# Arcadia Biosciences, Inc.: Form 10-Q for the period ended Sep 30, 2023

- Company: [Arcadia Biosciences, Inc.](/companies/rkda.md) (CIK 1469443)
- Form: 10-Q
- Filed: 2023-11-09
- Accepted by EDGAR: Nov 9, 2023, 17:03 ET
- Period: 2023-09-30
- Accession: 0000950170-23-062216
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1469443/000095017023062216/rkda-20230930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1469443/000095017023062216/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.6m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2023-01-01 to 2023-09-30 | $4.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2023-07-01 to 2023-09-30 | $1.1m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2023-01-01 to 2023-09-30 | $2.6m | us-gaap:CostOfGoodsAndServicesSold |
| Research and development | 3 months, 2023-07-01 to 2023-09-30 | $305.0k | us-gaap:ResearchAndDevelopmentExpense |
| Research and development | 9 months, 2023-01-01 to 2023-09-30 | $1.1m | us-gaap:ResearchAndDevelopmentExpense |
| Selling, general and administrative | 3 months, 2023-07-01 to 2023-09-30 | $3.4m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2023-01-01 to 2023-09-30 | $11.1m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2023-07-01 to 2023-09-30 | −$3.2m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2023-01-01 to 2023-09-30 | −$10.6m | us-gaap:OperatingIncomeLoss |
| Income tax | 3 months, 2023-07-01 to 2023-09-30 | $0 | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2023-01-01 to 2023-09-30 | $1.0k | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-07-01 to 2023-09-30 | −$2.6m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2023-01-01 to 2023-09-30 | −$11.1m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.89 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2023-01-01 to 2023-09-30 | −$9.31 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-07-01 to 2023-09-30 | −$1.89 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2023-01-01 to 2023-09-30 | −$9.31 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-07-01 to 2023-09-30 | 1,359,511 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2023-01-01 to 2023-09-30 | 1,195,354 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2023-01-01 to 2023-09-30 | −$11.1m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2023-01-01 to 2023-09-30 | $5.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2023-09-30 | $10.6m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2023-09-30 | $20.0m | us-gaap:AssetsCurrent |
| Total assets | at 2023-09-30 | $23.5m | us-gaap:Assets |
| Current liabilities | at 2023-09-30 | $3.9m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2023-09-30 | $8.1m | us-gaap:Liabilities |
| Shareholders' equity | at 2023-09-30 | $15.5m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,388 characters.

### Special Note Regarding Forward-Looking Statements

*The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes to those statements included herein. In addition to historical financial information, this report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in the most recent Annual Report on Form 10-K filed by the Company. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.*

*Solely for convenience, the trademarks, service marks and trade names referred to in this report may appear without the ®, TM, or SM symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, or trade names.*

### Overview

We are a producer and marketer of innovative, plant-based food and beverage products. Our history as a leader in science-based approaches to developing high value crop improvements, primarily in wheat, designed to enhance farm economics by improving the performance of crops in the field, as well as their value as food ingredients, has laid the foundation for our path forward. We have used non-genetically modified advanced breeding techniques to develop these proprietary innovations which we are now commercializing through the sales of seed and grain, food ingredients and products, trait licensing and royalty agreements. The acquisition of the assets of Live Zola, LLC ("Zola") added coconut water to our portfolio of products.

Our commercial strategy is to satisfy consumer nutrition demands with the superior functional benefits our crops deliver directly from the farm, enabling us to share premium economics throughout the ag-food supply chain and to build a world-class estate of high value traits and varieties. The acquisition of the Zola brand allows us to broaden our reach within the beverage sector.

It is also estimated by the U.S. Department of Agriculture (“USDA”), that approximately one-fifth of the FDA recommended calories consumed by people in the US are from wheat. Therefore, the market opportunity for nutritional improvements in wheat are significant not only because the wheat market itself is vast, but also because of the “share of stomach” wheat represents. Considering that most people today are not getting enough fiber or protein in their daily diets, the superior nutrient density of our non-GMO GoodWheat™ (“GoodWheat”) technology can improve the dietary intake of average consumers, by increasing their fiber and protein consumption without changing the way they eat. We believe this proprietary advantage gives GoodWheat the potential to become a global standard in wheat.

### Our Growth Strategy

We believe there are significant opportunities to grow our business by executing the following elements of our strategy:

- ***Accelerate the monetization of our GoodWheat™ wheat trait portfolio.*** Our proprietary intellectual property ("IP") with multiple non-GMO wheat traits have clear functional benefits, and we will continue to build partnerships across the wheat value chain. This will include launching GoodWheat™ into multiple categories where our wheat can provide a compelling point-of-difference at attractive margins. We will continue to acquire, develop and retain the requisite management and industry experience to fully participate in, and control, the route to market for our high value food ingredients.
- ***Evaluate acquisitive growth opportunities.*** We intend to evaluate potential acquisitions that will allow us to bring the GoodWheat value proposition to an existing business. We believe there is a significant opportunity to scale our business faster by purchasing an existing business in a new wheat-based category outside of pasta.
- ***Scale Zola through retail expansion.*** We plan to expand distribution of our Zola coconut water brand through mass market retailers and grocery store chains. 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 refresh our packaging, launch new innovation and continue to invest in effective brand-building activities.

### Arcadia Wellness, LLC

In May 2021, our wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness” or “AW”), acquired the businesses of Eko, Lief, and Zola. The acquisition included consumer CBD brands like Soul Spring™, a CBD-infused botanical therapy brand in the natural category, Saavy Naturals™, a line of natural body care products and ProVault™, a CBD-infused sports performance formula made with natural ingredients, providing effective support and recovery for athletes (collectively "body care brands"). Also included in the purchase is Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand.

### Our Product Portfolio

### GoodWheat™ Consumer Products

In June 2022, we launched our GoodWheat pasta in five varieties – penne, spaghetti, fettuccine, elbows and rotini – in select retailers nationwide and on Amazon. Our pasta delivers 4 times the fiber of traditional wheat pasta with 9g of protein per serving and no sacrifice on taste. In fact, our research shows that GoodWheat pasta scores at parity on taste with leading wheat pasta competitors and significantly outscores market leading vegetable-based pastas. Made with only our USA farm grown wheat, GoodWheat pasta meets consumers’ preference for clean labels and transparent sourcing. And, in December of 2022, GoodWheat received the American Heart Association’s Heart-Check mark on all of our pasta products. With its high fiber, lower sodium and zero saturated fat, GoodWheat meets the criteria for a heart-healthy pasta and provides consumers with a better-for-you option that delivers superior nutrition with the taste and texture of traditional pasta.

In August 2023, we launched our GoodWheat into the breakfast category with new, better-for-you pancake and waffle mixes as well as single-serve Quikcakes™. Our new mixes are made with simple ingredients and Arcadia’s proprietary wheat grain, which is naturally higher in fiber and protein than traditional wheat.

GoodWheat pancake and waffle mixes will be sold in resealable, multi-serve pouches, with each serving delivering 8 times the fiber of traditional pancake mix and 5 grams of protein. Our multi-serve mixes will be available in 3 classic varieties, including Buttermilk, Chocolate Chocolate Chip and Apple Cinnamon.

GoodWheat Quikcakes are an innovative, single-serve instant pancake that is a great option for busy mornings – you simply pour one packet into a bowl, add water and microwave for 90 seconds. Quikcakes have 11 times the fiber of traditional single-serve pancake mixes and contain 7 grams of protein per serving. Quikcakes will be available in 3 flavors, including Buttermilk, Chocolate Chocolate Chip and Confetti.

We believe our products serve an important need as most Americans suffer from a significant fiber deficiency. Less than 10 percent of women and less than 3 percent of men get enough fiber in their daily diets. The recommended daily value of fiber is 25g for women and children, and 38g for men according to the May 2021 Food and Health Survey by the International Food Information Council. One serving of GoodWheat Pasta gets your fiber closer to your daily need, delivering 8g of fiber, which accounts for 32 percent of the daily value of fiber needs for women and children, and 20 percent for men.

We plan to continue expanding the GoodWheat portfolio with the launch of innovative, new wheat-based products in additional categories, offering consumers more options to improve their fiber intake at multiple mealtimes throughout the day.

### Zola Coconut Water

Zola is a pure, natural, 100% coconut water with a crisp, clean taste that’s lightly sweet and refreshing. Naturally hydrating and never from concentrate, Zola is Non-GMO Project Verified and only contains 60 calories per serving. In taste tests, Zola beats competitors 2 to 1 and is the best-tasting way to rehydrate, reset and reenergize.

### Discontinued Operations

In July 2023, management made the decision to exit its body care brands as a result of continued pressure on the CBD market due to regulatory uncertainty. This decision will streamline the business and allow the Company to focus on growth of the its other “core” brands, which consist of the GoodWheat portfolio and Zola. Body care operations ceased as of September 30, 2023. In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets and the results of the discontinued operations as a separate component of income on the condensed consolidated statements of operations and comprehensive loss for all periods presented. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

### Components of Our Statements of Operations Data

### Revenues

The Company derive our revenues from product sales, royalties and license fees.

#### Product revenues

Product revenues consist primarily of sales of GoodWheat, Zola and GLA products. We recognize revenue from product sales when control of the product is transferred to third-party distributors and manufacturers, collectively “our customers,” which generally occurs upon delivery. Revenues fluctuate depending on the timing of shipments of product to our customers and are reported net of estimated chargebacks, returns and losses.

#### Royalty Revenues

Royalty revenues consist of amounts earned from the sale of commercial products that incorporate the Company's traits by third parties. Royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products. The Company recognizes the minimum annual royalty on a straight-line basis over the year, and recognizes royalty revenue resulting from the sale of products when the third parties transfer control of the product to their customers, which generally occurs upon shipment. Royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers.

#### License revenues

License revenues consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our license agreements. Revenue generated from up-front license fees are recognized upon execution of the agreement. We recognize annual license fees when it is probable that a material reversal will not occur.

Milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts would not be reversed. The Company assesses when achievement of milestones are probable in order to determine the timing of revenue recognition for milestone fees. Milestones typically represent significant stages of development for our traits in a potential commercial product, such as achievement of specific technological targets, completion of field trials, filing with regulatory agencies, completion of the regulatory process, and commercial launch of a product containing our traits. Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and license revenues are likely to fluctuate significantly from period to period.

### Operating Expenses

#### Cost of revenues

Cost of revenues relates to the sale of GoodWheat, Zola and GLA products and consists of the cost of raw materials, including internal and third-party services costs related to procuring, processing, formulating, packaging and shipping our products, as well as in-licensing and royalty fees, any adjustments or write-downs to inventory or prepaid production costs.

#### Research and development expenses ("R&D")

Research and development expenses consist of costs incurred in the development and testing of our products and other products in development incorporating our traits. These expenses currently consist primarily of fees paid to product formulation consultants and are expensed as incurred. Additionally, the Company is required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties. The Company's research and development expenses may fluctuate from period to period.

#### Gain on sale of Verdeca

The gain on sale of Verdeca is the gain recognized for the sale the Company's membership interests in the Verdeca joint venture to our partner Bioceres in November 2020.

#### Change in fair value of contingent consideration.

Change in the fair value of contingent consideration is comprised of the fair value remeasurement of the liabilities associated with the Company's contingent consideration.

#### Gain on sale of property and equipment, net

Gain on sale of fixed assets includes gains from the sale of tangible assets sold above their net book value.

#### Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of employee costs, professional service fees, broker and sales commission fees, and overhead costs. Our selling, general, and administrative expenses may fluctuate from period to period. In connection with our commercialization activities for our consumer products, we expect to increase our investments in sales and marketing, including additional consulting fees.

#### Interest income

Interest income consists interest income on our cash and cash equivalents and investments.

#### Other income, net

Other income, net consists of miscellaneous income.

#### Valuation loss on March 2023 PIPE

Valuation loss on March 2023 PIPE includes the fair value in excess of gross proceeds and the increase in fair value related to the re-pricing of existing warrants.

#### Change in the estimated fair value of common stock warrant and option liabilities

Change in the estimated fair value of common stock warrant and option liabilities is comprised of the fair value remeasurement of the liabilities associated with our financing transactions.

#### Issuance and offering costs allocated to liability classified options

Issuance and offering costs generally include placement agent, legal, advisory, accounting and filing fees related to financing transactions.

#### Income tax provision

Our income tax provision has not been historically significant, as we have incurred losses since our inception. The provision for income taxes consists of state and foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our U.S. deferred tax assets as of September 30, 2023 and December 31, 2022. We consider all available evidence, both positive and negative, including but not limited to: earnings history, projected future outcomes, industry and market trends, and the nature of each of the deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. deferred tax assets.

#### Net loss from discontinued operations

Net loss from discontinued operations represent results of operations related to the discontinued body care brands. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

### Results of Operations

### Comparison of the Three Months Ended September 30, 2023 and 2022

*(In thousands except percentage)*

| Revenues: | Three Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Product | $1,597 | $1,543 | $54 | 3% |
| Royalty | — | 17 | (17) | (100)% |
| License | — | 10 | (10) | (100)% |
| Total revenues | 1,597 | 1,570 | 27 | 2% |
| Operating expenses (income): |  |  |  |  |
| Cost of revenues | 1,102 | 1,128 | (26) | (2)% |
| Research and development | 305 | 255 | 50 | 20% |
| Gain on sale of property and equipment | (11) | — | (11) | (100)% |
| Selling, general and administrative | 3,443 | 4,178 | (735) | (18)% |
| Total operating expenses | 4,839 | 5,561 | (722) | (13)% |
| Loss from continuing operations | (3,242) | (3,991) | 749 | 19% |
| Interest income | 133 | 95 | 38 | 40% |
| Other income, net | 17 | 43 | (26) | (60)% |
| Change in fair value of common stock warrant and option liabilities | 608 | 1,880 | (1,272) | (68)% |
| Issuance and offering costs allocated to liability classified options | — | (314) | 314 | (100)% |
| Net loss from continuing operations before income taxes | (2,484) | (2,287) | (197) | 9% |
| Income tax provision | — | (1) | 1 | (100)% |
| Net loss from continuing operations | (2,484) | (2,288) | (196) | 9% |
| Net loss from discontinued operations | (83) | (589) | 506 | (86)% |
| Net loss | (2,567) | (2,877) | 310 | (11)% |
| Net loss attributable to non-controlling interest | — | (10) | 10 | (100)% |
| Net loss attributable to common stockholders | $(2,567) | $(2,867) | $300 | (10)% |

#### Revenues

Product revenues accounted for 100% and 98% of total revenues during the three months ended September 30, 2023 and 2022, respectively. Product revenues increased $54,000, or 3%, during the three months ended September 30, 2023 compared to the same period in 2022 driven by an increase in GoodWheat product sales offset by a decrease in Zola sales.

Royalty revenues accounted for 0% and 1% of our total revenues during the three months ended September 30, 2023 and 2022, respectively.

License revenue accounted for 0% and 1% of our total revenues during the three months ended September 30, 2023 and 2022, respectively.

#### Cost of revenues

Cost of revenues decreased by $26,000, or 2%, during the three months ended September 30, 2023 compared to the same period in 2022. Gross profit, calculated as total revenues less cost of revenues, was $495,000 and $442,000 during the three months ended September 30, 2023 and 2022, respectively.

#### Research and development

Research and development expenses increased by $50,000, or 20%, during the three months ended September 30, 2023 compared to the same period in 2022 primarily related to the launch of GoodWheat pancake and waffle mixes in the third quarter of 2023.

#### Gain on sale of property and equipment

During the three months ended September 30, 2023, the Company sold property and equipment for net proceeds exceeding book value by $11,000. There was no such sale of property and equipment during the three months ended September 30, 2022.

#### Selling, general, and administrative

Selling, general, and administrative expenses decreased by $735,000, or 18%, during the three months ended September 30, 2023 compared to the same period in 2022 primarily driven by a decrease in employee compensation.

#### Interest income

During the three months ended September 30, 2023, the Company recognized interest income of $133,000 from investments as compared to $95,000 during the same period in 2022.

#### Other income, net

During the three months ended September 30, 2023, the Company recognized other income of $17,000 as compared to $43,000 during the same period in 2022.

#### Change in the estimated fair value of common stock warrant and option liabilities

The change in the estimated fair value of common stock warrant and option liabilities was $608,000 during the three months ended September 30, 2023 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions. The change in the estimated fair value of common stock warrant and option liabilities was $1.9 million during the three months ended September 30, 2022 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the August 2022 Registered Direct Offering financing transaction.

#### Issuance and offering costs

Issuance and offering costs were $314,000 during the three months ended September 30, 2022 related to the August 2022 Registered Direct Offering financing transaction.

#### Net loss from discontinued operations

Net loss from discontinued operations was $83,000 and $589,000 during the three months ended September 30, 2023 and 2022, respectively. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

### Comparison of the Nine Months Ended September 30, 2023 and 2022

*(In thousands except percentage)*

| Revenues: | Nine Months Ended September 30, 2023 | 2022 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Product | $4,150 | $5,685 | $(1,535) | (27)% |
| Royalty | — | 117 | (117) | (100)% |
| License | 10 | 872 | (862) | (99)% |
| Total revenues | 4,160 | 6,674 | (2,514) | (38)% |
| Operating expenses (income): |  |  |  |  |
| Cost of revenues | 2,630 | 5,201 | (2,571) | (49)% |
| Research and development | 1,055 | 1,009 | 46 | 5% |
| Gain on sale of Verdeca | — | (1,138) | 1,138 | (100)% |
| Change in fair value of contingent consideration | — | (70) | 70 | (100)% |
| Gain on sale of property and equipment | (36) | (386) | 350 | (91)% |
| Selling, general and administrative | 11,085 | 11,407 | (322) | (3)% |
| Total operating expenses | 14,734 | 16,023 | (1,289) | (8)% |
| Loss from continuing operations | (10,574) | (9,349) | (1,225) | 13% |
| Interest income | 538 | 123 | 415 | 337% |
| Other income, net | 36 | 13 | 23 | 177% |
| Valuation loss on March 2023 PIPE | (6,076) | — | (6,076) | (100)% |
| Change in fair value of common stock warrant and option liabilities | 5,965 | 1,880 | 4,085 | 217% |
| Issuance and offering costs allocated to liability classified options | (430) | (314) | (116) | 37% |
| Net loss from continuing operations before income taxes | (10,541) | (7,647) | (2,894) | 38% |
| Income tax provision | (1) | (1) | 0 | 0% |
| Net loss from continuing operations | (10,542) | (7,648) | (2,894) | 38% |
| Net loss from discontinued operations | (591) | (3,636) | 3,045 | (84)% |
| Net loss | (11,133) | (11,284) | 151 | (1)% |
| Net loss attributable to non-controlling interest | (5) | (152) | 147 | (97)% |
| Net loss attributable to common stockholders | $(11,128) | $(11,132) | $4 | 0% |

#### Revenues

Product revenues accounted for 100% and 85% of our total revenues during the nine months ended September 30, 2023 and 2022, respectively. The $1.5 million, or 27%, decrease in product revenues during the nine months ended September 30, 2023 compared to the same period in 2022 was primarily driven by 2022 GoodWheat grain sales.

Royalty revenues accounted for 0% and 2% of our total revenues during the nine months ended September 30, 2023 and 2022, respectively. The $117,000 of royalty revenues for the nine months ended September 30, 2022 represents the proportionate share of contracted minimum annual royalty fees that expired in 2022.

License revenue accounted for 0% and 13% of our total revenue during the nine months ended September 30, 2023 and 2022, respectively. During the nine months ended September 30, 2022, the Company recognized one-time license revenue of $862,000 related to the Verdeca-Bioceres licensing agreement discussed below.

#### Cost of revenues

Cost of revenues decreased by $2.6 million, or 49%, during the nine months ended September 30, 2023 compared to the same period in 2022. Cost of revenues during the nine months ended September 30, 2022 included GoodWheat grain sold at cost and higher inventory write-downs. Gross profit, calculated as total revenues less cost of revenues, was $1.5 million during each of the nine months ended September 30, 2023 and 2022.

#### Research and development

Research and development expenses increased by $46,000, or 5%, during the nine months ended September 30, 2023 compared to the same period in 2022 primarily related to the launch of GoodWheat pancake and waffle mixes in the third quarter of 2023.

#### Gain on sale of Verdeca

In February 2012, we partnered with Bioceres to form Verdeca, which we equally owned. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies. In November 2020, Arcadia sold its membership interest in Verdeca to Bioceres in a transaction in which Arcadia received cash, shares of Bioceres stock and a royalty stream of up to $10.0 million on sales of Haab 4 ("HB4") soybean. An additional $2.0 million in cash is to be paid upon achievement by Verdeca reaching commercial plantings of at least 200,000 hectares of HB4 or China approving the HB4 soybean trait for “food and feed”. During the nine months ended September 30, 2022, we recognized a gain on sale of Verdeca of $1.1 million related to the regulatory approval of the HB4 soybeans.

#### Change in fair value of contingent consideration

The change in fair value of contingent consideration during the nine months ended September 30, 2022 was related to the Industrial Seed Innovations ("ISI") contingent consideration remeasurement that resulted in a decrease of the liability in the amount of $70,000. See Note 13 to the condensed consolidated financial statements. There was no such change recorded during the nine months ended September 30, 2023.

#### Gain on sale of property and equipment

During the nine months ended September 30, 2023 and 2022, the Company sold property and equipment for net proceeds exceeding book value by $36,000 and $386,000, respectively.

#### Selling, general, and administrative

Selling, general, and administrative expenses decreased by $322,000, or 3%, during the nine months ended September 30, 2023 compared to the same period in 2022 primarily driven by a decrease in employee compensation.

#### Interest income

During the nine months ended September 30, 2023, the Company recognized interest income of $538,000 from investments as compared to $123,000 during the same period in 2022.

#### Other income, net

During the nine months ended September 30, 2023, the Company recognized other income of $36,000 as compared to $13,000 during the same period in 2022.

#### Valuation loss on March 2023 PIPE

During the nine months ended September 30, 2023, the Company recognized a $6.1 million valuation loss related to the March 2023 PIPE financing transaction. The valuation loss includes the fair value in excess of gross proceeds and the increase in fair value related to the re-pricing of existing warrants.

#### Change in the estimated fair value of common stock warrant and option liabilities

The change in the estimated fair value of common stock warrant and option liabilities was $6.0 million during the nine months ended September 30, 2023 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions. The change in the estimated fair value of common stock warrant and option liabilities was $1.9 million during the nine months ended September 30, 2022 related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the August 2022 Registered Direct Offering financing transaction.

#### Issuance and offering costs allocated to liability classified options

Issuance and offering costs were $430,000 during the nine months ended September 30, 2023 and were related to the liability classified options issued in the March 2023 PIPE financing transaction. Issuance and offering costs were $314,000 during the nine months ended September 30, 2022 related to the August 2022 Registered Direct Offering financing transaction.

#### Net loss from discontinued operations

Net loss from discontinued operations was $591,000 and $3.6 million during the nine months ended September 30, 2023 and 2022, respectively. See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

### Seasonality

We and our commercial partners operate in different geographies around the world and conduct field trials used for data generation, which must be conducted during the appropriate growing seasons for particular crops and markets. Demand for coconut water products is generally higher in the summer months.

The level of seasonality in our business overall is difficult to evaluate at this time due to our relatively limited number of commercialized products, our expansion into new geographical markets and our introduction of new products and traits.

### Liquidity & Capital Resources

We have funded our operations primarily with the net proceeds from our private and public offerings of our equity securities and debt, as well as proceeds from the sale of our products and payments under license agreements. Our principal use of cash is to fund our operations, which are primarily focused on commercializing our products. Our contractual obligations are primarily related to our operating leases for facilities, land and equipment. As of September 30, 2023, we had cash and cash equivalents of $10.6 million and short-term investments of $5.1 million. For the nine months ended September 30, 2023, the Company had net losses of $11.1 million and net cash used in operations of $11.1 million. For the twelve months ended December 31, 2022, the Company had net losses of $15.6 million and net cash used in operations of $14.0 million.

### Going Concern

We believe that our existing cash and cash equivalents and short-term investments will not be sufficient to meet our anticipated cash requirements for at least the next 12-18 months from the issuance date of these financial statements, and thus raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

We may seek to raise additional funds through debt or equity financings, if necessary. We may also consider entering into additional partner arrangements. Any sale of additional equity would result in dilution to our stockholders. Our incurrence of debt would result in debt service obligations, and the instruments governing our debt could provide for additional operating and financing covenants that would restrict our operations. If we require additional funds and are not able to secure adequate additional funding, we may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned product launches. Any of these actions could materially harm our business, results of operations and financial condition.

### Liquidity

The following table summarizes total current assets, current liabilities and working capital for the dates indicated (in thousands):

|  | As of September 30, 2023 | As of December 31, 2022 |
| --- | ---: | ---: |
| Current assets | $20,006 | $25,398 |
| Current liabilities | 3,885 | 4,209 |
| Working capital surplus | $16,121 | $21,189 |

### Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

| Net cash (used in) provided by: | Nine Months Ended September 30, 2023 | 2022 |
| --- | ---: | ---: |
| Operating activities | $(11,149) | $(11,621) |
| Investing activities | (4,396) | 1,136 |
| Financing activities | 5,512 | 4,519 |
| Net decrease in cash | $(10,033) | $(5,966) |

#### Cash flows from operating activities

Cash used in operating activities for the nine months ended September 30, 2023, was $11.1 million. With respect to our net loss of $11.1 million, non-cash charges, including $430,000 of issuance and offering costs, $6.1 million of valuation loss recognized for the March 2023 PIPE, $573,000 of stock-based compensation, $535,000 of lease amortization, $227,000 of depreciation and $444,000 of write-downs of inventory, were offset by the change in fair value of common stock warrant and option liabilities of $6.0 million, adjustments in our working capital accounts of $1.7 million, a gain on disposal of property and equipment of $36,000, and operating lease payments of $573,000.

Cash used in operating activities for the nine months ended September 30, 2022, was $11.6 million. With respect to our net loss of $11.3 million, non-cash charges including $897,000 of stock-based compensation, $686,000 of lease amortization, $1.5 million of write-downs of inventories, $370,000 of write-downs of property and equipment, $72,000 of write-downs of intangible assets, $314,000 of issuance and offering costs, and $354,000 of depreciation, were offset by adjustments in our working capital accounts of $439,000, the change in fair value of common stock warrant and option liabilities of $1.9 million, gain on sale of Verdeca of $1.1 million, $386,000 of gain on disposal of property and equipment, other non-cash income from the change in fair value of contingent consideration of $70,000, and operating lease payments of $718,000.

#### Cash flows from investing activities

Cash used in investing activities for the nine months ended September 30, 2023 consisted of proceeds of $42,000 from the sale of property and equipment as well as proceeds of $569,000 from the sale of Verdeca, offset by $5,000 of purchases of property and equipment and $5.0 million of purchases of investments.

Cash provided by investing activities for the nine months ended September 30, 2022 consisted of $897,000 of proceeds from sales of property and equipment, $285,000 proceeds from sale of Verdeca, partially offset by $46,000 of purchases of property and equipment.

#### Cash flows from financing activities

Cash provided by financing activities for the nine months ended September 30, 2023 consisted of gross proceeds of $6.0 million from the March 2023 PIPE financing transaction and proceeds from the purchase of ESPP shares of $12,000, which were offset by payments of transaction costs related to the March 2023 PIPE financing transaction of $497,000.

Cash provided by financing activities for the nine months ended September 30, 2022 consisted of proceeds from the issuance of common stock relating to the August 2022 RDO financing transaction of $5.0 million gross proceeds and proceeds from the purchase of ESPP shares of $7,000, which were offset by payments of transaction costs related to the August 2022 RDO financing transaction of $488,000.

### 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.

## Controls and procedures

As filed, 2,332 characters.

### Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation identified above that occurred during the quarter ended September 30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 627 characters.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

Filed Nov 9, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-062216. Last ingested by Listed: Oct 24, 2026, 15:08 ET. No prices; not investment advice.