Arcadia Biosciences(RKDA) - 2022 Q3 - Quarterly Report

Part I — Financial Information Condensed Consolidated Financial Statements The company reported total assets of $34.5 million and total liabilities of $9.5 million as of September 30, 2022, a decrease from year-end 2021; for the nine months ended September 30, 2022, revenues increased to $9.0 million from $4.6 million year-over-year, but the net loss attributable to common stockholders widened to $11.1 million from $5.4 million, with net cash used in operating activities at $11.6 million, reflecting a going concern uncertainty due to insufficient cash to fund operations for the next 12 months Condensed Consolidated Balance Sheets Balance Sheet Summary (in thousands) | | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $22,719 | $28,685 | | Total current assets | $30,031 | $35,388 | | Total assets | $34,474 | $43,918 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $4,051 | $5,040 | | Total liabilities | $9,455 | $12,722 | | Total stockholders' equity | $25,019 | $31,196 | | Total liabilities and stockholders' equity | $34,474 | $43,918 | Condensed Consolidated Statements of Operations and Comprehensive Loss Statement of Operations Summary (in thousands, except per share data) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,878 | $2,376 | $8,956 | $4,609 | | Cost of revenues | $1,344 | $2,511 | $8,250 | $4,954 | | Loss from operations | $(4,580) | $(8,713) | $(12,985) | $(21,722) | | Net loss attributable to common stockholders | $(2,867) | $(2,175) | $(11,132) | $(5,378) | | Net loss per share (Basic and diluted) | $(0.12) | $(0.10) | $(0.48) | $(0.26) | Condensed Consolidated Statements of Cash Flows Cash Flow Summary (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,621) | $(19,208) | | Net cash provided by (used in) investing activities | $1,136 | $16,678 | | Net cash provided by financing activities | $4,519 | $22,014 | | Net (decrease) increase in cash and cash equivalents | $(5,966) | $19,483 | | Cash and cash equivalents — end of period | $22,719 | $35,526 | Notes to Condensed Consolidated Financial Statements Key notes include the company's business description as a producer of plant-based health products, a significant going concern warning due to insufficient cash, details of the Arcadia Wellness acquisition, the wind-down of the Archipelago hemp JV, and recent equity financing activities, with a contingent liability of $2.0 million related to the Anawah acquisition remaining on the balance sheet - The company is a producer and marketer of plant-based health and wellness products, including high-value crop improvements, food ingredients, and bath and body care products; it has commercialized innovations through sales of seed, grain, and consumer products[19] - In May 2021, the company acquired the businesses of Eko, Lief, and Zola, adding brands like Soul Spring™, Saavy Naturals™, ProVault™, and Zola® coconut water to its portfolio; in July 2022, the Saavy Naturals™ brand was licensed to Radiance Beauty[20] - The company has determined that its existing cash and cash equivalents of $22.7 million are not sufficient to meet its anticipated cash requirements for at least the next 12 months, which raises substantial doubt about its ability to continue as a going concern[29] - In August 2022, the company completed a Registered Direct Offering, raising gross proceeds of $5.0 million through the sale of common stock, pre-funded warrants, and preferred investment options[80] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 94% year-over-year revenue growth for the nine-month period to the Arcadia Wellness acquisition and the launch of GoodWheat products; however, Q3 2022 revenue declined 21% YoY due to a strategic shift in body care products and the timing of GLA orders, leading to a widened net loss and a significant liquidity challenge, with substantial doubt about its ability to continue as a going concern without raising additional capital, as the growth strategy focuses on monetizing the GoodWheat portfolio and expanding its consumer brands Overview and Growth Strategy - The company's growth strategy is focused on two key areas: - Accelerating the monetization of its non-GMO GoodWheat™ wheat trait portfolio through partnerships and direct participation in the food ingredient market - Commercializing and scaling its Arcadia Wellness consumer brands (like Zola and ProVault) through retail and e-commerce expansion[128] - The company also intends to evaluate potential acquisitions for vertical integration to enhance margin capture and speed up new product innovations[129] Results of Operations Q3 2022 vs Q3 2021 Financial Comparison (in thousands) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,878 | $2,376 | $(498) | (21)% | | Cost of revenues | $1,344 | $2,511 | $(1,167) | (46)% | | Loss from operations | $(4,580) | $(8,713) | $4,133 | 47% | | Net loss attributable to common stockholders | $(2,867) | $(2,175) | $(692) | 32% | - The 20% decrease in Q3 2022 product revenue was driven by a decrease in sales of body care products due to a focus on higher-margin products, the new licensing agreement for Saavy Naturals™, and the timing of GLA orders[158] Nine Months 2022 vs 2021 Financial Comparison (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $8,956 | $4,609 | $4,347 | 94% | | Cost of revenues | $8,250 | $4,954 | $3,296 | 67% | | Loss from operations | $(12,985) | $(21,722) | $8,737 | (40)% | | Net loss attributable to common stockholders | $(11,132) | $(5,378) | $(5,754) | 107% | - The 77% increase in product revenue for the nine-month period was primarily driven by higher sales of Zola coconut water and body care products from the May 2021 acquisition, along with $2.1 million of GoodWheat grain and pasta sales not present in 2021[168] Liquidity, Capital Resources, and Going Concern - As of September 30, 2022, the company had cash and cash equivalents of $22.7 million; management believes this is not sufficient to meet anticipated cash requirements for the next 12 months, raising substantial doubt about the company's ability to continue as a going concern[186][187] - The company may seek to raise additional funds through debt or equity financings; failure to secure adequate funding may force spending reductions, asset liquidation, or suspension of planned programs[188] Cash Flow Summary (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,621) | $(19,208) | | Net cash provided by investing activities | $1,136 | $16,678 | | Net cash provided by financing activities | $4,519 | $22,014 | Controls and Procedures The company's President, CEO, and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting identified during the quarter - The President and Chief Executive Officer and the Chief Financial Officer concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2022[202] - There were no changes in internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[203] Part II — Other Information Legal Proceedings The company is not currently a party to any material litigation or other material legal proceedings - As of the filing date, the company is not a party to any material litigation or other material legal proceedings[205] Risk Factors A key risk is the potential delisting of the company's common stock from The Nasdaq Capital Market, as on September 27, 2022, the company received a notice from Nasdaq for failing to maintain a minimum bid price of $1.00 per share, with a compliance deadline of March 27, 2023, requiring the stock to close at or above $1.00 for at least 10 consecutive business days - The company faces a risk of its common stock being delisted from Nasdaq for failing to meet the minimum bid price requirement[207] - On September 27, 2022, the company received a notice from Nasdaq because its closing bid price was below $1.00 for 30 consecutive business days; the company has an initial 180-day period (until March 27, 2023) to regain compliance[208]