expense
SG&A expense was $3.5 million in the second quarter of 2021, a decrease of $1.7 million, or 33 percent, from the second quarter of 2020. The decrease was driven by lower personnel costs and non-cash stock compensation expense as a result of the reduction in cost following the move to sell grain compared to selling oil and meal, as well as other reductions in operating expenses.
Management Fees
Management fees were nominal for the three months ended June 30, 2021, and 2020.
Gain Upon Extinguishment of Payroll Protection Program Loan
On April 8, 2021, we were notified by the SBA that the full principal amount and all accrued interest of the PPP loan had been forgiven and in the second quarter of 2021 we recognized a gain upon the extinguishment of the PPP loan of $1.5 million.
Interest, net
Interest, net was an expense of $0.4 million in the second quarter of 2021, a decrease of $0.5 million, or 332 percent from the second quarter of 2020. The decline was driven by lower balances and lower rates on our invested cash balances.
Net Loss and Adjusted Net Loss
Net loss was $4.8 million in the second quarter of 2021, an improvement of $6.1 million, or 56 percent, from the second quarter of 2020. The improvement in net loss was driven by improved gross margins, reduced operating expenses, and the gain upon the extinguishment of the PPP loan.
Adjusted net loss was $7.8 million in the second quarter of 2021, an improvement of $0.8 million, or 9 percent, from the second quarter of 2020. The improvement in adjusted net loss was driven by the benefits resulting from the move to sell grain compared to selling oil and meal and reductions in operating expenses.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted net loss and a reconciliation of net loss, the most comparable GAAP measure, to adjusted net loss.
Net Loss Per Share and Adjusted Net Loss Per Share
Net loss per share was $0.13 in the second quarter of 2021, an improvement of $0.20 per share, or 61 percent, from the second quarter of 2020. The improvement in net loss per share was driven by the change in net loss and the year-over-year increase in the weighted average share count.
Adjusted net loss per share was $0.21 in the second quarter of 2021, an improvement of $0.05 per share, or 19 percent, from the second quarter of 2020. The improvement in adjusted net loss per share was driven by the change in adjusted net loss and the year-over-year increase in the weighted average share count.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted net loss per share and a reconciliation of net loss per share, the most comparable GAAP measure, to adjusted net loss per share.
- 20 -
Table of Contents
Adjusted EBITDA
Adjusted EBITDA loss was $5.8 million in the second quarter of 2021, an improvement of $0.7 million, or 11 percent, from the second quarter of 2020. The improvement was driven by the benefits resulting from the move to sell grain compared to selling oil and meal and reductions in operating expenses.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted EBITDA and a reconciliation of net loss, the most comparable GAAP measure, to adjusted EBITDA.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2021 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2020
A summary of our results of operations for the six months ended June 30, 2021, and 2020 follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
$ Change
|
|
|
% Change
|
|
|
Revenue
|
$
|
16,282
|
|
|
$
|
4,684
|
|
|
$
|
11,598
|
|
|
|
248
|
%
|
|
Cost of goods sold
|
|
18,272
|
|
|
|
9,205
|
|
|
|
9,067
|
|
|
|
99
|
%
|
|
Gross margin
|
|
(1,990
|
)
|
|
|
(4,521
|
)
|
|
|
2,531
|
|
|
|
56
|
%
|
|
Research and development expense
|
|
5,894
|
|
|
|
5,612
|
|
|
|
282
|
|
|
|
5
|
%
|
|
Selling, general, and administrative expense
|
|
7,736
|
|
|
|
11,465
|
|
|
|
(3,729
|
)
|
|
|
(33
|
)%
|
|
Management fees
|
|
45
|
|
|
|
104
|
|
|
|
(59
|
)
|
|
|
(57
|
)%
|
|
Gain upon extinguishment of Payroll Protection Program loan
|
|
1,528
|
|
|
|
—
|
|
|
|
1,528
|
|
|
NM
|
|
|
Interest, net
|
|
(703
|
)
|
|
|
(244
|
)
|
|
|
(459
|
)
|
|
|
(188
|
)%
|
|
Non-operating expenses
|
|
5
|
|
|
|
(19
|
)
|
|
|
24
|
|
|
|
126
|
%
|
|
Net loss
|
$
|
(14,835
|
)
|
|
$
|
(21,965
|
)
|
|
$
|
7,130
|
|
|
|
32
|
%
|
|
Basic and diluted net loss per share
|
$
|
(0.40
|
)
|
|
$
|
(0.67
|
)
|
|
$
|
0.27
|
|
|
|
40
|
%
|
|
Adjusted EBITDA 1
|
$
|
(12,641
|
)
|
|
$
|
(14,738
|
)
|
|
$
|
2,097
|
|
|
|
14
|
%
|
1 See “Use of Non-GAAP Financial Information” elsewhere in this report for a discussion of Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) and a reconciliation of Adjusted EBITDA to Net loss, the most comparable GAAP measure.
NM- not meaningful
Revenue
Revenue was $16.3 million in the first six months of 2021, an increase of $11.6 million, or 248 percent, from the first six months of 2020. The increase was driven by sales of a portion of the 2020 grain crop as compared to the six months of 2020, when we were selling soybean oil and meal. As of June 30, 2021, we had sold over 75 percent of the 2020 grain crop.
Cost of Goods Sold
Cost of goods sold was $18.3 million in the first six months of 2021, an increase of $9.1 million, or 99 percent, from the first six months of 2020. The increase was driven by higher volumes of product sold and higher average prices paid for grain as a result of increases in commodity market prices for soybeans. These increases were partially offset by the benefits resulting from the move to sell grain compared to selling oil and meal, as well as a $2.8 million year-over-year decrease in net realizable value adjustments to inventory as the year ago period included costs to write down excess seed inventory and also reflected the margin profile of selling soybean oil and meal compared to selling grain, and $1.1 million of unrealized commodity derivative gains from hedging contracts sold to convert our fixed price grain inventory and fixed price Forward Purchase Contracts to floating prices to link them to market, consistent with how we expect to sell the grain.
Gross Margin and Adjusted Gross Margin
Gross margin was a negative $2.0 million, or negative 12 percent, in the first six months of 2021, an improvement of $2.5 million, or 56 percent from the first six months of 2020. The improvement was driven by the benefits resulting from the move to sell grain compared to selling oil and meal, as well as a $2.8 million year-over-year decrease in net realizable value adjustments to inventory as the year ago period included costs to write down excess seed inventory and also reflected the margin profile of selling soybean oil and meal compared to selling grain, and $1.1 million of unrealized commodity derivative gains from hedging contracts sold to convert our fixed price
- 21 -
Table of Contents
grain inventory and fixed price Forward Purchase Contracts to floating prices to link them to market, consistent with how we expect to sell the grain.
Adjusted gross margin, a non-GAAP measure, was negative $2.5 million, or negative 15 percent, in the first six months of 2021, compared to negative $2.0 million, or negative 42 percent, in the first six months of 2020. The improvement on a percentage basis was driven by benefits resulting from the move to sell grain compared to selling oil and meal.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted gross margin and a reconciliation of gross margin, the most comparable GAAP measure, to adjusted gross margin.
Research and Development Expense
R&D expense was $5.9 million in the first six months of 2021, an increase of $0.3 million, or 5 percent, from the first six months of 2020. The increase was driven by an increase in personnel costs, partially offset by a decrease in third-party R&D expenses.
Selling, General, and Administrative Expense
SG&A expense was $7.7 million in the first six months of 2021, a decrease of $3.7 million, or 33 percent, from the first six months of 2020. The decrease was driven by lower non-cash stock compensation expenses of $3.4 million from the recapture of stock compensation from forfeitures of unvested stock awards primarily from the departure of our former CEO, lower personnel costs as a result of the reduction in cost following the move to sell grain compared to selling oil and meal, and other reductions in operating expenses. These decreases were partially offset by an increase of $2.3 million in Section 16 officer transition expenses.
Management Fees
Management fees were nominal for the first six months of 2021 and 2020.
Gain Upon Extinguishment of Payroll Protection Program Loan
On April 8, 2021, we were notified by the SBA that the full principal amount and all accrued interest of the PPP loan had been forgiven. Accordingly, we recognized a gain upon the extinguishment of the PPP loan of $1.5 million.
Interest, net
Interest, net was expense of $0.7 million in the first six months of 2021, a $0.5 million decrease, or 188 percent, compared to the first six months of 2020. The decline was driven by lower balances and lower rates on our invested cash balances.
Net Loss and Adjusted Net Loss
Net loss was $14.8 million in first six months of 2021, an improvement of $7.1 million, or 32 percent, from the first six months of 2020. The improvement in net loss was driven by improved gross margins, reduced operating expenses, and the gain upon the extinguishment of the PPP loan.
Adjusted net loss was $16.7 million in the first six months of 2021, an improvement of $2.7 million, or 14 percent, from the second quarter of 2020. The improvement in adjusted net loss was driven by the benefits resulting from the move to sell grain compared to selling oil and meal and reductions in operating expenses.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted net loss and a reconciliation of net loss, the most comparable GAAP measure, to adjusted net loss.
Net Loss Per Share and Adjusted Net Loss Per Share
Net loss per share was $0.40 in the first six months of 2021, an improvement of $0.27 per share, or 40 percent, from the first six months of 2020. The improvement in net loss per share was driven by the change in net loss and the year-over-year increase in the weighted average share count.
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Table of Contents
Adjusted net loss per share was $0.45 in the first six months of 2021, an improvement of $0.14 per share, or 24 percent, from the first six months of 2020. The improvement in net loss per share was driven by the change in net loss and the year-over-year increase in the weighted average share count.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted net loss per share and a reconciliation of net loss per share, the most comparable GAAP measure, to adjusted net loss per share.
Adjusted EBITDA
Adjusted EBITDA loss was $12.6 million in the first six months of 2021, an improvement of $2.1 million, or 14 percent, from the first six months of 2020. The improvement was driven by the benefits resulting from the move to sell grain compared to selling oil and meal and reductions in operating expenses.
See below under the heading “Use of Non-GAAP Financial Information” for a discussion of adjusted EBITDA and a reconciliation of net loss, the most comparable GAAP measure, to adjusted EBITDA.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Our primary source of liquidity is our cash and cash equivalents, with additional liquidity accessible, subject to market conditions and other factors, from the capital markets. As of June 30, 2021, we had a total of $18.5 million of cash, cash equivalents, restricted cash, and short-term investments. As of June 30, 2021, we did not have any short-term investments. All of these amounts are convertible to cash within 90 days except for $1.0 million of restricted cash associated with our financing leases which will be returned to us over the next 18 months. Current liabilities were $7.2 million as of June 30, 2021. Accordingly, we have cash and cash equivalents sufficient to fund all short-term obligations as of that date.
Our liquidity funds our non-discretionary cash requirements and our discretionary spending. Working capital is our principal non-discretionary funding requirement, which we anticipate will decline over the remainder of 2021 as we wind-down our grain purchases and associated sales. In addition, we have contractual obligations related to our recurring business operations, primarily related to our headquarters and laboratory facilities and a diminishing amount of grain purchases associated with our former go-to-market strategy for soybean products. Our principal discretionary cash spending is for capital expenditures.
We incurred losses from operations of $6.0 million for the three months ended June 30, 2021, and $15.7 million for the six months ended June 30, 2021. As of June 30, 2021, we had an accumulated deficit of $181.7 million and expect to continue to incur losses in the future.
On April 8, 2021, we were notified by the SBA that the full principal amount and all accrued interest of the PPP loan had been forgiven. Accordingly, we recognized a gain upon the extinguishment of the PPP loan for $1.5 million.
Cash Flows from Operating Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
In Thousands
|
2021
|
|
|
2020
|
|
|
$ Change
|
|
|
% Change
|
|
|
Net loss
|
$
|
(14,835
|
)
|
|
$
|
(21,965
|
)
|
|
$
|
7,130
|
|
|
|
32
|
%
|
|
Gain upon extinguishment of Payroll Protection Program loan
|
|
(1,528
|
)
|
|
|
—
|
|
|
|
(1,528
|
)
|
|
NM
|
|
|
Depreciation and amortization expense
|
|
1,180
|
|
|
|
904
|
|
|
|
276
|
|
|
|
31
|
%
|
|
Stock-based compensation
|
|
(371
|
)
|
|
|
3,068
|
|
|
|
(3,439
|
)
|
|
|
(112
|
)%
|
|
Changes in operating assets and liabilities
|
|
4,305
|
|
|
|
(7,658
|
)
|
|
|
11,963
|
|
|
|
156
|
%
|
|
Net cash used by operating activities
|
$
|
(11,249
|
)
|
|
$
|
(25,651
|
)
|
|
$
|
14,402
|
|
|
|
56
|
%
|
NM- not meaningful
Net cash used by operating activities was $11.2 million in the first six months of 2021, an improvement of $14.4 million, or 56 percent, from the first six months of 2020. The decrease was driven by a $12.0 million improvement in cash used by operating assets and liabilities as we converted a substantial amount of inventory and accounts receivable to cash in 2021 compared to the same period in 2020, and a $7.1 million decrease in net loss. These improvements were partially offset by a $3.4 million decrease in non-cash stock compensation, primarily the result of the forfeiture of unvested stock awards, and the $1.5 million non-cash gain upon the extinguishment of the PPP loan.
- 23 -
Table of Contents
We expect net cash used by operating activities over the remainder of 2021 to be lower than the second half of 2020 as a result of working capital improvements and expense reductions following the move to sell grain compared to selling oil and meal.
Cash Flows from Investing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
In Thousands
|
2021
|
|
|
2020
|
|
|
$ Change
|
|
|
% Change
|
|
|
Sales and (purchases) of short-term investments, net
|
$
|
11,698
|
|
|
$
|
(29,942
|
)
|
|
$
|
41,640
|
|
|
|
139
|
%
|
|
Purchases of land, buildings, and equipment
|
|
(307
|
)
|
|
|
(525
|
)
|
|
|
218
|
|
|
|
42
|
%
|
|
Net cash provided by (used by) investing activities
|
$
|
11,391
|
|
|
$
|
(30,467
|
)
|
|
$
|
41,858
|
|
|
|
137
|
%
|
Net cash provided by investing activities was $11.4 million in the first six months of 2021, an increase of $41.9 million, or 137 percent, from the first six months of 2020. This increase was driven by changes in purchases and sales of short-term investments, as the first six months of 2020 saw us invest our cash in short-term investments while the first six months of 2021 reflects the draw-down of those short-term investments to fund operations.
We expect net cash used for purchases of land, buildings, and equipment in the remainder of 2021 to be largely for capital expenditures, and for those levels to be comparable to the first six months of 2021.
Cash Flows from Financing Activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended June 30,
|
|
|
In Thousands
|
2021
|
|
|
2020
|
|
|
$ Change
|
|
|
% Change
|
|
|
Proceeds from Paycheck Protection Program loan
|
$
|
—
|
|
|
$
|
1,518
|
|
|
$
|
(1,518
|
)
|
|
|
(100
|
)%
|
|
Repayments of financing lease obligations
|
|
(178
|
)
|
|
|
(130
|
)
|
|
|
(48
|
)
|
|
|
(37
|
)%
|
|
Proceeds from the exercise of stock options
|
|
227
|
|
|
|
—
|
|
|
|
227
|
|
|
NM
|
|
|
Net cash provided by financing activities
|
$
|
49
|
|
|
$
|
1,388
|
|
|
$
|
(1,339
|
)
|
|
|
96
|
%
|
NM – not meaningful
Net cash provided by financing activities was nil in the first six months of 2021, a decrease of $1.3 million, or 96 percent, from the first six months of 2020. The decrease was driven by the cash inflows from the $1.5 million PPP loan received in the first six months of 2020, partially offset by cash flows from the exercise of stock options.
CAPITAL RESOURCES
Operating Capital Requirements
Considering factors such as our anticipated cash receipts from sales of grain and our product development and technology licensing efforts with partners, our anticipated cash burn rate, and our expense reduction efforts, we believe our cash, cash equivalents, and restricted cash as of June 30, 2021, will be sufficient to fund our operations for at least the next twelve months and into the second half of 2022.
We anticipate that we will continue to generate losses for the next several years before revenue is enough to support our operating capital requirements. Until we can generate substantial cash flow, we expect to finance a portion of future cash needs through cash on hand, commercialization activities, which may result in various types of revenue streams from seed sales and future development agreements, trait licenses, and technology licenses, including upfront and milestone payments, annual license fees, and royalties, government or other third-party funding, and public or private equity or debt financings. However, additional capital may not be available on reasonable terms, if at all. If we are unable to raise additional capital in enough amounts or on terms acceptable to us, we may have to significantly delay, scale back, or discontinue the development or commercialization of our activities. Failure to receive additional funding could cause us to cease operations, in part or in full. If we raise additional funds through the issuance of additional debt or equity securities, it could result in dilution to our existing stockholders and increased fixed payment obligations, and these securities may have rights senior to those of our shares of common stock. Any of these events could significantly harm our business, financial condition, and prospects.
Our financing needs are subject to change depending on, among other things, the success of our product development efforts, the effective execution of our streamlined business model, our revenue, and our efforts to effectively manage expenses. The effects of the COVID-19 pandemic on the financial markets and broader economic uncertainties may make obtaining capital through equity or debt financings more challenging and have exacerbated the risk that such capital, if available, may not be available on terms acceptable to us.
- 24 -
Table of Contents
In response to current economic conditions, we have postponed non-essential capital expenditures and undertaken other efficiency efforts. In addition, the headcount reductions undertaken in connection with our move to sell grain compared to selling oil and meal will contribute to our cost-saving initiatives. We will continue to review our operating expenses and to take actions that support efficient operations, financial flexibility, and optimized liquidity.
CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES
As of June 30, 2021, there were no material changes in our commitments under contractual obligations as disclosed in our Annual Report, except that our Forward Purchase Contracts, which consist of commitments to purchase grain and seed, have decreased to $6.8 million at June 30, 2021, from $21.2 million at December 31, 2020, and that as of June 30, 2021 we have a remaining severance obligation primarily to Mr. Blome, our former CEO, of $2.2 million.
CRITICAL ACCOUNTING POLICIES
The preceding discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements and the related disclosures, which have been prepared in accordance with U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts in our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the policies discussed in Note 1, Basis of Presentation and Summary of Significant Accounting Policies, are the most critical to an understanding of our financial condition and results of operations because they require us to make estimates, assumptions, and judgments about matters that are inherently uncertain.
As of June 30, 2021, there have been no significant changes to our critical accounting policies disclosure reported in “Critical Accounting Estimates” in our Annual Report.
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standard Update (ASU) No. 2016-02, “Leases (Topic 842)” (ASU 2016-02). Under ASU 2016-02, an entity will be required to recognize assets and liabilities for the rights and obligations created by leases on the entity’s balance sheet for both finance and operating leases. For leases with a term of 12 months or less, an entity can elect to not recognize lease assets and lease liabilities and expense the lease over a straight-line basis for the term of the lease. Because we are an emerging growth company, the requirements of the new standard are effective for annual reporting periods beginning after December 15, 2021, and interim periods within those annual periods. We are in the process of analyzing the impact of this standard on our results of operations and financial position.
In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326)” (ASU 2016-13). ASU 2016-13 creates accounting requirements on how to account for credit losses on most financial assets and certain other instruments. This will require the estimation of lifetime expected credit losses and corresponding recognition of allowance for losses on trade and other receivables, loans, and other instruments held at amortized cost. The ASU requires certain recurring disclosures and is effective for annual periods, and interim periods within those annual periods, beginning on or after December 15, 2023. We are in the process of analyzing the impact of this standard on our results of operations.
USE OF NON-GAAP FINANCIAL INFORMATION
To supplement our audited financial results prepared in accordance with GAAP, we have prepared certain non-GAAP measures that include or exclude special items. These non-GAAP measures are not meant to be considered in isolation or as a substitute for financial information presented in accordance with GAAP and should be viewed as supplemental and in addition to our financial information presented in accordance with GAAP. Investors are cautioned that there are material limitations associated with the use of non-GAAP financial measures. In addition, other companies may report similarly titled measures, but calculate them differently, which reduces their usefulness as a comparative measure. Management utilizes these non-GAAP metrics as performance measures in evaluating and making operational decisions regarding our business.
We present adjusted gross margin, a non-GAAP measure that reflects adjustments necessary to present the underlying gross margin of our soybean product line, including (i) unrealized gains and losses associated with commodity derivatives entered into to hedge the change in value of fixed price grain inventories and fixed price forward purchase contracts that should be recognized in the future when
- 25 -
Table of Contents
the underlying inventory is sold, (ii) gains and losses from commodity derivatives realized in prior periods but associated with inventory sold in the current period, (iii) net realizable value adjustments to inventories occurring in the period, which otherwise would have been recognized in the future when the underlying inventory is sold, and (iv) net realizable value adjustments recognized in prior periods but associated with inventory sold in the current period.
We provide in the table below a reconciliation of gross margin, which is the most directly comparable GAAP financial measure, to adjusted gross margin. We provide adjusted gross margin because we believe that this non-GAAP financial metric provides investors with useful supplemental information at this stage of commercialization as the amounts being adjusted affect the period-to-period comparability of our gross margins and financial performance.
The table below presents a reconciliation of gross margin to adjusted gross margin:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
In Thousands
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Gross margin (GAAP measure)
|
$
|
353
|
|
|
$
|
(3,014
|
)
|
|
$
|
(1,990
|
)
|
|
$
|
(4,521
|
)
|
|
Gross margin percentage
|
|
3
|
%
|
|
|
(131
|
)%
|
|
|
(12
|
)%
|
|
|
(97
|
)%
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative impact, net
|
|
(658
|
)
|
|
|
—
|
|
|
|
(447
|
)
|
|
|
—
|
|
|
Net realizable value adjustments to inventories
|
|
(859
|
)
|
|
|
2,221
|
|
|
|
(72
|
)
|
|
|
2,555
|
|
|
Adjusted gross margin
|
$
|
(1,164
|
)
|
|
$
|
(793
|
)
|
|
$
|
(2,509
|
)
|
|
$
|
(1,966
|
)
|
|
Adjusted gross margin percentage
|
|
(10
|
)%
|
|
|
(34
|
)%
|
|
|
(15
|
)%
|
|
|
(42
|
)%
|
We present adjusted net loss, a non-GAAP measure, and define it as net loss including adjustments necessary to present the underlying gross margin of our soybean product line, including (i) unrealized gains and losses associated with commodity derivatives entered into to hedge the change in value of fixed price grain inventories and fixed price Forward Purchase Contracts that should be recognized in the future when the underlying inventory is sold, (ii) gains and losses from commodity derivatives realized in prior periods but associated with inventory sold in the current period, (iii) net realizable value adjustments to inventories occurring in the period, which otherwise would have been recognized in the future when the underlying inventory is sold, and (iv) net realizable value adjustments recognized in prior periods but associated with inventory sold in the current period, and excluding Section 16 officer transition expenses, the recapture of non-cash stock compensation primarily associated with the departure of Section 16 officers, the gain upon the extinguishment of the PPP loan, and non-operating expenses, which are primarily gains and losses on foreign exchange transactions and losses on the disposals of land, buildings, and equipment.
We provide in the table below a reconciliation of net loss, which is the most directly comparable GAAP financial measure, to adjusted net loss. We provide adjusted net loss because we believe that this non-GAAP financial metric provides investors with useful supplemental information at this stage of commercialization as the amounts being adjusted affect the period-to-period comparability of our net losses and financial performance.
The table below presents a reconciliation of net loss to adjusted net loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
In Thousands
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Net loss (GAAP measure)
|
$
|
(4,807
|
)
|
|
$
|
(10,902
|
)
|
|
$
|
(14,835
|
)
|
|
$
|
(21,965
|
)
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative impact, net
|
|
(658
|
)
|
|
|
—
|
|
|
|
(447
|
)
|
|
|
—
|
|
|
Net realizable value adjustments to inventories
|
|
(859
|
)
|
|
|
2,221
|
|
|
|
(72
|
)
|
|
|
2,555
|
|
|
Section 16 officer transition expenses
|
|
13
|
|
|
|
77
|
|
|
|
2,734
|
|
|
|
437
|
|
|
Recapture of non-cash stock compensation
|
|
—
|
|
|
|
—
|
|
|
|
(2,540
|
)
|
|
|
(471
|
)
|
|
Gain upon extinguishment of Payroll Protection Program loan
|
|
(1,528
|
)
|
|
|
—
|
|
|
|
(1,528
|
)
|
|
|
—
|
|
|
Non-operating expenses
|
|
(6
|
)
|
|
|
8
|
|
|
|
(5
|
)
|
|
|
19
|
|
|
Adjusted net loss
|
$
|
(7,845
|
)
|
|
$
|
(8,596
|
)
|
|
$
|
(16,693
|
)
|
|
$
|
(19,425
|
)
|
We present adjusted net loss per share, a non-GAAP measure, and define it as net loss per share including adjustments necessary to present the underlying gross margin of our soybean product line, including (i) unrealized gains and losses associated with commodity derivatives entered into to hedge the change in value of fixed price grain inventories and fixed price Forward Purchase Contracts that should be recognized in the future when the underlying inventory is sold, (ii) gains and losses from commodity derivatives realized in
- 26 -
Table of Contents
prior periods but associated with inventory sold in the current period, (iii) net realizable value adjustments to inventories occurring in the period, which otherwise would have been recognized in the future when the underlying inventory is sold, and (iv) net realizable value adjustments recognized in prior periods but associated with inventory sold in the current period, and excluding Section 16 officer transition expenses, the recapture of non-cash stock compensation primarily associated with the departure of Section 16 officers, the gain upon the extinguishment of the PPP loan, and non-operating expenses, which are primarily gains and losses on foreign exchange transactions and losses on the disposals of land, buildings, and equipment.
We provide in the table below a reconciliation of net loss per share, which is the most directly comparable GAAP financial measure, to adjusted net loss per share. We provide adjusted net loss per share because we believe that this non-GAAP financial metric provides investors with useful supplemental information at this stage of commercialization as the amounts being adjusted affect the period-to-period comparability of our net losses per share and financial performance.
The table below presents a reconciliation of net loss per share to adjusted net loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Net loss per share (GAAP measure)
|
$
|
(0.13
|
)
|
|
$
|
(0.33
|
)
|
|
$
|
(0.40
|
)
|
|
$
|
(0.67
|
)
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Commodity derivative impact, net
|
|
(0.02
|
)
|
|
|
—
|
|
|
|
(0.01
|
)
|
|
|
—
|
|
|
Net realizable value adjustments to inventories
|
|
(0.02
|
)
|
|
|
0.07
|
|
|
|
—
|
|
|
|
0.08
|
|
|
Section 16 officer transition expenses
|
|
—
|
|
|
|
—
|
|
|
|
0.07
|
|
|
|
0.01
|
|
|
Recapture of non-cash stock compensation
|
|
—
|
|
|
|
—
|
|
|
|
(0.07
|
)
|
|
|
(0.01
|
)
|
|
Gain upon extinguishment of Payroll Protection Program loan
|
|
(0.04
|
)
|
|
|
—
|
|
|
|
(0.04
|
)
|
|
|
—
|
|
|
Non-operating expenses
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Adjusted net loss per share
|
$
|
(0.21
|
)
|
|
$
|
(0.26
|
)
|
|
$
|
(0.45
|
)
|
|
$
|
(0.59
|
)
|
We present adjusted EBITDA, a non-GAAP measure, and define it as net loss excluding interest, net, depreciation and amortization expenses, non-cash stock-based compensation expenses including the recapture of non-cash stock compensation primarily associated with the departure of Section 16 officers, Section 16 officer transition expenses, the gain upon the extinguishment of the PPP loan, and non-operating expenses, which are primarily gains and losses on foreign exchange transactions and losses on the disposals of land, buildings, and equipment, and including adjustments necessary to present the underlying gross margin of our soybean product line, including (i) unrealized gains and losses associated with commodity derivatives entered into to hedge the change in value of fixed price grain inventories and fixed price Forward Purchase Contracts that should be recognized in the future when the underlying inventory is sold, (ii) gains and losses from commodity derivatives realized in prior periods but associated with inventory sold in the current period, (iii) net realizable value adjustments to inventories occurring in the period, which otherwise would have been recognized in the future when the underlying inventory is sold, and (iv) net realizable value adjustments recognized in prior periods but associated with inventory sold in the current period.
We provide in the table below a reconciliation of net loss, which is the most directly comparable GAAP financial measure, to adjusted EBITDA. Because adjusted EBITDA excludes non-cash items and discrete or infrequently occurring items, we believe that adjusted EBITDA provides investors with useful supplemental information about the operational performance of our business and facilitates the period-to-period comparability of our financial results where certain items may vary significantly independent of our business performance.
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Table of Contents
The table below presents a reconciliation of net loss to adjusted EBITDA:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
In Thousands
|
2021
|
|
|
2020
|
|
|
2021
|
|
|
2020
|
|
|
Net loss (GAAP measure)
|
$
|
(4,807
|
)
|
|
$
|
(10,902
|
)
|
|
$
|
(14,835
|
)
|
|
$
|
(21,965
|
)
|
|
Non-GAAP adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
357
|
|
|
|
(154
|
)
|
|
|
703
|
|
|
|
244
|
|
|
Depreciation and amortization expenses
|
|
595
|
|
|
|
452
|
|
|
|
1,180
|
|
|
|
904
|
|
|
Stock-based compensation expenses
|
|
1,079
|
|
|
|
1,797
|
|
|
|
(371
|
)
|
|
|
3,068
|
|
|
Commodity derivative impact, net
|
|
(658
|
)
|
|
|
—
|
|
|
|
(447
|
)
|
|
|
—
|
|
|
Net realizable value adjustments to inventories
|
|
(859
|
)
|
|
|
2,221
|
|
|
|
(72
|
)
|
|
|
2,555
|
|
|
Section 16 officer transition expenses
|
|
13
|
|
|
|
77
|
|
|
|
2,734
|
|
|
|
437
|
|
|
Gain upon extinguishment of Payroll Protection Program loan
|
|
(1,528
|
)
|
|
|
—
|
|
|
|
(1,528
|
)
|
|
|
—
|
|
|
Non-operating expenses
|
|
(6
|
)
|
|
|
8
|
|
|
|
(5
|
)
|
|
|
19
|
|
|
Adjusted EBITDA
|
$
|
(5,814
|
)
|
|
$
|
(6,501
|
)
|
|
$
|
(12,641
|
)
|
|
$
|
(14,738
|
)
|