Arcadia Biosciences, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; unaudited. Arcadia develops and sells plant-based food and beverage products, including GoodWheat products and Zola coconut water, and licenses crop traits. Financial amounts below are in millions unless noted.
Financial performance and position
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | $1.509 | $3.220; down 53% |
| Gross profit (loss) | $0.684; 45.3% gross margin | $(0.238); (7.4%) gross margin |
| Operating loss | $(4.048) | $(4.623) |
| Net loss | $(9.384) | $(4.610) |
| Net loss per share | $(10.86) | $(8.09), basic and diluted |
| Cash used in operations | $(3.466) | $(4.885) |
| Cash and cash equivalents | $22.998 at March 31 | $20.644 at December 31, 2022 |
| Working capital | $23.108 surplus | $21.189 surplus at December 31, 2022 |
Operating expenses were $5.557 million, including $4.392 million of selling, general and administrative costs and $0.359 million of research and development. Cash provided by investing activities was $0.315 million, including $0.285 million received from the Verdeca sale; financing activities provided $5.505 million. No conventional borrowings are reported in the balance sheet; operating lease liabilities totaled $1.774 million. Total liabilities were $13.718 million.
Material changes versus the prior period
- Revenue fell $1.711 million. Management attributed much of the prior-year comparison to $1.8 million of GoodWheat grain sales and sales of body-care products that are no longer in the portfolio; Q1 2023 had no royalty revenue.
- Cost of revenue declined $2.633 million. Management cited the absence of low-margin grain and body-care sales and lower inventory write-downs; gross profit consequently improved from a loss to a profit.
- Net loss increased $4.774 million, primarily reflecting a $6.076 million noncash valuation loss associated with the March 2023 private placement and related warrant repricing. The company also recorded a $0.940 million gain from changes in fair value of warrant and option liabilities. These financing-related items materially affect the reported loss.
- Cash increased by $2.354 million, supported by the private placement, despite operating cash use. Q1 2023 private-placement proceeds were $6.0 million gross and $5.505 million net cash from financing activities after reported offering-cost payments and ESPP proceeds.
Outlook, risks and other notable items
- Going concern: Management states existing cash is not expected to meet anticipated cash requirements for at least the next 12–18 months from issuance of the statements, raising substantial doubt about the company’s ability to continue as a going concern. It may pursue additional equity or debt financing or partnerships; equity issuance could dilute holders, while debt could add repayment obligations and covenants. If funding is unavailable, management may reduce spending, extend supplier payment terms, liquidate assets, or curtail product launches.
- Commercial plans: The company plans to expand GoodWheat into additional product categories in 2023 and pursue broader Zola retail distribution. It is exploring strategic alternatives for its CBD body-care brands. The filing gives no quantified revenue, earnings, or cash-flow guidance.
- Financing and dilution: The March placement included 165,500 common shares, 500,834 pre-funded warrants and two series of options, each covering up to 666,334 shares at $9.00 per share. Existing warrants/options were also repriced. The company reported 857,572 common shares outstanding at March 31 and 950,406 as of May 8; the filing also identifies substantial additional potential shares from warrants and options. All share data reflect the 1-for-40 reverse split effective March 1.
- Operating and contingent risks: Inventory is subject to future write-downs if demand or market conditions weaken. Archipelago’s hemp cultivation activities were wound down because of regulatory challenges and a saturated market. The company reports no material litigation, but routine audits relating to government grant revenues are in process; Archipelago was selected for an IRS audit for tax year 2021.
- The company reported an accumulated deficit of $267.2 million. Its $2.0 million Anawah-related contingent liability remains recorded; management considers it probable. Disclosure controls were assessed as effective, and no material change in internal control over financial reporting was reported for the quarter.
Most important facts for investors to verify
- Cash burn and available funding against management’s stated 12–18-month liquidity shortfall; any subsequent financing, cost reductions or partnership arrangements.
- Actual sales trends and margins for GoodWheat and Zola, including whether planned launches and distribution expansion translate into sustained growth.
- The potential dilution, exercise terms and fair-value accounting for the March 2023 financing instruments and repriced warrants, alongside the reported share count after quarter-end.
- Whether inventory values, the Anawah contingent liability, and ongoing government and IRS audits result in material charges, payments or other adverse outcomes.