Arcadia Biosciences, Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023, with comparisons to 2022. Although the request refers to 2023 Q4, this filing reports full-year results, not standalone quarterly results. Amounts below are in U.S. dollars; financial figures are generally in millions unless stated otherwise.
Business context
Arcadia develops and markets plant-based food and beverage products, including GoodWheat products made with proprietary non-GMO wheat and Zola coconut water. It also seeks revenue from seed and grain sales, licensing, and royalties. Management says its focus is shifting from trait discovery toward commercialization, food product development, GoodWheat partnerships, and Zola retail expansion. The company had 21 employees at year-end.
Financial performance and liquidity
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Revenue | $5.330 | $7.418 | Down 28% |
| Product revenue | $5.313 | $6.422 | Down 17% |
| Gross profit | $2.030 | $1.317 | Up $0.713 |
| Gross margin | 38.1% | 17.8% | Up about 20.3 percentage points |
| Loss from operations | $(13.938) | $(14.007) | Slight improvement |
| Net loss | $(13.986) | $(15.612) | Loss narrowed $1.626 |
| Net cash used in operations | $(15.294) | $(13.977) | Use increased $1.317 |
Product sales accounted for virtually all revenue in 2023. The revenue decline reflected lower GoodWheat grain sales and the absence of 2022 one-time Verdeca-related license revenue and royalties. Gross profit improved mainly because 2022 included grain sales at cost and higher inventory write-downs. SG&A was $14.508 million, down 4%; R&D was $1.387 million, down 8%.
At December 31, 2023, cash and cash equivalents were $6.518 million and short-term investments were $5.124 million, versus $20.644 million of cash and no short-term investments a year earlier. Working capital was $11.382 million, down from $21.189 million. Operating cash use exceeded year-end cash and cash equivalents plus short-term investments. Investing activities used $4.344 million and financing activities provided $5.512 million, including approximately $6.0 million gross proceeds from the March 2023 private placement.
Going concern: Management states existing cash and short-term investments will not cover anticipated requirements for at least 12 months from issuance of the financial statements, raising substantial doubt about the company’s ability to continue as a going concern. The auditor’s report also highlights this uncertainty. Management may seek financing or partners; financing may dilute shareholders or impose debt obligations and restrictive covenants.
The filing does not disclose conventional borrowings as a major balance-sheet item. Reported liabilities include $1.007 million of operating lease liabilities, $1.257 million of warrant and option liabilities, and $2.000 million of other noncurrent liabilities, principally an Anawah contingent liability. Operating lease payments total approximately $1.042 million before imputed interest.
Material changes, outlook, and risks
- Commercial portfolio: GoodWheat pancake and waffle mixes launched in August 2023; Mac and Cheese was announced in November 2023. Management plans further GoodWheat monetization and Zola distribution expansion, but gives no quantitative revenue, earnings, or cash-flow guidance.
- Discontinued operations: Arcadia decided in July 2023 to exit its remaining body care brands, Soul Spring and ProVault, citing CBD-market pressure and regulatory uncertainty. Operations ceased September 30, 2023. Discontinued-operations loss fell to $0.821 million from $4.784 million in 2022.
- Financing and unusual items: The March 2023 PIPE raised approximately $6.0 million gross and included common stock, pre-funded warrants, and preferred investment options. Its accounting generated a $6.076 million valuation loss, partly offset by a $6.544 million gain from changes in fair value of warrant and option liabilities. These fair-value items materially affected reported results and are not equivalent to operating cash flows.
- Equity dilution: The March 2023 financing repriced certain existing warrants and issued options. At year-end, 1,489,952 preferred investment options were outstanding; the filing reports 1,285,337 common shares outstanding at December 31, 2023 and 1,362,840 as of March 21, 2024. Potential exercises and future financing could materially dilute shareholders.
- Key risks: Continued losses and cash burn, need for additional capital, consumer acceptance and competitive pressure, customer concentration, inventory valuation and demand forecasting, dependence on collaborators and third parties, crop and supply risks, regulatory uncertainty, and intellectual-property protection. GoodWheat inventory valuation was identified as a critical audit matter. The company reported no material litigation and no cybersecurity incident known to have materially affected it.
- Audit and controls: Deloitte issued an unqualified opinion on the financial statements while emphasizing the going-concern uncertainty. Management concluded disclosure controls and internal control over financial reporting were effective as of year-end; the auditor was not engaged to opine on internal-control effectiveness.
Important facts for investors to verify
- Near-term cash needs, subsequent financing or partnership activity, and whether management’s plans address the stated going-concern uncertainty.
- Cash conversion and sales momentum: revenue declined while operating cash use increased; determine whether new GoodWheat launches are generating repeat orders and sustainable margins.
- GoodWheat inventory composition, expected sell-through, and assumptions behind inventory valuation; year-end inventory was $5.312 million, including $3.354 million classified as noncurrent.
- Potential dilution from outstanding warrants and options, including their exercise prices, terms, and settlement provisions.
- Customer concentration and the timing and recurrence of licensing, royalty, and other non-product revenue.
- Any updates to the CBD-brand exit, remaining contingent liabilities, government grant audits, and lease or other contractual commitments.