Arcadia Biosciences Inc.
11/12/2024 | Press release | Distributed by Public on 11/12/2024 16:01
Quarterly Report for Quarter Ending September 30, 2024 (Form 10-Q)
10-Q
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, 2024
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 |
|
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 |
☐ |
Accelerated filer |
☐ |
|||
|
Non-accelerated filer |
☒ |
Smaller reporting company |
☒ |
|||
|
Emerging growth company |
☐ |
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 5, 2024, the registrant had 1,364,940shares of common stock outstanding, $0.001 par value per share.
Arcadia Biosciences, Inc.
FORM 10-Q FOR THE QUARTER ENDED September 30, 2024
INDEX
|
Page |
||||||
|
Part I - |
Financial Information (Unaudited) |
|||||
|
Item 1. |
Condensed Consolidated Financial Statements: |
1 |
||||
|
Condensed Consolidated Balance Sheets |
1 |
|||||
|
Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
|||||
|
Condensed Consolidated Statements of Stockholders' Equity |
3 |
|||||
|
Condensed Consolidated Statements of Cash Flows |
4 |
|||||
|
Notes to Condensed Consolidated Financial Statements |
5 |
|||||
|
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
19 |
||||
|
Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
28 |
||||
|
Item 4. |
Controls and Procedures |
28 |
||||
|
Part II - |
Other Information |
29 |
||||
|
Item 1. |
Legal Proceedings |
29 |
||||
|
Item 1A. |
Risk Factors |
29 |
||||
|
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
29 |
||||
|
Item 3. |
Defaults Upon Senior Securities |
29 |
||||
|
Item 4. |
Mine Safety Disclosures |
29 |
||||
|
Item 5. |
Other Information |
29 |
||||
|
Item 6. |
Exhibits |
30 |
||||
|
SIGNATURES |
31 |
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Arcadia Biosciences, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share data)
|
September 30, 2024 |
December 31, 2023 |
|||||||
|
Assets |
||||||||
|
Current assets: |
||||||||
|
Cash and cash equivalents |
$ |
3,936 |
$ |
6,518 |
||||
|
Short-term investments |
2,640 |
5,124 |
||||||
|
Accounts receivable and other receivables, net of allowance for doubtful accounts of |
882 |
506 |
||||||
|
Inventories - current |
835 |
837 |
||||||
|
Assets held for sale |
- |
51 |
||||||
|
Note receivable - current |
1,827 |
- |
||||||
|
Prepaid expenses and other current assets |
521 |
807 |
||||||
|
Current assets of discontinued operations - GoodWheat |
70 |
1,129 |
||||||
|
Total current assets |
10,711 |
14,972 |
||||||
|
Property and equipment, net |
55 |
70 |
||||||
|
Right of use asset |
306 |
792 |
||||||
|
Inventories - noncurrent |
- |
196 |
||||||
|
Intangible assets, net |
39 |
39 |
||||||
|
Note receivable - noncurrent |
3,966 |
- |
||||||
|
Other noncurrent assets |
164 |
164 |
||||||
|
Noncurrent assets of discontinued operations - GoodWheat |
- |
3,472 |
||||||
|
Total assets |
$ |
15,241 |
$ |
19,705 |
||||
|
Liabilities and stockholders' equity |
||||||||
|
Current liabilities: |
||||||||
|
Accounts payable and accrued expenses |
$ |
1,692 |
$ |
1,910 |
||||
|
Amounts due to related parties |
30 |
58 |
||||||
|
Operating lease liability - current |
346 |
852 |
||||||
|
Other current liabilities |
260 |
270 |
||||||
|
Current liabilities of discontinued operations - GoodWheat |
- |
500 |
||||||
|
Total current liabilities |
2,328 |
3,590 |
||||||
|
Operating lease liability - noncurrent |
- |
155 |
||||||
|
Common stock warrant and option liabilities |
764 |
1,257 |
||||||
|
Other noncurrent liabilities |
2,000 |
2,000 |
||||||
|
Total liabilities |
5,092 |
7,002 |
||||||
|
Commitments and contingencies (Note 14) |
||||||||
|
Stockholders' equity: |
||||||||
|
Common stock, $0.001 par value-150,000,000 shares authorized; 1,364,940 and 1,285,337 |
65 |
65 |
||||||
|
Additional paid-in capital |
284,919 |
284,515 |
||||||
|
Accumulated other comprehensive income |
117 |
101 |
||||||
|
Accumulated deficit |
(274,814 |
) |
(271,840 |
) |
||||
|
Total stockholders' equity |
10,287 |
12,841 |
||||||
|
Non-controlling interest |
(138 |
) |
(138 |
) |
||||
|
Total stockholders' equity |
10,149 |
12,703 |
||||||
|
Total liabilities and stockholders' equity |
$ |
15,241 |
$ |
19,705 |
See accompanying notes to the unaudited condensed consolidated financial statements.
1
Arcadia Biosciences, Inc.
Condensed Consolidated Statements ofOperations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share data)
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Revenues: |
||||||||||||||||
|
Product |
$ |
1,537 |
$ |
1,298 |
$ |
3,829 |
$ |
3,667 |
||||||||
|
License |
- |
- |
- |
10 |
||||||||||||
|
Total revenues |
1,537 |
1,298 |
3,829 |
3,677 |
||||||||||||
|
Operating expenses: |
||||||||||||||||
|
Cost of revenues |
1,032 |
818 |
2,136 |
1,996 |
||||||||||||
|
Research and development |
24 |
15 |
40 |
55 |
||||||||||||
|
Gain on sale of intangible assets |
- |
- |
(4,000 |
) |
- |
|||||||||||
|
Impairment of property and equipment |
- |
- |
36 |
- |
||||||||||||
|
Selling, general and administrative |
2,241 |
1,862 |
6,986 |
6,535 |
||||||||||||
|
Total operating expenses |
3,297 |
2,695 |
5,198 |
8,586 |
||||||||||||
|
Loss from continuing operations |
(1,760 |
) |
(1,397 |
) |
(1,369 |
) |
(4,909 |
) |
||||||||
|
Interest income |
233 |
133 |
428 |
538 |
||||||||||||
|
Other income, net |
15 |
17 |
168 |
36 |
||||||||||||
|
Valuation loss on March 2023 PIPE |
- |
- |
- |
(6,076 |
) |
|||||||||||
|
Change in fair value of common stock warrant and option liabilities |
330 |
608 |
493 |
5,965 |
||||||||||||
|
Issuance and offering costs allocated to liability classified options |
- |
- |
- |
(430 |
) |
|||||||||||
|
Net loss from continuing operations before income taxes |
(1,182 |
) |
(639 |
) |
(280 |
) |
(4,876 |
) |
||||||||
|
Income tax provision |
- |
- |
- |
(1 |
) |
|||||||||||
|
Net loss from continuing operations |
(1,182 |
) |
(639 |
) |
(280 |
) |
(4,877 |
) |
||||||||
|
Net loss from discontinued operations - Body Care |
- |
(83 |
) |
- |
(591 |
) |
||||||||||
|
Net loss from discontinued operations - GoodWheat |
(430 |
) |
(1,845 |
) |
(2,694 |
) |
(5,665 |
) |
||||||||
|
Net loss |
(1,612 |
) |
(2,567 |
) |
(2,974 |
) |
(11,133 |
) |
||||||||
|
Net loss attributable to non-controlling interest |
- |
- |
- |
(5 |
) |
|||||||||||
|
Net loss attributable to common stockholders |
$ |
(1,612 |
) |
$ |
(2,567 |
) |
$ |
(2,974 |
) |
$ |
(11,128 |
) |
||||
|
Net loss per share attributable to common stockholders: |
||||||||||||||||
|
Basic and diluted from continuing operations |
$ |
(0.87 |
) |
$ |
(0.47 |
) |
$ |
(0.21 |
) |
$ |
(4.08 |
) |
||||
|
Basic from discontinuing operations |
$ |
(0.32 |
) |
$ |
(1.42 |
) |
$ |
(1.98 |
) |
$ |
(5.24 |
) |
||||
|
Net loss per basic and diluted share attributable to common stockholders |
$ |
(1.18 |
) |
$ |
(1.89 |
) |
$ |
(2.18 |
) |
$ |
(9.31 |
) |
||||
|
Weighted-average number of shares used in per share |
||||||||||||||||
|
Basic and diluted |
1,363,753 |
1,359,511 |
1,362,754 |
1,195,354 |
||||||||||||
|
Other comprehensive income (loss), net of tax |
||||||||||||||||
|
Unrealized gains on available-for-sale securities |
$ |
36 |
$ |
66 |
$ |
117 |
$ |
87 |
||||||||
|
Reclassification adjustment for gains on available-for-sale securities included in net loss |
- |
- |
(111 |
) |
- |
|||||||||||
|
Change in unrealized gains on available-for-sale securities |
$ |
36 |
$ |
66 |
$ |
6 |
$ |
87 |
||||||||
|
Comprehensive loss |
$ |
(1,576 |
) |
$ |
(2,501 |
) |
$ |
(2,968 |
) |
$ |
(11,041 |
) |
See accompanying notes to the unaudited condensed consolidated financial statements.
2
Arcadia Biosciences, Inc.
Condensed Consolidated Statements of Stockholders' Equity
(Unaudited)
(In thousands, except share data)
|
Common Stock |
Additional |
Accumulated |
Accumulated Other |
Non- |
Total |
|||||||||||||||||||||||
|
Shares |
Amount |
Capital |
Deficit |
Comprehensive Income |
Interest |
Equity |
||||||||||||||||||||||
|
Balance at December 31, 2023 |
1,285,337 |
$ |
65 |
$ |
284,515 |
$ |
(271,840 |
) |
$ |
101 |
$ |
(138 |
) |
$ |
12,703 |
|||||||||||||
|
Issuance of shares related to March 2023 pre-funded warrants exercise |
75,000 |
- |
- |
- |
- |
- |
- |
|||||||||||||||||||||
|
Issuance of shares related to employee stock |
2,503 |
- |
5 |
- |
- |
- |
5 |
|||||||||||||||||||||
|
Stock-based compensation |
- |
- |
138 |
- |
- |
- |
138 |
|||||||||||||||||||||
|
Unrealized gains on available-for-sale securities |
- |
- |
- |
- |
60 |
- |
60 |
|||||||||||||||||||||
|
Net loss |
- |
- |
- |
(2,423 |
) |
- |
- |
(2,423 |
) |
|||||||||||||||||||
|
Balance at March 31, 2024 |
1,362,840 |
$ |
65 |
$ |
284,658 |
$ |
(274,263 |
) |
$ |
161 |
$ |
(138 |
) |
$ |
10,483 |
|||||||||||||
|
Stock-based compensation |
- |
- |
102 |
- |
- |
- |
102 |
|||||||||||||||||||||
|
Change in unrealized gains on available-for-sale securities |
- |
- |
- |
- |
(80 |
) |
- |
(80 |
) |
|||||||||||||||||||
|
Net income |
- |
- |
- |
1,061 |
- |
- |
1,061 |
|||||||||||||||||||||
|
Balance at June 30, 2024 |
1,362,840 |
$ |
65 |
$ |
284,760 |
$ |
(273,202 |
) |
$ |
81 |
$ |
(138 |
) |
$ |
11,566 |
|||||||||||||
|
Issuance of shares related to employee stock |
2,100 |
- |
4 |
- |
- |
- |
4 |
|||||||||||||||||||||
|
Stock-based compensation |
- |
- |
155 |
- |
- |
- |
155 |
|||||||||||||||||||||
|
Change in unrealized gains on available-for-sale securities |
- |
- |
- |
- |
36 |
- |
36 |
|||||||||||||||||||||
|
Net loss |
- |
- |
- |
(1,612 |
) |
- |
- |
(1,612 |
) |
|||||||||||||||||||
|
Balance at September 30, 2024 |
1,364,940 |
$ |
65 |
$ |
284,919 |
$ |
(274,814 |
) |
$ |
117 |
$ |
(138 |
) |
$ |
10,149 |
|
Common Stock |
Additional |
Accumulated |
Accumulated Other |
Non- |
Total |
|||||||||||||||||||||||
|
Shares |
Amount |
Capital |
Deficit |
Comprehensive Income |
Interest |
Equity |
||||||||||||||||||||||
|
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 |
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, |
||||||||
|
2024 |
2023 |
|||||||
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||
|
Net loss |
$ |
(2,974 |
) |
$ |
(11,133 |
) |
||
|
Adjustments to reconcile net loss to cash used in operating activities: |
||||||||
|
Change in fair value of common stock warrant and option liabilities |
(493 |
) |
(5,965 |
) |
||||
|
Issuance and offering costs allocated to liability classified options |
- |
430 |
||||||
|
Valuation loss on March 2023 PIPE |
- |
6,076 |
||||||
|
Depreciation |
92 |
227 |
||||||
|
Lease amortization |
502 |
535 |
||||||
|
Amortization of note receivable discount |
(90 |
) |
- |
|||||
|
Gain on disposal of property and equipment |
(65 |
) |
(36 |
) |
||||
|
Gain on sale of RS durum wheat trait |
(4,000 |
) |
- |
|||||
|
Stock-based compensation |
395 |
573 |
||||||
|
Write-down of inventories |
154 |
444 |
||||||
|
Impairment of property and equipment |
36 |
- |
||||||
|
Changes in operating assets and liabilities: |
||||||||
|
Accounts receivable and other receivables |
(445 |
) |
249 |
|||||
|
Inventories |
620 |
(1,388 |
) |
|||||
|
Prepaid expenses and other current assets |
287 |
(284 |
) |
|||||
|
Other noncurrent assets |
- |
(13 |
) |
|||||
|
Accounts payable and accrued expenses |
(719 |
) |
(300 |
) |
||||
|
Amounts due to related parties |
(29 |
) |
(2 |
) |
||||
|
Other current liabilities |
(11 |
) |
11 |
|||||
|
Operating lease liabilities |
(678 |
) |
(573 |
) |
||||
|
Net cash used in operating activities |
(7,418 |
) |
(11,149 |
) |
||||
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||
|
Proceeds from sale of property and equipment |
342 |
42 |
||||||
|
Proceeds from sale of Verdeca - earn-out received |
- |
569 |
||||||
|
Proceeds from sale of investments |
2,501 |
- |
||||||
|
Proceeds from sale of RS durum wheat trait |
4,000 |
- |
||||||
|
Cash paid related to sale of GoodWheat |
(2,000 |
) |
- |
|||||
|
Purchases of property and equipment |
(16 |
) |
(5 |
) |
||||
|
Purchases of investments |
- |
(5,002 |
) |
|||||
|
Net cash provided by (used in) investing activities |
4,827 |
(4,396 |
) |
|||||
|
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 ESPP purchases |
9 |
12 |
||||||
|
Net cash provided by financing activities |
9 |
5,512 |
||||||
|
Net decrease in cash and cash equivalents |
(2,582 |
) |
(10,033 |
) |
||||
|
Cash and cash equivalents - beginning of period |
6,518 |
20,644 |
||||||
|
Cash and cash equivalents - end of period |
$ |
3,936 |
$ |
10,611 |
||||
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION |
||||||||
|
NONCASH INVESTING AND FINANCING ACTIVITIES: |
||||||||
|
Common stock options issued to placement agent and included in offering |
$ |
- |
$ |
212 |
||||
|
Warrant and option modifications included in Valuation loss on March |
$ |
- |
$ |
404 |
||||
|
Right of use assets obtained in exchange for new operating lease liabilities |
$ |
86 |
$ |
- |
||||
|
Note receivable recognized from sale of GoodWheat |
$ |
5,705 |
$ |
- |
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 Arizonain 2002and maintains its headquarters in Dallas, Texas, with additional office space in Davis and Sacramento, California. The Company was reincorporated in Delawarein March 2015.
Since acquiring the assets of Live Zola, LLC ("Zola") in May 2021, the Company has provided consumers with a great tasting way to rehydrate, reset, and reenergize with Zola coconut water products. The company has leveraged its history as a leader in science-based approaches to develop high value products and drive innovation in the consumer goods industry. Previously, the Company developed products primarily in wheat, which it commercialized through the sales of seed, grain and food ingredients and products, and through trait licensing and royalty agreements.
On May 16, 2024, the Company sold the GoodWheat brand to Above Food Ingredients Corp. ("Above Food") for net consideration of $3.7million. Refer to Note 6 for details of the transaction.
On May 14, 2024, the Company sold its non-GMO Resistant Starch ("RS") durum wheat trait to longtime partner Corteva AgriScience ("Corteva"). Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait. The Company received $4.0million in cash payment from Corteva during the nine months ended September 30, 2024 and recorded a gain of the same amount as the trait had no carrying value on the condensed consolidated statement of operations and comprehensive loss related to the transaction. Refer to Note 8 for details of the partnership and transaction.
In May 2021, the Company's wholly owned subsidiary Arcadia Wellness, LLC ("Arcadia Wellness" or "AW") acquired the businesses of Eko Holdings, LLC, Lief, LLC, and Zola. The acquisition included Saavy Naturals, a line of natural body care products, Soul Spring, a CBD-infused botanical therapy brand in the natural category, and ProVault, a THC-free CBD 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 July 2022, the Company entered into an agreement to license Saavy Naturals to Radiance Beauty and Wellness, Inc. ("Radiance Beauty"). In July 2023, management made the decision to exit the remaining body care brands, Soul Spring and ProVault, as a result of continued pressure on the CBD market due to regulatory uncertainty. Body care operations ceased during the third quarter of 2023.
In August 2019, the Company entered into a joint venture agreement with Legacy Ventures Hawaii, LLC ("Legacy," see Note 7) 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 $10.0million on sales of Haab 4 soybeans ("HB4"). An additional $2.0million in cash was to be paid to Arcadia upon Verdeca achieving 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 $862,000and a gain on sale of Verdeca of $1.1million on the condensed consolidated statements of operations and comprehensive loss. The Company received the full payment of $2.0million as of December 31, 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.
5
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. The non-controlling partner's equity interests are presented as non-controlling interests on the condensed consolidated balance sheets.
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, 2023 included in the Company's Annual Report on Form 10-K, filed with the SEC on March 28, 2024.
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 GoodWheat and 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 to the Company's certificate of incorporation, 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, 19,118additional shares of common stock 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 financings. As of September 30, 2024, the Company had an accumulated deficit of $274.8million, cash and cash equivalents of $3.9million, short-term investments of $2.6million and current note receivable of $1.8million. For the nine months ended September 30, 2024, the Company had net loss of $3.0million and net cash used in operations of $7.4million. For the twelve months ended December 31, 2023, the Company had net losses of $14.0million and net cash used in operations of $15.3million.
With cash and cash equivalents of $3.9million, short-term investments of $2.6million and current note receivable of $1.8million as of September 30, 2024, 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
On May 16, 2024, the Company sold the GoodWheat brand to Above Food. GoodWheat operations ceased during the second quarter of 2024.
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. Body care operations ceased during the third quarter of 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 separate components on the condensed consolidated statements of operations and comprehensive loss for all periods presented.
6
Major classes of line items constituting the balance sheet of discontinued operations:
|
GoodWheat |
Body Care |
|||||||||||||||
|
(In thousands) |
September 30, 2024 |
December 31, 2023 |
September 30, 2024 |
December 31, 2023 |
||||||||||||
|
Assets |
||||||||||||||||
|
Accounts receivable and other receivables |
$ |
70 |
$ |
8 |
$ |
- |
$ |
- |
||||||||
|
Inventories, net - current |
- |
1,121 |
- |
- |
||||||||||||
|
Property and equipment, net |
- |
314 |
- |
- |
||||||||||||
|
Inventories, net - noncurrent |
- |
3,158 |
- |
- |
||||||||||||
|
Total assets |
$ |
70 |
$ |
4,601 |
$ |
- |
$ |
- |
||||||||
|
Liabilities |
||||||||||||||||
|
Accounts payable and accrued expenses |
$ |
- |
$ |
500 |
$ |
- |
$ |
- |
||||||||
|
Total liabilities |
$ |
- |
$ |
500 |
$ |
- |
$ |
- |
Major classes of line items constituting net loss from discontinued operations:
|
GoodWheat |
Body Care |
|||||||||||||||||||||||||||||||
|
Three Months Ended September 30, |
Nine Months Ended September 30, |
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
2024 |
2023 |
|||||||||||||||||||||||||
|
(In thousands) |
||||||||||||||||||||||||||||||||
|
Product revenue |
$ |
(76 |
) |
$ |
300 |
$ |
372 |
$ |
484 |
$ |
- |
$ |
37 |
$ |
- |
$ |
373 |
|||||||||||||||
|
Cost of revenues |
- |
(285 |
) |
(691 |
) |
(634 |
) |
- |
(34 |
) |
- |
(313 |
) |
|||||||||||||||||||
|
Research and development |
- |
(291 |
) |
(400 |
) |
(1,000 |
) |
- |
- |
- |
- |
|||||||||||||||||||||
|
(Loss) Gain on sale of property and equipment |
(24 |
) |
11 |
65 |
36 |
- |
- |
- |
- |
|||||||||||||||||||||||
|
Selling, general and administrative |
(330 |
) |
(1,580 |
) |
(2,040 |
) |
(4,551 |
) |
- |
(86 |
) |
- |
(651 |
) |
||||||||||||||||||
|
Net loss from discontinued operations |
$ |
(430 |
) |
$ |
(1,845 |
) |
$ |
(2,694 |
) |
$ |
(5,665 |
) |
$ |
- |
$ |
(83 |
) |
$ |
- |
$ |
(591 |
) |
The following table presents non-cash items of discontinued operations:
|
GoodWheat |
Body Care |
|||||||||||||||
|
Nine Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
|
(In thousands) |
2024 |
2023 |
2024 |
2023 |
||||||||||||
|
Depreciation |
$ |
37 |
$ |
109 |
$ |
- |
$ |
24 |
||||||||
|
Gain on disposal of property and equipment |
$ |
(65 |
) |
$ |
(36 |
) |
$ |
- |
$ |
- |
||||||
|
Write-down of inventories |
$ |
- |
$ |
275 |
$ |
- |
$ |
- |
||||||||
|
Accounts receivable and other receivables |
$ |
(78 |
) |
$ |
- |
$ |
- |
$ |
(99 |
) |
||||||
|
Inventories |
$ |
575 |
$ |
(1,975 |
) |
$ |
- |
$ |
250 |
|||||||
|
Prepaid expenses and other current assets |
$ |
- |
$ |
- |
$ |
- |
$ |
14 |
||||||||
|
Accounts payable and accrued expenses |
$ |
(500 |
) |
$ |
144 |
$ |
- |
$ |
5 |
|||||||
|
Proceeds from sale of property and equipment |
$ |
342 |
$ |
37 |
$ |
- |
$ |
- |
There were no other operating or investing non-cash items for the nine months ended September 30, 2024 and 2023.
7
2.Recent Accounting Pronouncements
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) - Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new guidance is effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this update on our segment disclosures.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures. The amendments in this update require additional income tax disclosures primarily related to the rate reconciliation and income taxes paid. The new guidance is effective either prospectively or retrospectively, for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this update on our income tax 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 a write-down of $154,000related to hemp and GoodWheat seed during the three and nine months ended September 30, 2024. The Company recorded inventory write-downs of $252,000and $444,000related to packaging materials, hemp seed and GoodWheat during the three and nine months ended September 30, 2023, respectively. 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, 2024 |
December 31, 2023 |
|||||||
|
Raw materials |
$ |
450 |
$ |
373 |
||||
|
Finished goods |
385 |
660 |
||||||
|
Inventories |
$ |
835 |
$ |
1,033 |
4. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
|
September 30, 2024 |
December 31, 2023 |
|||||||
|
Software and computer equipment |
$ |
291 |
$ |
349 |
||||
|
Machinery and equipment |
- |
34 |
||||||
|
Furniture and fixtures |
32 |
39 |
||||||
|
Leasehold improvements |
1,584 |
1,590 |
||||||
|
Property and equipment, gross |
1,907 |
2,012 |
||||||
|
Less: accumulated depreciation and amortization |
(1,852 |
) |
(1,942 |
) |
||||
|
Property and equipment, net |
$ |
55 |
$ |
70 |
Depreciation expense was $7,000and $92,000for the three and nine months ended September 30, 2024, respectively. Depreciation expense was $89,000and $227,000for the three and nine months ended September 30, 2023, respectively.
During the three and nine months ended September 30, 2024 and 2023, there were no sales of property and equipment from continuing operations.
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.
Property and equipment related to Archipelago of$51,000wereclassified as assets held for sale as of December 31, 2023. During the first quarter of 2024, the Company recorded an impairment of $36,000related to these assets. During the second quarter of 2024, all Archipelago property and equipment previously held for sale were sold.
8
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 income, 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, 2024 and December 31, 2023 and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income:
|
(Dollars in thousands) |
Amortized |
Unrealized |
Unrealized |
Estimated |
||||||||||||
|
September 30, 2024 |
||||||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ |
2,770 |
$ |
- |
$ |
- |
$ |
2,770 |
||||||||
|
Short-term investments: |
||||||||||||||||
|
Treasury bills |
2,523 |
117 |
- |
2,640 |
||||||||||||
|
Total Assets at Fair Value |
$ |
5,293 |
$ |
117 |
$ |
- |
$ |
5,410 |
|
(Dollars in thousands) |
Amortized |
Unrealized |
Unrealized |
Estimated |
||||||||||||
|
December 31, 2023 |
||||||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ |
4,925 |
$ |
- |
$ |
- |
$ |
4,925 |
||||||||
|
Short-term investments: |
||||||||||||||||
|
Treasury bills |
5,023 |
101 |
- |
$ |
5,124 |
|||||||||||
|
Total Assets at Fair Value |
$ |
9,948 |
$ |
101 |
$ |
- |
$ |
10,049 |
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, 2024.
Fair Value Measurement
The fair value of the investment securities at September 30, 2024 were as follows:
|
Fair Value Measurements at September 30, 2024 |
||||||||||||||||
|
(Dollars in thousands) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Assets at Fair Value |
||||||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ |
2,770 |
$ |
- |
$ |
- |
$ |
2,770 |
||||||||
|
Short-term investments: |
||||||||||||||||
|
Treasury bills |
2,640 |
- |
- |
2,640 |
||||||||||||
|
Total Assets at Fair Value |
$ |
5,410 |
$ |
- |
$ |
- |
$ |
5,410 |
The fair value of the investment securities at December 31, 2023 were as follows:
|
Fair Value Measurements at December 31, 2023 |
||||||||||||||||
|
(Dollars in thousands) |
Level 1 |
Level 2 |
Level 3 |
Total |
||||||||||||
|
Assets at Fair Value |
||||||||||||||||
|
Cash equivalents: |
||||||||||||||||
|
Money market funds |
$ |
4,925 |
$ |
- |
$ |
- |
$ |
4,925 |
||||||||
|
Short-term investments: |
||||||||||||||||
|
Treasury bills |
5,124 |
- |
- |
5,124 |
||||||||||||
|
Total Assets at Fair Value |
$ |
10,049 |
$ |
- |
$ |
- |
$ |
10,049 |
9
The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2024 or 2023. The Company's financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable and other receivables, note receivable, 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, 2024 and December 31, 2023 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 note receivable is recorded at amortized cost. The amortized cost of the note receivable is considered approximate fair value due to its variable interest rate.
The Company's Level 3 liabilities consist of a contingent liability resulting from the Anawah, Inc. ("Anawah") acquisition as described in Note 14, as well as preferred investment options related to the March 2023 Private Placement and August 2022 Registered Direct offerings described in Note 10.
The contingent liability related to the Anawah acquisition was measured and recorded on a recurring basis as of September 30, 2024 and December 31, 2023, 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, 2024 and December 31, 2023:
|
March 2023 Options - Series A & |
March 2023 Options - Series B |
August 2022 Options & August 2022 Placement Agent Options |
||||||||||||||||||||||
|
September 30, 2024 |
December 31, |
September 30, 2024 |
December 31, |
September 30, 2024 |
December 31, |
|||||||||||||||||||
|
Remaining term (in years) |
3.40 |
4.16 |
- |
0.61 |
2.92 |
3.67 |
||||||||||||||||||
|
Expected volatility |
86.9 |
% |
91.7 |
% |
- |
78.7 |
% |
91.8 |
% |
90.5 |
% |
|||||||||||||
|
Risk-free interest rate |
3.6 |
% |
3.9 |
% |
- |
5.2 |
% |
3.6 |
% |
4.0 |
% |
|||||||||||||
|
Expected dividend yield |
0 |
% |
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 assets and 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 |
Note Receivable Bifurcated Derivatives |
Contingent |
Total |
||||||||||||||||||||||||
|
Balance as of December 31, 2023 |
$ |
1,008 |
$ |
41 |
$ |
46 |
$ |
159 |
$ |
3 |
$ |
- |
$ |
2,000 |
$ |
3,257 |
||||||||||||||||
|
Initial recognition |
- |
- |
- |
- |
- |
250 |
- |
250 |
||||||||||||||||||||||||
|
Change in fair value |
(378 |
) |
(41 |
) |
(19 |
) |
(53 |
) |
(2 |
) |
- |
- |
(493 |
) |
||||||||||||||||||
|
Balance as of September 30, 2024 |
$ |
630 |
$ |
- |
$ |
27 |
$ |
106 |
$ |
1 |
$ |
250 |
$ |
2,000 |
$ |
3,014 |
10
6. Note Receivable
On May 16, 2024, the Company sold the GoodWheat brand to Above Food for net consideration of $3.7million. The assets sold consisted primarily of grain and finished goods inventories, formulations and trademarks. A loss of $1,500was recognized in the condensed consolidated statements of operations and comprehensive loss during the nine months ended September 30, 2024, related to the sale.
In connection with the transaction, Arcadia paid to Above Food $2.0million and received a $6.0million promissory note dated May 14, 2024. The promissory note has a term of three yearsand accrues interest at the Wall Street Journal prime rate. On each of the first, second and third anniversaries of the promissory note, accrued interest and $2.0million of principal are payable to Arcadia. The promissory note contains contingent features, including an option that requires Above Food to cause its parent entity, Above Food Ingredients Inc. ("Parent Company"), to issue to the Company publicly traded stock of Parent Company in exchange for the cancellation of a portion of the principal of the promissory note, as well as default provisions.
The Company accounted for the promissory note as a note receivable in accordance with ASC 310. The Company did not elect the fair value option and since the Company intends to and has the ability to hold the promissory note to maturity, it has been classified as held for investment and is reported on the condensed consolidated balance sheet at amortized cost. The first installment payment due in 2025 is classified as current and the remaining installment payments due in 2026 and 2027 are classified as noncurrent on the condensed consolidated balance sheet.
The contingent features of the promissory note were evaluated for bifurcation in accordance with ASC 815. The contingent features requiring bifurcation had an estimated fair value of $250,000as of the transaction date and as of September 30, 2024. The estimated fair value of the contingent features is reported in note receivable - noncurrent on the condensed consolidated balance sheet as of September 30, 2024. The promissory note was recorded at a discount of $545,000, which is being amortized over the term of the promissory note using the effective interest method. The Company recognized discount amortization of $60,000and $89,000in the condensed consolidated statements of operations and comprehensive lossduring the three and nine months ended September 30, 2024, respectively. The Company recognized accrued interest of $126,000and $193,000in the condensed consolidated statements of operations and comprehensive lossduring the three and nine months ended September 30, 2024, respectively.
7. 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 twoindividuals appointed by the Company and twoindividuals appointed by Legacy will manage Archipelago. As of September 30, 2024, the Company and Legacy hold 50.75% and 49.25% interests in Archipelago, respectively, and have made capital contributions to Archipelago of $3.1million and $3.0million, 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. 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.
8. Collaborative Arrangements
In August 2017, the Company entered into a collaborative arrangement for the research, development and commercialization of our non-GMO RS durum wheat trait in North America. This collaborative arrangement was a contractual agreement with Corteva and involved a joint operating activity where both Arcadia and Corteva were active participants in the activities of the collaboration. Arcadia and Corteva participated in the research and development, and Arcadia had the primary responsibility for the intellectual property strategy while Corteva generally led the marketing and commercialization efforts. Both parties were exposed to significant risks and rewards of the collaboration and the agreement included both cost sharing and profit sharing. The activities were performed with no guarantee of either technological or commercial success.
The Company accounted 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.
11
On May 14, 2024, the Company sold its RS durum wheat trait to Corteva. Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait. The Company received $4.0million in cash payment from Corteva during the nine months ended September 30, 2024 and recorded a gain of the same amount as the trait had no carrying value on the condensed consolidated statement of operations and comprehensive loss related to the transaction.
9. Leases
Operating Leases
As of September 30, 2024, 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.
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 oneto six years. The exercise of lease renewal options is at the Company's sole discretion. In January 2024, the Company exercised it's option to renew the facility lease in American Falls, Idaho for one yearthrough December 31, 2024. The lease renewal resulted in recognition of additional right-of-use asset and lease liability of $86,000on the condensed consolidated balance sheet. The Company subsequently terminated the facility lease in American Falls, Idaho effective July 2024.
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, 2024 |
December 31, 2023 |
|||||||
|
Assets |
||||||||||
|
Operating lease assets |
Right of use asset |
$ |
306 |
$ |
792 |
|||||
|
Total leased assets |
$ |
306 |
$ |
792 |
||||||
|
Liabilities |
||||||||||
|
Current - Operating |
Operating lease liability- current |
$ |
346 |
$ |
852 |
|||||
|
Noncurrent - Operating |
Operating lease liability- noncurrent |
- |
155 |
|||||||
|
Total leased liabilities |
$ |
346 |
$ |
1,007 |
|
Lease Cost |
Classification |
Three |
Three |
Nine |
Nine |
|||||||||||||
|
Operating lease cost |
SG&A and R&D Expenses |
$ |
172 |
$ |
191 |
$ |
678 |
$ |
572 |
|||||||||
|
Short term lease cost |
SG&A Expenses |
3 |
3 |
10 |
10 |
|||||||||||||
|
Sublease income (1) |
SG&A and R&D Expenses |
(142 |
) |
(111 |
) |
(404 |
) |
(329 |
) |
|||||||||
|
Net lease cost |
$ |
33 |
$ |
83 |
$ |
284 |
$ |
253 |
(1)
Sublease income is recorded as a reduction to lease expense.
|
Lease Term |
September 30, 2024 |
December 31, 2023 |
||||||
|
Weighted-average remaining |
0.7 |
2.3 |
||||||
|
Weighted-average discount rate |
6.5 |
% |
6.0 |
% |
12
10. 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) 165,500shares of its common stock, (ii) pre-funded common stock purchase warrants (the "March 2023 Pre-Funded Warrants") to purchase up to 500,834shares of common stock, at an exercise price of $0.0001per share, (iii) Series A preferred investment options (the "March 2023 Options - Series A") to purchase up to a total of 666,334shares of common stock, at an exercise price of $9.00per 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 666,334shares of common stock, at an exercise price of $9.00per share, and raised total gross proceeds of $6.0million. The March 2023 Private Placement closed on March 6, 2023. The March 2023 Pre-Funded Warrants became exercisable upon issuance and were fully exercised as of September 30, 2024. The March 2023 Options - Series Aare exercisable at any time at the option of the holder and expire 5years from the date of issuance. The March 2023 Options - SeriesB were exercisable at any time at the option of the holder and expire 1.5years from the date of issuance. As of September 30, 2024, the March 2023 Options - Series B expired.
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 178,132shares 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, $125.20and $37.35per share, respectively (the "Existing Warrants"). Under the Option Amendment Agreements, the Company agreed to lower the exercise price of the Existing Warrants to $9.00per share. In addition, the Company granted to a placement agent preferred investment options to purchase a total of 33,317shares of Common Stock (the "March 2023 Placement Agent Options") that have an exercise price per share equal to $11.25and a term of 5years from the date of issuance. The re-pricing of the Existing Warrants resulted in an increase in fair value of $404,000, of which $185,000of 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 $7.61and risk-free rate of 4.27%. The following assumptions were utilized for the Series B Investment Options: volatility of 103.33%, stock price of $7.61and risk-free rate of 4.97%. The estimated fair value of the liability classified March 2023 Options issued was $6.6million. The estimated fair value of the common stock option liabilities was subsequently remeasured at September 30, 2024 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 $5.1million. 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 $5.7million 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 $548,000that consist of direct incremental legal, advisory, accounting and filing fees relating to the March 2023 Private Placement. A total of $430,000was allocated to the common stock option liabilities and expensed while the remaining $330,000was allocated to the common stock and March 2023 Pre-Funded Warrants and offset to additional paid in capital.
13
11. 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, 2024 and December 31, 2023, 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 |
$ |
- |
(425,834 |
) |
75,000 |
(75,000 |
) |
- |
||||||||||||||
|
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 |
) |
- |
- |
- |
|||||||||||||||
|
January 2021 Placement Agent Warrants |
January 2021 |
5.5 years |
$ |
159.60 |
- |
9,846 |
- |
9,846 |
||||||||||||||||
|
December 2020 Warrants (2) |
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 (2) |
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 (2) |
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 |
||||||||||||||||
|
September 2019 Placement Agent Warrants (3) |
September 2019 |
5 years |
$ |
379.20 |
- |
1,649 |
- |
- |
||||||||||||||||
|
June 2019 Placement Agent Warrants (3) |
June 2019 |
5 years |
$ |
251.60 |
- |
1,862 |
- |
- |
||||||||||||||||
|
April 2019 Service and Performance Warrants (1)(3) |
April 2019 |
5 years |
$ |
247.20 |
- |
3,629 |
- |
- |
||||||||||||||||
|
January 2021 Warrants (2) |
January 2021 |
5.5 years |
$ |
9.00 |
- |
7,831 |
- |
7,831 |
||||||||||||||||
|
January 2021 Warrants |
January 2021 |
5.5 years |
$ |
125.20 |
- |
90,629 |
- |
90,629 |
||||||||||||||||
|
September 2019 Warrants (2) |
September 2019 |
5.5 years |
$ |
9.00 |
- |
9,892 |
- |
9,892 |
||||||||||||||||
|
September 2019 Warrants |
September 2019 |
5.5 years |
$ |
300.80 |
- |
6,594 |
- |
6,594 |
||||||||||||||||
|
June 2019 Warrants |
June 2019 |
5.5 years |
$ |
200.00 |
- |
10,896 |
- |
10,896 |
||||||||||||||||
|
Total |
(482,647 |
) |
341,957 |
(75,000 |
) |
259,817 |
(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)These warrants were repriced as part of the March 2023 Private Placement offering.
(3)These warrants expired during the nine months ended September 30, 2024.
14
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 condensed 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 |
- |
666,334 |
||||||||||||||||
|
March 2023 Options - Series B (2) |
March 2023 |
1.5 years |
$ |
9.00 |
- |
666,334 |
- |
- |
||||||||||||||||
|
March 2023 Placement Agent Options |
March 2023 |
5 years |
$ |
11.25 |
- |
33,317 |
- |
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 |
- |
1,489,952 |
- |
823,618 |
(1)These options were repriced as part of the March 2023 Private Placement offering.
(2)These warrants expired during the nine months ended September 30, 2024.
12. Stock-Based Compensation and Employee Stock Purchase Program
Stock Incentive Plans
The Company has twoequity 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 3,860shares of common stock reserved for future issuance, which included 259that 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.Themaximum number of shares that may be awarded to any individual employee, including our directors and officers, during any calendar year was 9,375shares. 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-yearperiod; however, there might be alternative vesting schedules, as approved by the Board. Options granted, once vested, are generally exercisable for up to 10years, after grant to the extent vested.
OnJune 25, 2024, the shareholders approved an amendment to the Company's 2015 Plan that increased the number of shares of common stock that may be issued under the 2015 Plan by 200,000shares and increased themaximum number of shares of common stock issuable to employees, including our officers and directors, in any fiscal year from 9,375shares to 50,000shares. On February 2, 2022, formerpresident and chief executive officer of the Company, Stanley Jacot, Jr. was hired. The Company granted Mr. Jacot an inducement stock option to purchase 7,902shares of the Company's commonstock pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The Company 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 were issued outside of the 2015 Plan, but are subject to the terms and conditions of the 2015 Plan. As of September 30, 2024, a total of 338,248shares of common stock were reserved for issuance under the 2015 Plan, of which 127,725shares of common stock are available for future grant. As of September 30, 2024, a total of 102and 210,523options are outstanding under the 2006 and 2015 Plans, respectively. As of December 31, 2023, a total of 102and 71,609options were outstanding under the 2006 and 2015 Plans, respectively.A total of 6,949and 8,366inducement options were outstanding as of September 30, 2024 and December 31, 2023, respectively.
15
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, 2023 |
80,078 |
$ |
85.30 |
$ |
- |
|||||||
|
Options granted |
158,000 |
2.71 |
- |
|||||||||
|
Options forfeited |
(7,927 |
) |
19.08 |
$ |
397 |
|||||||
|
Options expired |
(12,576 |
) |
170.08 |
- |
||||||||
|
Outstanding - Balance at September 30, 2024 |
217,575 |
$ |
22.83 |
$ |
3,140 |
|||||||
|
Vested and expected to vest - September 30, 2024 |
198,542 |
$ |
24.68 |
$ |
2,778 |
|||||||
|
Exercisable - September 30, 2024 |
50,515 |
$ |
84.37 |
$ |
- |
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, 2024, there was $524,000of unrecognized compensation cost related to unvested stock-based compensation grants that will be recognized over the weighted-average remaining recognition period of 1.4years.
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, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Expected term (years) |
8.04 |
- |
8.04 |
7.06 |
||||||||||||
|
Expected volatility |
101.31 |
% |
- |
101.31 |
% |
124 |
% |
|||||||||
|
Risk-free interest rate |
3.77 |
% |
- |
3.77 |
% |
3.61 |
% |
|||||||||
|
Dividend yield |
- |
- |
- |
- |
The Company recognized $155,000and $395,000of compensation expense for stock options awards during the three and nine months ended September 30, 2024, respectively. The Company recognized $162,000and $573,000of compensation expense for stock options awards during the three and nine months ended September 30, 2023, respectively.
16
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, 2015and ended on February 1, 2016, the ESPP provides for six-monthoffering 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, 2024, the number of shares of common stock reserved for future issuance under the ESPP is 3,209. The ESPP provides for automatic annual increases in the shares available for purchase beginning on January 1, 2016. As of September 30, 2024, 8,073shares had been issued under the ESPP. The Company recorded $2,000and $6,000of ESPP related compensation expense during the three and nine months ended September 30, 2024, respectively. The Company recorded $7,000and $12,000of ESPP related compensation expense during the three and nine months ended September 30, 2023, respectively.
13. 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, 2024and 2023. 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, 2024, there were nomaterial changes to the Company's uncertain tax positions.
In February 2023, the Company received notification from the Internal Revenue Service ("IRS") that our Archipelago joint venture was selected for audit for the 2021 tax year. The Company received the IRS Notice of Proposed Partnership Adjustment during the third quarter of 2024 and accepted the adjustments. The Company is now awaiting the IRS Final Partnership Adjustment ("FPA"). Reception of the FPA will start a 45-day clock on making the push out election, to push the audit adjustments to the partners. Upon conclusion of the audit, Arcadia expects to adjust their balance of available tax net operating losses and have no penalties or interest due. The Company is currently not under audit for state purposes.
14. Commitments and Contingencies
Leases
The Company leases office and warehouse space and equipment under operating lease agreements having initial lease terms ranging from oneto 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. SeeNote 9.
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
InJune 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 $5.0million. 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 threeof the sixAnawah product programs thus, the contingent liability was reduced to $3.0million. 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, 2024, 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, $2.0million remains on the condensed consolidated balance sheet as an other noncurrent liability.
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 oneto three yearsin duration and in certain cases are cancelable.
17
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.
15. 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):
|
Three Months Ended September 30, |
For the Nine Months Ended September 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Options to purchase common stock |
217,575 |
84,058 |
217,575 |
84,058 |
||||||||||||
|
Warrants to purchase common stock |
259,817 |
266,957 |
259,817 |
266,957 |
||||||||||||
|
Preferred investment options |
823,618 |
1,489,952 |
823,618 |
1,489,952 |
||||||||||||
|
Total |
1,301,010 |
1,840,967 |
1,301,010 |
1,840,967 |
16. 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, one of 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 $30,000and $58,000as of September 30, 2024 and December 31, 2023, respectively, and are included in the condensed consolidated balance sheets as amounts due to related parties.
18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OFFINANCIAL 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
Since acquiring the assets of Live Zola, LLC ("Zola") in May 2021, the Company has provided consumers with a great tasting way to rehydrate, reset, and reenergize with Zola coconut water products. The company has leveraged its history as a leader in science-based approaches to develop high value products and drive innovation in the consumer goods industry. Previously, the Company developed products primarily in wheat, which it commercialized through the sales of seed, grain and food ingredients and products, and through trait licensing and royalty agreements.
On May 16, 2024, the Company sold the GoodWheat brand to Above Food Ingredients Corp. ("Above Food") for net consideration of $3.7 million. Refer to Note 6 to the condensed consolidated financial statements for further details of the transaction.
On May 14, 2024, the Company sold its non-GMO Resistant Starch ("RS") durum wheat trait to longtime partner Corteva AgriScience ("Corteva"). Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait. The Company received $4.0 million in cash payment from Corteva during the nine months ended September 30, 2024 and recorded a gain of the same amount as the trait had no carrying value on the condensed consolidated statement of operations and comprehensive loss related to the transaction. Refer to Note 8 to the condensed consolidated financial statements for further details of the partnership and transaction.
In May 2021, the Company's wholly owned subsidiary Arcadia Wellness, LLC ("Arcadia Wellness" or "AW") acquired the businesses of Eko Holdings, LLC, Lief, LLC, and Zola. The acquisition included Saavy Naturals, a line of natural body care products, Soul Spring, a CBD-infused botanical therapy brand in the natural category, and ProVault, a THC-free CBD 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 July 2022, the Company entered into an agreement to license Saavy Naturals to Radiance Beauty and Wellness, Inc. ("Radiance Beauty"). In July 2023, management made the decision to exit the remaining body care brands, Soul Spring and ProVault, as a result of continued pressure on the CBD market due to regulatory uncertainty. Body care operations ceased during the third quarter of 2023.
19
Our Growth Strategy
We believe there are significant opportunities to grow our business by executing the following elements of our strategy:
•
Scale Zola through retail expansion.Based on our research, consumers prefer the clean, crisp taste of Zola to that of other leading coconut water brands. As a result, we plan to continue to invest in trial-driving activities and expand distribution of our Zola coconut water brand through mass market retailers and grocery store chains.
•
Monetization of our wheat trait portfolio.Our proprietary intellectual property ("IP") with multiple non-GMO wheat traits have clear functional benefits, which we utilized to launch the GoodWheat brand into multiple categories. We believe our wheat provides a compelling point of difference and we will continue to evaluate ways to extract value from our proprietary technology.
•
Evaluate M&A opportunities.We intend to evaluate potential asset sales, mergers, acquisitions and other strategic opportunities.
Our Product Portfolio
Zola Coconut Water
Founded in 2002, Zola became part of the Arcadia family of brands in May 2021. Sourced from Thailand, Zola is a pure, natural, 100% coconut water with a crisp, clean taste that's slightly sweet and refreshing. Naturally hydrating and rich in electrolytes, Zola is Non-GMO Project Verified and only contains 60 calories per serving. In taste tests, Zola beat competitors 2 to 1 and is the best tasting way to rehydrate, reset and reenergize. Zola flavors include original, original with pulp, and espresso, and in May 2024, we added lime and pineapple.
Wheat Traits
RG Wheat
Many consumers are interested in reducing levels of gluten in their diet. Critically, for some, this is due to having Celiac disease ("CD"), an autoimmune disease that impacts many people worldwide with estimates from 1% of the population in Europe to 3.5% in Mexico. Furthermore, non-celiac gluten sensitivity ("NCGS") impacts an estimated additional 6% of the population. Both CD and NCGS are characterized by sensitivity to dietary gluten. The only effective treatment of CD and NCGS requires removal of gluten sources from the diet. Since required adherence to a gluten-free diet is extremely difficult to accomplish for average consumers, efforts to develop alternative approaches are needed.
Our proprietary, non-GMO wheat variety developed using advanced screening and plant breeding techniques have reduced allergenic glutens and increased essential amino acids such as lysine, along with all the other health benefits of high protein wheat. Importantly, this variety also delivers impressively high fiber content at approximately 14 grams per serving compared to 2-3 grams per serving of traditional wheat, providing additional value to health-conscious consumers.
Improved Shelf Life of Whole Grain Flour
The United States Department of Agriculture recommends that "at least one serving of grains per day must be whole grain-rich" due to evidence that a diet containing whole grains provides a multitude of benefits, including lower risk of obesity, cardiovascular disease, and type-2 diabetes. Despite these health benefits, consumption of whole grain products is negatively affected by the bitter and rancid flavors and odors that accumulate in whole wheat flour after milling. Our improved stability and flavor wheat lines greatly reduced the production of rancid and bitter compounds in milled whole grain flour as it progresses through the supply chain.
20
Discontinued Operations
As mentioned above, the Company exited the GoodWheat and body care brands. 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 separate components 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
Product revenues
Product revenues consist primarily of sales of 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.
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.
Operating Expenses
Cost of revenues
Cost of revenues primarily relates to the sale of Zola products and consists primarily of product and freight costs. Adjustments or write-downs to inventory are also included in cost of revenues.
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. The Company's research and development expenses may fluctuate from period to period.
Gain on sale of intangible assets
Gain on sale of intangible assets consists of the gain on sale of our RS durum wheat trait to Corteva.
Impairment of property and equipment
Impairment of property and equipment includes losses from tangible assets due to impairment or recoverability test charges to write down fixed assets to their fair value or recoverability 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.
21
Interest income
Interest income consists of interest income on our cash and cash equivalents, investments and note receivable.
Other income, net
Other income, net consists of miscellaneous income net of miscellaneous losses.
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.
Net loss from discontinued operations
Net loss from discontinued operations represents results of operations related to the discontinued GoodWheat and 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, 2024 and 2023
|
Three Months Ended September 30, |
$ Change |
% Change |
||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
(In thousands except percentage) |
||||||||||||||||
|
Revenues: |
||||||||||||||||
|
Product |
$ |
1,537 |
$ |
1,298 |
$ |
239 |
18 |
% |
||||||||
|
License |
- |
- |
- |
0 |
% |
|||||||||||
|
Total revenues |
1,537 |
1,298 |
239 |
18 |
% |
|||||||||||
|
Operating expenses: |
||||||||||||||||
|
Cost of revenues |
1,032 |
818 |
214 |
26 |
% |
|||||||||||
|
Research and development |
24 |
15 |
9 |
60 |
% |
|||||||||||
|
Selling, general and administrative |
2,241 |
1,862 |
379 |
20 |
% |
|||||||||||
|
Total operating expenses |
3,297 |
2,695 |
602 |
22 |
% |
|||||||||||
|
Loss from continuing operations |
(1,760 |
) |
(1,397 |
) |
(363 |
) |
(26 |
)% |
||||||||
|
Interest income |
233 |
133 |
100 |
75 |
% |
|||||||||||
|
Other income, net |
15 |
17 |
(2 |
) |
(12 |
)% |
||||||||||
|
Change in fair value of common stock warrant and option liabilities |
330 |
608 |
(278 |
) |
(46 |
)% |
||||||||||
|
Net loss from continuing operations before income taxes |
(1,182 |
) |
(639 |
) |
(543 |
) |
85 |
% |
||||||||
|
Income tax provision |
- |
- |
- |
0 |
% |
|||||||||||
|
Net loss from continuing operations |
(1,182 |
) |
(639 |
) |
(543 |
) |
85 |
% |
||||||||
|
Net loss from discontinued operations - Body Care |
- |
(83 |
) |
83 |
(100 |
)% |
||||||||||
|
Net loss from discontinued operations - GoodWheat |
(430 |
) |
(1,845 |
) |
1,415 |
(77 |
)% |
|||||||||
|
Net loss |
(1,612 |
) |
(2,567 |
) |
955 |
(37 |
)% |
|||||||||
|
Net loss attributable to non-controlling interest |
- |
- |
- |
0 |
% |
|||||||||||
|
Net loss attributable to common stockholders |
$ |
(1,612 |
) |
$ |
(2,567 |
) |
$ |
955 |
(37 |
)% |
22
Revenues
Product revenues accounted for 100% of total revenues during the three months ended September 30, 2024. Product revenues increased $239,000, or 18%, during the three months ended September 30, 2024 compared to the same period in 2023 driven by an increase in Zola sales.
Cost of revenues
Cost of revenues increased by $214,000, or 26%, during the three months ended September 30, 2024 compared to the same period in 2023 driven by higher revenues and input costs.
Research and development
Research and development expenses increased by $9,000, or 60%, during the three months ended September 30, 2024 compared to the same period in 2023.
Selling, general, and administrative
Selling, general, and administrative expenses increased by $379,000, or 20%, during the three months ended September 30, 2024 compared to the same period in 2023 primarily driven by employee severance expenses related to the change in management.
Interest income
During the three months ended September 30, 2024, the Company recognized interest income of $233,000, of which $186,000 was related to discount amortization and accrued interest on the promissory note from Above Food. The remaining difference was related to interest from investments. During the three months ended September 30, 2023, the Company recognized interest income of $133,000 from investments.
Other income, net
During the three months ended September 30, 2024 and 2023, the Company recognized other income of $15,000 and $17,000, respectively.
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 resulted in a gain of $330,000 and $608,000 during the three months ended September 30, 2024 and 2023, respectively, 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.
Net loss from discontinued operations
Net loss from discontinued operations for Body Care was $83,000 during the three months ended September 30, 2023. Net loss from discontinued operations for GoodWheat was $430,000 and $1.8 million during the three months ended September 30, 2024 and 2023, 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, 2024 and 2023
|
Nine Months Ended September 30, |
$ Change |
% Change |
||||||||||||||
|
2024 |
2023 |
|||||||||||||||
|
(In thousands except percentage) |
||||||||||||||||
|
Revenues: |
||||||||||||||||
|
Product |
$ |
3,829 |
$ |
3,667 |
$ |
162 |
4 |
% |
||||||||
|
License |
- |
10 |
(10 |
) |
(100 |
)% |
||||||||||
|
Total revenues |
3,829 |
3,677 |
152 |
4 |
% |
|||||||||||
|
Operating expenses: |
||||||||||||||||
|
Cost of revenues |
2,136 |
1,996 |
140 |
7 |
% |
|||||||||||
|
Research and development |
40 |
55 |
(15 |
) |
(27 |
)% |
||||||||||
|
Gain on sale of intangible assets |
(4,000 |
) |
- |
(4,000 |
) |
100 |
% |
|||||||||
|
Impairment of property and equipment |
36 |
- |
36 |
(100 |
)% |
|||||||||||
|
Selling, general and administrative |
6,986 |
6,535 |
451 |
7 |
% |
|||||||||||
|
Total operating expenses |
5,198 |
8,586 |
(3,388 |
) |
(39 |
)% |
||||||||||
|
Loss from continuing operations |
(1,369 |
) |
(4,909 |
) |
3,540 |
(72 |
)% |
|||||||||
|
Interest income |
428 |
538 |
(110 |
) |
(20 |
)% |
||||||||||
|
Other income, net |
168 |
36 |
132 |
367 |
% |
|||||||||||
|
Valuation loss on March 2023 PIPE |
- |
(6,076 |
) |
6,076 |
(100 |
)% |
||||||||||
|
Change in fair value of common stock warrant and option liabilities |
493 |
5,965 |
(5,472 |
) |
(92 |
)% |
||||||||||
|
Issuance and offering costs allocated to liability classified options |
- |
(430 |
) |
430 |
(100 |
)% |
||||||||||
|
Net loss from continuing operations before income taxes |
(280 |
) |
(4,876 |
) |
4,596 |
(94 |
)% |
|||||||||
|
Income tax provision |
- |
(1 |
) |
1 |
(100 |
)% |
||||||||||
|
Net loss from continuing operations |
(280 |
) |
(4,877 |
) |
4,597 |
(94 |
)% |
|||||||||
|
Net loss from discontinued operations - Body Care |
- |
(591 |
) |
591 |
(100 |
)% |
||||||||||
|
Net loss from discontinued operations - GoodWheat |
(2,694 |
) |
(5,665 |
) |
2,971 |
(52 |
)% |
|||||||||
|
Net loss |
(2,974 |
) |
(11,133 |
) |
8,159 |
(73 |
)% |
|||||||||
|
Net loss attributable to non-controlling interest |
- |
(5 |
) |
5 |
(100 |
)% |
||||||||||
|
Net loss attributable to common stockholders |
$ |
(2,974 |
) |
$ |
(11,128 |
) |
$ |
8,154 |
(73 |
)% |
Revenues
Product revenues accounted for 100% of total revenues during the nine months ended September 30, 2024. Product revenues increased $162,000, or 4%, during the nine months ended September 30, 2024 compared to the same period in 2023 driven by an increase in Zola sales.
Cost of revenues
Cost of revenues increased by $140,000, or 7%, during the nine months ended September 30, 2024 compared to the same period in 2023 driven by higher revenues and input costs.
Research and development
Research and development expenses decreased by $15,000, or 27%, during the nine months ended September 30, 2024 compared to the same period in 2023.
Gain on sale of intangible assets
During the nine months ended September 30, 2024, the Company realized a gain of $4.0 million related to the sale of its RS durum wheat trait to Corteva. There was no such gain recorded during the nine months ended September 30, 2023.
Impairment of property and equipment
During the nine months ended September 30, 2024, the Company recognized impairment of property and equipment held for sale of $36,000. There was no such impairment of property and equipment during the nine months ended September 30, 2023.
24
Selling, general, and administrative
Selling, general, and administrative expenses increased by $451,000, or 7%, during the nine months ended September 30, 2024 compared to the same period in 2023 primarily driven by employee severance expenses related to the change in management as well as higher consulting and legal expenses.
Interest income
During the nine months ended September 30, 2024, the Company recognized interest income of $428,000, of which $282,000 was related to discount amortization and accrued interest on the promissory note from Above Food. The remaining difference was related to interest from investments. During the nine months ended September 30, 2023, the Company recognized interest income of $538,000 from investments.
Other income, net
During the nine months ended September 30, 2024, the Company recognized other income of $168,000, of which $117,000 was related to realized gains on investments. During the nine months ended September 30, 2023, the Company recognized other income of $36,000.
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. There was no such valuation loss during the nine months ended September 30, 2024.
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 resulted in a gain of $493,000 and $6.0 million during the nine months ended September 30, 2024 and 2023, respectively, 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.
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. There were no such issuance and offering costs during the nine months ended September 30, 2024.
Net loss from discontinued operations
Net loss from discontinued operations for Body Care was $591,000 during the nine months ended September 30, 2023. Net loss from discontinued operations for GoodWheat was $2.7 million and $5.7 million during the nine months ended September 30, 2024 and 2023, respectively. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.
Seasonality
The coconut water category, similar to other beverages, is seasonal. Generally, sales volumes are highest during our second and third fiscal quarters when the weather is warmer.
25
Liquidity & Capital Resources
We have funded our operations primarily with the net proceeds from our private and public offerings of our equity securities 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, 2024, we had cash and cash equivalents of $3.9 million, short-term investments of $2.6 million and current note receivable of $1.8 million. For the nine months ended September 30, 2024, the Company had net losses of $3.0 million and net cash used in operations of $7.4 million. For the twelve months ended December 31, 2023, the Company had net losses of $14.0 million and net cash used in operations of $15.3 million.
Going Concern
We believe that our existing cash and cash equivalents, short-term investments and current note receivable 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.
Liquidity
The following table summarizes total current assets, current liabilities and working capital for the dates indicated (in thousands):
|
As of |
As of |
|||||||
|
2024 |
2023 |
|||||||
|
Current assets |
$ |
10,711 |
$ |
14,972 |
||||
|
Current liabilities |
2,328 |
3,590 |
||||||
|
Working capital surplus |
$ |
8,383 |
$ |
11,382 |
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
|
Nine Months Ended September 30, |
||||||||
|
2024 |
2023 |
|||||||
|
Net cash (used in) provided by: |
||||||||
|
Operating activities |
$ |
(7,418 |
) |
$ |
(11,149 |
) |
||
|
Investing activities |
4,827 |
(4,396 |
) |
|||||
|
Financing activities |
9 |
5,512 |
||||||
|
Net decrease in cash |
$ |
(2,582 |
) |
$ |
(10,033 |
) |
Cash flows from operating activities
Cash used in operating activities for the nine months ended September 30, 2024, was $7.4 million. With respect to our net loss of $3.0 million, non-cash charges including $92,000 of depreciation, $502,000 of lease amortization, $395,000 of stock-based compensation, $154,000 of write-downs of inventory, and $36,000 of impairment of property and equipment, were offset by the change in fair value of common stock warrant and option liabilities of $493,000, amortization of note receivable discount of $90,000, a gain on disposal of property and equipment of $65,000, gain on sale of RS durum wheat trait of $4.0 million, adjustments in our working capital accounts of $297,000, and operating lease payments of $678,000.
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.
26
Cash flows from investing activities
Cash provided by investing activities for the nine months ended September 30, 2024 consisted of proceeds of $342,000 from the sale of property and equipment, proceeds from the sale of investments of $2.5 million, proceeds from the sale of our RS durum wheat trait of $4.0 million, offset by cash paid related to the GoodWheat sale of $2.0 million and $16,000 of purchases of property and equipment.
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 flows from financing activities
Cash provided by financing activities for the nine months ended September 30, 2024 consisted of proceeds from the purchase of ESPP shares of $9,000.
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.
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.
27
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Required.
ITEM 4: CONTROLSAND 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, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
28
PART II. OTHERINFORMATION
ITEM 1. LEGALPROCEEDINGS
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, 2023, 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
Not applicable.
ITEM 5. OTHERINFORMATION
During the quarter ended September 30, 2024, no director or "officer" (as defined in Rule 16a-1(f) under the Exchange Act) of the Company adoptedor terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.
29
ITEM 6. EXHIBITS
The following exhibits are attached hereto or are incorporated herein by reference.
|
Incorporated by Reference |
||||||||||||
|
Exhibit Number |
Exhibit Description |
Form |
File No. |
Exhibit |
Filing Date |
Filed Herewith |
||||||
|
10.1+ |
Employment Letter and Severance and Change In Control Agreement for Thomas J. Schaefer |
8-K/A |
001-37383 |
10.1 |
8/23/2024 |
|||||||
|
10.2+ |
Employment Letter and Severance and Change In Control Agreement for Mark Kawakami |
8-K/A |
001-37383 |
10.2 |
8/23/2024 |
|||||||
|
10.3+ |
8-K |
001-37383 |
10.1 |
7/8/2024 |
||||||||
|
31.1 |
Principal Executive Officer's Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
X |
||||||||||
|
31.2 |
Principal Financial Officer's Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
X |
||||||||||
|
32.1(1) |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
X |
||||||||||
|
32.2(1) |
Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
X |
||||||||||
|
101.INS |
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 |
X |
||||||||||
|
101.SCH |
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
X |
||||||||||
|
104.1 |
Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in inline XBRL (and contained in Exhibit 101) |
X |
(1)
This certification is deemed not filed for purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
+ Represents a compensatory plan or arrangement.
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 12, 2024 |
By: |
/s/ THOMAS J. SCHAEFER |
||
|
Thomas J. Schaefer |
||||
|
President and Chief Executive Officer |
|
November 12, 2024 |
By: |
/s/ MARK KAWAKAMI |
||
|
Mark Kawakami |
||||
|
Chief Financial Officer |
31