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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 September 30, 2023
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 |
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5950 Sherry Lane, Suite 215 Dallas, TX |
75225 |
(Address of Principal Executive Offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (214) 974-8921
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 CAPITAL MARKET |
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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Smaller reporting company |
☒ |
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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 November 2, 2023, the registrant had 1,110,337 shares of common stock outstanding, $0.001 par value per share.
Arcadia Biosciences, Inc.
FORM 10-Q FOR THE QUARTER ENDED September 30, 2023
INDEX
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Page |
Part I — |
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Financial Information (Unaudited) |
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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 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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18 |
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Item 3. |
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28 |
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Item 4. |
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28 |
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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 |
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ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Arcadia Biosciences, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
|
|
September 30, 2023 |
|
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December 31, 2022 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
|
$ |
10,611 |
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$ |
20,644 |
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Short-term investments |
|
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5,089 |
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|
|
— |
|
Accounts receivable and other receivables, net of allowance for doubtful accounts of |
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304 |
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|
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1,221 |
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Inventories, net — current |
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2,657 |
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|
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2,321 |
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Assets held for sale |
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87 |
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|
|
87 |
|
Prepaid expenses and other current assets |
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1,093 |
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|
795 |
|
Current assets of discontinued operations |
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165 |
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330 |
|
Total current assets |
|
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20,006 |
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25,398 |
|
Property and equipment, net |
|
|
468 |
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|
|
680 |
|
Right of use asset |
|
|
1,147 |
|
|
|
1,848 |
|
Inventories, net — noncurrent |
|
|
1,624 |
|
|
|
767 |
|
Intangible assets, net |
|
|
40 |
|
|
|
40 |
|
Other noncurrent assets |
|
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181 |
|
|
|
165 |
|
Noncurrent assets of discontinued operations |
|
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— |
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24 |
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Total assets |
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$ |
23,466 |
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$ |
28,922 |
|
Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable and accrued expenses |
|
$ |
2,602 |
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$ |
2,855 |
|
Amounts due to related parties |
|
|
46 |
|
|
|
48 |
|
Operating lease liability — current |
|
|
924 |
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|
|
1,010 |
|
Other current liabilities |
|
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282 |
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|
270 |
|
Current liabilities of discontinued operations |
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31 |
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26 |
|
Total current liabilities |
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3,885 |
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|
4,209 |
|
Operating lease liability — noncurrent |
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347 |
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1,007 |
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Common stock warrant and option liabilities |
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1,836 |
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806 |
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Other noncurrent liabilities |
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2,000 |
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|
2,000 |
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Total liabilities |
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8,068 |
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8,022 |
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Commitments and contingencies (Note 13) |
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Stockholders’ equity: |
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Common stock, $0.001 par value—150,000,000 shares authorized as |
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65 |
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65 |
|
Additional paid-in capital |
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284,371 |
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278,827 |
|
Accumulated other comprehensive income |
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87 |
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|
|
— |
|
Accumulated deficit |
|
|
(268,987 |
) |
|
|
(257,859 |
) |
Total stockholders’ equity |
|
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15,536 |
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21,033 |
|
Non-controlling interest |
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(138 |
) |
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(133 |
) |
Total stockholders' equity |
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15,398 |
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|
20,900 |
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Total liabilities and stockholders’ equity |
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$ |
23,466 |
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$ |
28,922 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
1
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share data)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2023 |
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2022 |
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2023 |
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2022 |
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Revenues: |
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Product |
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$ |
1,597 |
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$ |
1,543 |
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$ |
4,150 |
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$ |
5,685 |
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Royalty |
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— |
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17 |
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— |
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117 |
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License |
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— |
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10 |
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10 |
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872 |
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Total revenues |
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1,597 |
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1,570 |
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4,160 |
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6,674 |
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Operating expenses (income): |
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Cost of revenues |
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1,102 |
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1,128 |
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2,630 |
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5,201 |
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Research and development |
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305 |
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255 |
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1,055 |
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1,009 |
|
Gain on sale of Verdeca |
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— |
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— |
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— |
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(1,138 |
) |
Change in fair value of contingent consideration |
|
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— |
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— |
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— |
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(70 |
) |
Gain on sale of property and equipment |
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(11 |
) |
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— |
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|
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(36 |
) |
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(386 |
) |
Selling, general and administrative |
|
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3,443 |
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4,178 |
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|
11,085 |
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|
11,407 |
|
Total operating expenses |
|
|
4,839 |
|
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|
5,561 |
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|
|
14,734 |
|
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|
16,023 |
|
Loss from continuing operations |
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(3,242 |
) |
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(3,991 |
) |
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(10,574 |
) |
|
|
(9,349 |
) |
Interest income |
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133 |
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|
95 |
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|
538 |
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123 |
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Other income, net |
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|
17 |
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|
43 |
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|
36 |
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|
13 |
|
Valuation loss on March 2023 PIPE |
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— |
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— |
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|
(6,076 |
) |
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— |
|
Change in fair value of common stock warrant and option liabilities |
|
|
608 |
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|
1,880 |
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5,965 |
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|
1,880 |
|
Issuance and offering costs allocated to liability classified options |
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|
— |
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|
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(314 |
) |
|
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(430 |
) |
|
|
(314 |
) |
Net loss from continuing operations before income taxes |
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|
(2,484 |
) |
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|
(2,287 |
) |
|
|
(10,541 |
) |
|
|
(7,647 |
) |
Income tax provision |
|
|
— |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
Net loss from continuing operations |
|
|
(2,484 |
) |
|
|
(2,288 |
) |
|
|
(10,542 |
) |
|
|
(7,648 |
) |
Net loss from discontinued operations |
|
|
(83 |
) |
|
|
(589 |
) |
|
|
(591 |
) |
|
|
(3,636 |
) |
Net loss |
|
|
(2,567 |
) |
|
|
(2,877 |
) |
|
|
(11,133 |
) |
|
|
(11,284 |
) |
Net loss attributable to non-controlling interest |
|
|
— |
|
|
|
(10 |
) |
|
|
(5 |
) |
|
|
(152 |
) |
Net loss attributable to common stockholders |
|
$ |
(2,567 |
) |
|
$ |
(2,867 |
) |
|
$ |
(11,128 |
) |
|
$ |
(11,132 |
) |
Net loss per share attributable to common stockholders: |
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and diluted from continuing operations |
|
$ |
(1.83 |
) |
|
$ |
(3.71 |
) |
|
$ |
(8.81 |
) |
|
$ |
(13.05 |
) |
Basic and diluted from discontinued operations |
|
$ |
(0.06 |
) |
|
$ |
(0.96 |
) |
|
$ |
(0.49 |
) |
|
$ |
(6.33 |
) |
Net loss per basic and diluted share attributable to common stockholders |
|
$ |
(1.89 |
) |
|
$ |
(4.67 |
) |
|
$ |
(9.31 |
) |
|
$ |
(19.37 |
) |
Weighted-average number of shares used in per share |
|
|
|
|
|
|
|
|
|
|
|
|
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Basic and diluted |
|
|
1,359,511 |
|
|
|
613,814 |
|
|
|
1,195,354 |
|
|
|
574,621 |
|
Other comprehensive income, net of tax |
|
|
|
|
|
|
|
|
|
|
|
|
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Unrealized gains on available-for-sale securities |
|
$ |
66 |
|
|
$ |
— |
|
|
$ |
87 |
|
|
$ |
— |
|
Other comprehensive income |
|
$ |
66 |
|
|
$ |
— |
|
|
$ |
87 |
|
|
$ |
— |
|
Comprehensive loss attributable to common stockholders |
|
$ |
(2,501 |
) |
|
$ |
(2,867 |
) |
|
$ |
(11,041 |
) |
|
$ |
(11,132 |
) |
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 |
|
|
Accumulated Other |
|
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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 |
|
|
Comprehensive Income |
|
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Interest |
|
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Equity |
|
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Balance at December 31, 2022 |
|
|
616,079 |
|
|
$ |
65 |
|
|
$ |
278,827 |
|
|
$ |
(257,859 |
) |
|
$ |
— |
|
|
$ |
(133 |
) |
|
$ |
20,900 |
|
Issuance of shares related to March 2023 PIPE |
|
|
165,500 |
|
|
|
— |
|
|
|
4,740 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
4,740 |
|
Modification of warrants related to March 2023 PIPE |
|
|
— |
|
|
|
— |
|
|
|
219 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
219 |
|
Issuance of shares related to August 2022 pre-funded warrants exercise |
|
|
56,813 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of shares related to employee stock |
|
|
88 |
|
|
|
— |
|
|
|
5 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
5 |
|
Issuance of shares related to reverse stock split |
|
|
19,092 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
212 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
212 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(9,384 |
) |
|
|
— |
|
|
|
— |
|
|
|
(9,384 |
) |
Balance at March 31, 2023 |
|
|
857,572 |
|
|
$ |
65 |
|
|
$ |
284,003 |
|
|
$ |
(267,243 |
) |
|
$ |
— |
|
|
$ |
(133 |
) |
|
$ |
16,692 |
|
Issuance of shares related to March 2023 pre-funded warrants exercise |
|
|
250,834 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Issuance of shares related to reverse stock split |
|
|
26 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
199 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
199 |
|
Unrealized gains on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
21 |
|
|
|
— |
|
|
|
21 |
|
Net income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
823 |
|
|
|
— |
|
|
|
(5 |
) |
|
|
818 |
|
Balance at June 30, 2023 |
|
|
1,108,432 |
|
|
$ |
65 |
|
|
$ |
284,202 |
|
|
$ |
(266,420 |
) |
|
$ |
21 |
|
|
$ |
(138 |
) |
|
$ |
17,730 |
|
Issuance of shares related to employee stock |
|
|
1,905 |
|
|
|
— |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
7 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
162 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
162 |
|
Unrealized gains on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
66 |
|
|
|
— |
|
|
|
66 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,567 |
) |
|
|
— |
|
|
|
— |
|
|
|
(2,567 |
) |
Balance at September 30, 2023 |
|
|
1,110,337 |
|
|
$ |
65 |
|
|
$ |
284,371 |
|
|
$ |
(268,987 |
) |
|
$ |
87 |
|
|
$ |
(138 |
) |
|
$ |
15,398 |
|
|
|
Common Stock |
|
|
Additional |
|
|
Accumulated |
|
|
Non- |
|
|
Total |
|
|||||||||
|
|
Shares |
|
|
Amount |
|
|
Capital |
|
|
Deficit |
|
|
Interest |
|
|
Equity |
|
||||||
Balance at December 31, 2021 |
|
|
554,609 |
|
|
$ |
63 |
|
|
$ |
257,515 |
|
|
$ |
(226,485 |
) |
|
$ |
103 |
|
|
$ |
31,196 |
|
Reclassification upon adoption of ASU 2020-06 |
|
|
— |
|
|
|
— |
|
|
|
19,390 |
|
|
|
(15,998 |
) |
|
|
— |
|
|
|
3,392 |
|
Issuance of shares related to employee stock |
|
|
118 |
|
|
|
— |
|
|
|
4 |
|
|
|
— |
|
|
|
— |
|
|
|
4 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
260 |
|
|
|
— |
|
|
|
— |
|
|
|
260 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(4,488 |
) |
|
|
(122 |
) |
|
|
(4,610 |
) |
Balance at March 31, 2022 |
|
|
554,727 |
|
|
$ |
63 |
|
|
$ |
277,169 |
|
|
$ |
(246,971 |
) |
|
$ |
(19 |
) |
|
$ |
30,242 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
323 |
|
|
|
— |
|
|
|
— |
|
|
|
323 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(3,777 |
) |
|
|
(20 |
) |
|
|
(3,797 |
) |
Balance at June 30, 2022 |
|
|
554,727 |
|
|
$ |
63 |
|
|
$ |
277,492 |
|
|
$ |
(250,748 |
) |
|
$ |
(39 |
) |
|
$ |
26,768 |
|
Issuance of shares related to August 2022 Offering |
|
|
61,250 |
|
|
|
2 |
|
|
|
1,174 |
|
|
|
— |
|
|
|
— |
|
|
|
1,176 |
|
Offering costs related to August 2022 Offering |
|
|
— |
|
|
|
— |
|
|
|
(365 |
) |
|
|
— |
|
|
|
— |
|
|
|
(365 |
) |
Issuance of shares related to employee stock |
|
|
102 |
|
|
|
— |
|
|
|
3 |
|
|
|
— |
|
|
|
— |
|
|
|
3 |
|
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
314 |
|
|
|
— |
|
|
|
— |
|
|
|
314 |
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(2,867 |
) |
|
|
(10 |
) |
|
|
(2,877 |
) |
Balance at September 30, 2022 |
|
|
616,079 |
|
|
$ |
65 |
|
|
$ |
278,618 |
|
|
$ |
(253,615 |
) |
|
$ |
(49 |
) |
|
$ |
25,019 |
|
See accompanying notes to the unaudited condensed consolidated financial statements.
3
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
|
|
Nine Months Ended September 30, |
|
|||||
|
|
|
2023 |
|
|
|
2022 |
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
||
Net loss |
|
$ |
(11,133 |
) |
|
$ |
(11,284 |
) |
Adjustments to reconcile net loss to cash used in operating activities: |
|
|
|
|
|
|
||
Change in fair value of common stock warrant and option liabilities |
|
|
(5,965 |
) |
|
|
(1,880 |
) |
Change in fair value of contingent consideration |
|
|
— |
|
|
|
(70 |
) |
Issuance and offering costs allocated to liability classified options |
|
|
430 |
|
|
|
314 |
|
Valuation loss on March 2023 PIPE |
|
|
6,076 |
|
|
|
— |
|
Depreciation |
|
|
227 |
|
|
|
354 |
|
Amortization of intangible assets |
|
|
— |
|
|
|
39 |
|
Lease amortization |
|
|
535 |
|
|
|
686 |
|
Impairment of intangible assets |
|
|
— |
|
|
|
72 |
|
Gain on disposal of property and equipment |
|
|
(36 |
) |
|
|
(386 |
) |
Stock-based compensation |
|
|
573 |
|
|
|
897 |
|
Bad debt expense |
|
|
— |
|
|
|
32 |
|
Gain on sale of Verdeca |
|
|
— |
|
|
|
(1,138 |
) |
Write-down of inventories |
|
|
444 |
|
|
|
1,530 |
|
Impairment of property and equipment |
|
|
— |
|
|
|
370 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable and other receivables |
|
|
249 |
|
|
|
(534 |
) |
Inventories |
|
|
(1,388 |
) |
|
|
1,071 |
|
Prepaid expenses and other current assets |
|
|
(284 |
) |
|
|
(90 |
) |
Other noncurrent assets |
|
|
(13 |
) |
|
|
15 |
|
Accounts payable and accrued expenses |
|
|
(300 |
) |
|
|
(890 |
) |
Amounts due to related parties |
|
|
(2 |
) |
|
|
(17 |
) |
Other current liabilities |
|
|
11 |
|
|
|
6 |
|
Operating lease liabilities |
|
|
(573 |
) |
|
|
(718 |
) |
Net cash used in operating activities |
|
|
(11,149 |
) |
|
|
(11,621 |
) |
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from sale of property and equipment |
|
|
42 |
|
|
|
897 |
|
Proceeds from sale of Verdeca — earn-out received |
|
|
569 |
|
|
|
285 |
|
Purchases of property and equipment |
|
|
(5 |
) |
|
|
(46 |
) |
Purchases of investments |
|
|
(5,002 |
) |
|
|
— |
|
Net cash (used in) provided by investing activities |
|
|
(4,396 |
) |
|
|
1,136 |
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Proceeds from issuance of common stock, pre-funded warrants and |
|
|
5,997 |
|
|
|
— |
|
Payments of offering costs relating to March 2023 PIPE |
|
|
(497 |
) |
|
|
— |
|
Proceeds from issuance of common stock, pre-funded warrants and |
|
|
— |
|
|
|
5,000 |
|
Payments of offering costs relating to August 2022 Offering |
|
|
— |
|
|
|
(488 |
) |
Proceeds from ESPP purchases |
|
|
12 |
|
|
|
7 |
|
Net cash provided by financing activities |
|
|
5,512 |
|
|
|
4,519 |
|
Net decrease in cash and cash equivalents |
|
|
(10,033 |
) |
|
|
(5,966 |
) |
Cash and cash equivalents — beginning of period |
|
|
20,644 |
|
|
|
28,685 |
|
Cash and cash equivalents — end of period |
|
$ |
10,611 |
|
|
$ |
22,719 |
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: |
|
|
|
|
|
|
||
Cash paid for interest |
|
$ |
— |
|
|
$ |
1 |
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
|
|
|
|
|
|
||
Common stock warrant liabilities reclassified to equity upon adoption of ASU 2020-06 |
|
$ |
— |
|
|
$ |
3,392 |
|
Common stock options issued to placement agent and included in offering costs related to August 2022 RDO securities purchase agreement |
|
$ |
— |
|
|
$ |
191 |
|
Common stock options issued to placement agent and included in offering costs related to March 2023 PIPE |
|
$ |
212 |
|
|
$ |
— |
|
Right of use assets obtained in exchange for new operating lease liabilities |
|
$ |
— |
|
|
$ |
114 |
|
Proceeds from sale of Verdeca in accounts receivable and other receivables |
|
$ |
— |
|
|
$ |
854 |
|
Warrant and option modifications included in Valuation loss on March 2023 PIPE |
|
$ |
404 |
|
|
$ |
— |
|
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," "Arcadia" or "management"), was incorporated in Arizona in 2002 and maintains its headquarters in Dallas, Texas, with additional office space in Davis and Sacramento, California, and additional facilities in American Falls, Idaho. The Company was reincorporated in Delaware in March 2015.
The Company is a producer and marketer of innovative, plant-based food and beverage products. Its history as a leader in science-based approaches to developing high-value crop improvements, as well as nutritionally enhanced food ingredients, 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 acquisition of the assets of Live Zola, LLC (“Zola”) added coconut water to the Company's portfolio of products.
In May 2021, the Company’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness” or “AW”) 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 (collectively "body care brands"). Also included in the purchase was 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 6) 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.
In February 2012, the Company formed Verdeca, which was equally owned with Bioceres. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies. In November 2020, Arcadia sold its membership interest in Verdeca to Bioceres in a transaction in which Arcadia received cash, shares of Bioceres stock and a royalty stream of up to $10.0 million on sales of Haab 4 soybeans (“HB4”). An additional $2.0 million in cash is to be paid upon achievement by Verdeca of reaching commercial plantings of at least 200,000 hectares of HB4 or China approving the HB4 soybean trait for “food and feed”. During 2022, Bioceres received China's approval of the HB4 soybean trait and as a result, Arcadia recorded license revenue of $862,000 and a gain on sale of Verdeca of $1.1 million on the condensed consolidated statements of operations and comprehensive loss. The Company received the full payment of $2.0 million as of September 30, 2023.
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 $10,000 and $152,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the three and nine months ended September 30, 2022, respectively. There was minimal activity during the three and nine months ended September 30, 2023. The non-controlling partner’s equity interests are presented as non-controlling interests on the condensed consolidated balance sheets.
5
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, 2022 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 30, 2023.
Reclassifications
Certain previously reported financial information has been reclassified to conform to the current year presentation. For a discussion of the reclassification of the financial presentation of our former body care brands reported as discontinued operations, see “Discontinued Operations” section below. Unless otherwise noted, amounts and disclosures throughout these notes to condensed consolidated financial statements relate solely to continuing operations and exclude all discontinued operations.
Reverse Stock Split
In February 2023, the Company’s board of directors approved a reverse split of 40:1 on the Company’s issued and outstanding common stock. On February 15, 2023, the Company’s stockholders approved the certificate of amendment, which the Company filed on February 27, 2023 with the Secretary of State of Delaware to effect the reverse split on March 1, 2023. As a result of the reverse stock split, additional shares of common stock of 19,118 were issued in lieu of fractional shares. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the reverse stock split for all periods presented.
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 Company has financed its operations primarily through equity and debt financings. As of September 30, 2023, the Company had an accumulated deficit of $269.0 million, cash and cash equivalents of $10.6 million and short-term investments of $5.1 million. For the nine months ended September 30, 2023, the Company had net losses of $11.1 million and net cash used in operations of $11.1 million. For the twelve months ended December 31, 2022, the Company had net losses of $15.6 million and net cash used in operations of $14.0 million.
With cash and cash equivalents of $10.6 million and short-term investments of $5.1 million as of September 30, 2023, the Company believes that its existing cash, cash equivalents and short-term investments will not be sufficient to meet its anticipated cash requirements for at least the next 12-18 months from the issuance date of these financial statements, 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.
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 requires 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 product launches. Any of these actions could materially harm the business, results of operations and financial condition.
Discontinued Operations
In July 2023, management made the decision to exit its body care brands as a result of continued pressure on the CBD market due to regulatory uncertainty. This decision will streamline the business and allow the Company to focus on growth of the its other “core” brands, which consist of the GoodWheat portfolio and Zola. Body care operations ceased as of September 30, 2023. In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets and the results of the discontinued operations as a separate component of income on the condensed consolidated statements of operations and comprehensive loss for all periods presented.
Major classes of line items constituting the balance sheet of discontinued operations:
(In thousands) |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Assets |
|
|
|
|
|
|
||
Accounts receivable and other receivables |
|
$ |
165 |
|
|
$ |
66 |
|
Inventories, net — current |
|
|
— |
|
|
|
250 |
|
Prepaid expenses and other current assets |
|
|
— |
|
|
|
14 |
|
Property and equipment, net |
|
|
— |
|
|
|
24 |
|
Total assets |
|
$ |
165 |
|
|
$ |
354 |
|
|
|
|
|
|
|
|
||
Liabilities |
|
|
|
|
|
|
||
Accounts payable and accrued expenses |
|
$ |
31 |
|
|
$ |
26 |
|
Total liabilities |
|
$ |
31 |
|
|
$ |
26 |
|
6
Major classes of line items constituting net loss from discontinued operations:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
(In thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product revenue |
|
$ |
37 |
|
|
$ |
308 |
|
|
$ |
373 |
|
|
$ |
2,282 |
|
Cost of revenues |
|
|
(34 |
) |
|
|
(214 |
) |
|
|
(313 |
) |
|
|
(3,046 |
) |
Impairment of intangible assets |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(72 |
) |
Impairment of property and equipment |
|
|
— |
|
|
|
(24 |
) |
|
|
— |
|
|
|
(370 |
) |
Selling, general and administrative |
|
|
(86 |
) |
|
|
(659 |
) |
|
|
(651 |
) |
|
|
(2,430 |
) |
Net loss from discontinued operations |
|
$ |
(83 |
) |
|
$ |
(589 |
) |
|
$ |
(591 |
) |
|
$ |
(3,636 |
) |
The following table presents significant non-cash items of discontinued operations:
|
|
Nine Months Ended September 30, |
|
|||||
(In thousands) |
|
2023 |
|
|
2022 |
|
||
Depreciation |
|
$ |
24 |
|
|
$ |
83 |
|
Impairment of intangible assets |
|
$ |
— |
|
|
$ |
72 |
|
Write-down of inventories |
|
$ |
— |
|
|
$ |
806 |
|
Impairment of property and equipment |
|
$ |
— |
|
|
$ |
370 |
|
Accounts receivable and other receivables |
|
$ |
(99 |
) |
|
$ |
517 |
|
Inventories |
|
$ |
250 |
|
|
$ |
(247 |
) |
Prepaid expenses and other current assets |
|
$ |
14 |
|
|
$ |
125 |
|
Accounts payable and accrued expenses |
|
$ |
5 |
|
|
$ |
(396 |
) |
There were no other significant operating or investing non-cash items for the nine months ended September 30, 2023 and 2022.
2. Recent Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("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 adopted ASU No. 2016-13 on January 1, 2023 with an immaterial impact on the Company’s disclosures.
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 inventory write-downs of $252,000 and $444,000 related to packaging materials, hemp seed and GoodWheat during the three and nine months ended September 30, 2023. The Company recorded write-downs of CBD oil of $15,000 during the three months ended September 30, 2022 and of wheat, hemp seed, CBD oil and body care inventories of $1.5 million during the nine months ended September 30, 2022. Of inventory write-downs during the nine months ended September 30, 2022, $394,000 was related to the Radiance Beauty licensing agreement. If there are significant changes in demand and market conditions, substantial future write-downs of inventory may be required, which would materially increase the Company’s expenses in the period the write down is taken and materially affect the Company’s operating results.
Inventories, net consist of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Raw materials |
|
$ |
530 |
|
|
$ |
610 |
|
Goods in process |
|
|
133 |
|
|
|
— |
|
Finished goods |
|
|
3,618 |
|
|
|
2,478 |
|
Inventories |
|
$ |
4,281 |
|
|
$ |
3,088 |
|
7
4. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
|
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Laboratory equipment |
|
$ |
513 |
|
|
$ |
679 |
|
Software and computer equipment |
|
|
377 |
|
|
|
383 |
|
Machinery and equipment |
|
|
440 |
|
|
|
450 |
|
Furniture and fixtures |
|
|
48 |
|
|
|
83 |
|
Vehicles |
|
|
302 |
|
|
|
306 |
|
Leasehold improvements |
|
|
1,590 |
|
|
|
1,590 |
|
Property and equipment, gross |
|
|
3,270 |
|
|
|
3,491 |
|
Less: accumulated depreciation and amortization |
|
|
(2,802 |
) |
|
|
(2,811 |
) |
Property and equipment, net |
|
$ |
468 |
|
|
$ |
680 |
|
Depreciation expense was $89,000 and $227,000 for the three and nine months ended September 30, 2023, respectively. Depreciation expense was $77,000 and $354,000 for the three and nine months ended September 30, 2022, respectively.
As of December 31, 2022, there was $10,000 of construction in progress included in property and equipment that had not been placed into service and was not subject to depreciation. As of September 30, 2023, there was no construction in progress included in property and equipment.
Property and equipment are considered assets held for sale when management approves and commits to a plan to dispose of a property or group of properties. The property and equipment held for sale prior to the sale date is separately presented, within current assets, on the condensed consolidated balance sheet as assets held for sale.
During the three and nine months ended September 30, 2023, management sold property and equipment and realized a gain on sale of $11,000 and $36,000, respectively, recorded on the condensed consolidated statements of operations and comprehensive loss, with proceeds of $5,000 and $42,000, respectively. During the three and nine months ended September 30, 2022, management initiated the sale of property and equipment related to the Davis laboratory and Archipelago, respectively. The Company completed the sale of a portion of such property and equipment with a gain on sale of property and equipment in the amount of $0 and $386,000 recorded on the condensed consolidated statements of operations and comprehensive loss during the three and nine months ended September 30, 2022, respectively. The proceeds related to the sale of property and equipment during the three and nine months ended September 30, 2022 were $5,000 and $897,000, respectively.
Property and equipment related to Archipelago, in the amount of $87,000, have been classified as assets held for sale, and are recorded at fair value as of September 30, 2023 and December 31, 2022. The fair value has been estimated using publicly available prices for some of the assets, and business partners' estimates for assets with prices not readily available, due to the relatively small size of the industry in which they can be used. In October 2023, the Company sold some of these assets for total proceeds of $65,000.
5. Investments and Fair Value 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 are included in accumulated other comprehensive loss, which is reflected as a separate component of stockholder’s equity in the condensed consolidated balance sheets. Gains and losses are recognized when realized in the condensed consolidated statements of operations and comprehensive loss.
The following tables summarize the amortized cost and fair value of the investment securities portfolio at September 30, 2023 and December 31, 2022 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:
(Dollars in thousands) |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
September 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
8,672 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,672 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Treasury bills |
|
|
5,002 |
|
|
|
87 |
|
|
|
— |
|
|
|
5,089 |
|
Total Assets at Fair Value |
|
$ |
13,674 |
|
|
$ |
87 |
|
|
$ |
— |
|
|
$ |
13,761 |
|
8
(Dollars in thousands) |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Estimated |
|
||||
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
18,620 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,620 |
|
Total Assets at Fair Value |
|
$ |
18,620 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,620 |
|
The Company did not have any investment categories that were in a continuous unrealized loss position for more than twelve months as of September 30, 2023.
Fair Value Measurement
The fair value of the investment securities at September 30, 2023 were as follows:
|
|
Fair Value Measurements at September 30, 2023 |
|
|||||||||||||
(Dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
8,672 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
8,672 |
|
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Treasury bills |
|
|
5,089 |
|
|
|
— |
|
|
|
— |
|
|
|
5,089 |
|
Total Assets at Fair Value |
|
$ |
13,761 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
13,761 |
|
The fair value of the investment securities at December 31, 2022 were as follows:
|
|
Fair Value Measurements at December 31, 2022 |
|
|||||||||||||
(Dollars in thousands) |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
||||
Assets at Fair Value |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
18,620 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,620 |
|
Total Assets at Fair Value |
|
$ |
18,620 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
18,620 |
|
The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2023 or 2022. The Company’s financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable and other receivables, accounts payable and accrued liabilities. For short-term investments, accounts receivable and other receivables, accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of September 30, 2023 and December 31, 2022 were considered representative of their fair values due to their short term to maturity or repayment. Cash equivalents are carried at cost, which approximates their fair value.
The Company’s Level 3 liabilities consist of a contingent liability resulting from the Anawah, Inc. ("Anawah") acquisition as described in Note 13, as well as preferred investment options related to the March 2023 Private Placement and August 2022 Registered Direct offerings described in Note 9.
The contingent liability related to the Anawah acquisition was measured and recorded on a recurring basis as of September 30, 2023 and December 31, 2022, using unobservable inputs, namely the Company’s ability and intent to pursue certain specific products developed using technology acquired in the purchase. A significant deviation in the Company’s ability and/or intent to pursue the technology acquired in the purchase could result in a significantly lower (higher) fair value measurement.
The preferred investment option liabilities were measured and recorded on a recurring basis using the Black-Scholes Model with the following assumptions as of September 30, 2023 and December 31, 2022:
9
|
|
March 2023 Options - Series A & |
|
|
March 2023 Options - Series B |
|
|
August 2022 Options & August 2022 Placement Agent Options |
|
|||||||||||||||
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
|
September 30, |
|
|
December 31, |
|
||||||
Remaining term (in years) |
|
|
4.42 |
|
|
|
— |
|
|
|
0.86 |
|
|
|
— |
|
|
|
3.92 |
|
|
|
4.67 |
|
Expected volatility |
|
|
106.3 |
% |
|
|
— |
|
|
|
89.9 |
% |
|
|
— |
|
|
|
92.2 |
% |
|
|
106.2 |
% |
Risk-free interest rate |
|
|
4.7 |
% |
|
|
— |
|
|
|
5.5 |
% |
|
|
— |
|
|
|
4.7 |
% |
|
|
4.0 |
% |
Expected dividend yield |
|
|
0 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
— |
|
|
|
0 |
% |
|
|
0 |
% |
The significant input used in the fair value measurement of the Company’s Level 3 options liabilities is volatility. A significant increase (decrease) in volatility could result in a significantly higher (lower) fair value measurement.
The following table sets forth the establishment of the Company’s Level 3 liabilities, as well as a summary of the changes in the fair value and other adjustments (in thousands):
|
|
|
|
|||||||||||||||||||||||||
(Dollars in thousands) |
|
March 2023 |
|
|
March 2023 |
|
|
March 2023 Placement Agent Options |
|
|
August 2022 |
|
|
August 2022 |
|
|
Contingent |
|
|
Total |
|
|||||||
Balance as of December 31, 2022 |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
767 |
|
|
$ |
39 |
|
|
$ |
2,000 |
|
|
$ |
2,806 |
|
Initial recognition |
|
|
4,324 |
|
|
|
2,274 |
|
|
|
212 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
6,810 |
|
Change in fair value and other adjustments |
|
|
(2,934 |
) |
|
|
(2,090 |
) |
|
|
(146 |
) |
|
|
(575 |
) |
|
|
(35 |
) |
|
|
— |
|
|
|
(5,780 |
) |
Balance as of September 30, 2023 |
|
$ |
1,390 |
|
|
$ |
184 |
|
|
$ |
66 |
|
|
$ |
192 |
|
|
$ |
4 |
|
|
$ |
2,000 |
|
|
$ |
3,836 |
|
Assets classified as held for sale are recorded at fair value as of September 30, 2023. The Company has classified the fair value measurements as a Level 3 measurement in the fair value hierarchy as the fair value has been estimated using publicly available prices for some of the assets, and business partners' estimates for assets with prices not readily available, due to the relatively small size of the industry in which they can be used.
6. Consolidated Joint Venture
In 2019, the Company and Legacy Ventures Hawaii, LLC, a Nevada limited liability company (“Legacy”), formed Archipelago Ventures Hawaii, LLC, a Delaware limited liability company and entered into a Limited Liability Company Operating Agreement (the “Operating Agreement”). The Company and Legacy formed Archipelago to develop, extract and commercialize hemp-derived products from industrial hemp grown in Hawaii.
Pursuant to the Operating Agreement, a joint operating committee consisting of two individuals appointed by the Company and two individuals appointed by Legacy will manage Archipelago. As of September 30, 2023, the Company and Legacy hold 50.75% and 49.25% interests in Archipelago, respectively, and have made capital contributions to Archipelago of $3.1 million and $3.0 million, respectively, as determined by the joint operating committee. The Operating Agreement includes indemnification rights, non-competition obligations, and certain rights and obligations in connection with the transfer of membership interests, including rights of first refusal.
The Company consolidates Archipelago in the condensed consolidated financial statements after eliminating intercompany transactions. Net loss attributable to non-controlling interest of $10,000 and $152,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the three and nine months ended September 30, 2022, respectively. There was minimal activity during the three and nine months ended September 30, 2023. Legacy’s equity interests are presented as non-controlling interests on the condensed consolidated balance sheets. Refer to Note 1 for basis of presentation.
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.
7. Collaborative Arrangements
In August 2017, the Company entered into a collaborative arrangement for the research, development and commercialization of an improved wheat quality trait in North America. This collaborative arrangement is a contractual agreement with Corteva AgriScience (“Corteva”) and involves a joint operating activity where both Arcadia and Corteva are active participants in the activities of the collaboration. Arcadia and Corteva participate in the research and development, and Arcadia has the primary responsibility for the intellectual property strategy while Corteva will generally lead the marketing and commercialization efforts. Both parties are exposed to significant risks and rewards of the collaboration and the agreement includes both cost sharing and profit sharing. The activities are performed with no guarantee of either technological or commercial success.
The Company accounts for research and development (“R&D”) costs in accordance ASC 730, Research and Development, which states R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results are achieved.
10
8. Leases
Operating Leases
As of September 30, 2023, the Company leases office space in Dallas, TX, Davis and Sacramento, CA, as well as additional buildings, land and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these short-term leases on a straight-line basis. The Company subleases the Davis office to third parties. In 2022, the Company terminated its lease for office space in Chesterfield, MO effective September 30, 2022. The original lease term was scheduled to expire in May 2024. As a result, the Company paid $47,000 in early termination fees. In addition, the Company subleased the facility in Chatsworth, CA to Radiance Beauty as part of the licensing agreement beginning November 1, 2022 for the remainder of the lease term. During 2022, the Company entered into an agreement to lease office space in Dallas, TX. The lease commenced in July 2022.
Some leases (the Dallas and Davis offices, a warehouse, and a copy machine) include one or more options to renew, with renewal terms that can extend the lease term from one to six years. The exercise of lease renewal options is at the Company’s sole discretion.
The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or material restrictive covenants. Leases consisted of the following (in thousands):
Leases |
|
Classification |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Assets |
|
|
|
|
|
|
|
|
||
Operating lease assets |
|
Right of use asset |
|
$ |
1,147 |
|
|
$ |
1,848 |
|
Total leased assets |
|
|
|
$ |
1,147 |
|
|
$ |
1,848 |
|
Liabilities |
|
|
|
|
|
|
|
|
||
Current - Operating |
|
Operating lease liability- current |
|
$ |
924 |
|
|
$ |
1,010 |
|
Noncurrent - Operating |
|
Operating lease liability- noncurrent |
|
|
347 |
|
|
|
1,007 |
|
Total leased liabilities |
|
|
|
$ |
1,271 |
|
|
$ |
2,017 |
|
Lease Cost |
|
Classification |
|
Three |
|
|
Three |
|
|
Nine |
|
|
Nine |
|
||||
Operating lease cost |
|
SG&A and R&D Expenses |
|
$ |
191 |
|
|
$ |
271 |
|
|
$ |
572 |
|
|
$ |
815 |
|
Short term lease cost |
|
R&D Expenses |
|
|
3 |
|
|
|
(7 |
) |
|
|
10 |
|
|
|
4 |
|
Sublease income (1) |
|
SG&A and R&D Expenses |
|
|
(111 |
) |
|
|
(99 |
) |
|
|
(329 |
) |
|
|
(276 |
) |
Net lease cost |
|
|
|
$ |
83 |
|
|
$ |
165 |
|
|
$ |
253 |
|
|
$ |
543 |
|
Lease Term |
|
September 30, 2023 |
|
|
December 31, 2022 |
|
||
Weighted-average remaining |
|
|
1.9 |
|
|
|
2.4 |
|
Weighted-average discount rate |
|
|
6.4 |
% |
|
|
6.0 |
% |
9. Equity Financing
March 2023 Private Placement
In March 2023, the Company issued in a private placement offering (the “March 2023 Private Placement”) pursuant to a securities purchase agreement (“March 2023 Purchase Agreement”) (i) 165,500 shares of its common stock, (ii) pre-funded common stock purchase warrants (the “March 2023 Pre-Funded Warrants”) to purchase up to 500,834 shares of common stock, at an exercise price of $0.0001 per share, (iii) Series A preferred investment options (the “March 2023 Options - Series A") to purchase up to a total of 666,334 shares of common stock, at an exercise price of $9.00 per share, and (iv) Series B preferred investment options (the “March 2023 Options - Series B”, and together with the March 2023 Options - Series A, the "March 2023 Options") to purchase up to a total of 666,334 shares of common stock, at an exercise price of $9.00 per share, and raised total gross proceeds of $6.0 million. The March 2023 Private Placement closed on March 6, 2023. The March 2023 Pre-Funded Warrants became exercisable upon issuance and are exercisable until exercised in full. The March 2023 Options - Series A are exercisable at any time at the option of the holder and expire 5 years from the date of issuance. The March 2023 Options - Series B are exercisable at any time at the option of the holder and expire 1.5 years from the date of issuance. During the nine months ended September 30, 2023, 250,834 Pre-Funded Warrants were exercised.
11
In connection with the March 2023 Private Placement, the Company entered into preferred investment option amendment agreements (the “Option Amendment Agreements”) with certain investors. Under the Option Amendment Agreements, the Company agreed to amend certain existing warrants and preferred investment options to purchase up to a total of 178,132 shares of common stock that were previously issued to the investors in September 2019, May 2020, July 2020, December 2020, January 2021 and August 2022, with exercise prices of $300.80, $191.00, $154.00, $120.00, $125.20 and $37.35 per share, respectively (the “Existing Warrants”). Under the Option Amendment Agreements, the Company agreed to lower the exercise price of the Existing Warrants to $9.00 per share. In addition, the Company granted to a placement agent preferred investment options to purchase a total of 33,317 shares of Common Stock (the “March 2023 Placement Agent Options”) that have an exercise price per share equal to $11.25 and a term of 5 years from the date of issuance. The re-pricing of the Existing Warrants resulted in an increase in fair value of $404,000, of which $185,000 of the increase in fair value was related to the August 2022 liability classified options. The increase in fair value related to the re-pricing of Existing Warrants was recognized in Valuation Loss on March 2023 PIPE on the condensed consolidated statements of operations and comprehensive loss.
The March 2023 Options and March 2023 Placement Agent Options are classified as liabilities within Level 3 due to certain early settlement provisions that preclude them from equity classification. The Company utilized the Black-Scholes Model on March 6, 2023 with the following assumptions for the Series A Investment Options: volatility of 128.55%, stock price of $7.61 and risk-free rate of 4.27%. The following assumptions were utilized for the Series B Investment Options: volatility of 103.33%, stock price of $7.61 and risk-free rate of 4.97%. The estimated fair value of the liability classified March 2023 Options issued was $6.6 million. The estimated fair value of the common stock option liabilities was subsequently remeasured at September 30, 2023 with the changes recorded on the Company’s condensed consolidated statements of operations and comprehensive loss.
The estimated fair value of the common stock issued and March 2023 Pre-Funded Warrants was $5.1 million. The total estimated fair value of the common stock issued, March 2023 Pre-Funded Warrants and March 2023 Options as of March 6, 2023 exceeded the gross proceeds of the March 2023 Private Placement by $5.7 million and this amount was recognized in Valuation Loss on March 2023 PIPE on the condensed consolidated statements of operations and comprehensive loss.
The March 2023 Placement Agent Options were issued for services performed by the placement agent as part of the March 2023 Private Placement and were treated as offering costs. The value of the March 2023 Placement Agent Options was determined to be $212,000, calculated using the Black-Scholes Model. The Company incurred additional offering costs totaling $548,000 that consist of direct incremental legal, advisory, accounting and filing fees relating to the March 2023 Private Placement. A total of $430,000 was allocated to the common stock option liabilities and expensed while the remaining $330,000 was allocated to the common stock and March 2023 Pre-Funded Warrants and offset to additional paid in capital.
August 2022 Registered Direct Offering
On May 11, 2018, the Company filed a shelf Registration Statement on Form S-3 with the SEC which was declared effective on June 8, 2018 (“2018 Shelf Registration Statement”). On April 21, 2022, the Company filed a shelf Registration Statement on Form S-3 with the SEC which was declared effective on May 12, 2022 (“2022 Shelf Registration Statement”). Each of the 2018 Shelf Registration Statement and the 2022 Shelf Registration Statement allows the Company to sell any combination of common stock, preferred stock, warrants and units consisting of such securities in one or more offerings from time to time having aggregate offering prices of up to $50.0 million. The Company ceased being able to use the 2018 Shelf Registration Statement after June 8, 2021, the three-year anniversary of its effective date. The 2022 Shelf Registration Statement may no longer be used after May 12, 2025, the three-year anniversary of its effective date.
In August 2022, the Company entered into a securities purchase agreement (the “August 2022 Purchase Agreement”) pursuant to which it sold (i) 61,250 registered shares of its common stock, pursuant to the 2022 Shelf Registration Statement, (ii) pre-funded common stock purchase warrants (the “August 2022 Pre-Funded Warrants”) to purchase up to 56,813 shares of common stock, at an exercise price of $0.004 per share, which the August 2022 Pre-Funded Warrants were registered under the 2022 Shelf Registration Statement, and (iii) unregistered preferred investment options (the "August 2022 Options") to purchase up to 118,063 shares of common stock, at an exercise price of $37.35 per share, for total gross proceeds of $5.0 million (the “August 2022 Registered Direct Offering”). The August 2022 Registered Direct Offering closed on August 16, 2022. The August 2022 Pre-Funded Warrants became exercisable upon issuance and were fully exercised during the nine months ended September 30, 2023. The August 2022 Options became exercisable upon issuance and expire 5 years after the date of issuance. In connection with the August 2022 Registered Direct Offering, the Company granted to a placement agent preferred investment options ("August 2022 Placement Agent Options") to purchase a total of 5,904 shares of common stock that have an exercise price per share equal to $52.80 and a term of five years.
The August 2022 Options and August 2022 Placement Agent Options are classified as liabilities within Level 3 due to certain early settlement provisions that preclude them from equity classification. The Company utilized the Black-Scholes Model on August 16, 2022 with the following assumptions: volatility of 128.46%, stock price of $37.60, risk-free rate of 2.97% and a term of 5 years. The estimated fair value of the common stock option liabilities was subsequently remeasured at September 30, 2023 with the changes recorded on the Company’s condensed consolidated statements of operations and comprehensive loss.
12
The August 2022 Placement Agent Options were issued for services performed by the placement agent as part of the August 2022 Registered Direct Offering and were treated as offering costs. The value of the August 2022 Placement Agent Options was determined to be $191,000, calculated using the Black-Scholes Model. The Company incurred additional offering costs totaling $488,000 that consist of direct incremental legal, advisory, accounting and filing fees relating to the August 2022 Registered Direct Offering. The offering costs, inclusive of the August 2022 Placement Agent Options, totaled $679,000 and were allocated to the common stock option liabilities, the common stock and August 2022 Pre-Funded Warrants using their relative fair values. A total of $314,000 was allocated to the common stock option liabilities and expensed while the remaining $365,000 was allocated to the common stock and August 2022 Pre-Funded Warrants and offset to additional paid in capital.
10. Warrants and Options
Equity Classified Common Stock Warrants
The Company issued the following warrants to purchase shares of its common stock, which are outstanding as of September 30, 2023 and December 31, 2022, respectively. These warrants are exercisable any time at the option of the holder until their expiration date.
|
|
Issuance Date |
|
Term |
|
Exercise |
|
|
Exercised |
|
|
Outstanding at |
|
|
Exercised |
|
|
Outstanding at |
|
|||||
March 2023 Pre-Funded Warrants |
|
March 2023 |
|
perpetual |
|
$ |
— |
|
|
|
— |
|
|
|
— |
|
|
|
(250,834 |
) |
|
|
250,000 |
|
December 2022 Service and Performance Warrants (1) |
|
December 2022 |
|
5 years |
|
$ |
11.20 |
|
|
|
— |
|
|
|
1,000 |
|
|
|
— |
|
|
|
1,000 |
|
October 2022 Service and Performance Warrants (1) |
|
October 2022 |
|
5 years |
|
$ |
16.00 |
|
|
|
— |
|
|
|
1,000 |
|
|
|
— |
|
|
|
1,000 |
|
August 2022 Pre-Funded Warrants |
|
August 2022 |
|
perpetual |
|
$ |
— |
|
|
|
— |
|
|
|
56,813 |
|
|
|
(56,813 |
) |
|
|
— |
|
January 2021 Placement Agent Warrants |
|
January 2021 |
|
5.5 years |
|
$ |
159.60 |
|
|
|
— |
|
|
|
9,846 |
|
|
|
— |
|
|
|
9,846 |
|
January 2021 Service and Performance Warrants (1)(3) |
|
January 2021 |
|
2 years |
|
$ |
123.20 |
|
|
|
— |
|
|
|
188 |
|
|
|
— |
|
|
|
— |
|
December 2020 Warrants (4) |
|
December 2020 |
|
5.5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
16,367 |
|
|
|
— |
|
|
|
16,367 |
|
December 2020 Warrants |
|
December 2020 |
|
5.5 years |
|
$ |
120.00 |
|
|
|
— |
|
|
|
49,100 |
|
|
|
— |
|
|
|
49,100 |
|
December 2020 Placement Agent Warrants |
|
December 2020 |
|
5 years |
|
$ |
152.80 |
|
|
|
— |
|
|
|
3,274 |
|
|
|
— |
|
|
|
3,274 |
|
July 2020 Warrants (4) |
|
July 2020 |
|
5.5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
16,036 |
|
|
|
— |
|
|
|
16,036 |
|
July 2020 Placement Agent Warrants |
|
July 2020 |
|
5.5 years |
|
$ |
198.80 |
|
|
|
— |
|
|
|
802 |
|
|
|
— |
|
|
|
802 |
|
May 2020 Warrants (4) |
|
May 2020 |
|
5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
9,946 |
|
|
|
— |
|
|
|
9,946 |
|
May 2020 Warrants |
|
May 2020 |
|
5 years |
|
$ |
191.20 |
|
|
|
— |
|
|
|
24,863 |
|
|
|
— |
|
|
|
24,863 |
|
May 2020 Placement Agent Warrants |
|
May 2020 |
|
5 years |
|
$ |
245.20 |
|
|
|
— |
|
|
|
1,741 |
|
|
|
— |
|
|
|
1,741 |
|
March 2020 Service and Performance Warrants (1)(3) |
|
March 2020 |
|
3 years |
|
$ |
100.00 |
|
|
|
— |
|
|
|
459 |
|
|
|
— |
|
|
|
— |
|
September 2019 Placement Agent Warrants |
|
September 2019 |
|
5 years |
|
$ |
379.20 |
|
|
|
— |
|
|
|
1,649 |
|
|
|
— |
|
|
|
1,649 |
|
June 2019 Placement Agent Warrants |
|
June 2019 |
|
5 years |
|
$ |
251.60 |
|
|
|
— |
|
|
|
1,862 |
|
|
|
— |
|
|
|
1,862 |
|
April 2019 Service and Performance Warrants (1) |
|
April 2019 |
|
5 years |
|
$ |
247.20 |
|
|
|
— |
|
|
|
3,629 |
|
|
|
— |
|
|
|
3,629 |
|
June 2018 Placement Agent Warrants (3) |
|
June 2018 |
|
5 years |
|
$ |
502.80 |
|
|
|
— |
|
|
|
1,741 |
|
|
|
— |
|
|
|
— |
|
March 2018 Placement Agent Warrants (3) |
|
March 2018 |
|
5 years |
|
$ |
1,662.40 |
|
|
|
— |
|
|
|
376 |
|
|
|
— |
|
|
|
— |
|
January 2021 Warrants (2)(4) |
|
January 2021 |
|
5.5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
7,831 |
|
|
|
— |
|
|
|
7,831 |
|
January 2021 Warrants (2) |
|
January 2021 |
|
5.5 years |
|
$ |
125.20 |
|
|
|
— |
|
|
|
90,629 |
|
|
|
— |
|
|
|
90,629 |
|
September 2019 Warrants (2)(4) |
|
September 2019 |
|
5.5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
9,892 |
|
|
|
— |
|
|
|
9,892 |
|
September 2019 Warrants (2) |
|
September 2019 |
|
5.5 years |
|
$ |
300.80 |
|
|
|
— |
|
|
|
6,594 |
|
|
|
— |
|
|
|
6,594 |
|
June 2019 Warrants (2) |
|
June 2019 |
|
5.5 years |
|
$ |
200.00 |
|
|
|
— |
|
|
|
10,896 |
|
|
|
— |
|
|
|
10,896 |
|
March 2018 Warrants (2)(3) |
|
March 2018 |
|
5 years |
|
$ |
429.20 |
|
|
|
— |
|
|
|
16,036 |
|
|
|
— |
|
|
|
— |
|
Total |
|
|
|
|
|
|
|
|
|
— |
|
|
|
342,570 |
|
|
|
(307,647 |
) |
|
|
516,957 |
|
|
(1) The Company issued service and performance warrants (“Service and Performance Warrants”) in connection with professional services agreements with non-affiliated third party entities.
(2) Certain warrants contain a contingent cash payment feature and therefore were accounted for as a liability at the date of issuance and were adjusted to fair value at each balance sheet date. Upon adoption of ASU No. 2020-06 on January 1, 2022, all of the common stock warrant liabilities have been reclassified to equity classified common stock warrants, due to the elimination of the contingent cash payments as criteria for liability classification.
(3) These warrants expired in the during the nine months ended September 30, 2023.
(4) These warrants were repriced as part of the March 2023 Private Placement offering.
13
Liability Classified Preferred Investment Options
The preferred investment options issued in connection with the March 2023 Private Placement and August 2022 Registered Direct offerings contain certain early settlement provisions that preclude them from equity classification and therefore were accounted for as liabilities at the date of issuance and are adjusted to fair value at each balance sheet date. The change in fair value of the options liabilities is recorded as change in fair value of common stock warrant and option liabilities in the consolidated statements of operations and comprehensive loss. The key terms and activity of the liability classified preferred investment options are summarized as follows:
|
|
Issuance Date |
|
Term |
|
Exercise |
|
|
Exercised |
|
|
Outstanding at |
|
|
Exercised |
|
|
Outstanding at |
|
|||||
March 2023 Options - Series A |
|
March 2023 |
|
5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
666,334 |
|
March 2023 Options - Series B |
|
March 2023 |
|
1.5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
666,334 |
|
March 2023 Placement Agent Options |
|
March 2023 |
|
5 years |
|
$ |
11.25 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
33,317 |
|
August 2022 Options (1) |
|
August 2022 |
|
5 years |
|
$ |
9.00 |
|
|
|
— |
|
|
|
118,063 |
|
|
|
— |
|
|
|
118,063 |
|
August 2022 Placement Agent Options |
|
August 2022 |
|
5 years |
|
$ |
52.80 |
|
|
|
— |
|
|
|
5,904 |
|
|
|
— |
|
|
|
5,904 |
|
Total |
|
|
|
|
|
|
|
|
|
— |
|
|
|
123,967 |
|
|
|
— |
|
|
|
1,489,952 |
|
|
(1) These options were repriced as part of the March 2023 Private Placement offering.
11. Stock-Based Compensation and Employee Stock Purchase Program
Stock Incentive Plans
The Company has two equity incentive plans: the 2006 Stock Plan (“2006 Plan”) and the 2015 Omnibus Equity Incentive Plan (“2015 Plan”).
In 2006, the Company adopted the 2006 Plan, which provided for the granting of stock options to executives, employees, and other service providers under terms and provisions established by the Board of Directors. The Company granted non-statutory stock options (“NSOs”) under the 2006 Plan until May 2015, when it was terminated as to future awards, although it continues to govern the terms of options that remain outstanding and were issued under the 2006 Plan. The 2015 Plan became effective upon the Company’s IPO in May 2015 and all shares that were reserved, but not issued, under the 2006 Plan were assumed by the 2015 Plan. Upon effectiveness, the 2015 Plan had 3,860 shares of common stock reserved for future issuance, which included 259 that were transferred to and assumed by the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant. In addition, shares subject to awards under the 2006 Plan that are forfeited or canceled will be added to the 2015 Plan. The 2015 Plan provides for the grant of incentive stock options (“ISOs”), NSOs, restricted stock awards, stock units, stock appreciation rights, and other forms of equity compensation, all of which may be granted to employees, officers, non-employee directors, and consultants. The exercise price for ISOs and NSOs will be granted at a price per share not less than the fair value of our common stock at the date of grant. Options granted generally vest over a four-year period; however, there might be alternative vesting schedules, as approved by the Board. Options granted, once vested, are generally exercisable for up to 10 years, after grant to the extent vested.
In June 2019, the shareholders approved an amendment to the Company’s 2015 Plan for a one-time increase to the number of shares of common stock that may be issued under the 2015 Plan by 3,000 shares. On February 2, 2022, Stanley Jacot, Jr. was hired as the new president and chief executive officer of the Company. The Company granted Mr. Jacot an inducement stock option to purchase 7,902 shares of the Company’s common stock pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The Company has filed a registration statement on Form S-8 to register the issuance of shares upon exercise of this inducement stock option. The inducement options grants have been issued outside of the 2015 Plan, but are subject to the terms and conditions of the 2015 Plan. As of September 30, 2023, a total of 86,834 shares of common stock were reserved for issuance under the 2015 Plan, of which 11,357 shares of common stock are available for future grant. As of September 30, 2023, a total of 103 and 75,477 options are outstanding under the 2006 and 2015 Plans, respectively. As of December 31, 2022, a total of 103 and 51,421 options were outstanding under the 2006 and 2015 Plans, respectively. A total of 8,477 inducement options were outstanding as of September 30, 2023 and December 31, 2022.
14
The following is a summary of stock option information and weighted average exercise prices under the Company’s stock incentive plans (in thousands, except share data and price per share):
|
|
Shares |
|
|
Weighted- |
|
|
Aggregate |
|
|||
Outstanding — Balance at December 31, 2022 |
|
|
60,002 |
|
|
$ |
114.80 |
|
|
$ |
— |
|
Options granted |
|
|
26,021 |
|
|
|
6.38 |
|
|
|
— |
|
Options exercised |
|
|
— |
|
|
|
— |
|
|
|
— |
|
Options forfeited |
|
|
(1,755 |
) |
|
|
32.02 |
|
|
|
39,062 |
|
Options expired |
|
|
(210 |
) |
|
|
118.35 |
|
|
|
— |
|
Outstanding — Balance at September 30, 2023 |
|
|
84,058 |
|
|
$ |
82.71 |
|
|
$ |
— |
|
Vested and expected to vest — September 30, 2023 |
|
|
76,998 |
|
|
$ |
87.65 |
|
|
$ |
— |
|
Exercisable — September 30, 2023 |
|
|
35,364 |
|
|
$ |
143.59 |
|
|
$ |
— |
|
Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock determined by its Board of Directors for each of the respective periods.
As of September 30, 2023, there was $833,000 of unrecognized compensation cost related to unvested stock-based compensation grants that will be recognized over the weighted-average remaining recognition period of 2.0 years.
In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.
Expected Term—The expected term is the estimated period of time outstanding for stock options granted and was estimated based on a simplified method allowed by the SEC, and defines the term as the average of the contractual term of the options and the weighted-average vesting period for all open employee awards.
Expected Volatility—The historical volatility data was computed using the daily closing prices for the Company’s shares during the equivalent period of the calculated expected term of the stock-based awards.
Risk-Free Interest Rate—The risk-free interest rate is based on the interest rate of U.S. Treasuries of comparable maturities on the date the options were granted.
Expected Dividend—The expected dividend yield is based on the Company’s expectation of future dividend payouts to common stockholders.
The fair value of stock option awards was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumption:
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2023 |
|
|
2022 |
|
|
2023 |
|
|
2022 |
|
||||
Expected term (years) |
|
|
— |
|
|
|
5.69 |
|
|
|
7.06 |
|
|
|
6.41 |
|
Expected volatility |
|
|
— |
|
|
|
122 |
% |
|
|
124 |
% |
|
|
122 |
% |
Risk-free interest rate |
|
|
— |
|
|
|
2.99 |
% |
|
|
3.61 |
% |
|
|
2.59 |
% |
Dividend yield |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
There were no option grants during the three months ended September 30, 2023.
The Company recognized $162,000 and $573,000 of compensation expense for stock options awards during the three and nine months ended September 30, 2023, respectively. The Company recognized $314,000 and $897,000 of compensation expense for stock options awards for the three and nine months ended September 30, 2022, respectively.
15
Employee Stock Purchase Plan
The Company’s 2015 Employee Stock Purchase Plan (“ESPP”) became effective on May 14, 2015. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of up to 15% of their eligible compensation through payroll deductions, subject to any plan limitations. After the first offering period, which began on May 14, 2015 and ended on February 1, 2016, the ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. As of September 30, 2023, the number of shares of common stock reserved for future issuance under the ESPP is 7,265. The ESPP provides for automatic annual increases in the shares available for purchase beginning on January 1, 2016. As of September 30, 2023, 3,468 shares had been issued under the ESPP. The Company recorded $7,000 and $12,000 of ESPP related compensation expense during the three and nine months ended September 30, 2023, respectively. The Company recorded $1,000 and $3,000 of ESPP related compensation expense for the three and nine months ended September 30, 2022, respectively.
12. Income Taxes
Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items that are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known, or as the tax environment changes.
The interim financial statement provision for income taxes is different from the amounts computed by applying the United States federal statutory income tax rate of 21%. The Company’s effective tax rate was 0.00% for each of the three and nine months ended September 30, 2023 and 2022. The difference between the effective tax rate and the federal statutory rate of 21% was primarily due to the full valuation allowance recorded on the Company’s net deferred tax assets.
During the nine months ended September 30, 2023, there were no material changes to the Company’s uncertain tax positions.
In February 2023, the Company received notification from the Internal Revenue Service that our Archipelago joint venture was selected for audit for the 2021 tax year. The Opening Conference was held on April 24, 2023. Management received the IRS agent’s Initial Document Request in April 2023 and has provided the documents requested. The Company is currently not under audit for state purposes.
13. Commitments and Contingencies
Leases
The Company leases office and laboratory space, grain storage bins, warehouse space, farmland, and equipment under operating lease agreements having initial lease terms ranging from one to five years, including certain renewal options available to the Company at market rates. The Company also leases land for field trials on a short-term basis. See Note 8.
Legal Matters
From time to time, in the ordinary course of business, the Company may become involved in certain legal proceedings. The Company currently is not a party to any material litigation or other material legal proceedings.
Contingent Liability Related to the Anawah Acquisition
In June 2005, the Company completed its agreement and plan of merger and reorganization with Anawah, to purchase the Anawah’s food and agricultural research company through a non-cash stock purchase. Pursuant to the merger with Anawah, and in accordance with the ASC 805 - Business Combinations, the Company incurred a contingent liability not to exceed $5.0 million. This liability represents amounts to be paid to Anawah’s previous stockholders for cash collected on revenue recognized by the Company upon commercial sale of certain specific products developed using technology acquired in the purchase. During 2010, the Company ceased activities relating to three of the six Anawah product programs thus, the contingent liability was reduced to $3.0 million. During 2016, one of the programs previously accrued for was abandoned and another program previously abandoned was reactivated. During 2019, the Company determined that one of the technologies was no longer active and decided to abandon the previously accrued program. As of September 30, 2023, the Company continues to pursue or are otherwise liable for a total of two development programs using this technology and believes that the contingent liability is probable. As a result, $2.0 million remains on the condensed consolidated balance sheet as an other noncurrent liability.
16
Contingent Liability Related to the ISI Acquisition
In August 2020, the Company acquired by merger ISI. A portion of the purchase price consideration for the acquisition in the amount of $280,000 will be recognized in two annual installments, each of up to 3,316 shares of the Company’s common stock, subject to the achievement of revenue milestones in 2021 and 2022. The contingent consideration was measured and recorded at fair value. The contingent consideration liability was remeasured quarterly with changes in fair value recorded on the condensed consolidated statements of operations and comprehensive loss. During 2022, the contingent consideration liability was fully written down as the probability of achievement of the 2022 revenue milestone was remote.
Contracts
The Company has entered into contract research agreements with unrelated parties that require the Company to pay certain funding commitments. The initial terms of these agreements range from one to three years in duration and in certain cases are cancelable.
The Company licenses certain technologies via executed agreements (“In-Licensing Agreements”) that are used to develop and advance the Company’s own technologies. The Company has entered into various In-Licensing Agreements with related and unrelated parties that require the Company to pay certain license fees, royalties, and/or milestone fees. In addition, certain royalty payments ranging from 2% to 15% of net revenue amounts as defined in the In-Licensing Agreements are or will be due.
The Company could be adversely affected by certain actions by the government as it relates to government contract revenue received in prior years. Government agencies, such as the Defense Contract Audit Agency routinely audit and investigate government contractors. These agencies review a contractor’s performance under its agreements; cost structure; and compliance with applicable laws, regulations and standards. The agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. While the Company’s management anticipates no adverse result from an audit, should any costs be found to be improperly allocated to a government agreement, such costs will not be reimbursed, or if already reimbursed, may need to be refunded. If an audit uncovers improper or illegal activities, civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments or fines, and suspension or prohibition from doing business with the government could occur. In addition, serious reputational harm or significant adverse financial effects could occur if allegations of impropriety were made against the Company. There currently are routine audits in process relating to government grant revenues.
14. Net Loss per Share
Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period and excludes any dilutive effects of stock-based awards and warrants. Diluted net loss per share attributable to common stockholders is computed giving effect to all potentially dilutive common shares, including common stock issuable upon exercise of stock options and warrants. Dilutive securities are not included in the computation of net loss per share when the impact would be anti-dilutive.
Securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in shares):
|
|
For the Three and Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Options to purchase common stock |
|
|
84,058 |
|
|
|
60,044 |
|
Warrants to purchase common stock |
|
|
266,957 |
|
|
|
283,751 |
|
Preferred investment options |
|
|
1,489,952 |
|
|
|
123,966 |
|
Total |
|
|
1,840,967 |
|
|
|
467,761 |
|
15. Related-Party Transactions
The Company’s related parties include Moral Compass Corporation (“MCC”) and the John Sperling Foundation (“JSF”). The rights to the intellectual property owned by Blue Horse Labs, Inc. (“BHL”) were assigned to its sole shareholder, the John Sperling Revocable Trust (“JSRT”) due to BHL’s dissolution and then subsequently to the JSF. The JSF is deemed a related party of the Company because MCC, the Company’s largest stockholder, and the JSF share common officers and directors.
JSF receives a single digit royalty from the Company when revenue has been collected on product sales or for license payments from third parties that involve certain intellectual property developed under research funding originally from BHL. Royalty fees due to JSF were $46,000 and $48,000 as of September 30, 2023 and December 31, 2022, respectively, and are included in the condensed consolidated balance sheets as amounts due to related parties.
16. Subsequent Events
Management has evaluated subsequent events through November 9, 2023, the date that the financial statements were available to be issued.
17
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Special Note Regarding Forward-Looking Statements
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes to those statements included herein. In addition to historical financial information, this report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in the most recent Annual Report on Form 10-K filed by the Company. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Solely for convenience, the trademarks, service marks and trade names referred to in this report may appear without the ®, TM, or SM symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, or trade names.
Overview
We are a producer and marketer of innovative, plant-based food and beverage products. Our history as a leader in science-based approaches to developing high value crop improvements, primarily in wheat, designed to enhance farm economics by improving the performance of crops in the field, as well as their value as food ingredients, has laid the foundation for our path forward. We have used non-genetically modified advanced breeding techniques to develop these proprietary innovations which we are now commercializing through the sales of seed and grain, food ingredients and products, trait licensing and royalty agreements. The acquisition of the assets of Live Zola, LLC ("Zola") added coconut water to our portfolio of products.
Our commercial strategy is to satisfy consumer nutrition demands with the superior functional benefits our crops deliver directly from the farm, enabling us to share premium economics throughout the ag-food supply chain and to build a world-class estate of high value traits and varieties. The acquisition of the Zola brand allows us to broaden our reach within the beverage sector.
It is also estimated by the U.S. Department of Agriculture (“USDA”), that approximately one-fifth of the FDA recommended calories consumed by people in the US are from wheat. Therefore, the market opportunity for nutritional improvements in wheat are significant not only because the wheat market itself is vast, but also because of the “share of stomach” wheat represents. Considering that most people today are not getting enough fiber or protein in their daily diets, the superior nutrient density of our non-GMO GoodWheat™ (“GoodWheat”) technology can improve the dietary intake of average consumers, by increasing their fiber and protein consumption without changing the way they eat. We believe this proprietary advantage gives GoodWheat the potential to become a global standard in wheat.
Our Growth Strategy
We believe there are significant opportunities to grow our business by executing the following elements of our strategy:
18
Arcadia Wellness, LLC
In May 2021, our wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness” or “AW”), 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 (collectively "body care brands"). Also included in the purchase is Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand.
Our Product Portfolio
GoodWheat™ Consumer Products
In June 2022, we launched our GoodWheat pasta in five varieties – penne, spaghetti, fettuccine, elbows and rotini – in select retailers nationwide and on Amazon. Our pasta delivers 4 times the fiber of traditional wheat pasta with 9g of protein per serving and no sacrifice on taste. In fact, our research shows that GoodWheat pasta scores at parity on taste with leading wheat pasta competitors and significantly outscores market leading vegetable-based pastas. Made with only our USA farm grown wheat, GoodWheat pasta meets consumers’ preference for clean labels and transparent sourcing. And, in December of 2022, GoodWheat received the American Heart Association’s Heart-Check mark on all of our pasta products. With its high fiber, lower sodium and zero saturated fat, GoodWheat meets the criteria for a heart-healthy pasta and provides consumers with a better-for-you option that delivers superior nutrition with the taste and texture of traditional pasta.
In August 2023, we launched our GoodWheat into the breakfast category with new, better-for-you pancake and waffle mixes as well as single-serve Quikcakes™. Our new mixes are made with simple ingredients and Arcadia’s proprietary wheat grain, which is naturally higher in fiber and protein than traditional wheat.
GoodWheat pancake and waffle mixes will be sold in resealable, multi-serve pouches, with each serving delivering 8 times the fiber of traditional pancake mix and 5 grams of protein. Our multi-serve mixes will be available in 3 classic varieties, including Buttermilk, Chocolate Chocolate Chip and Apple Cinnamon.
GoodWheat Quikcakes are an innovative, single-serve instant pancake that is a great option for busy mornings – you simply pour one packet into a bowl, add water and microwave for 90 seconds. Quikcakes have 11 times the fiber of traditional single-serve pancake mixes and contain 7 grams of protein per serving. Quikcakes will be available in 3 flavors, including Buttermilk, Chocolate Chocolate Chip and Confetti.
We believe our products serve an important need as most Americans suffer from a significant fiber deficiency. Less than 10 percent of women and less than 3 percent of men get enough fiber in their daily diets. The recommended daily value of fiber is 25g for women and children, and 38g for men according to the May 2021 Food and Health Survey by the International Food Information Council. One serving of GoodWheat Pasta gets your fiber closer to your daily need, delivering 8g of fiber, which accounts for 32 percent of the daily value of fiber needs for women and children, and 20 percent for men.
We plan to continue expanding the GoodWheat portfolio with the launch of innovative, new wheat-based products in additional categories, offering consumers more options to improve their fiber intake at multiple mealtimes throughout the day.
Zola Coconut Water
Zola is a pure, natural, 100% coconut water with a crisp, clean taste that’s lightly sweet and refreshing. Naturally hydrating and never from concentrate, Zola is Non-GMO Project Verified and only contains 60 calories per serving. In taste tests, Zola beats competitors 2 to 1 and is the best-tasting way to rehydrate, reset and reenergize.
19
Discontinued Operations
In July 2023, management made the decision to exit its body care brands as a result of continued pressure on the CBD market due to regulatory uncertainty. This decision will streamline the business and allow the Company to focus on growth of the its other “core” brands, which consist of the GoodWheat portfolio and Zola. Body care operations ceased as of September 30, 2023. In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets and the results of the discontinued operations as a separate component of income on the condensed consolidated statements of operations and comprehensive loss for all periods presented. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.
Components of Our Statements of Operations Data
Revenues
The Company derive our revenues from product sales, royalties and license fees.
Product revenues
Product revenues consist primarily of sales of GoodWheat, Zola and GLA products. We recognize revenue from product sales when control of the product is transferred to third-party distributors and manufacturers, collectively “our customers,” which generally occurs upon delivery. Revenues fluctuate depending on the timing of shipments of product to our customers and are reported net of estimated chargebacks, returns and losses.
Royalty Revenues
Royalty revenues consist of amounts earned from the sale of commercial products that incorporate the Company's traits by third parties. Royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products. The Company recognizes the minimum annual royalty on a straight-line basis over the year, and recognizes royalty revenue resulting from the sale of products when the third parties transfer control of the product to their customers, which generally occurs upon shipment. Royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers.
License revenues
License revenues consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our license agreements. Revenue generated from up-front license fees are recognized upon execution of the agreement. We recognize annual license fees when it is probable that a material reversal will not occur.
Milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts would not be reversed. The Company assesses when achievement of milestones are probable in order to determine the timing of revenue recognition for milestone fees. Milestones typically represent significant stages of development for our traits in a potential commercial product, such as achievement of specific technological targets, completion of field trials, filing with regulatory agencies, completion of the regulatory process, and commercial launch of a product containing our traits. Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and license revenues are likely to fluctuate significantly from period to period.
Operating Expenses
Cost of revenues
Cost of revenues relates to the sale of GoodWheat, Zola and GLA products and consists of the cost of raw materials, including internal and third-party services costs related to procuring, processing, formulating, packaging and shipping our products, as well as in-licensing and royalty fees, any adjustments or write-downs to inventory or prepaid production costs.
Research and development expenses ("R&D")
Research and development expenses consist of costs incurred in the development and testing of our products and other products in development incorporating our traits. These expenses currently consist primarily of fees paid to product formulation consultants and are expensed as incurred. Additionally, the Company is required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties.
20
The Company's research and development expenses may fluctuate from period to period.
Gain on sale of Verdeca
The gain on sale of Verdeca is the gain recognized for the sale the Company's membership interests in the Verdeca joint venture to our partner Bioceres in November 2020.
Change in fair value of contingent consideration.
Change in the fair value of contingent consideration is comprised of the fair value remeasurement of the liabilities associated with the Company's contingent consideration.
Gain on sale of property and equipment, net
Gain on sale of fixed assets includes gains from the sale of tangible assets sold above their net book value.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of employee costs, professional service fees, broker and sales commission fees, and overhead costs. Our selling, general, and administrative expenses may fluctuate from period to period. In connection with our commercialization activities for our consumer products, we expect to increase our investments in sales and marketing, including additional consulting fees.
Interest income
Interest income consists interest income on our cash and cash equivalents and investments.
Other income, net
Other income, net consists of miscellaneous income.
Valuation loss on March 2023 PIPE
Valuation loss on March 2023 PIPE includes the fair value in excess of gross proceeds and the increase in fair value related to the re-pricing of existing warrants.
Change in the estimated fair value of common stock warrant and option liabilities
Change in the estimated fair value of common stock warrant and option liabilities is comprised of the fair value remeasurement of the liabilities associated with our financing transactions.
Issuance and offering costs allocated to liability classified options
Issuance and offering costs generally include placement agent, legal, advisory, accounting and filing fees related to financing transactions.
21
Income tax provision
Our income tax provision has not been historically significant, as we have incurred losses since our inception. The provision for income taxes consists of state and foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our U.S. deferred tax assets as of September 30, 2023 and December 31, 2022. We consider all available evidence, both positive and negative, including but not limited to: earnings history, projected future outcomes, industry and market trends, and the nature of each of the deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. deferred tax assets.
Net loss from discontinued operations
Net loss from discontinued operations represent results of operations related to the discontinued body care brands. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.
Results of Operations
Comparison of the Three Months Ended September 30, 2023 and 2022
|
|
Three Months Ended September 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(In thousands except percentage) |
|
|||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product |
|
$ |
1,597 |
|
|
$ |
1,543 |
|
|
$ |
54 |
|
|
|
3 |
% |
Royalty |
|
|
— |
|
|
|
17 |
|
|
|
(17 |
) |
|
|
(100 |
)% |
License |
|
|
— |
|
|
|
10 |
|
|
|
(10 |
) |
|
|
(100 |
)% |
Total revenues |
|
|
1,597 |
|
|
|
1,570 |
|
|
|
27 |
|
|
|
2 |
% |
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
1,102 |
|
|
|
1,128 |
|
|
|
(26 |
) |
|
|
(2 |
)% |
Research and development |
|
|
305 |
|
|
|
255 |
|
|
|
50 |
|
|
|
20 |
% |
Gain on sale of property and equipment |
|
|
(11 |
) |
|
|
— |
|
|
|
(11 |
) |
|
|
(100 |
)% |
Selling, general and administrative |
|
|
3,443 |
|
|
|
4,178 |
|
|
|
(735 |
) |
|
|
(18 |
)% |
Total operating expenses |
|
|
4,839 |
|
|
|
5,561 |
|
|
|
(722 |
) |
|
|
(13 |
)% |
Loss from continuing operations |
|
|
(3,242 |
) |
|
|
(3,991 |
) |
|
|
749 |
|
|
|
19 |
% |
Interest income |
|
|
133 |
|
|
|
95 |
|
|
|
38 |
|
|
|
40 |
% |
Other income, net |
|
|
17 |
|
|
|
43 |
|
|
|
(26 |
) |
|
|
(60 |
)% |
Change in fair value of common stock warrant and option liabilities |
|
|
608 |
|
|
|
1,880 |
|
|
|
(1,272 |
) |
|
|
(68 |
)% |
Issuance and offering costs allocated to liability classified options |
|
|
— |
|
|
|
(314 |
) |
|
|
314 |
|
|
|
(100 |
)% |
Net loss from continuing operations before income taxes |
|
|
(2,484 |
) |
|
|
(2,287 |
) |
|
|
(197 |
) |
|
|
9 |
% |
Income tax provision |
|
|
— |
|
|
|
(1 |
) |
|
|
1 |
|
|
|
(100 |
)% |
Net loss from continuing operations |
|
|
(2,484 |
) |
|
|
(2,288 |
) |
|
|
(196 |
) |
|
|
9 |
% |
Net loss from discontinued operations |
|
|
(83 |
) |
|
|
(589 |
) |
|
|
506 |
|
|
|
(86 |
)% |
Net loss |
|
|
(2,567 |
) |
|
|
(2,877 |
) |
|
|
310 |
|
|
|
(11 |
)% |
Net loss attributable to non-controlling interest |
|
|
— |
|
|
|
(10 |
) |
|
|
10 |
|
|
|
(100 |
)% |
Net loss attributable to common stockholders |
|
$ |
(2,567 |
) |
|
$ |
(2,867 |
) |
|
$ |
300 |
|
|
|
(10 |
)% |
Revenues
Product revenues accounted for 100% and 98% of total revenues during the three months ended September 30, 2023 and 2022, respectively. Product revenues increased $54,000, or 3%, during the three months ended September 30, 2023 compared to the same period in 2022 driven by an increase in GoodWheat product sales offset by a decrease in Zola sales.
Royalty revenues accounted for 0% and 1% of our total revenues during the three months ended September 30, 2023 and 2022, respectively.
License revenue accounted for 0% and 1% of our total revenues during the three months ended September 30, 2023 and 2022, respectively.
22
Cost of revenues
Cost of revenues decreased by $26,000, or 2%, during the three months ended September 30, 2023 compared to the same period in 2022. Gross profit, calculated as total revenues less cost of revenues, was $495,000 and $442,000 during the three months ended September 30, 2023 and 2022, respectively.
Research and development
Research and development expenses increased by $50,000, or 20%, during the three months ended September 30, 2023 compared to the same period in 2022 primarily related to the launch of GoodWheat pancake and waffle mixes in the third quarter of 2023.
Gain on sale of property and equipment
During the three months ended September 30, 2023, the Company sold property and equipment for net proceeds exceeding book value by $11,000. There was no such sale of property and equipment during the three months ended September 30, 2022.
Selling, general, and administrative
Selling, general, and administrative expenses decreased by $735,000, or 18%, during the three months ended September 30, 2023 compared to the same period in 2022 primarily driven by a decrease in employee compensation.
Interest income
During the three months ended September 30, 2023, the Company recognized interest income of $133,000 from investments as compared to $95,000 during the same period in 2022.
Other income, net
During the three months ended September 30, 2023, the Company recognized other income of $17,000 as compared to $43,000 during the same period in 2022.
Change in the estimated fair value of common stock warrant and option liabilities
The change in the estimated fair value of common stock warrant and option liabilities was $608,000 during the three months ended September 30, 2023 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions. The change in the estimated fair value of common stock warrant and option liabilities was $1.9 million during the three months ended September 30, 2022 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the August 2022 Registered Direct Offering financing transaction.
Issuance and offering costs
Issuance and offering costs were $314,000 during the three months ended September 30, 2022 related to the August 2022 Registered Direct Offering financing transaction.
Net loss from discontinued operations
Net loss from discontinued operations was $83,000 and $589,000 during the three months ended September 30, 2023 and 2022, respectively. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.
23
Comparison of the Nine Months Ended September 30, 2023 and 2022
|
|
Nine Months Ended September 30, |
|
|
$ Change |
|
|
% Change |
|
|||||||
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
||||
|
|
(In thousands except percentage) |
|
|||||||||||||
Revenues: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Product |
|
$ |
4,150 |
|
|
$ |
5,685 |
|
|
$ |
(1,535 |
) |
|
|
(27 |
)% |
Royalty |
|
|
— |
|
|
|
117 |
|
|
|
(117 |
) |
|
|
(100 |
)% |
License |
|
|
10 |
|
|
|
872 |
|
|
|
(862 |
) |
|
|
(99 |
)% |
Total revenues |
|
|
4,160 |
|
|
|
6,674 |
|
|
|
(2,514 |
) |
|
|
(38 |
)% |
Operating expenses (income): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Cost of revenues |
|
|
2,630 |
|
|
|
5,201 |
|
|
|
(2,571 |
) |
|
|
(49 |
)% |
Research and development |
|
|
1,055 |
|
|
|
1,009 |
|
|
|
46 |
|
|
|
5 |
% |
Gain on sale of Verdeca |
|
|
— |
|
|
|
(1,138 |
) |
|
|
1,138 |
|
|
|
(100 |
)% |
Change in fair value of contingent consideration |
|
|
— |
|
|
|
(70 |
) |
|
|
70 |
|
|
|
(100 |
)% |
Gain on sale of property and equipment |
|
|
(36 |
) |
|
|
(386 |
) |
|
|
350 |
|
|
|
(91 |
)% |
Selling, general and administrative |
|
|
11,085 |
|
|
|
11,407 |
|
|
|
(322 |
) |
|
|
(3 |
)% |
Total operating expenses |
|
|
14,734 |
|
|
|
16,023 |
|
|
|
(1,289 |
) |
|
|
(8 |
)% |
Loss from continuing operations |
|
|
(10,574 |
) |
|
|
(9,349 |
) |
|
|
(1,225 |
) |
|
|
13 |
% |
Interest income |
|
|
538 |
|
|
|
123 |
|
|
|
415 |
|
|
|
337 |
% |
Other income, net |
|
|
36 |
|
|
|
13 |
|
|
|
23 |
|
|
|
177 |
% |
Valuation loss on March 2023 PIPE |
|
|
(6,076 |
) |
|
|
— |
|
|
|
(6,076 |
) |
|
|
(100 |
)% |
Change in fair value of common stock warrant and option liabilities |
|
|
5,965 |
|
|
|
1,880 |
|
|
|
4,085 |
|
|
|
217 |
% |
Issuance and offering costs allocated to liability classified options |
|
|
(430 |
) |
|
|
(314 |
) |
|
|
(116 |
) |
|
|
37 |
% |
Net loss from continuing operations before income taxes |
|
|
(10,541 |
) |
|
|
(7,647 |
) |
|
|
(2,894 |
) |
|
|
38 |
% |
Income tax provision |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
0 |
|
|
|
0 |
% |
Net loss from continuing operations |
|
|
(10,542 |
) |
|
|
(7,648 |
) |
|
|
(2,894 |
) |
|
|
38 |
% |
Net loss from discontinued operations |
|
|
(591 |
) |
|
|
(3,636 |
) |
|
|
3,045 |
|
|
|
(84 |
)% |
Net loss |
|
|
(11,133 |
) |
|
|
(11,284 |
) |
|
|
151 |
|
|
|
(1 |
)% |
Net loss attributable to non-controlling interest |
|
|
(5 |
) |
|
|
(152 |
) |
|
|
147 |
|
|
|
(97 |
)% |
Net loss attributable to common stockholders |
|
$ |
(11,128 |
) |
|
$ |
(11,132 |
) |
|
$ |
4 |
|
|
|
0 |
% |
Revenues
Product revenues accounted for 100% and 85% of our total revenues during the nine months ended September 30, 2023 and 2022, respectively. The $1.5 million, or 27%, decrease in product revenues during the nine months ended September 30, 2023 compared to the same period in 2022 was primarily driven by 2022 GoodWheat grain sales.
Royalty revenues accounted for 0% and 2% of our total revenues during the nine months ended September 30, 2023 and 2022, respectively. The $117,000 of royalty revenues for the nine months ended September 30, 2022 represents the proportionate share of contracted minimum annual royalty fees that expired in 2022.
License revenue accounted for 0% and 13% of our total revenue during the nine months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2022, the Company recognized one-time license revenue of $862,000 related to the Verdeca-Bioceres licensing agreement discussed below.
24
Cost of revenues
Cost of revenues decreased by $2.6 million, or 49%, during the nine months ended September 30, 2023 compared to the same period in 2022. Cost of revenues during the nine months ended September 30, 2022 included GoodWheat grain sold at cost and higher inventory write-downs. Gross profit, calculated as total revenues less cost of revenues, was $1.5 million during each of the nine months ended September 30, 2023 and 2022.
Research and development
Research and development expenses increased by $46,000, or 5%, during the nine months ended September 30, 2023 compared to the same period in 2022 primarily related to the launch of GoodWheat pancake and waffle mixes in the third quarter of 2023.
Gain on sale of Verdeca
In February 2012, we partnered with Bioceres to form Verdeca, which we equally owned. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies. In November 2020, Arcadia sold its membership interest in Verdeca to Bioceres in a transaction in which Arcadia received cash, shares of Bioceres stock and a royalty stream of up to $10.0 million on sales of Haab 4 ("HB4") soybean. An additional $2.0 million in cash is to be paid upon achievement by Verdeca reaching commercial plantings of at least 200,000 hectares of HB4 or China approving the HB4 soybean trait for “food and feed”. During the nine months ended September 30, 2022, we recognized a gain on sale of Verdeca of $1.1 million related to the regulatory approval of the HB4 soybeans.
Change in fair value of contingent consideration
The change in fair value of contingent consideration during the nine months ended September 30, 2022 was related to the Industrial Seed Innovations ("ISI") contingent consideration remeasurement that resulted in a decrease of the liability in the amount of $70,000. See Note 13 to the condensed consolidated financial statements. There was no such change recorded during the nine months ended September 30, 2023.
Gain on sale of property and equipment
During the nine months ended September 30, 2023 and 2022, the Company sold property and equipment for net proceeds exceeding book value by $36,000 and $386,000, respectively.
Selling, general, and administrative
Selling, general, and administrative expenses decreased by $322,000, or 3%, during the nine months ended September 30, 2023 compared to the same period in 2022 primarily driven by a decrease in employee compensation.
Interest income
During the nine months ended September 30, 2023, the Company recognized interest income of $538,000 from investments as compared to $123,000 during the same period in 2022.
Other income, net
During the nine months ended September 30, 2023, the Company recognized other income of $36,000 as compared to $13,000 during the same period in 2022.
Valuation loss on March 2023 PIPE
During the nine months ended September 30, 2023, the Company recognized a $6.1 million valuation loss related to the March 2023 PIPE financing transaction. The valuation loss includes the fair value in excess of gross proceeds and the increase in fair value related to the re-pricing of existing warrants.
25
Change in the estimated fair value of common stock warrant and option liabilities
The change in the estimated fair value of common stock warrant and option liabilities was $6.0 million during the nine months ended September 30, 2023 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions. The change in the estimated fair value of common stock warrant and option liabilities was $1.9 million during the nine months ended September 30, 2022 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the August 2022 Registered Direct Offering financing transaction.
Issuance and offering costs allocated to liability classified options
Issuance and offering costs were $430,000 during the nine months ended September 30, 2023 and were related to the liability classified options issued in the March 2023 PIPE financing transaction. Issuance and offering costs were $314,000 during the nine months ended September 30, 2022 related to the August 2022 Registered Direct Offering financing transaction.
Net loss from discontinued operations
Net loss from discontinued operations was $591,000 and $3.6 million during the nine months ended September 30, 2023 and 2022, respectively. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.
Seasonality
We and our commercial partners operate in different geographies around the world and conduct field trials used for data generation, which must be conducted during the appropriate growing seasons for particular crops and markets. Demand for coconut water products is generally higher in the summer months.
The level of seasonality in our business overall is difficult to evaluate at this time due to our relatively limited number of commercialized products, our expansion into new geographical markets and our introduction of new products and traits.
Liquidity & Capital Resources
We have funded our operations primarily with the net proceeds from our private and public offerings of our equity securities and debt, as well as proceeds from the sale of our products and payments under license agreements. Our principal use of cash is to fund our operations, which are primarily focused on commercializing our products. Our contractual obligations are primarily related to our operating leases for facilities, land and equipment. As of September 30, 2023, we had cash and cash equivalents of $10.6 million and short-term investments of $5.1 million. For the nine months ended September 30, 2023, the Company had net losses of $11.1 million and net cash used in operations of $11.1 million. For the twelve months ended December 31, 2022, the Company had net losses of $15.6 million and net cash used in operations of $14.0 million.
Going Concern
We believe that our existing cash and cash equivalents and short-term investments will not be sufficient to meet our anticipated cash requirements for at least the next 12-18 months from the issuance date of these financial statements, 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.
We may seek to raise additional funds through debt or equity financings, if necessary. We may also consider entering into additional partner arrangements. Any sale of additional equity would result in dilution to our stockholders. Our incurrence of debt would result in debt service obligations, and the instruments governing our debt could provide for additional operating and financing covenants that would restrict our operations. If we require additional funds and are not able to secure adequate additional funding, we may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned product launches. Any of these actions could materially harm our business, results of operations and financial condition.
26
Liquidity
The following table summarizes total current assets, current liabilities and working capital for the dates indicated (in thousands):
|
|
As of |
|
|
As of |
|
||
|
|
2023 |
|
|
2022 |
|
||
Current assets |
|
$ |
20,006 |
|
|
$ |
25,398 |
|
Current liabilities |
|
|
3,885 |
|
|
|
4,209 |
|
Working capital surplus |
|
$ |
16,121 |
|
|
$ |
21,189 |
|
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
|
|
Nine Months Ended September 30, |
|
|||||
|
|
2023 |
|
|
2022 |
|
||
Net cash (used in) provided by: |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(11,149 |
) |
|
$ |
(11,621 |
) |
Investing activities |
|
|
(4,396 |
) |
|
|
1,136 |
|
Financing activities |
|
|
5,512 |
|
|
|
4,519 |
|
Net decrease in cash |
|
$ |
(10,033 |
) |
|
$ |
(5,966 |
) |
Cash flows from operating activities
Cash used in operating activities for the nine months ended September 30, 2023, was $11.1 million. With respect to our net loss of $11.1 million, non-cash charges, including $430,000 of issuance and offering costs, $6.1 million of valuation loss recognized for the March 2023 PIPE, $573,000 of stock-based compensation, $535,000 of lease amortization, $227,000 of depreciation and $444,000 of write-downs of inventory, were offset by the change in fair value of common stock warrant and option liabilities of $6.0 million, adjustments in our working capital accounts of $1.7 million, a gain on disposal of property and equipment of $36,000, and operating lease payments of $573,000.
Cash used in operating activities for the nine months ended September 30, 2022, was $11.6 million. With respect to our net loss of $11.3 million, non-cash charges including $897,000 of stock-based compensation, $686,000 of lease amortization, $1.5 million of write-downs of inventories, $370,000 of write-downs of property and equipment, $72,000 of write-downs of intangible assets, $314,000 of issuance and offering costs, and $354,000 of depreciation, were offset by adjustments in our working capital accounts of $439,000, the change in fair value of common stock warrant and option liabilities of $1.9 million, gain on sale of Verdeca of $1.1 million, $386,000 of gain on disposal of property and equipment, other non-cash income from the change in fair value of contingent consideration of $70,000, and operating lease payments of $718,000.
Cash flows from investing activities
Cash used in investing activities for the nine months ended September 30, 2023 consisted of proceeds of $42,000 from the sale of property and equipment as well as proceeds of $569,000 from the sale of Verdeca, offset by $5,000 of purchases of property and equipment and $5.0 million of purchases of investments.
Cash provided by investing activities for the nine months ended September 30, 2022 consisted of $897,000 of proceeds from sales of property and equipment, $285,000 proceeds from sale of Verdeca, partially offset by $46,000 of purchases of property and equipment.
Cash flows from financing activities
Cash provided by financing activities for the nine months ended September 30, 2023 consisted of gross proceeds of $6.0 million from the March 2023 PIPE financing transaction and proceeds from the purchase of ESPP shares of $12,000, which were offset by payments of transaction costs related to the March 2023 PIPE financing transaction of $497,000.
Cash provided by financing activities for the nine months ended September 30, 2022 consisted of proceeds from the issuance of common stock relating to the August 2022 RDO financing transaction of $5.0 million gross proceeds and proceeds from the purchase of ESPP shares of $7,000, which were offset by payments of transaction costs related to the August 2022 RDO financing transaction of $488,000.
27
Off-Balance Sheet Arrangements
Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities other than Verdeca, which was disposed of in November 2020.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
We consider our critical accounting policies and estimates to be revenue recognition, determination of the provision for income taxes, and net realizable value of inventory.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Required.
ITEM 4: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation identified above that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We currently are not a party to any material litigation or other material legal proceedings. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.
ITEM 1A. RISK FACTORS
In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES The following exhibits are attached hereto or are incorporated herein by reference.
Not applicable.
ITEM 5. OTHER INFORMATION
None.
29
ITEM 6. EXHIBITS
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Incorporated by Reference |
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Exhibit Number |
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Exhibit Description |
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Form |
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File No. |
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Exhibit |
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Filing Date |
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Filed Herewith |
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31.1 |
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X |
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31.2 |
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X |
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32.1(1) |
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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X |
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32.2(1) |
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Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
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X |
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101.INS |
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Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
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X |
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101.SCH |
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Inline XBRL Taxonomy Extension Schema Document |
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X |
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101.CAL |
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Inline XBRL Taxonomy Extension Calculation Linkbase Document |
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X |
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101.DEF |
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Inline XBRL Taxonomy Extension Definition Linkbase Document |
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X |
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101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
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X |
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101.PRE |
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Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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X |
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104.1 |
|
Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2023, formatted in inline XBRL (and contained in Exhibit 101) |
|
|
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|
X |
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Arcadia Biosciences, Inc. |
||
|
|
|
||
November 9, 2023 |
|
By: |
|
/s/ STANLEY E. JACOT, JR. |
|
|
|
|
Stanley E. Jacot, Jr. |
|
|
|
|
President and Chief Executive Officer |
November 9, 2023 |
|
By: |
|
/s/ THOMAS J. SCHAEFER |
|
|
|
|
Thomas J. Schaefer |
|
|
|
|
Chief Financial Officer |
31
Exhibit 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Stanley E. Jacot, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Arcadia Biosciences, Inc. for the period ended September 30, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 9, 2023 |
|
/s/ STANLEY E. JACOT, JR. |
|
|
Stanley E. Jacot, Jr. |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO EXCHANGE ACT RULE 13a-14(a)/15d-14(a)
AS ADOPTED PURSUANT TO SECTION 302
OF THE SARBANES-OXLEY ACT OF 2002
I, Thomas J. Schaefer, certify that:
1. I have reviewed this Quarterly Report on Form 10-Q of Arcadia Biosciences, Inc. for the period ended September 30, 2023;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Dated: November 9, 2023 |
|
/s/ THOMAS J. SCHAEFER |
|
|
Thomas J. Schaefer |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |
Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report of Arcadia Biosciences, Inc. (the “Company”), on Form 10-Q for the quarter ended September 30, 2023 (the “Report”), I, Stanley E. Jacot, Jr., President and Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:
(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 9, 2023 |
|
/s/ STANLEY E. JACOT, JR. |
|
|
Stanley E. Jacot, Jr. |
|
|
President and Chief Executive Officer |
|
|
(Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the accompanying Quarterly Report of Arcadia Biosciences, Inc. (the “Company”), on Form 10-Q for the quarter ended September 30, 2023 (the “Report”), I, Thomas J. Schaefer, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002 that:
(1) the Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Dated: November 9, 2023 |
|
/s/ THOMAS J. SCHAEFER |
|
|
Thomas J. Schaefer |
|
|
Chief Financial Officer |
|
|
(Principal Financial Officer) |