Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2021 |
Organization | Organization Arcadia Biosciences, Inc. (the "Company"), was incorporated in Arizona in 2002 and maintains its headquarters in Davis, California, with additional facilities in American Falls, Idaho, and Chatsworth, California. The Company was reincorporated in Delaware in March 2015 . The Company is a producer and marketer of innovative, plant-based health and wellness products. Its history as a leader in science-based approaches to developing high-value crop improvements, as well as nutritionally enhanced food ingredients and health and wellness products, has laid the foundation for its path forward. The Company used advanced breeding techniques to develop these proprietary innovations which are now being commercialized through the sales of seed and grain, as well as food ingredients and products. The recent acquisition of the businesses of Lief Holdings, LLC (“Lief”), EKO Holdings, LLC (“Eko”) and Live Zola, LLC (“Zola”) added bath and body care products, as well as coconut water, to the Company’s portfolio. In May 2021, the Company’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness” or “AW”, see Note 8), acquired the businesses of Eko, Lief, and Zola. The acquisition included consumer CBD brands like Soul Spring, a CBD-infused botanical therapy brand in the natural category, Saavy Naturals, a line of natural body care products and Provault, a CBD-infused sports performance formula made with natural ingredients, providing effective support and recovery for athletes. Also included in the purchase is Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand. In April 2021, the newly formed Company’s wholly owned subsidiary Arcadia SPA, S.L. (“Arcadia Spain” or “ASPA”) acquired the physical and intellectual property assets of Agrasys S.A. (“Agrasys”), a food ingredients company based in Barcelona, Spain. The Company sold all of the assets and liabilities related to the subsidiary Arcadia Spain in November 2021 to a European buyer (the "buyer"), to focus on the US domestic market. The loss on sale of Arcadia Spain recorded on the consolidated statements of operations and comprehensive loss was $ 497,000 . The buyer assumed all present and future liabilities, including the initial commitments related to the 2022 planting season. In August 2019, the Company entered into a joint venture agreement with Legacy Ventures Hawaii, LLC (“Legacy,” see Note 10) 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. As a result, the Company recorded impairments of property and equipment in the amount of $ 1.4 million and $ 0 for the years ended December 31, 2021, and 2020, respectively. The Company assessed Archipelago’s fixed assets for impairment through an asset recoverability test, using prices for similar assets. See Note 5. |
Liquidity, Capital Resources, and Going Concern | Liquidity, Capital Resources, and Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. Since inception, the Company has financed its operations primarily through equity and debt financings. As of December 31, 2021, the Company had an accumulated deficit of $ 226.5 million, and cash and cash equivalents of $ 28.7 million. For the years ended December 31, 2021 and 2020, the Company had net losses of $ 16.1 million and $ 6.0 million, respectively, and net cash used in operations of $ 25.9 million and $ 30.2 million, respectively. The Company believes that its existing cash and cash equivalents will not be sufficient to meet its anticipated cash requirements for at least the next 12 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 does require additional funds and is unable to secure adequate additional funding at terms agreeable to the Company, the Company may be forced to reduce spending, extend payment terms with suppliers, liquidate assets, or suspend or curtail planned development programs. Any of these actions could materially harm the business, results of operations and financial condition. |
Basis of Presentation and Principles of Consolidation | Basis of Presentation and Principles of Consolidation The consolidated financial statements include the accounts of the Company, Arcadia Wellness, Arcadia Spain and Archipelago. All intercompany balances and transactions have been eliminated in consolidation. The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP (“GAAP”), and with the rules of the Securities and Exchange Commission. 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 consolidated financial statements after eliminating intercompany transactions. For consolidated joint ventures, the non-controlling partner’s share of the assets, liabilities and operations of the joint venture is included in non-controlling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage of Archipelago. Net loss attributable to non-controlling interest of $ 1,474,000 and $ 1,371,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the years ended December 31, 2021 and 2020, respectively. The non-controlling partner’s equity interests are presented as non-controlling interests on the consolidated balance sheets as of December 31, 2021 and 2020. The functional currency of the foreign subsidiary Arcadia Spain during the year ended December 31, 2021, was its local currency (i.e., the Euro). Accordingly, period-end exchange rates were applied to translate its assets and liabilities and average transaction exchange rates to translate its revenues, expenses, gains, and losses into U.S. dollars. Upon disposal of all of the assets and liabilities related to Arcadia Spain, the Company deconsolidated the accounts of the subsidiary as of November 30, 2021, and recorded a loss on the sale in the amount of $ 497,000 during the quarter ended December 31, 2021. |
Use of Estimates | Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in the Company’s consolidated financial statements and notes thereto. Significant estimates and assumptions made by management included the determination of the provision for income taxes, stock-based compensation, impairments of long-lived assets such as intangible assets and goodwill, impairment of property and equipment, and net realizable value of inventory. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. |
Cash and cash equivalents | Cash and cash equivalents The Company considers any liquid investment with a stated maturity of three months or less at the date of purchase to be a cash equivalent. Cash and cash equivalents consist of cash on deposit with banks, and money-market funds. The Company limits cash investments to financial institutions with high credit standings; therefore, management believes that there is no significant exposure to any credit risk in the Company’s cash and cash equivalents. However, as of December 31, 2021 and 2020, a substantial portion of the Company’s cash in depository accounts is in excess of the federal deposit insurance limits. |
Restricted cash | Restricted cash Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on the consolidated balance sheets. |
Investments in debt and equity securities | Investments in debt and equity securities Investments in debt and equity securities are carried at fair value and classified as short-term investments. Realized and unrealized gains and losses on investment securities are included in other income, net, in the consolidated statements of operations and comprehensive loss. Investment securities are reported as cash and cash equivalent, short-term investments or long-term investments in the consolidated balance sheets based on the nature of the investments and maturity period. Short-term investments have maturities of less than a year and long-term investments have maturities of a year and greater from the balance sheet date. |
Other-than-temporary impairments on investments | Other-than-temporary impairments on investments The Company regularly reviews each of its investments for impairment by determining if the investment has sustained an other-than-temporary decline in its value, in which case the investment is written down to its fair value by a charge to earnings. Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include (i) the market value of the investment in relation to its cost basis, (ii) the financial condition of the investment, and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery of the market value of the investment. As of December 31, 2021, the Company had no short-term investments, and as of December 31, 2020, there was no impairment of the Company’s investments. |
Accounts receivable | Accounts receivable Accounts receivable represents amounts owed to the Company from product sales, licenses, and royalties. The carrying value of the Company’s receivables represents estimated net realizable values. The Company generally does not require collateral and estimates any required allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables, and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is recorded accordingly. Past-due receivable balances are written off when the Company’s internal collection efforts have been unsuccessful in collecting the amounts due. The Company had $ 76,000 and $ 0 amounts reserved for doubtful accounts at December 31, 2021 and 2020, respectively, and the allowance activity during the year ended December 31, 2021, was immaterial. |
Inventory | Inventory Inventory costs are tracked on a lot-identified basis and are included as cost of product 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 . GoodWheat: Proprietary wheat plants are grown, producing seed and grain with a variety of improved nutritional qualities, including high levels of amylose, improved shelf-life, and reduced gluten. The seed is used for subsequent plantings and the grain is either sold or used as an ingredient in the production of food products, which the Company refers to collectively as GoodWheat products. Amounts inventoried consist primarily of fees paid to contracted cooperators to grow the crops, costs to process harvested seed and grain, and costs to mill the grain into flour. Body care : A portfolio of CBD-infused and CBD-free consumer bath and body care products such as body lotions, bath-bombs and topical pain relievers, that are produced in the US. Amounts inventoried consist primarily of purchased raw materials, components, labor, and manufacturing facility costs. Zola Coconut water : Inventories mainly consist of coconut water imported from Thailand, freight-in, supplies, and labor. GoodHemp : Proprietary seeds are grown and used for subsequent plantings and sold as final product to other growers. Amounts in inventory for internally produced hemp seeds consist primarily of labor, supplies and facility costs. The costs to procure seeds from external growers and suppliers are included in inventory, as well. In addition, hemp seeds were planted on land leased in Hawaii. The costs of purchasing, planting and growing the seed, and harvesting the resulting biomass are captured as inventory, along with the costs to process the biomass into CBD oil. Amounts in inventory for growing biomass primarily consist of labor, supplies and facility costs. The inventories—current line item on the balance sheet represents inventory forecasted to be sold or used in production in the next 12 months, as of the balance sheet date, and consists primarily of the cost of GoodWheat seed and grain, body care products, Zola Coconut water, and hemp seed. The inventories—noncurrent line item on the balance sheet represents inventory expected to be used in production or sold beyond the next 12 months, as of the balance sheet date, and consists primarily of GoodWheat seed and grain, and GoodHemp seed. Raw materials inventories consist primarily of the costs to produce body care products and GoodWheat seeds. Goods in process inventories consist of costs to produce GoodHemp seed, hemp seed production costs incurred by Archipelago, and GoodWheat seed and grain. Finished goods inventories consist of GoodWheat and body care products, and GoodHemp seeds that are available for sale. |
Property and equipment | Property and equipment Property and equipment acquisitions are recorded at cost. Provisions for depreciation are calculated using the straight-line method over the following average estimated useful lives of the assets: Years Laboratory equipment 5 Software and computer equipment 3 Machinery and equipment 2 - 20 Furniture and fixtures 7 Vehicles 5 Leasehold improvements 2 - 10 * * Leasehold improvements are depreciated over the shorter of the estimated life of the asset or the remaining life of the lease. |
Impairment of long-lived intangible assets and goodwill | Impairment of long-lived intangible assets and goodwill The Company evaluates if events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets and identifiable intangible assets may warrant revision or that the remaining balance of these assets may not be recoverable. In evaluating for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. In the event that the balance of any asset exceeds the future undiscounted cash flow estimate, impairment is recognized based on the excess of the carrying amounts of the asset above its estimated fair value. Intangible assets, net As of December 31, 2021 and 2020, there were $ 3.3 million and $ 0 , respectively of impairm ent of intangible assets, recorded on the consolidated statements of operations and comprehensive loss. See Note 9 for more information. Goodwill During the year ended December 31, 2021, the Company recorded an impairment charge of $ 1.6 million, which was included as impairment of goodwill on our consolidated statements of operations and comprehensive loss. The goodwill carrying value of $ 1.6 million was fully impaired. See Note 7 and 8 for the goodwill recorded at the time of the ISI and AW acquisitions, respectively. The impairment charge was primarily the result of weakness in our newly acquired consumer product margins combined with a volatile economic climate and higher than normal inflation. The decline in the stock price observed during the fourth quarter of 2021, pushed our market capitalization significantly below the recorded value of our stockholders' equity. No goodwill impairment charges were recorded during the year ended December 31, 2020. |
Fair value of financial instruments | Fair value of financial instruments Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. • Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 inputs are unobservable inputs for the asset or liability. The carrying values of the Company’s financial instruments, including cash equivalents, accounts receivable, and accounts payable approximated their fair values due to the short period of time to maturity or repayment. |
Concentration of risk | Concentration of risk Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties. |
Customer concentration | Customer concentration Significant customers are those that represent greater than 10% of the Company’s total revenues or gross accounts receivable balance at each respective balance sheet date. Customers representing greater than 10% of accounts receivable were as follows (in percentages): As of 2021 2020 Customer B 11 21 Customer D 15 — Customer C — 12 Customer E 11 — Customer A — 57 Customers representing greater than 10% of total revenues were as follows (in percentages): For Year Ended 2021 2020 Customer D 11 — Customer B 10 7 Customer A — 83 |
Stock-based compensation | Stock-based compensation The Company recognizes compensation expense related to its employee stock purchase plan and the cost of stock-based compensation awards on a straight-line basis over the requisite service period, net of estimated forfeitures. Judgment is required in estimating the amount of stock-based awards that will be forfeited prior to vesting. Compensation expense could be revised in subsequent periods if actual forfeitures differ from those estimates. The Company has selected the Black-Scholes option-pricing model and various inputs to estimate the fair value of its stock-based awards. See Note 16 for additional information. Amounts recognized in the consolidated statements of operations and comprehensive loss were as follows (in thousands): Year Ended December 31, 2021 2020 (in thousands) Research and development $ 98 $ 341 Selling, general and administrative 1,443 1,701 Total stock-based compensation $ 1,541 $ 2,042 |
Income taxes | Income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. |
Net loss per share | Net loss per share Basic net loss per share, which excludes dilution, is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, convertible promissory notes, convertible preferred stock, redeemable convertible preferred stock and warrants, result in the issuance of common stock which share in the losses of the Company. Certain potential shares of common stock have been excluded from the computation of diluted net loss per share as their effect would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce the loss per share. Due to net losses, there is no impact on earnings per share calculation in applying the two-class method since the participating securities have no legal requirement to share in any losses. |
Revenue recognition | Revenue recognition The Company derives its revenues from product sales, licensing agreements, royalty fees, contract research agreements, and government grants. |
Unearned revenue | Unearned revenue The Company defers revenue to the extent that cash received in conjunction with a license agreement, contract or grant exceeds the revenue recognized in accordance with Company policies. During the year ended December 31, 2021, the Company recognized revenue of $ 8,000 that was included in unearned revenue on the consolidated balance sheet as of December 31, 2020. |
Cost of product revenues | Cost of product revenues Cost of product revenues relates to the sale of GoodWheat, Zola Coconut water, body care, GLA oil and GoodHemp products and consists of manufacturing costs, including production overhead costs such as depreciation, rent and others, in-licensing and royalty fees, any adjustments or write-downs to inventory, as well as the cost of raw materials, including inventory and third-party services costs related to procuring, processing, formulating, packaging, and shipping the Company’s products. |
Research and development expenses | Research and development expenses Research and development expenses consist of costs incurred in the discovery, development, and testing of the Company’s products and products in development incorporating the Company’s traits. These expenses consist primarily of employee salaries and benefits, fees paid to subcontracted research providers, fees associated with in-licensing technology, land leased for field trials, chemicals and supplies, and other external expenses. These costs are expensed as incurred. |
Change in fair value of contingent consideration | Change in fair value of contingent consideration Change in the fair value of contingent consideration is comprised of the gain associated with the reduction of the contingent liability. See Note 17. |
Change in the estimated fair value of common stock warrant liabilities | Change in the estimated fair value of common stock warrant liabilities Change in the estimated fair value of common stock warrant liabilities is comprised of the fair value remeasurement of liability classified common stock warrants. See Note 15. |
Product Revenues | |
Revenue recognition | Product revenues Product revenues to date have consisted primarily of sales of SONOVA GLA products, GoodWheat grain sales, body care products, Zola Coconut water, and GoodHemp seed sales. The Company recognizes revenue from product sales when ownership of the product is transferred to third-party distributors and consumers, collectively “our customers”, which generally occurs upon delivery. Shipping and handling costs charged to customers are recorded as revenues and included in cost of product revenues at the time the sale is recognized. Revenues fluctuate depending on the timing of shipments of product to our customers. |
License Revenues | |
Revenue recognition | License revenues License revenues to date consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that the Company receives under the Company’s research and license agreements. The Company recognizes revenue generated from up-front, nonrefundable license fees upon execution of the agreement and recognizes annual license fees when it is probable that a material reversal will not occur. Milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts would not be reversed. The Company assesses when achievement of milestones is probable to determine the timing of revenue recognition for milestone fees. Milestones typically consist of significant stages of development for the Company’s traits in a potential commercial product, such as achievement of specific technological targets, completion of field trials, filing with regulatory agencies, completion of the regulatory process, and commercial launch of a product containing the Company’s traits. Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and the Company’s license revenues are likely to fluctuate significantly from period to period. |
Royalty | |
Revenue recognition | Royalty revenues Royalty revenues from the Company’s agreements with third parties are recognized when the Company can reasonably determine the amounts earned. In most cases, this will be upon notification from the third-party licensee. |
Contract Research and Government Grant Revenues | |
Revenue recognition | Contract research and government grant revenues Contract research and government grant revenues consist of amounts earned from performing contracted research primarily related to breeding programs or the genetic engineering of plants for third parties. Contract research revenue and government grants revenues are accounted for as a single performance obligation for which revenues are recognized over time using the input method (e.g., costs incurred to date relative to the total estimated costs at completion). The Company receives payments from government entities in the form of government grants. The Company’s obligation with respect to these government agreements is to perform the research on a best-efforts basis. |