UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of May 6, 2022, the registrant had
Arcadia Biosciences, Inc.
FORM 10-Q FOR THE QUARTER ENDED March 31, 2022
INDEX
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Part I — |
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Financial Information (Unaudited) |
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Item 1. |
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Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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Part II — |
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Item 1. |
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27 |
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Item 1A. |
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27 |
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Item 2. |
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27 |
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Item 3. |
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27 |
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Item 4. |
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27 |
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Item 5. |
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Item 6. |
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28 |
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29 |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Arcadia Biosciences, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
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March 31, 2022 |
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December 31, 2021 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, net of allowance for doubtful accounts of $ |
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Inventories, net — current |
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Assets held for sale |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right of use asset |
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Inventories, net — noncurrent |
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Intangible assets, net |
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Other noncurrent assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
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$ |
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Amounts due to related parties |
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Operating lease liability — current |
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Other current liabilities |
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Total current liabilities |
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Operating lease liability — noncurrent |
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Common stock warrant liabilities |
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— |
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Other noncurrent liabilities |
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Total liabilities |
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Stockholders’ equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Total Arcadia Biosciences stockholders’ equity |
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Non-controlling interest |
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Total stockholders' equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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See accompanying notes to the unaudited condensed consolidated financial statements.
1
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income
(Unaudited)
(In thousands, except share and per share data)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Revenues: |
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Product |
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$ |
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$ |
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Royalty |
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Total revenues |
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Operating expenses (income): |
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Cost of revenues |
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Research and development |
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Change in fair value of contingent consideration |
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( |
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( |
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Impairment of property and equipment |
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— |
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Gain on sale of property and equipment |
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( |
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— |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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Interest expense |
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( |
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Other income, net |
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Change in fair value of common stock warrant liabilities |
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— |
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Issuance and offering costs |
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— |
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( |
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Net (loss) income before income taxes |
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( |
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Income tax provision |
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— |
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Net (loss) income |
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( |
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Net loss attributable to non-controlling interest |
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( |
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Net (loss) income attributable to common stockholders |
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$ |
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$ |
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Net (loss) income per share attributable to common stockholders: |
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Basic |
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$ |
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$ |
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Diluted |
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$ |
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$ |
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Weighted-average number of shares used in per share |
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Basic |
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Diluted |
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See accompanying notes to the unaudited condensed consolidated financial statements.
2
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share data)
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Common Stock |
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Additional |
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Accumulated |
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Non- |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Interest |
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Equity |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Reclassification upon adoption of |
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— |
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— |
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$ |
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$ |
( |
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— |
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Issuance of shares related to employee stock |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
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( |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Non- |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Interest |
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Equity |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of shares related to the |
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— |
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— |
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Offering costs related to the January 2021 PIPE |
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— |
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— |
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( |
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— |
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— |
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( |
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Issuance of placement agent warrants related to |
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— |
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— |
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— |
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— |
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Issuance of shares related to employee stock |
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— |
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— |
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— |
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Non-controlling interest capital contribution |
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— |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net income (loss) |
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— |
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— |
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— |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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See accompanying notes to the unaudited condensed consolidated financial statements.
3
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
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Three Months Ended March 31, |
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2022 |
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2021 |
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CASH FLOWS FROM OPERATING ACTIVITIES: |
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Net (loss) income |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to cash used in operating activities: |
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Change in fair value of common stock warrant liabilities |
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— |
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( |
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Change in fair value of contingent consideration |
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( |
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( |
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Issuance and offering costs |
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— |
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Depreciation |
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Amortization of intangible assets |
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Lease amortization |
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Gain on disposal of property and equipment |
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( |
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— |
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Stock-based compensation |
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Unrealized gain on corporate securities |
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— |
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( |
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Write-down of fixed assets |
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— |
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Write-down of inventory |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventories |
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Prepaid expenses and other current assets |
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( |
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Other noncurrent assets |
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— |
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Accounts payable and accrued expenses |
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( |
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( |
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Amounts due to related parties |
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( |
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Unearned revenue |
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— |
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Other current liabilities |
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— |
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Operating lease payments |
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( |
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( |
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Net cash used in operating activities |
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( |
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CASH FLOWS FROM INVESTING ACTIVITIES: |
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Proceeds from sale of property and equipment |
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— |
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Purchases of property and equipment |
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( |
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( |
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Net cash provided by (used in) investing activities |
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( |
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CASH FLOWS FROM FINANCING ACTIVITIES: |
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Proceeds from issuance of common stock and warrants from |
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— |
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Payments of offering costs relating to January 2021 PIPE |
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— |
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( |
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Principal payments on debt |
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— |
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( |
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Proceeds from ESPP purchases |
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Capital contributions received from non-controlling interest |
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— |
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Net cash provided by financing activities |
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Net (decrease) increase in cash and cash equivalents |
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( |
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Cash and cash equivalents — beginning of period |
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Cash and cash equivalents — end of period |
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$ |
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$ |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
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Cash paid for interest |
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$ |
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$ |
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NONCASH INVESTING AND FINANCING ACTIVITIES: |
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Common stock warrant liabilities reclassified to equity |
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$ |
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— |
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Common stock warrants issued to placement agent and included in offering |
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$ |
— |
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$ |
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Purchases of fixed assets included in accounts payable and accrued expenses |
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$ |
— |
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$ |
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See accompanying notes to the unaudited condensed consolidated financial statements.
4
Arcadia Biosciences, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Description of Business and Basis of Presentation
Organization
Arcadia Biosciences, Inc. (the "Company"), was incorporated in
The Company is a producer and marketer of innovative, plant-based health and wellness products. Its history as a leader in science-based approaches to developing high-value crop improvements, as well as nutritionally enhanced food ingredients and health and wellness products, has laid the foundation for its path forward. The Company used advanced breeding techniques to develop these proprietary innovations which are now being commercialized through the sales of seed and grain, as well as food ingredients and products. The recent acquisition of the businesses of Lief Holdings, LLC (“Lief”), EKO Holdings, LLC (“Eko”) and Live Zola, LLC (“Zola”) added bath and body care products, as well as coconut water, to the Company’s portfolio.
In May 2021, the Company’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness” or “AW”, see Note 6), acquired the businesses of Eko, Lief, and Zola. The acquisition included consumer CBD brands like Soul Spring, a CBD-infused botanical therapy brand in the natural category, Saavy Naturals, a line of natural body care products and Provault, a CBD-infused sports performance formula made with natural ingredients, providing effective support and recovery for athletes. Also included in the purchase is Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand.
In August 2019, the Company entered into a joint venture agreement with Legacy Ventures Hawaii, LLC (“Legacy,” see Note 8) to grow, extract, and sell hemp products. The partnership Archipelago Ventures Hawaii, LLC (“Archipelago”), combines the Company’s extensive genetic expertise and resources with Legacy’s experience in hemp extraction and sales. In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to regulatory challenges and a saturated hemp market.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (the “SEC”) in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, Arcadia Wellness, and Archipelago.
The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities ("VIEs"). This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE.
For all periods presented, the Company has determined that it is the primary beneficiary of Archipelago, a joint venture, as it has a controlling interest in Archipelago. Accordingly, the Company consolidates Archipelago in the condensed consolidated financial statements after eliminating intercompany transactions. For consolidated joint ventures, the non-controlling partner’s share of the assets, liabilities and operations of the joint venture is included in non-controlling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage of Archipelago. Net loss attributable to non-controlling interest of $
The information included in these condensed consolidated financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the condensed consolidated financial statements and notes thereto for the fiscal year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2022.
Liquidity, Capital Resources, and Going Concern
The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. Since inception, the
5
Company has financed its operations primarily through equity and debt financings. As of March 31, 2022, the Company had an accumulated deficit of $
With cash and cash equivalents of $
The Company may seek to raise additional funds through debt or equity financings. The Company may also consider entering into additional partner arrangements. The sale of additional equity would result in dilution to the Company’s stockholders. The incurrence of debt would result in debt service obligations, and the instruments governing such debt could provide for additional operating and financing covenants that would restrict operations. If the Company does require additional funds and is unable to secure adequate additional funding at terms agreeable to the Company, the Company may be forced to reduce spending, extend payment terms with suppliers, liquidate assets, or suspend or curtail planned development programs. Any of these actions could materially harm the business, results of operations and financial condition.
2. Recent Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Additionally, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 in April 2019 and ASU 2019-05, Financial Instruments — Credit Losses (Topic 326) — Targeted Transition Relief in May 2019. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. In November 2019, the FASB issued ASU No. 2019-10, which defers the effective date of ASU No. 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU No. 2016-13 on the condensed consolidated financial statements.
In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB Board is issuing this Update to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. In addressing the complexity, the FASB Board focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The amendments in this Update are effective for public business entities that meet the definition of a smaller reporting company, as defined by the SEC, for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company early
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in this Update clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company
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3. Inventory
Inventory costs are tracked on a lot-identified basis and are included as cost of revenues when sold. Inventories are stated at the lower of cost or net realizable value. The Company makes adjustments to inventory when conditions indicate that the net realizable value may be less than cost due to physical deterioration, obsolescence, changes in price levels, or other factors. Additional adjustments to inventory are made for excess and slow-moving inventory on hand that is not expected to be sold within a reasonable timeframe to reduce the carrying amount to its estimated net realizable value. The write-downs to inventory are included in cost of revenues and are based upon estimates about future demand from the Company’s customers and distributors and market conditions. The Company recorded write-downs of wheat and body care inventories of $
Inventories, net consist of the following (in thousands):
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March 31, 2022 |
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December 31, 2021 |
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Raw materials |
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$ |
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$ |
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Goods in process |
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Finished goods |
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Inventories |
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$ |
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$ |
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4. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
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March 31, 2022 |
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December 31, 2021 |
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Laboratory equipment |
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$ |
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$ |
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Software and computer equipment |
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Machinery and equipment |
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Furniture and fixtures |
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