Arcadia Biosciences, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. Unaudited results; amounts below are in millions of dollars unless noted. Arcadia develops and sells plant-based food, agricultural and wellness products, including GoodWheat, Zola and consumer-care brands.
Financial performance and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | $1.878 | $2.376 | $8.956 | $4.609 |
| Gross profit (loss) | $0.534 | $(0.135) | $0.706 | $(0.345) |
| Operating loss | $(4.580) | $(8.713) | $(12.985) | $(21.722) |
| Net loss | $(2.877) | $(2.836) | $(11.284) | $(6.577) |
| Net loss attributable to common stockholders | $(2.867) | $(2.175) | $(11.132) | $(5.378) |
| Basic and diluted loss per share | $(0.12) | $(0.10) | $(0.48) | $(0.26) |
- Q3 revenue declined 21%, chiefly from lower body-care sales and GLA order timing; cost of revenue fell 46%, and gross profit improved, partly because inventory write-downs were lower.
- Nine-month revenue rose 94%, driven by acquired Zola and body-care sales, $2.1 million of GoodWheat sales, and $0.862 million of Verdeca-related license revenue. Gross profit improved, but operating expenses remained well above revenue.
- Nine-month common-stockholder loss more than doubled. The prior-year comparison included a $10.2 million realized gain on corporate securities and a $1.1 million PPP-loan forgiveness gain; these did not recur in 2022. Current-period results also included a $1.1 million Verdeca sale gain and a $1.9 million noncash gain from changes in warrant and option fair value.
- Cash and cash equivalents were $22.719 million at September 30, 2022, down from $28.685 million at year-end 2021. Nine-month operating cash use was $11.621 million, investing activities provided $1.136 million, and financing activities provided $4.519 million. The company reported no conventional debt balance; liabilities included $2.255 million of operating lease obligations and a $2.0 million Anawah contingent liability.
- Current assets were $30.031 million and current liabilities $4.051 million. Total liabilities were $9.455 million. The company reported $25.019 million of total stockholders’ equity and a $253.615 million accumulated deficit.
Material changes, outlook and risks
- Management states that existing cash will not be sufficient for anticipated requirements for at least the next 12 months from issuance of the statements, raising substantial doubt about the company’s ability to continue as a going concern. Potential responses include additional debt or equity, partnerships, or spending reductions; none is assured.
- The August 2022 registered direct offering raised $5.0 million gross, with $0.488 million of cash offering costs. It included 2.45 million common shares and warrants/options, creating potential dilution. Common shares outstanding were 24,642,960 at September 30, 2022.
- Arcadia licensed Saavy Naturals to Radiance Beauty in July 2022. The agreement transferred certain receivables, inventory and equipment and included transition costs; Arcadia is to receive a 4% royalty on gross sales beginning January 1, 2023. Related inventory, property and equipment, and intangible-asset write-downs were recorded.
- Arcadia launched GoodWheat pasta in June 2022 and said additional product categories were slated for 2023. The filing gives no quantified revenue, earnings or cash-flow guidance.
- Inventory write-downs were $1.530 million for the first nine months of 2022. Management cautions that changes in demand or market conditions could require further write-downs. Commercialization, market acceptance, seasonality, regulatory challenges in hemp, and the need for additional financing remain relevant risks.
- Nasdaq notified the company that its share price had been below the $1.00 minimum bid for 30 consecutive business days. The initial compliance deadline was March 27, 2023; failure to regain compliance could lead to delisting. The filing reports no material litigation and states disclosure controls were effective.
Key facts for investors to verify
- Cash runway, actual operating cash burn, and progress in securing funding or strategic partners.
- Whether GoodWheat and wellness-product sales can grow enough to improve gross margins and reduce losses.
- Potential dilution from outstanding warrants, pre-funded warrants, preferred investment options and stock options.
- Collection timing for the $1.5 million Verdeca-related receivable and the expected economics of the Radiance Beauty royalty arrangement.
- Progress toward Nasdaq bid-price compliance and any effects on access to capital markets.