Benson Hill(BHIL) - 2023 Q1 - Quarterly Report

Part I. Financial Information Item 1. Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business activities, financial instruments, and segment information Condensed Consolidated Balance Sheets (Unaudited) The balance sheet shows a decrease in total assets from $500,920 thousand at December 31, 2022, to $448,914 thousand at March 31, 2023, primarily driven by a reduction in marketable securities and cash | Metric | March 31, 2023 (USD in Thousands) | December 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------- | :-------------------------------- | :----------------------------------- | :------------------------ | | Total Assets | $448,914 | $500,920 | $(52,006) | | Total Liabilities | $254,275 | $307,018 | $(52,743) | | Total Stockholders' Equity | $194,639 | $193,902 | $737 | | Cash and cash equivalents | $20,399 | $25,053 | $(4,654) | | Marketable securities | $89,873 | $132,121 | $(42,248) | | Warrant liability | $9,107 | $24,285 | $(15,178) | | Conversion option liability | $1,572 | $8,091 | $(6,519) | Condensed Consolidated Statements of Operations (Unaudited) The company significantly improved its financial performance for the three months ended March 31, 2023, reporting a net loss of $(3,054) thousand, a substantial reduction from $(16,576) thousand in the prior year period | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | YoY Change (%) | | :---------------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | :------------- | | Revenues | $134,643 | $66,126 | $68,517 | 103.6% | | Cost of sales | $125,120 | $75,061 | $50,059 | 66.7% | | Gross profit (loss) | $9,523 | $(8,935) | $18,458 | N/A | | Loss from operations | $(19,286) | $(41,485) | $22,199 | (53.5%) | | Net loss | $(3,054) | $(16,576) | $13,522 | (81.6%) | | Basic and diluted net loss per common share | $(0.02) | $(0.10) | $0.08 | (80.0%) | Condensed Consolidated Statements of Comprehensive Loss (Unaudited) The total comprehensive loss for the three months ended March 31, 2023, significantly decreased to $(2,198) thousand from $(19,200) thousand in the prior year, primarily due to a substantial reduction in net loss and positive comprehensive income from marketable securities | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Net loss | $(3,054) | $(16,576) | $13,522 | | Foreign currency comprehensive loss | $0 | $(65) | $65 | | Marketable securities comprehensive income (loss) | $856 | $(2,559) | $3,415 | | Total other comprehensive income (loss) | $856 | $(2,624) | $3,480 | | Total comprehensive loss | $(2,198) | $(19,200) | $17,002 | Condensed Consolidated Statements of Stockholders' Equity (Unaudited) Stockholders' equity increased slightly from $193,902 thousand at December 31, 2022, to $194,639 thousand at March 31, 2023, primarily due to stock option exercises and stock-based compensation expense, partially offset by the comprehensive loss | Metric | December 31, 2022 (USD in Thousands) | March 31, 2023 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------------------- | :----------------------------------- | :-------------------------------- | :------------------------ | | Total Stockholders' Equity | $193,902 | $194,639 | $737 | | Common Shares Outstanding | 206,668 | 207,459 | 791 | | Additional Paid-In Capital | $609,450 | $612,385 | $2,935 | | Accumulated Deficit | $(408,474) | $(411,528) | $(3,054) | | Accumulated Other Comprehensive Loss | $(7,095) | $(6,239) | $856 | Condensed Consolidated Statements of Cash Flows (Unaudited) For the three months ended March 31, 2023, net cash used in operating activities decreased significantly to $(37,693) thousand from $(53,192) thousand in the prior year, while investing activities shifted to a net provision of cash, and financing activities saw a substantial decrease in cash inflows | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Net cash used in operating activities | $(37,693) | $(53,192) | $15,499 | | Net cash provided/(used) by investing activities | $38,994 | $(11,614) | $50,608 | | Net cash (used)/provided by financing activities | $(3,515) | $89,885 | $(93,400) | | Net (decrease) increase in cash and cash equivalents | $(2,214) | $25,014 | $(27,228) | | Cash, cash equivalents and restricted cash, end of period | $41,107 | $103,977 | $(62,870) | Notes to the Condensed Consolidated Financial Statements (Unaudited) The notes provide detailed explanations of the company's business, liquidity, accounting policies, and financial instruments, including the divestiture of the Fresh segment, ongoing liquidity management, and fair value changes of financial instruments - Financial statements are prepared in conformity with U.S. GAAP for interim reporting and SEC regulations, with reclassifications made to prior period balances for consistency[11][291] - The company is an "emerging growth company" and intends to rely on JOBS Act exemptions, including extended transition periods for new accounting standards and reduced disclosure requirements[12][34][292][293][243][244] 1. Description of Business Benson Hill, Inc. is a food technology company focused on unlocking the natural genetic diversity of plants using its CropOS platform to design more nutritious, flavorful, and accessible food - Benson Hill is a food technology company leveraging its CropOS platform and advanced breeding techniques to develop more nutritious and sustainable food products from plants[29][151] - The company's operations include soy crushing and manufacturing in Creston, Iowa, a soy crushing facility in Seymour, Indiana, and dry pea processing in North Dakota[29][151] 1. Liquidity and Going Concern The company reported a net loss from continuing operations and negative cash flows from operating activities for Q1 2023, with an accumulated deficit, but management believes it can meet obligations for the next 12 months through a Liquidity Improvement Plan - The company incurred a net loss of $4,845 thousand from continuing operations and used $37,693 thousand in operating cash flows for Q1 2023, with an accumulated deficit of $411,528 thousand[312] - Management has a Liquidity Improvement Plan to meet obligations for the next 12 months, involving operational efficiencies, exploring strategic options for the Seymour facility, potential equity financing, and refinancing up to $100 million in high-cost debt[289][312][184] - An amendment to the Convertible Loan and Security Agreement extended the interest-only period through Q2 2024 and allowed restricted cash to count towards minimum liquidity covenants[289] 2. Summary of Significant Accounting Policies The financial statements are prepared in accordance with U.S. GAAP for interim reporting and SEC regulations, with certain prior period reclassifications, and the company operates as an "emerging growth company" utilizing associated exemptions Basis of Presentation and Principles of Consolidation The condensed consolidated financial statements include the accounts of Benson Hill and its wholly-owned subsidiaries, with all intercompany transactions eliminated, prepared in accordance with U.S. GAAP for interim reporting and SEC regulations - The unaudited condensed consolidated financial statements include the accounts of Benson Hill and its wholly-owned subsidiaries, with all intercompany transactions and balances eliminated[291] - Statements are prepared in accordance with U.S. GAAP for interim financial reporting and SEC regulations, with all necessary adjustments included for fair presentation[291] Emerging Growth Company Status Benson Hill qualifies as an "emerging growth company" under the JOBS Act and plans to leverage the extended transition period for new accounting standards and reduced reporting requirements until at least December 31, 2023 - Benson Hill is an "emerging growth company" and will utilize the extended transition period for new or revised financial accounting standards, expecting to remain so at least through December 31, 2023[34][243] - The company will rely on JOBS Act exemptions, including not requiring an auditor's attestation report on internal control over financial reporting and reduced compensation disclosure[12][216] Cash, Cash Equivalents and Restricted Cash Cash equivalents include short-term, highly liquid investments with maturities of 90 days or less, while restricted cash, mainly from asset sales covenants, is classified as non-current if expected to remain restricted for over one year - Cash equivalents are defined as short-term, highly liquid investments with maturities of 90 days or less at acquisition[14] - Restricted cash, mainly from asset sale proceeds under lender covenants, is classified as non-current if restrictions are expected to last over one year[14] | Metric | March 31, 2023 (USD in Thousands) | | :------------------------------------------------------------------ | :-------------------------------- | | Cash and cash equivalents | $23,195 | | Restricted cash, current | $17,912 | | Total cash, cash equivalents and restricted cash (cash flows statement) | $41,107 | Recently Issued Accounting Guidance Not Yet Effective The company is evaluating the impact of ASU 2020-06 (Debt) on its financial statements, which reduces accounting models for convertible debt instruments, and is affected by the deferred sunset date of ASU 2020-04 (Reference Rate Reform) on its floating rate debt - The company is evaluating ASU 2020-06 (Debt), which simplifies accounting for convertible debt instruments by reducing the number of accounting models[38] - The FASB deferred the sunset date for ASU 2020-04 (Reference Rate Reform) to December 31, 2024, impacting the company's floating rate revolving credit facility, term loan, and equipment loan[294] 3. Business Combinations On December 30, 2021, Benson Hill acquired ZFS Creston, LLC, a food-grade white flake and soy flour manufacturing operation, for $103,099 thousand in cash, including a working capital adjustment - Benson Hill acquired ZFS Creston, LLC, a food-grade white flake and soy flour manufacturing operation, on December 30, 2021[295] - The aggregate cash consideration for the ZFS Creston acquisition was $103,099 thousand, including a $1,034 thousand working capital adjustment payment in Q1 2022[295] 4. Discontinued Operations The company entered into an agreement on December 29, 2022, to sell J&J Produce, Inc. (the Fresh segment) for $3,000 thousand, with the closing scheduled for June 30, 2023, leading to its reclassification as discontinued operations - Benson Hill agreed to sell J&J Produce, Inc. (Fresh segment) for $3,000 thousand, with closing expected by June 30, 2023[8][16][141] - J&J Produce, Inc. also sold an agricultural production and processing facility for $18,000 thousand[8][17][141] - The Fresh segment's operations have been reclassified as discontinued operations in the condensed consolidated statements of operations for all periods presented[17][141] | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Revenues | $22,335 | $26,319 | | Cost of sales | $18,733 | $22,606 | | Gross profit | $3,602 | $3,713 | | Net earnings from discontinued operations, net of tax | $1,791 | $848 | 5. Fair Value Measurements The company measures financial instruments at fair value using a three-tier hierarchy, with marketable securities primarily Level 2, and warrant and conversion option liabilities a mix of Level 1 and Level 3, which significantly decreased due to valuation changes - Financial instruments are measured at fair value using a three-tier hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable inputs other than Level 1), and Level 3 (unobservable inputs)[20][71][43][298] | Asset/Liability | Level 1 (USD in Thousands) | Level 2 (USD in Thousands) | Level 3 (USD in Thousands) | Total (USD in Thousands) | | :-------------------------- | :------------------------- | :------------------------- | :------------------------- | :----------------------- | | March 31, 2023 | | | | | | Corporate bonds | — | $75,625 | — | $75,625 | | Preferred stock | — | $14,248 | — | $14,248 | | Marketable securities | — | $89,873 | — | $89,873 | | Warrant liabilities | $2,208 | — | $6,899 | $9,107 | | Conversion option liability | — | — | $1,572 | $1,572 | | Total liabilities | $2,208 | — | $8,471 | $10,679 | | December 31, 2022 | | | | | | U.S. treasury securities | $1,059 | — | — | $1,059 | | Corporate bonds | — | $116,616 | — | $116,616 | | Preferred stock | — | $14,446 | — | $14,446 | | Marketable securities | $1,059 | $131,062 | — | $132,121 | | Warrant liabilities | $5,469 | — | $18,816 | $24,285 | | Conversion option liability | — | — | $8,091 | $8,091 | | Total liabilities | $5,469 | — | $26,907 | $32,376 | - The fair value of Level 3 warrant and conversion option liabilities decreased from $26,907 thousand at December 31, 2022, to $8,471 thousand at March 31, 2023, primarily due to changes in estimated fair value[73][75][49] 6. Investments in Available-for-Sale Securities The company invests in marketable debt securities, primarily investment-grade corporate bonds and preferred stock, classified as available-for-sale, with a fair value of $89,873 thousand at March 31, 2023, and significant unrealized losses - The company holds marketable debt securities, primarily investment-grade corporate bonds and preferred stock, classified as available-for-sale[50][52] | Investment Type | Cost Basis (USD in Thousands) | Gross Unrealized Gains (USD in Thousands) | Gross Unrealized Losses (USD in Thousands) | Fair Value (USD in Thousands) | | :-------------------------- | :---------------------------- | :---------------------------------------- | :----------------------------------------- | :---------------------------- | | March 31, 2023 | | | | | | Corporate notes and bonds | $80,287 | $2 | $(4,663) | $75,626 | | Preferred stock | $15,379 | — | $(1,132) | $14,247 | | Total Investments | $95,666 | $2 | $(5,795) | $89,873 | | December 31, 2022 | | | | | | U.S. government and agency securities | $1,059 | — | — | $1,059 | | Corporate notes and bonds | $122,257 | — | $(5,641) | $116,616 | | Preferred stock | $15,454 | — | $(1,008) | $14,446 | | Total Investments | $138,770 | — | $(6,649) | $132,121 | - The aggregate fair value of investments with unrealized losses was $88,374 thousand at March 31, 2023, and $131,019 thousand at December 31, 2022[53] 7. Derivatives The company uses exchange-traded futures to manage price risk for forecasted purchases and sales of soybeans and soybean-related products, with these derivatives centrally cleared and cash-settled daily, resulting in a fair value approximating zero on the balance sheet - Benson Hill uses exchange-traded futures to manage price risk for forecasted purchases of soybeans and sales of soybean oil and soybean meal[54][80] - All derivative contracts are centrally cleared and cash-settled daily, resulting in a fair value approximating zero on the balance sheet[46][81][83] - Gains/losses on soybean derivatives are recorded in cost of sales, while those on soybean oil and meal derivatives are recorded in revenues[84] | Derivative Type | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | | :-------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Soybeans | $(664) | $(5,347) | | Soybean oil | $406 | $(6,423) | | Soybean meal | $93 | $(776) | | Total | $(165) | $(12,546) | 8. Inventories Total inventories decreased from $62,110 thousand at December 31, 2022, to $54,549 thousand at March 31, 2023, primarily due to a reduction in raw materials and supplies, with work-in-process inventory including seed provided to contracted growers and crops under production | Inventory Component | March 31, 2023 (USD in Thousands) | December 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :----------------------- | :-------------------------------- | :----------------------------------- | :------------------------ | | Raw materials and supplies | $23,342 | $37,483 | $(14,141) | | Work-in-process | $4,128 | $4,977 | $(849) | | Finished goods | $27,079 | $19,650 | $7,429 | | Total inventories | $54,549 | $62,110 | $(7,561) | - Work-in-process inventory includes seed provided to contracted seed producers and growers, and direct costs of land preparation, seed, planting, growing, and maintenance for crops under production[113] 9. Debt The company's total long-term debt was $103,447 thousand at March 31, 2023, including DDB Term and Equipment Loans, Convertible Notes Payable, and Equipment Financing, with the Convertible Loan and Security Agreement amended in March 2023 to extend the interest-only period and modify covenants | Debt Instrument | March 31, 2023 (USD in Thousands) | December 31, 2022 (USD in Thousands) | | :---------------------------------- | :-------------------------------- | :----------------------------------- | | DDB Term loan | $7,109 | $7,393 | | DDB Equipment loan | $1,050 | $1,225 | | Convertible Notes Payable | $112,700 | $110,700 | | Equipment Financing | $777 | $873 | | Less: unamortized debt discount and debt issuance costs | $(16,021) | $(14,039) | | Less: current maturities of long-term debt | $(2,244) | $(2,242) | | Long-term debt | $103,447 | $103,991 | - The Convertible Loan and Security Agreement was amended in March 2023, extending the interest-only period through Q2 2024, allowing restricted cash for liquidity covenants, increasing the final balloon payment by 200 basis points, and resetting the prime rate floor from 5.75% to 7.75%[92][140] - The company was in compliance with financial covenants under both the DDB Credit Agreement and the Convertible Loan and Security Agreement as of March 31, 2023[88][121] 10. Accrued Expenses and Other Current Liabilities Total accrued expenses and other current liabilities decreased from $33,435 thousand at December 31, 2022, to $19,010 thousand at March 31, 2023, primarily driven by reductions in payroll and employee benefits, and insurance premiums | Component | March 31, 2023 (USD in Thousands) | December 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------- | :-------------------------------- | :----------------------------------- | :------------------------ | | Payroll and employee benefits | $4,223 | $12,306 | $(8,083) | | Insurance premiums | $1,210 | $4,687 | $(3,477) | | Professional services | $1,815 | $2,842 | $(1,027) | | Contract liability | $8,005 | $9,965 | $(1,960) | | Total | $19,010 | $33,435 | $(14,425) | 11. Income Taxes The company's effective tax rate was 0% for the three months ended March 31, 2023 and 2022, due to a full valuation allowance on pretax losses, with tax expense relating to minor foreign deferred tax liabilities and amortization of indefinite-lived intangibles - The effective tax rate was 0% for Q1 2023 and Q1 2022 due to a full valuation allowance on pretax losses[124][174] - Tax expense primarily relates to minor foreign deferred tax liabilities and the amortization of indefinite-lived intangibles[124][174] 12. Comprehensive Income Other comprehensive income (loss) consists of unrealized gains and losses on available-for-sale marketable debt securities and foreign currency translation adjustments, with the company reporting $856 thousand in other comprehensive income for Q1 2023, a significant improvement from a loss of $(2,624) thousand in Q1 2022 - Other comprehensive income (loss) includes unrealized gains/losses on available-for-sale marketable debt securities and foreign currency translation adjustments from Brazilian and Canadian subsidiaries[125] | Component | March 31, 2023 (USD in Thousands) | March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------------------------- | :-------------------------------- | :-------------------------------- | :------------------------ | | Unrealized Gains/(Losses) on Marketable Securities | $(5,854) | $(3,286) | $(2,568) | | Other comprehensive income (loss) | $856 | $(2,624) | $3,480 | 13. Loss Per Common Share Basic and diluted net loss per common share from continuing operations was $(0.03) for Q1 2023, a significant improvement from $(0.11) in Q1 2022, with potentially dilutive securities excluded from diluted EPS calculations due to the net loss | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss from continuing operations | $(4,845) | $(17,424) | | Weighted average common shares outstanding, basic and diluted | 187,113 | 160,711 | | Net loss from continuing operations per common share, basic and diluted | $(0.03) | $(0.11) | - Potentially dilutive securities (warrants, stock options, restricted stock units) were excluded from diluted EPS calculations for Q1 2023 and Q1 2022 due to the company incurring a net loss[101] 14. Commitments and Contingencies The company accrues for contingencies when a loss is probable and determinable, with no material litigation accruals as of March 31, 2023, and has committed to purchase $83.9 million in seed and grain at fixed prices for 2023-2024 - The company accrues for contingencies when a loss is probable and reasonably determinable, with no litigation accruals as of March 31, 2023, and December 31, 2022[102] - Commitments include $83.9 million for seed and grain purchases at fixed prices for 2023-2024, with $76.3 million due within one year, and additional variable-priced commitments for 1.1 million bushels[103] 15. Segment Information Following the divestiture of its Fresh segment, Benson Hill now operates as a single reportable segment, "Ingredients," with the Chief Operating Decision Maker (CODM) reviewing financial information on a consolidated basis, and revenue disaggregated into Proprietary and Non-Proprietary categories - After divesting the Fresh segment, Benson Hill operates as one operating and reportable segment: Ingredients[131] - The CODM reviews financial information on a consolidated basis for operating decisions, resource allocation, and performance evaluation[131] | Revenue Category | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | | :--------------- | :--------------------------------------------------- | :--------------------------------------------------- | | Proprietary | $25,323 | $14,090 | | Non-Proprietary | $109,320 | $52,036 | | Total Revenues | $134,643 | $66,126 | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition and results of operations, highlighting significant improvements in revenue and gross profit, ongoing liquidity management efforts, and strategic initiatives, along with cautionary notes regarding forward-looking statements Cautionary Note Regarding Forward-Looking Statements The report contains forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially from projections, and investors are cautioned not to place undue reliance on these statements - Forward-looking statements are subject to known and unknown risks, uncertainties, and assumptions that may cause actual results to differ materially from projections[133] - Key factors that could affect future results include the success of the Liquidity Improvement Plan, debt refinancing, capital acquisition, divestiture benefits, and market conditions[108] - The company disclaims any obligation to publicly update or revise forward-looking statements, except as required by law[150] Overview Benson Hill is a food technology company using its CropOS platform to develop nutritious and sustainable plant-based food ingredients, executing a Liquidity Improvement Plan to enhance capital structure and reduce costs, while also engaging in strategic collaborations and divesting non-core assets - Benson Hill is a food technology company focused on unlocking plant genetic diversity with its CropOS platform to create healthier, more accessible, and sustainable food[151] - The company is implementing a Liquidity Improvement Plan to improve liquidity by an estimated $65 million to $75 million by the end of 2024 through operating efficiencies, restructuring, and working capital reduction[153][138] - The company partners with farmers and ingredient companies to commercialize proprietary innovations in soybean and yellow pea for various food and feed markets[152] Liquidity Improvement Plan The Board of Directors committed to a Liquidity Improvement Plan on March 27, 2023, aiming to improve liquidity by an estimated $65 million to $75 million by the end of 2024 through operational efficiencies, restructuring, and reduced working capital requirements - The Liquidity Improvement Plan, committed on March 27, 2023, aims to improve liquidity by an estimated $65 million to $75 million by the end of 2024[153] - The plan includes improving operating efficiencies, restructuring parts of the organization, and reducing working capital requirements[138] - Potential costs associated with the plan include those for exploring strategic options for the Seymour, Indiana facility and employee termination costs[138] COVID-19 The company modified business practices in response to the COVID-19 pandemic, including remote work and social distancing, which have not materially impacted business operations to date, aside from decreased travel and minor delays in laboratory supplies - The company modified business practices due to COVID-19, including limiting travel, remote work, social distancing, and enhanced sanitary measures[139] - No material impact on business operations has been experienced from COVID-19, except for decreased travel and delays in laboratory supplies and services[139] Convertible Notes Payable The company has borrowed $100.0 million under the Convertible Loan and Security Agreement, which was amended in March 2023 to extend the interest-only period, allow restricted cash for liquidity covenants, increase the final balloon payment, and reset the prime rate floor - Benson Hill has borrowed an aggregate principal sum of $100.0 million under the Convertible Loan and Security Agreement[140] - A March 2023 amendment extended the interest-only period to Q2 2024, allowed restricted cash to count towards liquidity covenants, increased the final balloon payment by 200 basis points, and reset the prime rate floor to 7.75%[140] - The amendment also modified the exercise price of the Convertible Notes Payable Warrants[140] Divestiture of J&J Produce, Inc. On December 29, 2022, the company agreed to sell J&J Produce, Inc. (the Fresh segment) for $3.0 million, with closing expected by June 30, 2023, a strategic decision that led to its reclassification as a discontinued operation - Benson Hill entered into a Stock Purchase Agreement on December 29, 2022, to sell J&J Produce, Inc. (the Fresh segment) for $3.0 million[141] - The closing of the divestiture is scheduled for June 30, 2023[141] - The strategic decision to exit the Fresh segment resulted in its classification as a discontinued operation[141] Collaboration Agreement with ADM On August 5, 2022, Benson Hill entered into an exclusive collaboration and marketing rights agreement with Archer-Daniels-Midland Company (ADM) to commercialize high-protein soy ingredients using Benson Hill's proprietary soybean genetics in North America, including upfront cash, annual technology access fees, value sharing, and potential milestone payments - Benson Hill entered an exclusive collaboration with ADM on August 5, 2022, to commercialize high-protein soy ingredients in North America using proprietary soybean genetics[142][159] - The agreement includes an upfront cash payment, annual technology access fees, value sharing payments, and potential milestone payments[159] - The collaboration is set to remain in effect until December 31, 2027, with a possible extension to December 31, 2030[159] PIPE Investment On March 24, 2022, the company completed a private placement (PIPE Investment) of 26,150 units for approximately $85.0 million, providing $80.8 million in net proceeds after transaction costs, with each unit including one common stock share and a warrant to purchase one-third of one common stock share - A PIPE Investment was completed on March 24, 2022, raising approximately $85.0 million in gross proceeds[160] - The investment involved the private placement of 26,150 units, each consisting of one common stock share and a warrant to purchase one-third of one common stock share[160] - Net proceeds from the PIPE Investment were $80.8 million after $4.2 million in transaction costs, providing additional liquidity[160] Key Components of Statement of Operations This section outlines the primary drivers of the company's revenues and expenses, with revenues generated from product sales and commissions, cost of sales including all costs from purchase to distribution, operating expenses categorized into R&D and SG&A, and other income/expense primarily relating to interest and fair value changes of financial instruments Revenue Revenue is primarily generated from sales of soybean grain, oil, meal, flakes, flour, processed yellow peas, and seeds, with the company using exchange-traded futures to manage price risk for forecasted sales of soybean oil and meal, recognizing gains/losses in revenue - Revenue is primarily derived from sales of soybean grain, oil, meal, flakes, flour, texturized flour, processed yellow peas, and seeds[161] - Exchange-traded futures are used to manage price risk for forecasted sales of soybean oil and meal, with changes in fair value immediately recognized in earnings[162] Cost of Sales Cost of sales includes all expenses incurred to purchase, process, and deliver products or services, covering direct costs from land preparation to distribution for farmed produce, and acquisition, warehousing, packaging, and distribution for purchased produce, with hedging gains/losses on soybean purchases recorded in cost of sales - Cost of sales includes all costs to purchase, process, and provide products or services to customers[164] - For farmed produce, costs include land preparation, seed, planting, growing, maintenance, packaging, and distribution; for purchased produce, it includes acquisition, warehousing, packaging, and distribution[164] - Gains and losses from exchange-traded futures used to manage price risk for forecasted soybean purchases are recorded in cost of sales[166] Research and Development Research and development expenses cover activities to discover and develop products and advance intellectual property, primarily including employee-related expenses, contractor fees, trait validation, greenhouse and field trials, laboratory supplies, licensing, and IT expenses - R&D expenses cover activities for product discovery, development, and intellectual property advancement[167] - Costs include employee-related expenses, contractor fees, trait validation, greenhouse and field trials, laboratory supplies, licensing, and IT expenses[167] Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses include employee-related costs for sales and business development, executive, legal, intellectual property, finance, and human resources functions, as well as unallocated facility and IT expenses, professional fees, and consulting costs - SG&A expenses include employee-related costs for sales, business development, and corporate functions (executive, legal, IP, finance, HR)[194] - Other SG&A costs include unallocated facility and IT expenses, professional fees (auditing, tax, legal), patent maintenance, and consulting[194] Total Other (Income) Expense, Net Total other expense (income), net primarily comprises interest expense from financing obligations, amortization of debt discount and commitment fees, remeasurements of warrant liability, and interest related to finance leases, offset by interest earned on cash and marketable securities - Total other expense (income), net primarily consists of interest expense from financing obligations, amortization of debt discount, commitment fees, and remeasurements of warrant liability[195] - It also includes interest related to finance leases, reduced by interest earned on cash and marketable securities[195] Results from Continuing Operations The company's continuing operations showed significant improvement for the three months ended March 31, 2023, with a substantial increase in revenue and a shift from gross loss to gross profit, leading to a reduced net loss, driven by operational efficiencies, commercial activities, and favorable commodity pricing Comparison of the Three Months Ended March 31, 2023 and 2022 Revenues for Q1 2023 increased by 104% to $134.6 million compared to Q1 2022, driven by favorable commodity pricing, demand for yellow pea ingredients, and increased shipments of proprietary soybean food ingredients, with hedging activities resulting in a gain of $0.5 million in 2023 | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | YoY Change (%) | | :---------------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | :------------- | | Revenues | $134,643 | $66,126 | $68,517 | 103.6% | | Proprietary Revenue | $25,323 | $14,090 | $11,233 | 79.7% | | Non-Proprietary Revenue | $109,320 | $52,036 | $57,284 | 110.1% | - Revenue increase was driven by favorable commodity pricing for non-proprietary soybean ingredients and crude oil, demand for yellow pea ingredients, and increased shipments of proprietary non-GMO soybean food ingredients[197] - Hedging activities resulted in gains of $0.5 million in Q1 2023, a significant improvement from losses of $7.2 million in Q1 2022[197] Gross Profit (Loss) The company reported a gross profit of $9.5 million for Q1 2023, a significant turnaround from a gross loss of $8.9 million in Q1 2022, due to operational efficiency gains, commercial activities in the closed-loop business model, and a profit contribution from a partnership and licensing agreement | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :------------------ | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Gross profit (loss) | $9,523 | $(8,935) | $18,458 | - The increase in gross profit was driven by significant operational efficiency gains and commercial activities within the closed-loop business model, and a profit contribution from a partnership and licensing agreement[171] - Hedging activities resulted in $0.2 million in losses in Q1 2023, a substantial improvement from $12.5 million in losses in Q1 2022[171] Research and Development Expenses Research and development expenses for Q1 2023 were $12.6 million, a slight increase of $0.3 million compared to Q1 2022, as the company continues to invest in technology, facilities (Crop Accelerator), and workforce to drive innovation | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | YoY Change (%) | | :--------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | :------------- | | Research and development | $12,642 | $12,295 | $347 | 2.8% | - Continued investment in technology costs, facilities expenses (Crop Accelerator), and workforce-related expenses to drive innovation[172] Selling, General and Administrative Expenses Selling, general and administrative expenses decreased by $4.1 million to $16.2 million in Q1 2023 compared to Q1 2022, primarily due to a reduction in non-cash stock-based compensation expense, influenced by a decline in the common stock share price | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | YoY Change (%) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | :------------- | | Selling, general and administrative expenses | $16,167 | $20,255 | $(4,088) | (20.2%) | - The decrease was primarily driven by a reduction in non-cash stock-based compensation expense, influenced by the decline in the common stock share price[172] Total Other (Income) Expense, Net Total other income, net, decreased by $9.6 million to $14.5 million in Q1 2023 compared to Q1 2022, largely due to a less steep decline in the valuation of warrant and conversion liabilities, influenced by fluctuations in the common stock share price and equity volatility | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :---------------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Total other (income) expense, net | $(14,456) | $(24,022) | $9,566 | | Change in fair value of warrants and conversion options | $(21,696) | $(31,741) | $10,045 | - The decrease in total other income was largely due to a less steep decline in the valuation of warrant and conversion liabilities in Q1 2023 compared to Q1 2022[173] - This change was influenced by fluctuations in the common stock share price and equity volatility[173] Income Tax (Benefit) Expense The company recorded a minor income tax expense of $15 thousand in Q1 2023, compared to a benefit of $(39) thousand in Q1 2022, with no net income tax benefit recorded for U.S. net operating losses due to a full valuation allowance | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :----------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Income tax expense (benefit) | $15 | $(39) | $54 | - No net income tax benefit was recorded for U.S. net operating losses due to uncertainty in realizing a benefit and a full valuation allowance[174] Adjusted EBITDA Adjusted EBITDA for Q1 2023 was a loss of $(10.7) million, representing a $20.4 million reduction in loss compared to Q1 2022, driven by a decrease in net loss and a less steep decline in the fair value of warrants and conversion options, with Adjusted EBITDA being a non-GAAP measure used by management to assess operating performance | Metric | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :----------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Adjusted EBITDA | $(10,733) | $(31,141) | $20,408 | - The improvement in Adjusted EBITDA was driven by a $13.5 million decrease in net loss and a $10.0 million less steep decline in the fair value of warrants and conversion options[179] - Adjusted EBITDA is a non-GAAP financial measure used by management and investors to compare operating performance, excluding items like stock-based compensation, depreciation, and interest expense[175][176] Liquidity and Capital Resources The company's liquidity at March 31, 2023, included $110.3 million in cash and marketable securities and $17.9 million in restricted cash, and despite significant losses and cash usage from operations, management believes its Liquidity Improvement Plan and potential refinancing efforts will enable it to meet obligations for the next 12 months - As of March 31, 2023, liquidity included $110.3 million in cash and marketable securities and $17.9 million in restricted cash from continuing operations[204] - The company incurred a net loss of $4.8 million from continuing operations and used $37.7 million in cash from operating activities for Q1 2023[183] - Management's liquidity plans include improving operating efficiencies, exploring strategic options for the Seymour facility, potential equity financing, and attempting to refinance high-cost debt with a conventional facility of up to $100 million[184] Summary of Cash Flows Net cash used in operating activities decreased by $15.5 million to $(37.7) million in Q1 2023, primarily due to a reduced net loss and a less steep decline in warrant/conversion option valuations, while investing activities shifted to a net inflow of $39.0 million, and financing activities saw a $93.4 million decrease in cash inflows | Cash Flow Activity | Three Months Ended March 31, 2023 (USD in Thousands) | Three Months Ended March 31, 2022 (USD in Thousands) | Change (USD in Thousands) | | :-------------------------------------- | :--------------------------------------------------- | :--------------------------------------------------- | :------------------------ | | Net cash used in operating activities | $(37,693) | $(53,192) | $15,499 | | Net cash provided/(used) by investing activities | $38,994 | $(11,614) | $50,608 | | Net cash (used)/provided by financing activities | $(3,515) | $89,885 | $(93,400) | | Net (decrease) increase in cash and cash equivalents | $(2,214) | $25,014 | $(27,228) | Operating Activities Net cash used in operating activities decreased by $15.5 million to $(37.7) million for Q1 2023, primarily due to a $13.5 million decrease in net loss and a $10.0 million less steep decline in warrant and conversion option valuations, partially offset by a $2.9 million decrease in stock compensation expense - Net cash used in operating activities decreased by $15.5 million to $(37.7) million in Q1 2023[185] - This decrease was primarily due to a $13.5 million reduction in net loss and a $10.0 million less steep decline in warrant and conversion option valuations[185][186] - The improvement was partially offset by a $2.9 million decrease in stock compensation expense[186] Investing Activities Net cash provided by investing activities was $39.0 million for Q1 2023, a $50.6 million increase in cash inflow compared to a net use of $11.6 million in Q1 2022, mainly driven by a $64.9 million increase in maturities and sales of marketable securities, partially offset by $23.3 million in purchases - Net cash provided by investing activities was $39.0 million in Q1 2023, an increase of $50.6 million from a net use of $11.6 million in Q1 2022[187] - The increase was primarily driven by a $64.9 million increase in maturities and sales of marketable securities, partially offset by $23.3 million in purchases[187] Financing Activities Net cash used in financing activities was $3.5 million for Q1 2023, a $93.4 million decrease in cash inflows compared to a source of $89.9 million in Q1 2022, primarily attributable to the absence of the $85.0 million PIPE Investment that occurred in Q1 2022 - Net cash used in financing activities was $3.5 million in Q1 2023, a $93.4 million decrease in cash inflows compared to Q1 2022[188] - The decrease is primarily attributable to the $85.0 million PIPE Investment in Q1 2022, which did not recur in Q1 2023[188] Commitments and Contingencies The company's commitments and contingencies are detailed in Note 14 of the financial statements, with no off-balance sheet arrangements reported - Commitments and contingencies are incorporated by reference from Note 14 of the condensed consolidated financial statements[189] Off-Balance Sheet Arrangements The company has not entered into any off-balance sheet arrangements as defined by SEC rules and regulations - The company has not entered into off-balance sheet arrangements as defined by SEC rules and regulations[212] Critical Accounting Policies and Estimates The preparation of financial statements requires management to make significant estimates and assumptions, with no substantial changes to these critical accounting policies or estimates occurring during Q1 2023 - The preparation of condensed consolidated financial statements requires significant estimates and assumptions affecting reported amounts[190] - No substantial changes to critical accounting policies or estimates occurred during the three months ended March 31, 2023[242] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's market risk exposure primarily stems from potential changes in inflation, exchange rates, and interest rates, managing commodity price risk through hedging, though not always fully offsetting volatility, and not holding financial instruments for trading purposes Commodity Price Risk Benson Hill is affected by fluctuations in agricultural commodity prices, particularly for crops purchased using a commodity base price and commodity soybeans processed at its facilities, and while hedging transactions are used to manage these risks, they may not always fully offset price volatility - The company is affected by fluctuations in agricultural commodity prices for crops purchased using a commodity base price and commodity soybeans processed at its facilities[247] - Hedging transactions are used to manage commodity price risks, but may not sufficiently offset volatility[247] Interest Rate Risk Fluctuations in interest rates may impact the interest expense on the company's outstanding borrowings, which bear interest at a fixed base rate plus a floating rate, and the company does not use derivative financial instruments for hedging or speculative purposes related to interest rates - Fluctuations in interest rates may impact the interest expense on outstanding borrowings, which bear interest at a fixed base rate plus a floating rate[248] - The company does not use derivative financial instruments for hedging or speculative purposes related to interest rates[219] Credit Risk Credit risk related to accounts receivable is generally not significant due to a limited balance and routine assessment of customer creditworthiness, with the company not experiencing material losses from individual or groups of customers and not requiring collateral - Credit risk for accounts receivable is generally not significant due to a limited carrying balance and routine creditworthiness assessments[220] - The company has not experienced material losses from receivables and does not require collateral[220] Foreign Currency Exchange Risk The company faces foreign currency risks primarily from operating expenses and intercompany loans denominated in Canadian dollars and Brazilian reals, and while foreign currency transaction gains and losses have not been material to date, the company may consider hedging in the future - Foreign currency risks arise from operating expenses denominated in Canadian dollars and Brazilian reals, and intercompany loans in Brazilian reals[221] - Foreign currency transaction gains and losses have not been material to date, and the company has not engaged in hedging foreign currency transactions[221] Item 4. Controls and Procedures Management, including the CEO and CFO, evaluated the effectiveness of disclosure controls and procedures as of March 31, 2023, and concluded they were effective, however, a material weakness in internal control over financial reporting related to the historical Fresh segment remains unremediated Evaluation of Disclosure Controls and Procedures Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective as of March 31, 2023, designed to ensure timely and accurate reporting of information required by the Exchange Act - Management, with CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2023[223] - Disclosure controls are designed to ensure timely and accurate recording, processing, summarizing, and reporting of information required by the Exchange Act[249] Limitations on Controls and Procedures Management acknowledges that disclosure controls and procedures can only provide reasonable, not absolute, assurance of achieving objectives, as their design involves judgment in evaluating cost-benefit, and controls may become inadequate over time - Disclosure controls and procedures can provide only reasonable, not absolute, assurance that objectives are met[224] - The design of control systems involves judgment in evaluating cost-benefit relationships, and controls may become inadequate over time due to changing conditions or deteriorating compliance[224] Material Weakness in Internal Control Over Financial Reporting A material weakness in internal control over financial reporting was identified within the historical Fresh segment for the year ended December 31, 2022, and remains unremediated as of March 31, 2023, relating to the lack of designed, implemented, or tested transaction-level or IT General Controls - A material weakness in internal control over financial reporting was identified in the historical Fresh segment for the year ended December 31, 2022, and remains unremediated as of March 31, 2023[225] - The material weakness relates to the absence of designed, implemented, or tested transaction-level or IT General Controls within the historical Fresh segment[251] - A material weakness indicates a reasonable possibility that a material misstatement of financial statements would not be prevented or detected timely[225] Plan to Remediate Material Weakness in Internal Control Over Financial Reporting Management is in the process of divesting the Fresh segment, which is expected to remediate the material weakness upon full divestiture, and if not completed, the company plans to implement measures to improve internal controls related to that segment - Management is divesting the Fresh segment, which is expected to fully remediate the material weakness upon completion[252] - If divestiture is not completed, the company plans to implement measures to improve internal control over financial reporting for the Fresh segment[252] Changes in Internal Control over Financial Reporting Except for the unremediated material weakness in the Fresh segment, there were no other material changes in internal control over financial reporting during the three months ended March 31, 2023 - No material changes in internal control over financial reporting occurred during Q1 2023, except for the unremediated material weakness in the Fresh segment[261] Part II. Other Information Item 1. Legal Proceedings The company is not a party to any material litigation or other material legal proceedings, though it may be subject to ordinary course claims from time to time - The company is not a party to any material litigation or other material legal proceedings[230] - The company may be subject to legal proceedings and claims in the ordinary course of business[230] Item 1A. Risk Factors The company's Liquidity Improvement Plan, while intended to improve liquidity, carries risks that it may not achieve financial objectives or could negatively impact productivity, innovation, and revenue, and failure to refinance existing high-cost debt could also materially adversely affect the business - The Liquidity Improvement Plan may not achieve financial objectives, could adversely impact productivity, product innovations, and sales, and may have unforeseeable negative consequences[231][263][264] - Failure to retire existing high-cost debt and replace it with a conventional, lower-cost lending facility could materially adversely affect the business, financial condition, and ability to operate[233][255] - The company's ability to secure additional capital (debt or equity) is crucial for growth, and failure to do so could have significant negative consequences, including dilution for common stockholders[235] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no unregistered sales of equity securities or use of proceeds to report for the period - No unregistered sales of equity securities or use of proceeds to report[265] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities to report for the period - No defaults upon senior securities to report[234][256] Item 4. Mine Safety Disclosures Not applicable to the company - Mine Safety Disclosures are not applicable[266] Item 5. Other Information No other information to report for the period - No other information to report[234] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including various agreements, plans, and certifications - The exhibits include the Amended and Restated Stock Purchase Warrant, 2021 Omnibus Incentive Plan, 2022 Employee Stock Purchase Plan, Third Amendment to Loan Documents, and various certifications (CEO, CFO)[267] Signatures Signatures The report is signed by Matthew B. Crisp, Chief Executive Officer, and Dean Freeman, Chief Financial Officer, on May 10, 2023, certifying its submission pursuant to the Securities Exchange Act of 1934 - The report is signed by Matthew B. Crisp (CEO) and Dean Freeman (CFO) on May 10, 2023[260][269] - The signing certifies the report's submission pursuant to the requirements of the Securities Exchange Act of 1934[260]