UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
☒ |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended June 30, 2019
OR
☐ |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-37383
Arcadia Biosciences, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware |
81-0571538 |
( State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
202 Cousteau Place, Suite 105 Davis, CA |
95618 |
(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (530) 756-7077
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. Yes ☒ No ◻
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). Yes ☒ No ☐
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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Accelerated filer |
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Non-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 ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Common |
RKDA |
NASDAQ |
As of August 1, 2019, the registrant had 6,266,994 shares of common stock outstanding, $0.001 par value per share.
FORM 10-Q FOR THE QUARTER ENDED June 30, 2019
INDEX
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Page |
Part I — |
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1 |
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Item 1. |
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1 |
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1 |
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Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) |
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2 |
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3 |
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4 |
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5 |
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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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17 |
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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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Part II — |
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29 |
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Item 1. |
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29 |
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Item 1A. |
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29 |
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Item 2. |
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29 |
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Item 3. |
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29 |
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Item 4. |
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29 |
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Item 5. |
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29 |
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Item 6. |
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30 |
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31 |
Arcadia Biosciences, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
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June 30, 2019 |
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December 31, 2018 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
14,646 |
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$ |
11,998 |
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Short-term investments |
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5,381 |
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9,825 |
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Accounts receivable |
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125 |
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165 |
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Unbilled revenue |
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— |
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3 |
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Inventories — current |
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839 |
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181 |
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Prepaid expenses and other current assets |
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1,009 |
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|
704 |
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Total current assets |
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22,000 |
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22,876 |
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Property and equipment, net |
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639 |
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395 |
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Right of use asset |
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2,051 |
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— |
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Inventories — noncurrent |
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649 |
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|
746 |
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Other noncurrent assets |
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7 |
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7 |
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Total assets |
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$ |
25,346 |
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$ |
24,024 |
|
Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
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$ |
3,265 |
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$ |
2,645 |
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Amounts due to related parties |
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19 |
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29 |
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Unearned revenue — current |
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15 |
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96 |
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Operating lease liability — current |
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594 |
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— |
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Other current liabilities |
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264 |
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284 |
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Total current liabilities |
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4,157 |
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3,054 |
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Operating lease liability — noncurrent |
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1,609 |
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— |
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Common stock warrant liabilities |
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8,294 |
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5,083 |
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Other noncurrent liabilities |
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3,000 |
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3,072 |
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Total liabilities |
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17,060 |
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11,209 |
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Stockholders’ equity: |
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Common stock, $0.001 par value—150,000,000 shares authorized as of June 30, 2019 and December 31, 2018; 6,266,994 and 4,774,919 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively |
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47 |
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45 |
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Additional paid-in capital |
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194,980 |
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191,136 |
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Accumulated deficit |
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(186,741 |
) |
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(178,366 |
) |
Total stockholders’ equity |
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8,286 |
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12,815 |
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Total liabilities and stockholders’ equity |
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$ |
25,346 |
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$ |
24,024 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
1
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except share and per share data)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2019 |
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2018 |
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2019 |
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2018 |
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Revenues: |
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Product |
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$ |
162 |
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$ |
188 |
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$ |
269 |
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$ |
249 |
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License |
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— |
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90 |
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— |
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90 |
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Contract research and government grants |
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41 |
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158 |
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92 |
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311 |
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Total revenues |
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203 |
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436 |
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361 |
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650 |
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Operating expenses: |
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Cost of product revenues |
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89 |
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271 |
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148 |
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307 |
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Research and development |
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1,950 |
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1,794 |
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3,456 |
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3,190 |
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Selling, general and administrative |
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3,145 |
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2,949 |
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5,957 |
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5,570 |
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Total operating expenses |
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5,184 |
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5,014 |
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9,561 |
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9,067 |
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Loss from operations |
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(4,981 |
) |
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(4,578 |
) |
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(9,200 |
) |
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(8,417 |
) |
Other income, net |
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101 |
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94 |
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221 |
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132 |
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Initial loss on common stock warrant and common stock adjustment feature liabilities |
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— |
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— |
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— |
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(4,000 |
) |
Change in fair value of common stock warrant and common stock adjustment feature liabilities |
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9,482 |
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(535 |
) |
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987 |
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(2,435 |
) |
Offering costs |
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(365 |
) |
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(1,639 |
) |
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(365 |
) |
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(2,543 |
) |
Net income (loss) before income taxes |
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4,237 |
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(6,658 |
) |
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(8,357 |
) |
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(17,263 |
) |
Income tax benefit (provision) |
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1 |
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(11 |
) |
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(18 |
) |
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(21 |
) |
Net income (loss) |
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$ |
4,238 |
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$ |
(6,669 |
) |
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$ |
(8,375 |
) |
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$ |
(17,284 |
) |
Net income (loss) per share: |
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Basic and diluted |
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$ |
0.84 |
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$ |
(2.02 |
) |
|
$ |
(1.70 |
) |
|
$ |
(6.29 |
) |
Weighted-average number of shares used in per share calculations: |
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Basic and diluted |
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5,054,812 |
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3,307,667 |
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4,916,116 |
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2,746,931 |
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Other comprehensive income, net of tax |
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Unrealized losses on available-for-sale securities |
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— |
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— |
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— |
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1 |
|
Other comprehensive income |
|
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— |
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|
|
— |
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— |
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|
|
1 |
|
Comprehensive income (loss) |
|
$ |
4,238 |
|
|
$ |
(6,669 |
) |
|
$ |
(8,375 |
) |
|
$ |
(17,283 |
) |
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)
|
|
Common Stock |
|
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Additional Paid-In Capital |
|
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Accumulated Deficit |
|
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Accumulated Other Comprehensive (Loss) |
|
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Total Stockholders’ Equity |
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Shares |
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Amount |
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Balance at January 1, 2018 |
|
|
2,134,153 |
|
|
$ |
42 |
|
|
$ |
175,223 |
|
|
$ |
(167,257 |
) |
|
$ |
(1 |
) |
|
$ |
8,007 |
|
Impact of adoption of Topic 606 |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
2,371 |
|
|
|
— |
|
|
|
2,371 |
|
Issuance of shares related to employee stock option exercises |
|
|
44,354 |
|
|
|
— |
|
|
|
963 |
|
|
|
— |
|
|
|
— |
|
|
|
963 |
|
Issuance of shares related to employee stock purchase plan |
|
|
1,122 |
|
|
|
— |
|
|
|
6 |
|
|
|
— |
|
|
|
— |
|
|
|
6 |
|
Issuance of shares related to Purchase Agreement |
|
|
1,201,634 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of placement agent warrants related to Purchase Agreement |
|
|
— |
|
|
|
— |
|
|
|
526 |
|
|
|
— |
|
|
|
— |
|
|
|
526 |
|
Common stock adjustment feature |
|
|
— |
|
|
|
— |
|
|
|
8,378 |
|
|
|
— |
|
|
|
— |
|
|
|
8,378 |
|
Issuance of shares related to June 2018 Offering |
|
|
1,392,345 |
|
|
|
2 |
|
|
|
4,976 |
|
|
|
— |
|
|
|
— |
|
|
|
4,978 |
|
Offering costs related to June 2018 Offering |
|
|
— |
|
|
|
— |
|
|
|
(912 |
) |
|
|
— |
|
|
|
— |
|
|
|
(912 |
) |
Issuance of placement agent warrants related to June 2018 Offering |
|
|
— |
|
|
|
— |
|
|
|
427 |
|
|
|
— |
|
|
|
— |
|
|
|
427 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
1,550 |
|
|
|
— |
|
|
|
— |
|
|
|
1,550 |
|
Issuance of shares related to reverse stock split |
|
|
1,311 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
1 |
|
|
|
1 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(13,480 |
) |
|
|
— |
|
|
|
(13,480 |
) |
Balance at December 31, 2018 |
|
|
4,774,919 |
|
|
$ |
45 |
|
|
$ |
191,136 |
|
|
$ |
(178,366 |
) |
|
$ |
— |
|
|
$ |
12,815 |
|
Issuance of shares related to employee stock purchase plan |
|
|
2,500 |
|
|
|
— |
|
|
|
8 |
|
|
|
— |
|
|
|
— |
|
|
|
8 |
|
Issuance of shares related to June 2019 Offering |
|
|
1,489,575 |
|
|
|
2 |
|
|
|
3,301 |
|
|
|
— |
|
|
|
— |
|
|
|
3,303 |
|
Issuance of placement agent warrants related to June 2019 Offering |
|
|
— |
|
|
|
— |
|
|
|
198 |
|
|
|
— |
|
|
|
— |
|
|
|
198 |
|
Offering costs related to June 2019 Offering |
|
|
— |
|
|
|
— |
|
|
|
(474 |
) |
|
|
— |
|
|
|
— |
|
|
|
(474 |
) |
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
811 |
|
|
|
— |
|
|
|
— |
|
|
|
811 |
|
Other comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(8,375 |
) |
|
|
— |
|
|
|
(8,375 |
) |
Balance at June 30, 2019 |
|
|
6,266,994 |
|
|
$ |
47 |
|
|
$ |
194,980 |
|
|
$ |
(186,741 |
) |
|
$ |
— |
|
|
$ |
8,286 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
3
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Six Months Ended June 30, |
|
|||||
|
|
|
2019 |
|
|
|
2018 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(8,375 |
) |
|
$ |
(17,284 |
) |
Adjustments to reconcile net loss to cash used in operating activities: |
|
|
|
|
|
|
|
|
Initial loss on common stock warrant and common stock adjustment feature liabilities |
|
|
— |
|
|
|
4,000 |
|
Change in fair value of common stock warrant and common stock adjustment feature liabilities |
|
|
(987 |
) |
|
|
2,435 |
|
Offering costs |
|
|
365 |
|
|
|
2,543 |
|
Depreciation and amortization |
|
|
77 |
|
|
|
98 |
|
Lease amortization |
|
|
348 |
|
|
|
— |
|
Gain on disposal of equipment |
|
|
— |
|
|
|
(3 |
) |
Net amortization of investment premium |
|
|
(82 |
) |
|
|
(27 |
) |
Stock-based compensation |
|
|
811 |
|
|
|
656 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Accounts receivable |
|
|
40 |
|
|
|
1,051 |
|
Unbilled revenue |
|
|
3 |
|
|
|
(102 |
) |
Inventories |
|
|
(561 |
) |
|
|
226 |
|
Prepaid expenses and other current assets |
|
|
(305 |
) |
|
|
(245 |
) |
Accounts payable and accrued expenses |
|
|
677 |
|
|
|
(52 |
) |
Amounts due to related parties |
|
|
(10 |
) |
|
|
(17 |
) |
Unearned revenue |
|
|
(81 |
) |
|
|
(197 |
) |
Operating lease payments |
|
|
(349 |
) |
|
|
— |
|
Net cash used in operating activities |
|
|
(8,429 |
) |
|
|
(6,918 |
) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from sale of property and equipment |
|
|
— |
|
|
|
9 |
|
Purchases of property and equipment |
|
|
(315 |
) |
|
|
(68 |
) |
Purchases of investments |
|
|
(8,623 |
) |
|
|
(18,908 |
) |
Proceeds from sales and maturities of investments |
|
|
13,150 |
|
|
|
3,900 |
|
Net cash provided by (used in) investing activities |
|
|
4,212 |
|
|
|
(15,067 |
) |
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock and warrants from June 2019 Offering |
|
|
7,500 |
|
|
|
— |
|
Payments of offering costs relating to June 2019 Offering |
|
|
(619 |
) |
|
|
— |
|
Proceeds from issuance of common stock and warrants from Purchase Agreement |
|
|
— |
|
|
|
10,000 |
|
Payments of offering costs relating to Purchase Agreement |
|
|
— |
|
|
|
(1,305 |
) |
Proceeds from issuance of common stock and warrants from June 2018 Offering |
|
|
— |
|
|
|
14,000 |
|
Payments of offering costs relating to June 2018 Offering |
|
|
(24 |
) |
|
|
(1,134 |
) |
Proceeds from exercise of stock options and ESPP purchases |
|
|
8 |
|
|
|
966 |
|
Net cash provided by financing activities |
|
|
6,865 |
|
|
|
22,527 |
|
Net increase in cash and cash equivalents |
|
|
2,648 |
|
|
|
542 |
|
Cash and cash equivalents — beginning of period |
|
|
11,998 |
|
|
|
9,125 |
|
Cash and cash equivalents — end of period |
|
$ |
14,646 |
|
|
$ |
9,667 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
|
|
Cash paid for income taxes |
|
$ |
2 |
|
|
$ |
24 |
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Offering costs in accounts payable and accrued expenses at end of period |
|
$ |
22 |
|
|
$ |
46 |
|
Common stock warrants issued to placement agent and included in offering costs related to Purchase Agreement |
|
$ |
— |
|
|
$ |
526 |
|
Common stock warrants issued to placement agent and included in offering costs related to June 2018 Offering |
|
$ |
— |
|
|
$ |
239 |
|
Common stock warrants issued to placement agent and included in offering costs related to June 2019 Offering |
|
$ |
86 |
|
|
$ |
— |
|
Reclassification of common stock adjustment feature liability balance |
|
$ |
— |
|
|
$ |
8,378 |
|
Right of use assets obtained in exchange for new operating lease liabilities |
|
$ |
2,328 |
|
|
$ |
— |
|
Proceeds from sale of fixed assets included in prepaid expenses and other current assets at end of period |
|
$ |
— |
|
|
$ |
1 |
|
Purchases of fixed assets included in accounts payable and accrued expenses |
|
$ |
6 |
|
|
$ |
— |
|
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 Arizona in 2002 and maintains its headquarters in Davis, California, with additional facilities in Phoenix, Arizona, American Falls, Idaho, and Molokai, Hawaii. The Company was reincorporated in Delaware in March 2015.
We are a consumer-driven, agricultural food ingredient company and proven leader in agricultural innovation to improve the quality and nutritional content of crops. We aim to create value across the agricultural production and supply chain beginning with enhanced crop productivity for farmers and ultimately delivering accelerated innovation in nutritional quality consumer foods. We use state of the art gene-editing technology and advanced breeding techniques to naturally enhance the nutritional quality of grains and oilseeds to address the rapidly evolving trends in consumer health and nutrition. In addition, we have developed high value crop productivity traits designed to enhance farm economics.
In February 2012, the Company formed Verdeca LLC (“Verdeca,” see Note 5), which is jointly owned with Bioceres Crop Solutions Corp. (“Bioceres”), a U.S. wholly owned subsidiary of Bioceres, S.A., an Argentine corporation. Bioceres, S.A. is an agricultural investment and development cooperative. Verdeca, which is consolidated by the Company, was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies.
Reverse Stock Split
In January 2018, the Company’s board of directors and its shareholders approved a reverse split of 1:20 on the Company’s issued and outstanding common stock which became effective on January 23, 2018. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the condensed consolidated financial statement have been retroactively adjusted to reflect the reverse stock split for all periods presented. The reverse stock split did not change the total number of authorized shares of common stock which remained at one hundred and fifty million shares.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and Verdeca 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 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 Verdeca, which is a VIE. The Company evaluates its relationships with the VIEs upon the occurrence of certain significant events that affect the design, structure or other factors pertinent to the primary beneficiary determination. Interim results are not necessarily indicative of results for any other interim period or for the full fiscal year. 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 consolidated financial statements and notes thereto for the fiscal year ended December 31, 2018 included in the Company’s Annual Report on Form 10-K, filed with the SEC on April 1, 2019.
Liquidity, Capital Resources, and Going Concern
As of June 30, 2019, the Company had an accumulated deficit of $186.7 million, cash and cash equivalents of $14.6 million and short-term investments of $5.4 million. For the six months ended June 30, 2019 and the twelve months ended December 31, 2018, the Company had net losses of $8.4 and $13.5 million, and net cash used in operations of $8.4 million and $13.6 million, respectively. The Company believes that its existing cash, cash equivalents and investments will be insufficient to meet its anticipated cash requirements for at least through August 2020, and thus raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
5
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 or operations. Any of these actions could materially harm the business, results of operations and financial condition.
2. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Based on the new standard, lessees recognize lease assets and lease liabilities for leases classified as operating leases under previous GAAP and disclose qualitative and quantitative information about leasing arrangements with terms longer than 12 months. The adoption required recording right-of-use assets and corresponding lease obligation liabilities for the current operating leases. The Company adopted ASU No. 2016-02 on January 1, 2019. See Note 7.
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. The amendments in this update will be effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU No. 2016-13 on its consolidated financial statements.
In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments address cash flow issues such as debt prepayment or debt extinguishment costs and zero-coupon debt instruments. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments are to be applied using a retrospective transition method to each period presented. If it is impractical to retrospectively apply, it can be applied prospectively as of the earliest date practicable. The Company adopted ASU No. 2016-15 on January 1, 2019 with no material impact to the consolidated financial statements.
In August 2018, the FASB issued ASU No. 2018-13 Fair Value Measurement (Topic 820) – Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The amendments affect any entity required to make disclosures about recurring or nonrecurring fair value measurements. The amendments will be effective for all entities for fiscal years beginning after December 15, 2019. The Company is currently evaluating the impact of the adoption of ASU No. 2018-13 on its consolidated financial statements.
3. Inventory
Raw materials costs consist primarily of SONOVA® Gamma Linolenic Acid (“GLA”) Safflower Oil seed production costs incurred by the Company’s contracted cooperators. Goods in process costs consist of GoodWheatTM seed and grain production costs incurred primarily by the Company’s contracted cooperators. Finished goods inventories consist of GLA oil that is available for sale. Inventory-current is comprised of the total of Goods in process plus a portion GLA oil within Finished Goods, which the Company anticipates to sell within 12 months. The remaining is recorded in Inventory-noncurrent. Inventories consist of the following (in thousands):
|
|
June 30, 2019 |
|
|
December 31, 2018 |
|
||
Raw materials |
|
$ |
41 |
|
|
$ |
41 |
|
Goods in process |
|
|
637 |
|
|
|
— |
|
Finished goods |
|
|
810 |
|
|
|
886 |
|
Inventories |
|
$ |
1,488 |
|
|
$ |
927 |
|
6
4. Investments and Fair Value of Financial Instruments
Available-for-Sale Investments
The Company classified short-term investments as “available-for-sale.” These short-term investments are free of trading restrictions. The investments are carried at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive income, which is reflected as a separate component of stockholder’s equity in the Consolidated Balance Sheets. Gains and losses are recognized when realized in the Consolidated Statements of Operations and Comprehensive Income (Loss).
The following tables summarize the amortized cost and fair value of the available-for-sale investment securities portfolio at June 30, 2019 and December 31, 2018, and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:
(Dollars in thousands) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
June 30, 2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
13,571 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,571 |
|
Corporate securities |
|
|
449 |
|
|
|
— |
|
|
|
— |
|
|
|
449 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities |
|
|
600 |
|
|
|
— |
|
|
|
— |
|
|
|
600 |
|
Commercial paper |
|
|
4,781 |
|
|
|
— |
|
|
|
— |
|
|
|
4,781 |
|
Total Assets at Fair Value |
|
$ |
19,401 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
19,401 |
|
(Dollars in thousands) |
|
Amortized Cost |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Estimated Fair Value |
|
||||
December 31, 2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
9,902 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
9,902 |
|
Commercial paper |
|
|
1,345 |
|
|
|
— |
|
|
|
— |
|
|
|
1,345 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate Securities |
|
|
656 |
|
|
|
— |
|
|
|
— |
|
|
|
656 |
|
Treasury Bills |
|
|
1,195 |
|
|
|
— |
|
|
|
— |
|
|
|
1,195 |
|
Commercial paper |
|
|
6,776 |
|
|
|
— |
|
|
|
— |
|
|
|
6,776 |
|
U.S. government securities |
|
|
1,198 |
|
|
|
— |
|
|
|
— |
|
|
|
1,198 |
|
Total Assets at Fair Value |
|
$ |
21,072 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
21,072 |
|
The Company did not have any investment categories that were in a continuous unrealized loss position for more than three months as of June 30, 2019. Unrealized gains and losses amounts would be included in accumulated other comprehensive income or loss; however, none were reported during the periods presented.
As of June 30, 2019, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company anticipates that it will recover the entire amortized cost basis of such fixed income securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three and six months ended June 30, 2019.
Fair Value Measurement
Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the condensed consolidated financial statements on a recurring basis. Assets and liabilities recorded at fair value in the condensed consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows:
|
• |
Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. |
7
|
• |
Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
|
• |
Level 3 inputs are unobservable inputs for the asset or liability. |
The following table sets forth the fair value of the Company’s financial assets as of June 30, 2019 and December 31, 2018:
|
|
Fair Value Measurements at June 30, 2019 |
|
|||||||||||||
(Dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds |
|
$ |
13,571 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,571 |
|
Corporate securities |
|
|
— |
|
|
|
449 |
|
|
|
— |
|
|
|
449 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate securities |
|
|
— |
|
|
|
600 |