Arcadia Biosciences, Inc. — FY2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This is an annual report; the filing does not provide standalone fourth-quarter results. Financial statement amounts below are in U.S. dollars.
Business context
Arcadia develops and markets plant-based food and beverage products and non-GMO crop traits, with a strategic focus on commercializing its GoodWheat wheat portfolio. Products include GoodWheat pasta and grain, Zola coconut water, and wellness and body-care brands. Arcadia launched GoodWheat pasta in select retailers and online in June 2022. It is shifting resources from trait discovery toward commercialization and food-science innovation; it also said it was exploring strategic alternatives for its CBD body-care brands.
Key financial metrics
| Metric | FY2022 | FY2021 |
|---|---|---|
| Total revenue | $9.956 million | $6.780 million |
| Gross profit (loss) | $0.154 million | $(1.928) million |
| Gross margin | 1.5% | (28.4)% |
| Operating loss | $(18.815) million | $(35.526) million |
| Net loss | $(15.612) million | $(16.134) million |
| Net loss attributable to common stockholders | $(15.376) million | $(14.660) million |
| Net cash used in operating activities | $(13.977) million | $(25.868) million |
| Cash and cash equivalents at year-end | $20.644 million | $28.685 million |
| Working capital | $21.189 million | $30.348 million |
| Total liabilities | $8.022 million | $12.722 million |
Revenue comprised product sales of $8.960 million, license revenue of $879,000 and royalties of $117,000. The filing reports no conventional loan balance at year-end; operating lease liabilities were $2.017 million, and other noncurrent liabilities included a $2.0 million Anawah contingent liability. Current assets were $25.398 million and current liabilities were $4.209 million.
Changes versus FY2021
- Revenue rose 47%, primarily from higher sales of Zola and body-care products acquired in May 2021, and $862,000 of license revenue associated with China’s approval of the HB4 soybean trait.
- Cost of revenue increased 13% to $9.802 million. A $2.471 million inventory write-down was recorded, leaving only $154,000 of gross profit despite higher revenue.
- Operating loss narrowed by $16.711 million, reflecting lower R&D and SG&A, lower impairment charges, and gains on Verdeca and property sales. Net loss improved only modestly; FY2021 included a $10.2 million realized securities gain and $1.1 million PPP-loan forgiveness gain, while FY2022 common-stockholder loss increased.
- Operating cash use declined by $11.891 million. Cash nonetheless fell by $8.041 million, partly offset by $4.519 million of financing cash flow, including the August 2022 offering.
Outlook, risks and unusual items
- Going concern: Management said existing cash would not cover anticipated requirements for at least the next 12–18 months from the issuance of the financial statements, raising substantial doubt about the Company’s ability to continue as a going concern. Management may seek financing or partners; equity financing would dilute shareholders, and debt could impose restrictive covenants. The auditor’s report also highlights this substantial doubt.
- Commercial outlook: Arcadia planned additional GoodWheat product-category launches in 2023 and retail expansion for Zola. These are plans, not quantified guidance; no revenue, profit or cash-flow guidance is provided.
- Financing and share count: In March 2023, after year-end, Arcadia closed a private placement for $6.0 million gross proceeds involving common stock, pre-funded warrants and options. It also effected a 1-for-40 reverse stock split on March 1, 2023. The filing’s share figures span the split and should be checked against post-split disclosures.
- Inventory and margins: GoodWheat inventory valuation was the auditor’s critical audit matter because estimates depend on product-demand forecasts and marketability. Further demand or market changes could cause additional write-downs. Inflation, input and freight costs, competition, customer acceptance and promotional spending may also pressure margins.
- Concentration and execution: One customer represented 13% of FY2022 revenue; a single customer represented 57% of year-end receivables. Commercialization depends on collaborators, growers and suppliers, and on regulatory progress and market acceptance.
- Other exposures: The filing describes regulatory uncertainty for CBD and hemp, crop and weather risks, intellectual-property and product-liability risks, and possible limits on use of tax-loss carryforwards. An IRS audit of the Archipelago joint venture’s 2021 tax year was announced in February 2023. Arcadia reported no material litigation.
Important facts for investors to verify
- Post-March 2023 cash, expected cash runway and whether additional financing is required, given the going-concern warning and the $6.0 million gross private placement.
- GoodWheat and Zola sales traction, gross margins, customer retention and the timing and economics of planned product launches.
- Inventory levels, subsequent sales and any further write-downs following the $2.471 million FY2022 charge and the audit focus on GoodWheat inventory valuation.
- Potential dilution and fully diluted share count from the 2022 and 2023 offerings, warrants and options, reconciled for the 1-for-40 reverse split.
- Progress on the Saavy Naturals license, the body-care strategic alternatives, and any royalty income expected from Radiance Beauty.