Arcadia Biosciences, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Arcadia sells plant-based food and beverage products, including GoodWheat and Zola. Management says it is focusing on these core brands after ceasing body-care operations in 2023.
Financial highlights
| Metric | Q1 2024 | Q1 2023 / comparison |
|---|---|---|
| Revenue | $1.255 million | $1.232 million; up 2% |
| Gross profit / margin | $435,000 / 34.7% | $544,000 / 44.2% |
| Operating expenses | $4.319 million | $5.099 million; down 15% |
| Net loss attributable to common stockholders | $2.423 million | $9.384 million |
| Net loss per share | $1.78 | $10.86 |
| Cash used in operating activities | $3.210 million | $3.466 million |
| Cash and cash equivalents, March 31 | $3.317 million | $6.518 million at December 31, 2023 |
| Short-term investments, March 31 | $5.184 million | $5.124 million at December 31, 2023 |
| Working capital, March 31 | $8.764 million | $11.382 million at December 31, 2023 |
Revenue growth came from GoodWheat and Zola, partly offset by higher costs associated with new distribution. Cost of revenue rose 19%, primarily due to grain sales, reducing gross profit. SG&A fell 22%, mainly from lower employee compensation and marketing expenses; R&D fell 24%, largely due to lower consulting fees.
The lower year-over-year net loss chiefly reflects the absence of the prior-year $6.076 million March 2023 PIPE valuation loss, $430,000 of offering costs, and $181,000 loss from discontinued operations. These items make the reported improvement a poor indicator by itself of underlying operating progress. Q1 2024 also included a $593,000 gain from the change in fair value of warrant and option liabilities.
Liquidity, liabilities and cash flow
Cash and short-term investments totaled $8.501 million at quarter-end, down from $11.642 million at year-end. Operating cash outflow was $3.210 million; investing activities provided $4,000 and financing activities provided $5,000. The filing reports no borrowings; liabilities include operating lease obligations, warrant and option liabilities, and a $2.0 million Anawah-related contingent liability. Total liabilities were $5.563 million.
Management states existing cash, cash equivalents and short-term investments are not expected to cover anticipated cash requirements for at least the next 12–18 months from the financial statement issuance date. The filing therefore identifies substantial doubt about the company’s ability to continue as a going concern. Potential responses include debt or equity financing, partner arrangements, spending reductions, asset sales, or curtailing product launches; equity financing could dilute shareholders.
Outlook, risks and other notable items
- No quantified revenue, earnings, or cash-flow guidance is provided. Management’s stated priorities include monetizing wheat traits, evaluating strategic transactions, and expanding Zola distribution and GoodWheat sales.
- Management notes coconut-water demand is generally higher in summer; overall seasonality is difficult to assess given the limited number of commercialized products and expansion into new markets.
- Inventory was $5.009 million, including $3.178 million classified as noncurrent. Management warns that changes in demand or market conditions could require further inventory write-downs.
- The company recorded a $36,000 impairment on Archipelago assets held for sale. Their March 31 fair value was $15,000.
- An IRS audit of Archipelago’s 2021 tax year is pending a Notice of Proposed Partnership Adjustment; the company says it plans to accept the adjustments. Routine audits relating to government grant revenue are also in process. Management anticipates no adverse result.
- The company reported no material litigation. Disclosure controls and procedures were assessed as effective; no material change in internal control over financial reporting was identified during the quarter.
Important facts for investors to verify
- Whether Arcadia can secure sufficient funding to address the going-concern shortfall, and the timing and terms of any financing or partnership.
- Whether GoodWheat and Zola sales and distribution expand enough to improve gross profit and reduce cash burn.
- The potential dilution from outstanding securities: 1,833,591 options, warrants and preferred investment options were excluded from diluted EPS as anti-dilutive; 1,489,952 preferred investment options remained outstanding at March 31.
- The recoverability and sale prospects of inventory and held-for-sale assets, and any resulting write-downs.
- The outcome of the Archipelago tax audit and government grant revenue audits, as well as developments concerning the $2.0 million Anawah contingent liability.