Business context and reporting period
Arcadia Biosciences, Inc. (NASDAQ: RKDA) filed this Form 10-K for the fiscal year ended December 31, 2021; it is an annual report, not a standalone fourth-quarter report. The filing does not provide clear standalone Q4 financial results. Arcadia develops and markets plant-based health and wellness products, including GoodWheat products and seed, hemp products, coconut water, and body-care brands.
In May 2021, Arcadia acquired the Eko, Lief, and Zola businesses for approximately $6.1 million in cash and stock. The company emphasized commercialization over trait research and development. It sold Arcadia Spain in November and agreed to wind down Archipelago’s hemp cultivation activities because of regulatory challenges and a saturated hemp market.
Financial performance and position
Amounts below are for the years ended December 31 and are in millions of dollars unless noted. The financial statements were audited; the auditor highlighted GoodWheat inventory valuation as a critical audit matter and stated that substantial doubt exists about Arcadia’s ability to continue as a going concern.
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $6.78 | $8.03 |
| Product revenue | $6.59 | $1.04 |
| Operating loss | $(35.53) | $(12.78) |
| Net loss | $(16.13) | $(6.03) |
| Net loss attributable to common stockholders | $(14.66) | $(4.66) |
| Net loss per share, basic and diluted | $(0.69) | $(0.47) |
| Net cash used in operations | $(25.87) | $(30.22) |
| Cash and cash equivalents at year-end | $28.69 | $14.04 |
- Product revenue rose 531%, primarily from $4.3 million of sales by the acquired Arcadia Wellness businesses, plus higher GoodWheat grain and GoodHemp seed sales. Total revenue fell 16%, as 2020 included $6.8 million in license revenue largely associated with the Bioceres transaction; 2021 license revenue was only $17,000.
- Cost of product revenue was $8.71 million against $6.59 million of product revenue, an implied product gross loss of about $2.12 million before other operating expenses. The filing attributes cost increases partly to acquired product lines and notes inventory write-downs of $3.6 million, versus $4.3 million in 2020.
- Operating loss widened substantially. 2021 included $3.3 million of intangible-asset impairment, $1.6 million of goodwill impairment, $1.5 million of property and equipment impairment, and a $0.5 million loss on the Arcadia Spain sale. SG&A rose 39% to $22.9 million; R&D fell 51% to $3.9 million as the company shifted toward commercialization.
- Reported net loss was partly offset by non-operating and unusual gains: $10.1 million of other income, primarily a $10.2 million realized gain on Bioceres securities; $8.9 million of income from warrant-liability fair-value changes; and $1.1 million from PPP loan forgiveness. These items do not represent recurring product operating performance.
- Year-end current assets were $35.4 million and current liabilities $5.0 million. No debt was outstanding at year-end after repayment of vehicle loans and a $2.0 million note; operating lease liabilities totaled $3.3 million, and warrant liabilities were $3.4 million.
- Cash increased by $12.6 million during 2021, supported by $21.8 million of investment-sale proceeds and $25.1 million gross proceeds from a January private placement, partly offset by operating cash use, acquisitions, and financing costs. The offering issued 7.88 million shares and warrants.
Changes, outlook, risks, and unusual items
- Revenue mix changed sharply from license-led in 2020 to product-led in 2021. Despite higher product sales, total revenue declined and operating losses increased.
- Management said year-end cash would not cover anticipated requirements for at least the next 12 months from the financial-statement issuance date. The filing identifies substantial doubt about continued operations and says additional debt, equity, or partner funding may be sought; equity financing could dilute shareholders. No quantified revenue or earnings guidance is provided.
- Arcadia planned to introduce GoodWheat pasta in Q2 2022, describing it as a single-ingredient product with four times the fiber of traditional pasta and 9 grams of protein per serving. Further product categories were slated for 2023; these are plans, not reported results.
- Key risks include financing needs and continued losses; uncertain consumer acceptance, competition, and product margins; customer concentration; inventory demand and valuation; hemp/CBD regulatory uncertainty; reliance on third-party growers and collaborators; crop, weather, and supply-chain exposure; and protection of intellectual property. The company reported that one customer accounted for 83% of 2020 revenue; no 2021 customer exceeded 11%.
- CEO Matt Plavan resigned effective December 31, 2021. Stanley E. Jacot Jr. became CEO in January 2022. Management concluded disclosure controls and internal control over financial reporting were effective at year-end, while noting control deficiencies that were not significant deficiencies or material weaknesses.
Important facts for investors to verify
- Available cash, subsequent financing or partnership activity, and whether management’s going-concern assessment has changed.
- Standalone Q4 results and the timing, sell-through, and margins of GoodWheat pasta and other consumer launches.
- Recurring operating performance excluding Bioceres investment gains, warrant remeasurement, PPP forgiveness, and impairment charges.
- Inventory forecasts, write-down exposure, acquired-brand margins, and the remaining impact of the Arcadia Wellness acquisition.
- Potential dilution from outstanding warrants and options; the filing reports 11.5 million warrants and 1.42 million options excluded from diluted EPS as anti-dilutive.