Arcadia Biosciences, Inc. — Q3 2021 Form 10-Q
Reporting period: Three and nine months ended September 30, 2021. Unless noted otherwise, financial amounts are in millions of dollars. Arcadia develops and sells plant-based seed, grain, food, and wellness products. During 2021 it added Tritordeum assets through Agrasys and acquired the Eko, Lief, and Zola businesses, expanding into CBD, body-care, and coconut-water products.
Financial performance and position
| Metric | Q3 2021 | Q3 2020 | Nine months 2021 | Nine months 2020 |
|---|---|---|---|---|
| Total revenue | $2.376 | $0.314 | $4.609 | $0.904 |
| Operating loss | $8.713 | $7.581 | $21.722 | $20.247 |
| Net loss | $2.836 | $7.165 | $6.577 | $14.634 |
| Net loss attributable to common stockholders | $2.175 | $6.391 | $5.378 | $13.553 |
| Basic and diluted loss per share | $0.10 | $0.60 | $0.26 | $1.42 |
Product revenue was $2.324 million in Q3 and $4.506 million year to date. Product cost was $2.511 million and $4.954 million, respectively, exceeding product revenue in both periods. Selling, general and administrative expenses were $6.312 million in Q3 and $16.750 million year to date. Research and development expense was $1.038 million in Q3 and $3.328 million year to date. The filing does not present a consolidated gross-margin percentage.
Cash and cash equivalents were $35.526 million at September 30, 2021, compared with $14.042 million at December 31, 2020; current assets were $43.834 million and current liabilities $6.489 million. Total debt was approximately $0.114 million. Operating lease liabilities totaled $3.696 million. Total liabilities were $19.005 million and stockholders’ equity was $40.223 million.
For the first nine months, operating cash use was $19.208 million, investing cash provided was $16.678 million, and financing cash provided was $22.014 million. Cash increased by $19.483 million. The company reported an accumulated deficit of $217.2 million.
Material changes versus the prior comparable periods
- Revenue grew substantially, primarily from product sales, including Arcadia Wellness products; Q3 product revenue also benefited from higher GLA SONOVA sales. Year-to-date product revenue additionally included higher GoodWheat grain and GoodHemp seed sales.
- Net losses narrowed, but operating losses increased. The reported net-loss improvement included sizable non-operating gains, notably the $10.2 million realized gain on sale of Bioceres shares year to date, warrant-liability fair-value gains of $4.6 million year to date, and $1.1 million from PPP loan forgiveness.
- SG&A rose 43% year to date, reflecting acquisition costs, increased headcount, and commercial and marketing investment. R&D fell 45% as the company shifted toward commercialization and reduced research staffing.
- Cash rose following the January 2021 private placement, which generated $25.1 million gross proceeds, and the June sale of Bioceres shares, which generated $22.2 million gross proceeds. Common shares outstanding increased from 13.45 million at year-end 2020 to 22.18 million at September 30, 2021.
Outlook, commentary, risks, and unusual items
- Management believed September 30 cash would fund anticipated requirements through at least November 2022. The company may seek additional financing or partnerships; further equity could dilute shareholders, and debt could add repayment obligations and restrictive covenants.
- Management planned a GoodWheat pasta soft launch at the beginning of 2022, with additional product categories expected in 2022. The filing provides no numerical revenue or earnings guidance.
- The company and its Archipelago joint-venture partner agreed to wind down hemp cultivation amid weak/saturated market demand and sufficient internal ingredient supply. Q3 charges included $1.108 million of fixed-asset write-downs and $0.120 million of intangible-asset impairment, the latter associated with a lower hemp-seed sales forecast.
- Inventory write-downs were $1.8 million year to date. Management warned that changes in demand or market conditions could require further write-downs. Q3 product costs also included charges relating to hemp seed inventory and crop destruction.
- Reported earnings included significant valuation-sensitive and non-recurring items: warrant-liability fair-value gains ($4.777 million in Q3; $4.601 million year to date), the Bioceres-share gain, and PPP forgiveness. These items do not represent recurring operating performance; the warrant gain is a fair-value accounting adjustment.
- COVID-related global supply-chain slowdowns caused delivery delays in Q3, though management did not expect a significant revenue impact. Other risks include seasonality, CBD product regulation and claims, hemp-market weakness, dependence on external funding, and routine audits of government-grant revenues. The company reported no material litigation and stated its disclosure controls were effective.
Important facts for investors to verify
- Whether acquired brands and GoodWheat/GoodHemp products can grow sales while improving product-level economics and recurring margins.
- Whether management’s cash-runway estimate remains valid given operating cash use of $19.2 million in the first nine months and planned commercialization spending.
- The magnitude and timing of any further hemp-related inventory, fixed-asset, or intangible-asset impairments, and the financial impact of winding down Archipelago cultivation.
- The extent of potential dilution: 11.51 million warrants and 1.55 million options were excluded from diluted loss per share as anti-dilutive; the filing reports 22.18 million common shares outstanding at September 30.
- Final purchase-price allocation and performance of Arcadia Wellness and Agrasys, including the contribution of acquired businesses to revenue and losses.
- Outcomes of government-grant audits and compliance with evolving CBD, FDA, advertising, and other applicable regulations.