Results of Operations - Three Months Ended September 30, 2022, Compared to Three
Months Ended September 30, 2021
Revenues of $10.3 million in the third quarter of 2022 increased $3.3 million,
or 48.3%, compared to the third quarter of 2021. This year-over-year increase
was due to higher core-SRB sales and strong growth from our MGI and Golden Ridge
milling operations.
Gross loss was $0.7 million in the third quarter of 2022, a $0.4 million
increase in gross loss compared to the third quarter of 2021. The increase in
gross loss was attributable to lower sales and cost overruns for our value-added
SRB derivatives business and higher gross losses at our Golden Ridge milling
operation versus a year ago, offset in part by improved profitability from our
core-SRB business and MGI milling operation.
Selling, general and administrative (SG&A) expenses were $1.8 million in the
third quarter of 2022 and the third quarter of 2021 as reductions in corporate
support headcount and outside professional services were offset in part by
higher wage rates and higher contract employee expense, as well as a
double-digit increase in insurance premiums.
Due to the increase in gross losses, operating losses were $2.5 million in the
third quarter of 2022, up from $2.1 million in the third quarter of 2021. In the
third quarter of 2022, we recognized a $0.6 million gain for the change in the
fair value of a warrant liability. As a result of higher operating losses being
offset by this gain, net loss in the third quarter of 2022 was $2.0 million, or
$0.38 per share, compared to a net loss of $2.2 million, or $0.47 per share, in
the third quarter of 2021.
Results of Operations - Nine Months Ended September 30, 2022, Compared to Nine
Months Ended September 30, 2021
Revenues of $31.0 million in the first nine months of 2022 increased $8.0
million, or 34.7%, compared to the nine months of 2021. This year-over-year
increase was due to higher core-SRB sales and strong growth from our MGI and
Golden Ridge milling operations, offset in part by lower value-added SRB
derivative product revenues due to production issues in the second quarter of
2022.
The $1.2 million decrease in gross profit in the first nine months of 2022,
compared to the first nine months of 2021, was primarily attributable to lower
gross profits from our value-added SRB derivative products and a modest increase
in gross losses from Golden Ridge, offset in part by a modest increase in gross
profits for our core-SRB business and MGI.
SG&A expenses of $5.2 million in the first nine months of 2022 decreased $0.3
million, or 5.7%, compared to the first nine months of 2021, as reductions in
corporate support headcount and outside professional services were offset in
part by higher wage rates and insurance premiums.
We recognized a gain on the involuntary conversion of assets of $0.1 million in
the first nine months of 2022, when we finalized our insurance claim for
hurricane damage that occurred in August 2020 to our Lake Charles, Louisiana
property.
Operating losses were $5.7 million in the first nine months of 2022, up from
$5.0 million in the first nine months of 2021, due to lower gross profits. In
January 2021, we recognized a $1.8 million gain on extinguishment of our Small
Business Administration (SBA) Paycheck Protection Program (PPP) loan (see Note
13 of the Notes to Unaudited Condensed Consolidated Financial Statements for
further discussion of the loan). As a result of higher operating losses, lower
SG&A, the impact of the gain on involuntary conversion of assets and the
nonrecurring gain on the extinguishment of debt in the first nine months of
2021, net loss in the first nine months of 2022 was $6.2 million, or $1.17 per
share, compared to a net loss of $3.5 million, or $0.38 per share, in the first
nine months of 2021.
17
--------------------------------------------------------------------------------
Table of Contents
Liquidity, Going Concern and Capital Resources
We had $4.4 million in cash and equivalents as of September 30, 2022, a decrease
of $1.5 million from $5.8 million on December 31, 2021. During the first nine
months of 2022, we were able to offset higher operating losses with increased
borrowing.
Cash used in operating activities in the first nine months of 2022 was $3.9
million, up from $2.0 million in the first nine months of 2021, driven
principally by higher net losses. Cash used in investing activities in the 2022
period consisted of $0.4 million in capital expenditures, primarily for the
purchase and installation of capital equipment at our MGI facility offset by
$0.1 million in insurance proceeds. Cash from financing activities in the 2022
period was $2.7 million, which included the $1.8 million net borrowings on a
line of credit and a $0.9 million over-advance on our factoring facility (see
Note 8 of the Notes to Unaudited Condensed Consolidated Financial Statements for
further discussion of the over-advance).
Management believes that despite the multi-year history of operating losses and
negative operating cash flows from continuing operations, there is no
substantial doubt about our ability to continue as a going concern within one
year after the date that these financial statements included in this Quarterly
Report are issued. Factors alleviating this concern include $4.4 million in cash
and cash equivalents as of September 30, 2022, and our ability to procure
additional capital if needed through a variety of sources. Most notably,
subsequent to the end of the third quarter of 2022, we were able to raise
approximately $1.2 million, net of costs, through a direct placement of our
common stock, and common stock equivalents, and in late September 2022, we
received a $0.9 million over-advance on our factoring facility, pending a
restructuring of our mortgage promissory note secured by our real property in
Wynne, Arkansas.
On March 30, 2020, we entered into a sales agreement with respect to an
at-the-market (ATM) offering program, under which we may offer and sell shares
of our common stock having an aggregate offering price of up to $6.0 million,
which we currently have $2.8 million remaining. Under the terms of the
securities purchase agreement related to the September 2021 offering, we are
prohibited from entering into an agreement to effect any at-the-market issuance
until September 13, 2023.
Critical Accounting Estimates
Our discussion and analysis of our financial condition and results of operations
are based upon unaudited condensed consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of financial statements requires
management to make estimates and judgments that affect the reported amounts of
assets and liabilities, revenues and expenses and disclosures on the date of the
financial statements. On an ongoing basis, we evaluate the estimates, including,
but not limited to, those related to revenue recognition, inventory valuation,
and long-lived asset impairment. We use authoritative pronouncements, historical
experience and other assumptions as the basis for making judgments. Actual
results could differ from those estimates.
Recent Accounting Pronouncements
See Note 3 in the Notes to Unaudited Condensed Consolidated Financial Statements
for further discussion.
© Edgar Online, source Glimpses