Financial Position - As of September 30, 2023, the company reported an accumulated deficit of $269.0 million, cash and cash equivalents of $10.6 million, and short-term investments of $5.1 million[29]. - As of September 30, 2023, the company had total assets at fair value of $13.761 million, including cash equivalents and short-term investments[45]. - The fair value of total investment securities as of September 30, 2023, was $13,761,000, a decrease of 26.6% from $18,620,000 on December 31, 2022[47]. - The company anticipates that its existing cash and investments will not be sufficient to meet its cash requirements for at least the next 12-18 months, raising substantial doubt about its ability to continue as a going concern[30]. Operational Performance - For the nine months ended September 30, 2023, the company incurred net losses of $11.1 million and net cash used in operations of $11.1 million[29]. - The net loss from discontinued operations for the three months ended September 30, 2023, was $83,000, compared to a loss of $589,000 for the same period in 2022[35]. - The Company recorded inventory write-downs of $252,000 and $444,000 for the three and nine months ended September 30, 2023, respectively[37]. - Total inventories as of September 30, 2023, amounted to $4.281 million, an increase from $3.088 million as of December 31, 2022[38]. Financing Activities - The Company raised $6.0 million in gross proceeds from the March 2023 Private Placement, which included the issuance of 165,500 shares of common stock and various preferred investment options[61]. - The Company has a shelf Registration Statement allowing for aggregate offering prices of up to $50.0 million, effective until May 12, 2025[66]. - The Company incurred additional offering costs of $548,000 related to the March 2023 Private Placement, with $212,000 attributed to the Placement Agent Options[65]. - The August 2022 Registered Direct Offering generated total gross proceeds of $5.0 million, including the sale of 61,250 registered shares and pre-funded warrants[67]. Liabilities and Contingencies - The Company recorded a contingent liability related to the Anawah acquisition, which is measured using unobservable inputs regarding the pursuit of specific products[48][49]. - The Company has a contingent liability of $2.0 million related to the Anawah acquisition, reflecting ongoing development programs using acquired technology[93]. - As of September 30, 2023, the Company’s Level 3 liabilities included $3,836,000, down from $2,806,000 as of December 31, 2022, reflecting changes in fair value and other adjustments[52]. Stock and Compensation - The Company recognized $162,000 and $573,000 of compensation expense for stock options awards during the three and nine months ended September 30, 2023, respectively[85]. - As of September 30, 2023, there was $833,000 of unrecognized compensation cost related to unvested stock-based compensation grants, expected to be recognized over a weighted-average remaining period of 2.0 years[81]. - The Company has 84,058 options outstanding under its stock incentive plans as of September 30, 2023, with a weighted average exercise price of $82.71[80]. - The Company recorded $7,000 and $12,000 of Employee Stock Purchase Plan (ESPP) related compensation expense during the three and nine months ended September 30, 2023, respectively[86]. Lease and Asset Management - The weighted-average remaining lease term as of September 30, 2023, was 1.9 years, with a weighted-average discount rate of 6.4%[60]. - The Company’s operating lease liabilities totaled $1,271,000 as of September 30, 2023, down from $2,017,000 on December 31, 2022[60]. - Property and equipment, net, decreased to $468,000 as of September 30, 2023, from $680,000 as of December 31, 2022[39]. Research and Development - The Company accounts for research and development costs as expenses incurred, with no guarantee of technological or commercial success in collaborative arrangements[58]. - The Company has entered into contract research agreements with initial terms ranging from one to three years, which may require certain funding commitments[95]. Taxation - The effective tax rate for the Company was 0.00% for each of the three and nine months ended September 30, 2023 and 2022, primarily due to a full valuation allowance on net deferred tax assets[88]. Subsequent Events - Management has evaluated subsequent events through November 9, 2023, the date the financial statements were available to be issued[102].

Financial Data and Key Metrics Changes - Arcadia's Q2 revenues were $1.4 million, down $119,000 or 8% quarter-over-quarter, primarily due to the wind-down of Body Care businesses [37] - Selling, general and administrative expenses declined by $576,000 or 13% compared to the previous quarter, now at the lowest level in three years [32] - Net income attributable to common stockholders was $823,000 or $0.61 per share [42] Business Line Data and Key Metrics Changes - GoodWheat and Zola added hundreds of stores of distribution in Q2, with GoodWheat expected to reach around 3,000 stores by the end of the year [10][50] - Zola experienced a 10% increase in distribution, still about 10% below its previous high watermark [48] - Research and development expenses were $391,000 in Q2, slightly higher than Q1, as preparations for GoodWheat pancakes continued [39] Market Data and Key Metrics Changes - The company is launching GoodWheat into the breakfast category with new pancake and waffle mixes, targeting a market valued at $850 million [19] - Quikcakes, a single-serve instant pancake product, launched on August 1st, with strong interest from retailers [20] Company Strategy and Development Direction - The company is executing Project Greenfield, a three-year strategic plan aimed at unlocking potential and providing a path to profitability [10] - A strategic review was announced to explore options including asset sales, acquisitions, or mergers, with a focus on acquiring an existing brand to scale faster [23][25] - The decision to exit Body Care brands aims to streamline operations and focus resources on GoodWheat and Zola [27] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the portfolio and plans to add to it, indicating a focus on core products [52] - The company is optimistic about the second half of the year, with expectations for improved distribution and sales [46] - Management acknowledged that while margins may erode slightly due to pricing strategies, they expect to maintain margins in the 20s [51] Other Important Information - The company has made significant progress in turning low-quality, non-recurring revenues into high-quality ongoing revenue streams [44] - Operating expense savings of $2 million are expected in the second half of the year, with annual savings projected at $3 million to $4 million [29][41] Q&A Session Summary Question: Can you provide details on the Zola distribution increase? - Management reported a 10% increase in Zola distribution, still about 10% below the previous high watermark [48] Question: What are the expectations for GoodWheat store count by year-end? - The target remains around 3,000 stores, with some variability based on retailer plans [50] Question: What is the expected margin structure for GoodWheat products? - Margins are expected to erode slightly, with projections in the mid to low-20s [51] Question: Will there be further changes to the organic business? - Management is confident in the current portfolio and plans to add to it [52] Question: What is the status of exploring strategic opportunities? - The company is early in the process of exploring various strategic options [58] Question: Are there new channels being explored for GoodWheat? - Management is actively exploring additional channels beyond grocery for GoodWheat [59] Question: Is the current product mix optimized? - Management is satisfied with the current SKUs and does not foresee further pairing opportunities [60]

FORM 10-Q [Filing Information](index=1&type=section&id=Filing%20Information) This Quarterly Report (Form 10-Q) for the period ended June 30, 2023, is filed by Arcadia Biosciences, Inc., a Delaware corporation headquartered in Dallas, TX, with common stock (RKDA) listed on the NASDAQ CAPITAL MARKET, classified as a non-accelerated filer and a smaller reporting company - Report Type: **Quarterly Report (Form 10-Q)** for the period ended **June 30, 2023**[2](index=2&type=chunk) Filing Details | Attribute | Value | | :--- | :--- | | Registrant Name | Arcadia Biosciences, Inc. | | State of Incorporation | Delaware | | Principal Executive Offices | Dallas, TX | | Trading Symbol | RKDA | | Exchange | NASDAQ CAPITAL MARKET | | Filer Status | Non-accelerated filer, Smaller reporting company | | Common Stock Outstanding (as of Aug 3, 2023) | 1,108,432 shares | INDEX Part I — Financial Information (Unaudited) [Item 1. Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents Arcadia Biosciences, Inc.'s unaudited condensed consolidated financial statements for the quarter ended June 30, 2023, including balance sheets, statements of operations and comprehensive income (loss), statements of stockholders' equity, and statements of cash flows, accompanied by detailed notes explaining the company's business, accounting policies, and financial activities [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $13,484 | $20,644 | | Short-term investments | $5,023 | — | | Total current assets | $23,339 | $25,398 | | Total assets | $26,798 | $28,922 | | **Liabilities and Stockholders' Equity** | | | | Total current liabilities | $4,091 | $4,209 | | Common stock warrant and option liabilities | $2,445 | $806 | | Total liabilities | $9,068 | $8,022 | | Total stockholders' equity | $17,730 | $20,900 | [Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Income%20%28Loss%29) Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (In thousands, except per share data) | Item | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Total revenues | $1,389 | $3,858 | $2,899 | $7,078 | | Cost of revenues | $981 | $3,447 | $1,806 | $6,906 | | Research and development | $391 | $359 | $750 | $754 | | Selling, general and administrative | $3,815 | $4,652 | $8,209 | $9,000 | | Loss from operations | $(3,791) | $(3,783) | $(7,840) | $(8,406) | | Interest income | $207 | $30 | $405 | $29 | | Valuation loss on March 2023 PIPE | — | — | $(6,076) | — | | Change in fair value of common stock warrant and option liabilities | $4,416 | — | $5,357 | — | | Net income (loss) | $818 | $(3,797) | $(8,566) | $(8,407) | | Net income (loss) attributable to common stockholders | $823 | $(3,777) | $(8,561) | $(8,265) | | Basic and diluted EPS | $0.61 | $(6.81) | $(7.70) | $(14.90) | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders%27%20Equity) Condensed Consolidated Statements of Stockholders' Equity (In thousands, except share data) | Item | December 31, 2022 | June 30, 2023 | | :----------------------------------- | :---------------- | :------------ | | Common Stock (Shares) | 616,079 | 1,108,432 | | Common Stock (Amount) | $65 | $65 | | Additional Paid-In Capital | $278,827 | $284,202 | | Accumulated Deficit | $(257,859) | $(266,420) | | Accumulated Other Comprehensive Income | — | $21 | | Non-Controlling Interest | $(133) | $(138) | | Total Stockholders' Equity | $20,900 | $17,730 | Key Changes (December 31, 2022 to June 30, 2023) * Issuance of shares related to March 2023 PIPE: **$4,740 thousand** * Stock-based compensation: **$212 thousand (Q1)** + **$199 thousand (Q2)** * Net loss (Q1): **$(9,384) thousand** * Net income (Q2): **$823 thousand** [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash used in operating activities | $(8,264) | $(8,250) | | Net cash used by investing activities | $(4,401) | $795 | | Net cash provided by financing activities | $5,505 | $4 | | Net decrease in cash and cash equivalents | $(7,160) | $(7,451) | | Cash and cash equivalents — beginning of period | $20,644 | $28,685 | | Cash and cash equivalents — end of period | $13,484 | $21,234 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Description of Business and Basis of Presentation](index=7&type=section&id=Note%201.%20Description%20of%20Business%20and%20Basis%20of%20Presentation) - Arcadia Biosciences, Inc. focuses on **plant-based food and beverage products**, utilizing advanced breeding techniques for crop improvements and nutritionally enhanced food ingredients, with **Zola coconut water** as a key product[21](index=21&type=chunk) - The company decided to **exit its remaining body care brands, ProVault and Soul Spring**, in July 2023, following the licensing of Saavy Naturals in July 2022[22](index=22&type=chunk) - A **40:1 reverse stock split** was approved and effected on **March 1, 2023**, retroactively adjusting all share and per share amounts[25](index=25&type=chunk) - Management has **substantial doubt about the company's ability to continue as a going concern**, as existing cash and short-term investments (**$13.5 million cash**, **$5.0 million short-term investments** as of June 30, 2023) are not expected to meet anticipated cash requirements for the **next 12-18 months**[30](index=30&type=chunk)[31](index=31&type=chunk) [Note 2. Recent Accounting Pronouncements](index=8&type=section&id=Note%202.%20Recent%20Accounting%20Pronouncements) - Adopted **ASU No. 2016-13 (Credit Losses)** on **January 1, 2023**, with an immaterial impact on disclosures[33](index=33&type=chunk) [Note 3. Inventory](index=9&type=section&id=Note%203.%20Inventory) - Inventory write-downs for the six months ended June 30, 2023, totaled **$192 thousand** (packaging materials and hemp seed), a decrease from **$1.5 million** in the same period of 2022 (wheat, hemp seed, CBD oil, body care)[35](index=35&type=chunk) Inventories, net (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :---------------- | :------------ | :---------------- | | Raw materials | $647 | $610 | | Goods in process | $88 | — | | Finished goods | $3,726 | $2,728 | | Total Inventories | $4,461 | $3,338 | [Note 4. Property and Equipment, Net](index=9&type=section&id=Note%204.%20Property%20and%20Equipment%2C%20Net) Property and Equipment, Net (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | Property and equipment, gross | $3,357 | $3,515 | | Less: accumulated depreciation and amortization | $(2,797) | $(2,811) | | Property and equipment, net | $560 | $704 | | Assets held for sale | $87 | $87 | - Gain on sale of property and equipment was **$26 thousand** for the six months ended June 30, 2023, down from **$386 thousand** in the same period of 2022[40](index=40&type=chunk) [Note 5. Investments and Fair Value Instruments](index=10&type=section&id=Note%205.%20Investments%20and%20Fair%20Value%20Instruments) Investments and Fair Value (In thousands) | Item | June 30, 2023 (Fair Value) | December 31, 2022 (Fair Value) | | :----------------------- | :------------------------- | :--------------------------- | | Money market funds | $11,353 | $18,620 | | Treasury bills | $5,023 | — | | Total Assets at Fair Value | $16,376 | $18,620 | | Unrealized gains on available-for-sale securities | $21 | — | | Total Level 3 Liabilities | $4,445 | $2,806 | - Level 3 liabilities increased from **$2.8 million to $4.4 million**, driven by the initial recognition of March 2023 Options (**$6.8 million**) offset by changes in fair value and other adjustments (**$5.2 million decrease**)[48](index=48&type=chunk) [Note 6. Consolidated Joint Venture](index=11&type=section&id=Note%206.%20Consolidated%20Joint%20Venture) - Archipelago Ventures Hawaii, LLC, a joint venture with Legacy Ventures Hawaii, LLC, is **consolidated by Arcadia** (50.75% interest)[50](index=50&type=chunk)[51](index=51&type=chunk) - Cultivation activities of Archipelago were **wound down in October 2021** due to regulatory challenges and a saturated hemp market[52](index=52&type=chunk) [Note 7. Collaborative Arrangements](index=12&type=section&id=Note%207.%20Collaborative%20Arrangements) - Collaborative arrangement with **Corteva AgriScience** for R&D and commercialization of an improved wheat quality trait in North America, involving **cost and profit sharing**[53](index=53&type=chunk) - R&D costs are **expensed as incurred**, including internal and third-party costs[54](index=54&type=chunk) [Note 8. Leases](index=12&type=section&id=Note%208.%20Leases) Leases (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------ | :---------------- | | Right of use asset | $1,384 | $1,848 | | Operating lease liability — current | $993 | $1,010 | | Operating lease liability — noncurrent | $532 | $1,007 | | Total leased liabilities | $1,525 | $2,017 | Lease Cost (In thousands) | Item | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :------------------------------- | :------------------------------- | :------------------------------- | | Operating lease cost | $381 | $544 | | Short term lease cost | $7 | $11 | | Sublease income | $(218) | $(177) | | Net lease cost | $170 | $378 | [Note 9. Equity Financing](index=13&type=section&id=Note%209.%20Equity%20Financing) - March 2023 Private Placement raised **$6.0 million gross proceeds** through the issuance of common stock, pre-funded warrants, and Series A & B preferred investment options[57](index=57&type=chunk) - Existing warrants were **repriced to $9.00 per share** as part of the March 2023 Private Placement, leading to a **$404 thousand increase in fair value** recognized as a valuation loss[58](index=58&type=chunk) - March 2023 Options and Placement Agent Options are classified as **Level 3 liabilities** due to early settlement provisions, with an estimated fair value of **$6.6 million** upon issuance[59](index=59&type=chunk) [Note 10. Warrants and Options](index=16&type=section&id=Note%2010.%20Warrants%20and%20Options) Equity Classified Common Stock Warrants Outstanding | Item | December 31, 2022 | June 30, 2023 | | :----------------------------------- | :---------------- | :------------ | | Total Outstanding Warrants | 342,570 | 516,957 | | Exercised during Six Months Ended June 30, 2023 | — | (307,647) | Liability Classified Preferred Investment Options Outstanding | Item | December 31, 2022 | June 30, 2023 | | :----------------------------------- | :---------------- | :------------ | | Total Outstanding Options | 123,967 | 1,489,952 | | March 2023 Options - Series A | — | 666,334 | | March 2023 Options - Series B | — | 666,334 | | March 2023 Placement Agent Options | — | 33,317 | | August 2022 Options (repriced) | 118,063 | 118,063 | | August 2022 Placement Agent Options | 5,904 | 5,904 | - March 2023 Pre-Funded Warrants (**250,834 exercised**) and August 2022 Pre-Funded Warrants (**56,813 fully exercised**) significantly impacted warrant activity[69](index=69&type=chunk) - Liability-classified preferred investment options are adjusted to fair value at each balance sheet date, with changes recorded in the consolidated statements of operations[72](index=72&type=chunk) [Note 11. Stock-Based Compensation and Employee Stock Purchase Program](index=18&type=section&id=Note%2011.%20Stock-Based%20Compensation%20and%20Employee%20Stock%20Purchase%20Program) Stock Option Information (In thousands, except share data and price per share) | Item | December 31, 2022 | June 30, 2023 | | :----------------------------------- | :---------------- | :------------ | | Outstanding Options (Shares) | 60,002 | 84,755 | | Weighted Average Exercise Price | $114.80 | $82.21 | | Options granted (6 months ended June 30, 2023) | — | 26,021 | | Options forfeited (6 months ended June 30, 2023) | — | (1,058) | | Options expired (6 months ended June 30, 2023) | — | (210) | Stock-Based Compensation Expense (In thousands) | Period | Amount | | :------------------------------- | :----- | | Three Months Ended June 30, 2023 | $199 | | Six Months Ended June 30, 2023 | $411 | | Three Months Ended June 30, 2022 | $323 | | Six Months Ended June 30, 2022 | $583 | - Unrecognized compensation cost related to unvested stock-based compensation grants was **$969 thousand** as of June 30, 2023, with a weighted-average remaining recognition period of **2.2 years**[79](index=79&type=chunk) - ESPP allows employees to purchase shares at a discount (up to **15%**), with **9,170 shares** reserved for future issuance and **1,563 shares** issued as of June 30, 2023[83](index=83&type=chunk) [Note 12. Income Taxes](index=19&type=section&id=Note%2012.%20Income%20Taxes) - Effective tax rate was **0.00%** for both periods due to a full valuation allowance on net deferred tax assets, reflecting cumulative losses[85](index=85&type=chunk) - The Archipelago joint venture is under **IRS audit** for the 2021 tax year[86](index=86&type=chunk) [Note 13. Commitments and Contingencies](index=20&type=section&id=Note%2013.%20Commitments%20and%20Contingencies) - A **$2.0 million contingent liability** from the Anawah acquisition remains on the balance sheet, related to two active development programs[89](index=89&type=chunk) - The contingent consideration liability for the ISI acquisition was **fully written down in 2022** due to the remote probability of achieving revenue milestones[90](index=90&type=chunk) - No material litigation, but routine audits are in process relating to government grant revenues[88](index=88&type=chunk)[93](index=93&type=chunk) [Note 14. Net Income (Loss) per Share](index=21&type=section&id=Note%2014.%20Net%20Income%20%28Loss%29%20per%20Share) Anti-Dilutive Securities Excluded from EPS Calculation (in shares) | Item | For the Three and Six Months Ended June 30, 2023 | For the Three and Six Months Ended June 30, 2022 | | :----------------------------------- | :----------------------------------------------- | :----------------------------------------------- | | Options to purchase common stock | 84,755 | 57,092 | | Warrants to purchase common stock | 266,957 | 283,751 | | Preferred investment options | 1,489,952 | — | | Total | 1,841,664 | 340,843 | [Note 15. Related-Party Transactions](index=21&type=section&id=Note%2015.%20Related-Party%20Transactions) - Royalty fees due to John Sperling Foundation (JSF) were **$33 thousand** as of June 30, 2023, compared to **$48 thousand** as of December 31, 2022[97](index=97&type=chunk) [Note 16. Subsequent Events](index=21&type=section&id=Note%2016.%20Subsequent%20Events) - Subsequent events were evaluated through **August 10, 2023**, with no material events identified[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance and condition, highlighting strategic shifts towards plant-based food and beverage products, growth initiatives for GoodWheat and Zola, and a detailed analysis of revenues and expenses, while also addressing liquidity challenges and going concern uncertainty [Overview](index=22&type=section&id=Overview) - Arcadia Biosciences is a producer and marketer of innovative, **plant-based food and beverage products**, commercializing proprietary innovations in seed, grain, food ingredients, and products, including **Zola coconut water**[102](index=102&type=chunk) - GoodWheat™ technology offers superior nutrient density (**fiber and protein**) in wheat, aiming to improve dietary intake without changing eating habits, and has significant market opportunity due to wheat's high consumption[104](index=104&type=chunk) [Our Growth Strategy](index=22&type=section&id=Our%20Growth%20Strategy) - Accelerate monetization of **GoodWheat™ wheat trait portfolio** by building partnerships and launching products in multiple categories, aiming for compelling differentiation and attractive margins[105](index=105&type=chunk) - Evaluate potential acquisitions to scale the business faster in new wheat-based categories beyond pasta[105](index=105&type=chunk) - Scale **Zola coconut water brand** through retail expansion, packaging refresh, new innovation, and brand-building activities, leveraging its preferred taste[106](index=106&type=chunk) [Arcadia Wellness, LLC](index=23&type=section&id=Arcadia%20Wellness%2C%20LLC) - Arcadia Wellness acquired Eko, Lief, and Zola businesses in **May 2021**, including CBD brands (Soul Spring, ProVault) and Zola coconut water[107](index=107&type=chunk) - Decision to **exit remaining body care brands (ProVault and Soul Spring)** in July 2023, following the licensing of Saavy Naturals in July 2022, to strategically focus on food and beverage[107](index=107&type=chunk) [Our Product Portfolio](index=23&type=section&id=Our%20Product%20Portfolio) [GoodWheat™ Consumer Products](index=23&type=section&id=GoodWheat%E2%84%A2%20Consumer%20Products) - GoodWheat pasta (launched **June 2022**) delivers **4x fiber** and **9g protein** per serving, with taste parity to traditional pasta and American Heart Association's Heart-Check mark[108](index=108&type=chunk) - GoodWheat expanded into breakfast (**August 2023**) with pancake/waffle mixes (**8x fiber**, **5g protein**) and Quikcakes™ (**11x fiber**, **7g protein**), addressing fiber deficiency[109](index=109&type=chunk)[110](index=110&type=chunk)[111](index=111&type=chunk)[112](index=112&type=chunk) [Zola Coconut Water](index=23&type=section&id=Zola%20Coconut%20Water) - Zola Coconut Water is a pure, natural, **100% coconut water**, Non-GMO Project Verified, with a crisp taste, **60 calories per serving**, and superior taste test results against competitors[114](index=114&type=chunk) [CBD Body Care ProVault Topical Pain Relief](index=24&type=section&id=CBD%20Body%20Care%20ProVault%20Topical%20Pain%20Relief) - Exiting **CBD body care brands (ProVault, Soul Spring)** due to regulatory uncertainty and strategic focus on food and beverage products[115](index=115&type=chunk)[116](index=116&type=chunk) [Components of Our Statements of Operations Data](index=24&type=section&id=Components%20of%20Our%20Statements%20of%20Operations%20Data) [Revenues](index=24&type=section&id=Revenues) - Revenue streams include product sales (Arcadia Wellness, GoodWheat, GLA), royalties from third-party sales, and license fees (up-front, annual, milestone payments)[117](index=117&type=chunk) - Milestone fees are recognized when probable of achievement and reversal is unlikely, leading to significant period-to-period fluctuations due to agricultural seasonality and development timelines[121](index=121&type=chunk) [Operating Expenses](index=24&type=section&id=Operating%20Expenses) - Cost of revenues includes raw materials, processing, packaging, shipping, in-licensing, royalty fees, and inventory write-downs[122](index=122&type=chunk) - R&D expenses cover product development and testing, consultant fees, and milestone payments for in-licensed technologies, expensed as incurred[123](index=123&type=chunk)[124](index=124&type=chunk) - Selling, general and administrative expenses primarily consist of employee costs, professional services, broker/sales commissions, and overhead, with expected increases for consumer product commercialization[130](index=130&type=chunk) - Other significant operating items include gain on sale of Verdeca, impairment of intangible assets, change in fair value of contingent consideration, impairment/gain on sale of property and equipment, valuation loss on March 2023 PIPE, and change in fair value of common stock warrant and option liabilities[125](index=125&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk)[129](index=129&type=chunk)[133](index=133&type=chunk)[134](index=134&type=chunk) [Results of Operations](index=26&type=section&id=Results%20of%20Operations) [Comparison of the Three Months Ended June 30, 2023 and 2022](index=26&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) Financial Performance (Three Months Ended June 30, In thousands, except percentage) | Item | 2023 | 2022 | $ Change | % Change | | :------------------------------------------------- | :--- | :--- | :------- | :------- | | Total revenues | $1,389 | $3,858 | $(2,469) | (64)% | | Product revenues | $1,379 | $2,946 | $(1,567) | (53)% | | Royalty revenues | — | $50 | $(50) | (100)% | | License revenues | $10 | $862 | $(852) | (99)% | | Cost of revenues | $981 | $3,447 | $(2,466) | (72)% | | Gross profit | $408 | $411 | $(3) | (1)% | | Research and development | $391 | $359 | $32 | 9% | | Selling, general and administrative | $3,815 | $4,652 | $(837) | (18)% | | Loss from operations | $(3,791) | $(3,783) | $(8) | 0% | | Interest income | $207 | $30 | $177 | 590% | | Change in fair value of common stock warrant and option liabilities | $4,416 | — | $4,416 | 100% | | Net income (loss) | $818 | $(3,797) | $4,615 | (122)% | | Net income (loss) attributable to common stockholders | $823 | $(3,777) | $4,600 | (122)% | - Product revenues decreased by **$1.6 million (53%)** due to lower GoodWheat grain sales and exit of body care products[138](index=138&type=chunk) - License revenue decreased by **$852 thousand (99%)** due to a one-time **$862 thousand** recognition in 2022 from the Verdeca-Bioceres agreement[140](index=140&type=chunk) - Selling, general, and administrative expenses decreased by **$837 thousand (18%)** due to lower employee compensation, insurance, and research expenses[148](index=148&type=chunk) [Comparison of the Six Months Ended June 30, 2023 and 2022](index=29&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Financial Performance (Six Months Ended June 30, In thousands, except percentage) | Item | 2023 | 2022 | $ Change | % Change | | :------------------------------------------------- | :--- | :--- | :------- | :------- | | Total revenues | $2,899 | $7,078 | $(4,179) | (59)% | | Product revenues | $2,889 | $6,116 | $(3,227) | (53)% | | Royalty revenues | — | $100 | $(100) | (100)% | | License revenues | $10 | $862 | $(852) | (99)% | | Cost of revenues | $1,806 | $6,906 | $(5,100) | (74)% | | Gross profit | $1,093 | $172 | $921 | 536% | | Research and development | $750 | $754 | $(4) | (1)% | | Selling, general and administrative | $8,209 | $9,000 | $(791) | (9)% | | Loss from operations | $(7,840) | $(8,406) | $566 | (7)% | | Interest income | $405 | $29 | $376 | 1297% | | Valuation loss on March 2023 PIPE | $(6,076) | — | $(6,076) | 0% | | Change in fair value of common stock warrant and option liabilities | $5,357 | — | $5,357 | 0% | | Net income (loss) | $(8,566) | $(8,407) | $(159) | 2% | | Net income (loss) attributable to common stockholders | $(8,561) | $(8,265) | $(296) | 4% | - Product revenues decreased by **$3.2 million (53%)** due to lower GoodWheat grain sales and the exit of body care products[154](index=154&type=chunk) - Gross profit increased significantly to **$1.1 million** from **$172 thousand**, driven by the absence of low-margin GoodWheat grain sales, focus on higher-margin products, and lower inventory write-downs[157](index=157&type=chunk) - A **$6.1 million valuation loss** on the March 2023 PIPE financing transaction was recognized[168](index=168&type=chunk) [Seasonality](index=31&type=section&id=Seasonality) - Seasonality is influenced by agricultural growing seasons for field trials and consumer demand patterns (e.g., body care around holidays, coconut water in summer)[171](index=171&type=chunk) - Overall seasonality is difficult to evaluate due to limited commercialized products and market expansion[172](index=172&type=chunk) [Liquidity & Capital Resources](index=31&type=section&id=Liquidity%20%26%20Capital%20Resources) - Operations funded primarily by equity/debt financings and product/license sales[173](index=173&type=chunk) Liquidity Snapshot (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $13,484 | $20,644 | | Short-term investments | $5,023 | — | | Net cash used in operating activities (6 months) | $(8,264) | $(8,250) | | Net loss (6 months) | $(8,566) | $(8,407) | | Net losses (12 months ended Dec 31, 2022) | — | $(15,600) | | Net cash used in operations (12 months ended Dec 31, 2022) | — | $(14,000) | [Going Concern](index=31&type=section&id=Going%20Concern) - Substantial doubt about the company's ability to continue as a going concern due to insufficient cash and short-term investments for the next **12-18 months**[174](index=174&type=chunk) - Potential actions include seeking additional debt/equity financing (leading to dilution or restrictive covenants) or partner arrangements; failure to secure funds could force spending cuts, asset liquidation, or suspension of product launches[175](index=175&type=chunk) [Liquidity](index=32&type=section&id=Liquidity) Liquidity (In thousands) | Item | June 30, 2023 | December 31, 2022 | | :----------------------- | :------------ | :---------------- | | Current assets | $23,339 | $25,398 | | Current liabilities | $4,091 | $4,209 | | Working capital surplus | $19,248 | $21,189 | [Cash Flows](index=32&type=section&id=Cash%20Flows) Cash Flows Summary (Six Months Ended June 30, In thousands) | Activity | 2023 | 2022 | | :----------------------- | :--- | :--- | | Operating activities | $(8,264) | $(8,250) | | Investing activities | $(4,401) | $795 | | Financing activities | $5,505 | $4 | | Net decrease in cash | $(7,160) | $(7,451) | - Operating cash outflow of **$8.3 million** in 2023 was influenced by an **$8.6 million net loss**, offset by non-cash charges like **$6.1 million valuation loss** on March 2023 PIPE and **$5.4 million change in fair value** of warrant liabilities[178](index=178&type=chunk) - Investing activities used **$4.4 million** in 2023, primarily due to **$5.0 million** in purchases of investments, compared to **$0.8 million** provided in 2022[180](index=180&type=chunk)[181](index=181&type=chunk) - Financing activities provided **$5.5 million** in 2023, mainly from **$6.0 million gross proceeds** from the March 2023 PIPE offering[183](index=183&type=chunk) [Off-Balance Sheet Arrangements](index=33&type=section&id=Off-Balance%20Sheet%20Arrangements) - No off-balance sheet arrangements, except for Verdeca (disposed in November 2020)[185](index=185&type=chunk) [Critical Accounting Policies and Estimates](index=33&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - Critical accounting policies and estimates are revenue recognition, income tax provision, and net realizable value of inventory, requiring significant judgment and assumptions[187](index=187&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This item is not required for the company, indicating no material quantitative or qualitative disclosures about market risk are presented - Not Required[188](index=188&type=chunk) [Item 4. Controls and Procedures](index=33&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2023, with no material changes in internal control over financial reporting during the quarter - Disclosure controls and procedures were **effective** at the reasonable assurance level as of **June 30, 2023**[190](index=190&type=chunk) - No material changes in internal control over financial reporting during the quarter ended **June 30, 2023**[191](index=191&type=chunk) Part II — Other Information [Item 1. Legal Proceedings](index=34&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material litigation or other material legal proceedings, though it may be subject to ordinary course legal proceedings and claims from time to time - Not a party to any **material litigation** or other material legal proceedings[192](index=192&type=chunk) [Item 1A. Risk Factors](index=34&type=section&id=Item%201A.%20Risk%20Factors) Readers are directed to the 'Risk Factors' section in the company's Annual Report on Form 10-K for the year ended December 31, 2022, for a comprehensive discussion of factors that could materially affect the business, financial condition, liquidity, or future results, with additional unknown or immaterial risks also potentially existing - Refer to Part I, 'Item 1A. Risk Factors' in the **Annual Report on Form 10-K** for the year ended **December 31, 2022**, for a discussion of material risks[193](index=193&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=34&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report for the period - None[194](index=194&type=chunk) [Item 3. Defaults Upon Senior Securities](index=34&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report for the period - None[195](index=195&type=chunk) [Item 4. Mine Safety Disclosures](index=34&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[196](index=196&type=chunk) [Item 5. Other Information](index=34&type=section&id=Item%205.%20Other%20Information) There is no other information to report under this item for the period - None[197](index=197&type=chunk) [Item 6. Exhibits](index=35&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including certifications (Sections 302 and 906 of Sarbanes-Oxley Act) and Inline XBRL documents, which are either attached or incorporated by reference - Exhibits include **Principal Executive Officer's and Principal Financial Officer's Certifications** (Sections 302 and 906 of Sarbanes-Oxley Act) and **Inline XBRL documents**[200](index=200&type=chunk) SIGNATURES

Financial Position - As of March 31, 2023, the company had an accumulated deficit of $267.2 million and cash and cash equivalents of $23.0 million, indicating potential liquidity issues[28]. - The company anticipates that its existing cash and cash equivalents will not be sufficient to meet its anticipated cash requirements for at least the next 12-18 months, raising substantial doubt about its ability to continue as a going concern[29]. - For the three months ended March 31, 2023, the company reported a net loss of $9.4 million and net cash used in operations of $3.5 million[28]. Assets and Liabilities - The company recorded a write-down of $23,000 related to packaging materials during the three months ended March 31, 2023, and had total inventories of $3.351 million as of March 31, 2023[33][34]. - Property and equipment, net decreased from $704,000 as of December 31, 2022, to $622,000 as of March 31, 2023, with depreciation expense of $71,000 for the three months ended March 31, 2023[35]. - The fair value of the company's Level 3 liabilities, including contingent liabilities from acquisitions, totaled $8.861 million as of March 31, 2023[46]. - A contingent liability of $2.0 million remains on the balance sheet related to the Anawah acquisition, reflecting ongoing development programs using acquired technology[86]. - The contingent consideration liability from the ISI acquisition was fully written down during 2022 as the probability of achieving the revenue milestone was deemed remote[87]. Financing Activities - The company may seek to raise additional funds through debt or equity financings, which could result in dilution to stockholders or increased debt service obligations[30]. - The Company raised total gross proceeds of $6.0 million from the March 2023 Private Placement, issuing 165,500 shares of common stock and various warrants[55]. - The estimated fair value of the common stock issued and March 2023 Pre-Funded Warrants was $5.1 million, exceeding the gross proceeds by $5.7 million, recognized as a valuation loss[58]. - The Company incurred additional offering costs of $548,000 related to the March 2023 Private Placement, which included legal and advisory fees[59]. Equity and Stock Options - As of March 31, 2023, the total outstanding stock options amounted to 61,844, with a weighted average exercise price of $110.91[75]. - The company recognized $212,000 in compensation expense for stock options awards during the three months ended March 31, 2023[79]. - The intrinsic value of options exercised was $0 for both quarters ended March 31, 2023, and 2022[75]. - A total of 90,861 shares of common stock were reserved for issuance under the 2015 Plan as of March 31, 2023[74]. - The company has $988,000 of unrecognized compensation cost related to unvested stock-based compensation grants, expected to be recognized over 2.2 years[76]. - The expected volatility for stock options granted was 124% for the three months ended March 31, 2023[79]. - The fair value of stock option awards was estimated using the Black-Scholes option-pricing model, with an expected term of 5.85 years for the three months ended March 31, 2023[79]. - The company granted 2,700 options with a weighted average exercise price of $11.17 during the three months ended March 31, 2023[75]. - The company has 666,334 outstanding options from the March 2023 Private Placement as of March 31, 2023[71]. - As of March 31, 2023, the number of shares reserved for future issuance under the Employee Stock Purchase Plan (ESPP) is 9,194, with 1,563 shares issued during the same period[80]. - The Company recorded $1,000 of ESPP related compensation expense during each of the three months ended March 31, 2023 and 2022[80]. Lease and Operating Costs - The Company has a weighted-average remaining lease term of 2.2 years and a weighted-average discount rate of 6.4% as of March 31, 2023[54]. - Operating lease cost for the three months ended March 31, 2023, was $191,000, compared to $276,000 for the same period in 2022[54]. - The Company terminated its lease for office space in Chesterfield, MO, effective September 30, 2022, incurring early termination fees of $47,000[53]. Research and Development - The Company entered into a collaborative arrangement with Corteva AgriScience for the research and development of improved wheat quality traits, sharing both risks and rewards[51]. - The Company has entered into contract research agreements with initial terms ranging from one to three years, which may require certain funding commitments[88]. Tax and Audit - The Company's effective tax rate was 0.00% for the three months ended March 31, 2023 and 2022, primarily due to a full valuation allowance on net deferred tax assets[82]. - The Company is currently not under audit for state tax purposes, but its Archipelago joint venture was selected for IRS audit for the 2021 tax year[83]. Subsequent Events - Management has evaluated subsequent events through May 15, 2023, the date the financial statements were available to be issued[95].

Financial Data and Key Metrics Changes - The company reported net sales of $1.5 million for Q1 2023, representing a 51% increase quarter-over-quarter driven by higher sales across all brands [55] - Gross margin for the quarter was around 45%, with expectations to maintain this level in upcoming quarters [10] - Despite a decline in net sales for Zola coconut water by 6% year-over-year, gross profit dollars increased threefold compared to the previous year, indicating a focus on revenue quality [53] Business Line Data and Key Metrics Changes - GoodWheat pasta has seen consistent distribution growth, with velocity surpassing many competitive brands, and is expected to expand into new categories in the second half of 2023 [30][31] - Zola coconut water's distribution was impacted, but sales increased by over 40% sequentially, despite a year-over-year decline of 53% due to previous grain quality issues [43][52] - The company has increased investment in trial-driving and brand-building activities by 43% compared to Q1 last year, primarily supporting GoodWheat's expansion [37] Market Data and Key Metrics Changes - The coconut water category was flat in units but saw a 16% increase in dollar sales for the 13 weeks ending March 25, driven by pricing [52] - GoodWheat's category sales reached $3 billion, with unit sales down 1% but dollar sales up 12% for the 13 weeks ending April 1 [28] Company Strategy and Development Direction - The company is focused on generating high-quality revenues and minimizing costs, avoiding empty top-line growth [36] - Project Greenfield is a three-year plan aimed at unlocking the company's potential and creating a path to profitability, with a focus on GoodWheat retail expansion and Zola's channel expansion [40][54] - The company is looking for acquisition candidates that have a compelling growth opportunity, existing distribution, and profitability potential [3] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the launch of new GoodWheat categories and innovation planned for Zola, indicating a positive outlook for future growth [18] - The company expects distribution and velocity headwinds in grocery to continue for the next couple of quarters but is preparing for annual shelf resets in Q3 and Q4 [31] Other Important Information - The company has a cash balance of $23 million at the end of Q1, sufficient to fund operations into 2024, with potential access to capital markets for acquisitions [59] - Research and development expenses decreased by 28% quarter-over-quarter, reflecting the timing of innovation work [46] Q&A Session Summary Question: What are the key drivers of margin improvement? - Management indicated that product mix was a significant driver of margin improvement, with a focus on growing businesses that have the best opportunity to scale and contribute profitably [9] Question: Does the company expect to monetize any of its hemp inventory near-term? - The company plans to actively monetize its hemp inventory, which currently stands at about $200,000 [13] Question: What is the total number of retail channels for GoodWheat products? - Currently, GoodWheat products are primarily sold through conventional grocery channels, with plans to expand into mass, club, and natural channels [22] Question: How will the company differentiate its coconut water product? - The company plans to highlight taste as a key differentiator, with a preference ratio of two to one compared to competitors, and will also introduce new innovative flavors [23]

Financial Data and Key Metrics Changes - In Q4, total revenues were $1 million, down $877,000 from the previous quarter, primarily due to seasonality in Zola and distribution losses in both Zola and SoulSpring [52] - For the full year 2022, total revenues were approximately $10 million, an increase of $3.2 million or 47% compared to 2021 [53] - The reported loss from operations was $18.8 million, which is $16.7 million or 47% lower than the prior year [27] - Cash used in operations declined significantly from $25.9 million in 2021 to $14 million in 2022 [14][79] Business Line Data and Key Metrics Changes - GoodWheat pasta experienced significant distribution gains, with store count increasing 34% in Q4, adding more than 1,200 stores in seven months [43] - Zola sales declined in Q4 compared to the same period last year, but for the full year, Zola gained market share with a 12% increase in sales [19] - The body care segment faced challenges, with SoulSpring losing more than half of its distribution due to retailer decisions [21] Market Data and Key Metrics Changes - The pasta category saw unit sales increase by 3% and dollar sales rise by 25% in the last three months of 2022, leading to category sales of $2.9 billion [15] - The coconut water category experienced a 4% decline in units but a 10% increase in dollars for the 13 weeks ending December 24, driven by pricing [46] Company Strategy and Development Direction - The company is focused on Project Greenfield, a three-year plan aimed at unlocking potential and creating shareholder value [10] - Key strategies include establishing GoodWheat footholds in retail categories, driving share growth in key brands, and building an agile organization [38][12] - The company plans to continue investing in marketing for GoodWheat while keeping SG&A expenses relatively flat [54] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the prospects for Zola moving forward, citing improvements in freight costs and plans for packaging refresh and innovation [47] - The company is ahead of its three-year path to profitability outlined in Project Greenfield, with improvements in gross profit and operating expense reductions [63] - Management acknowledged challenges in the CBD category due to retailer restrictions and marketing limitations [48] Other Important Information - The company executed a reverse stock split to avoid delisting from NASDAQ and raised additional capital to support future growth [50][23] - The company ended 2022 with $20.6 million in cash and cash equivalents, positioning it well to fund Project Greenfield beyond 2023 [79][58] Q&A Session Summary Question: When will the impact from GoodWheat retail footprint expansion be seen? - Management expects to see meaningful sales impact in the second half of 2023 [59] Question: What are the plans for coconut water and body care product lines? - Zola is seen as having strong growth prospects, while body care is under review for strategic alternatives [60] Question: What is the status of the legacy Hemp business? - The legacy business has been written down, and efforts will continue to sell remaining inventory [62] Question: When does the company expect to reach profitability? - The company is ahead of its three-year profitability plan initiated in June 2022 [63] Question: Can you elaborate on GoodWheat's performance from Q3 to Q4? - GoodWheat sales were impacted by a slowdown in new store count growth in Q4 [68] Question: What is the outlook for distribution losses in Zola? - Some distribution losses may be recoverable, while others are considered permanent [70]

Part I [Item 1. Business](index=4&type=section&id=Item%201.%20Business) Arcadia Biosciences produces and markets innovative plant-based food and beverage products, including GoodWheat™ and Zola® coconut water, leveraging non-GMO crop improvement and strategic partnerships - The company produces and markets innovative, plant-based food and beverage products, including GoodWheat™ and Zola® coconut water, using non-GMO advanced breeding techniques[19](index=19&type=chunk) - Growth strategy includes accelerating the monetization of the GoodWheat™ portfolio, evaluating acquisitive growth opportunities, and scaling the Zola brand through retail expansion[22](index=22&type=chunk) - In June 2022, the company launched its GoodWheat™ pasta, which offers **four times the fiber** of traditional pasta, and received the American Heart Association's Heart-Check mark in December 2022[22](index=22&type=chunk)[23](index=23&type=chunk) - The company is exploring strategic alternatives for its CBD body care brands (ProVault™ and SoulSpring™) to focus on its core food and beverage products[28](index=28&type=chunk) - As of December 31, 2022, Arcadia owned or exclusively controlled **70 issued patents** and **38 pending patent applications** worldwide, with a significant portion related to its GoodWheat® portfolio[43](index=43&type=chunk) [Item 1A. Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant financial risks, including a history of substantial losses and going concern doubts, alongside operational challenges from intense competition and regulatory complexities - The company has a history of significant losses, incurring net losses of **$15.6 million** in 2022 and **$16.1 million** in 2021, with an accumulated deficit of **$257.9 million** as of December 31, 2022[62](index=62&type=chunk) - The company may require additional financing to fund operations and commercialization, and failure to obtain it on favorable terms could force delays or elimination of R&D activities[63](index=63&type=chunk) - The markets for pasta and coconut water are intensely competitive, and the company faces competition from large, established manufacturers as well as smaller, innovative producers[66](index=66&type=chunk) - The company's ability to use its net operating loss (NOL) carryforwards of approximately **$81.1 million** (federal) and **$47.5 million** (state) is subject to limitations under IRC Section 382 due to past ownership changes[100](index=100&type=chunk)[428](index=428&type=chunk) - The company received a notice of non-compliance with Nasdaq's minimum bid price requirement in September 2022 but regained compliance in March 2023, with future failure potentially resulting in delisting[111](index=111&type=chunk)[112](index=112&type=chunk) [Item 1B. Unresolved Staff Comments](index=20&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments [Item 2. Properties](index=20&type=section&id=Item%202.%20Properties) The company's corporate headquarters are in Dallas, Texas, with additional leased facilities in Davis, California, and American Falls, Idaho, deemed adequate for current needs - Corporate headquarters are located in Dallas, Texas, with additional facilities in Davis, California, and American Falls, Idaho[114](index=114&type=chunk) [Item 3. Legal Proceedings](index=21&type=section&id=Item%203.%20Legal%20Proceedings) The company is not currently a party to any material litigation or legal proceedings [Item 4. Mine Safety Disclosures](index=21&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable Part II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=22&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Arcadia's common stock is listed on NASDAQ, and the company has never paid cash dividends nor repurchased equity securities in the year ended December 31, 2022 - The company's common stock is listed on the NASDAQ Stock Market under the symbol **"RKDA"**[120](index=120&type=chunk) - The company has never declared or paid cash dividends and does not intend to in the foreseeable future[122](index=122&type=chunk) - The company did not repurchase any of its equity securities during the year ended December 31, 2022[125](index=125&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Total revenues increased significantly in 2022, but the company continues to incur net losses and faces substantial doubt about its ability to continue as a going concern due to insufficient cash resources Comparison of the Years Ended December 31, 2022 and 2021 (in thousands) | Financial Metric | 2022 | 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | **Total Revenues** | **$9,956** | **$6,780** | **$3,176** | **47%** | | Product Revenues | $8,960 | $6,587 | $2,373 | 36% | | License Revenues | $879 | $17 | $862 | 5071% | | **Total Operating Expenses** | **$28,771** | **$42,306** | **($13,535)** | **-32%** | | Cost of Revenues | $9,802 | $8,708 | $1,094 | 13% | | Research and Development | $1,509 | $3,889 | ($2,380) | -61% | | Selling, General and Administrative | $18,048 | $22,938 | ($4,890) | -21% | | **Loss from Operations** | **($18,815)** | **($35,526)** | **$16,711** | **-47%** | | **Net Loss** | **($15,612)** | **($16,134)** | **$522** | **-3%** | | Net Loss Attributable to Common Stockholders | ($15,376) | ($14,660) | ($716) | 5% | - The **$2.4 million increase** in product revenues was primarily driven by higher sales of Zola coconut water and body care products, which were brands acquired in May 2021[157](index=157&type=chunk) - The company has raised substantial doubt about its ability to continue as a going concern, stating that existing cash and cash equivalents of **$20.6 million** will not be sufficient to meet anticipated cash requirements for the next 12-18 months[180](index=180&type=chunk)[249](index=249&type=chunk) Cash Flow Summary (in thousands) | Cash Flow Activity | 2022 | 2021 | | :--- | :--- | :--- | | **Operating Activities** | **($13,977)** | **($25,868)** | | Investing Activities | $1,417 | $16,608 | | Financing Activities | $4,519 | $21,900 | | **Net (Decrease) Increase in Cash** | **($8,041)** | **$12,642** | [Item 8. Financial Statements and Supplementary Data](index=35&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The consolidated financial statements highlight a 'Going Concern' uncertainty from the auditor, driven by recurring losses and insufficient cash, alongside a critical audit matter regarding GoodWheat inventory valuation - The independent auditor's report expresses substantial doubt about the Company's ability to continue as a going concern due to recurring net losses, net cash used in operations, and insufficient resources to meet anticipated cash requirements[216](index=216&type=chunk) - The auditor identified GoodWheat inventory valuation as a Critical Audit Matter, citing the significant judgments made by management in forecasting product demand and marketability[222](index=222&type=chunk)[223](index=223&type=chunk) Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Total Current Assets** | **$25,398** | **$35,388** | | Cash and cash equivalents | $20,644 | $28,685 | | **Total Assets** | **$28,922** | **$43,918** | | **Total Current Liabilities** | **$4,209** | **$5,040** | | **Total Liabilities** | **$8,022** | **$12,722** | | **Total Stockholders' Equity** | **$20,900** | **$31,196** | Consolidated Statements of Operations Data (in thousands) | | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | | :--- | :--- | :--- | | **Total Revenues** | **$9,956** | **$6,780** | | Cost of Revenues | $9,802 | $8,708 | | Loss from Operations | ($18,815) | ($35,526) | | **Net Loss** | **($15,612)** | **($16,134)** | | **Net Loss per Share (Basic & Diluted)** | **($25.65)** | **($27.56)** | - Subsequent to year-end, in March 2023, the company raised gross proceeds of **$6.0 million** through a private placement (PIPE) of common stock, pre-funded warrants, and preferred investment options[445](index=445&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=76&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reported no disagreements with its accountants regarding accounting principles, financial disclosure, or auditing procedures [Item 9A. Controls and Procedures](index=76&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with no material changes reported - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2022[448](index=448&type=chunk) - Based on an evaluation using the COSO framework, management concluded that the company's internal control over financial reporting was effective as of December 31, 2022[449](index=449&type=chunk) [Item 9B. Other Information](index=76&type=section&id=Item%209B.%20Other%20Information) None Part III [Items 10-14](index=77&type=section&id=Items%2010-14) Information for Items 10 through 14, covering governance, compensation, and related matters, is incorporated by reference from the company's definitive proxy statement - Information for Part III (Items 10-14) is incorporated by reference from the Registrant's Definitive Proxy Statement for its 2022 Annual Meeting of Stockholders[9](index=9&type=chunk)[455](index=455&type=chunk)[457](index=457&type=chunk) Part IV [Item 15. Exhibits, Financial Statement Schedules](index=78&type=section&id=Item%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists the financial statements, schedules, and an extensive exhibit index filed as part of the Form 10-K report - This part includes the financial statements from Item 8, notes that other schedules are omitted, and provides a detailed index of all exhibits filed with the report[462](index=462&type=chunk)[463](index=463&type=chunk)[464](index=464&type=chunk) [Item 16. Form 10-K Summary](index=78&type=section&id=Item%2016.%20Form%2010-K%20Summary) Not applicable

Arcadia Biosciences Inc (NASDAQ:RKDA) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET Company Participants Stan Jacot - President and Executive Officer Pam Haley - Chief Financial Officer Conference Call Participants Ben Klieve - Lake Street Capital Markets Dipesh Patel - H.C. Wainwright Operator Good afternoon, and welcome to the Arcadia Biosciences Third Quarter 2022 Earnings Conference Call. Today's presenters will be Stan Jacot, President and Chief Executive Officer; and Pam Haley, Chief F ...

[Part I — Financial Information](index=3&type=section&id=Part%20I%20%E2%80%94%20Financial%20Information) [Condensed Consolidated Financial Statements](index=3&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) The company reported total assets of $34.5 million and total liabilities of $9.5 million as of September 30, 2022, a decrease from year-end 2021; for the nine months ended September 30, 2022, revenues increased to $9.0 million from $4.6 million year-over-year, but the net loss attributable to common stockholders widened to $11.1 million from $5.4 million, with net cash used in operating activities at $11.6 million, reflecting a going concern uncertainty due to insufficient cash to fund operations for the next 12 months [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Balance Sheet Summary (in thousands) | | Sep 30, 2022 | Dec 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $22,719 | $28,685 | | Total current assets | $30,031 | $35,388 | | Total assets | $34,474 | $43,918 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $4,051 | $5,040 | | Total liabilities | $9,455 | $12,722 | | Total stockholders' equity | $25,019 | $31,196 | | Total liabilities and stockholders' equity | $34,474 | $43,918 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Statement of Operations Summary (in thousands, except per share data) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,878 | $2,376 | $8,956 | $4,609 | | Cost of revenues | $1,344 | $2,511 | $8,250 | $4,954 | | Loss from operations | $(4,580) | $(8,713) | $(12,985) | $(21,722) | | Net loss attributable to common stockholders | $(2,867) | $(2,175) | $(11,132) | $(5,378) | | Net loss per share (Basic and diluted) | $(0.12) | $(0.10) | $(0.48) | $(0.26) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash Flow Summary (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,621) | $(19,208) | | Net cash provided by (used in) investing activities | $1,136 | $16,678 | | Net cash provided by financing activities | $4,519 | $22,014 | | Net (decrease) increase in cash and cash equivalents | $(5,966) | $19,483 | | Cash and cash equivalents — end of period | $22,719 | $35,526 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Key notes include the company's business description as a producer of plant-based health products, a significant going concern warning due to insufficient cash, details of the Arcadia Wellness acquisition, the wind-down of the Archipelago hemp JV, and recent equity financing activities, with a contingent liability of $2.0 million related to the Anawah acquisition remaining on the balance sheet - The company is a producer and marketer of plant-based health and wellness products, including high-value crop improvements, food ingredients, and bath and body care products; it has commercialized innovations through sales of seed, grain, and consumer products[19](index=19&type=chunk) - In May 2021, the company acquired the businesses of Eko, Lief, and Zola, adding brands like Soul Spring™, Saavy Naturals™, ProVault™, and Zola® coconut water to its portfolio; in July 2022, the Saavy Naturals™ brand was licensed to Radiance Beauty[20](index=20&type=chunk) - The company has determined that its existing cash and cash equivalents of **$22.7 million** are not sufficient to meet its anticipated cash requirements for at least the next 12 months, which raises substantial doubt about its ability to continue as a going concern[29](index=29&type=chunk) - In August 2022, the company completed a Registered Direct Offering, raising gross proceeds of **$5.0 million** through the sale of common stock, pre-funded warrants, and preferred investment options[80](index=80&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the 94% year-over-year revenue growth for the nine-month period to the Arcadia Wellness acquisition and the launch of GoodWheat products; however, Q3 2022 revenue declined 21% YoY due to a strategic shift in body care products and the timing of GLA orders, leading to a widened net loss and a significant liquidity challenge, with substantial doubt about its ability to continue as a going concern without raising additional capital, as the growth strategy focuses on monetizing the GoodWheat portfolio and expanding its consumer brands [Overview and Growth Strategy](index=24&type=section&id=Overview%20and%20Growth%20Strategy) - The company's growth strategy is focused on two key areas: - Accelerating the monetization of its non-GMO GoodWheat™ wheat trait portfolio through partnerships and direct participation in the food ingredient market - Commercializing and scaling its Arcadia Wellness consumer brands (like Zola and ProVault) through retail and e-commerce expansion[128](index=128&type=chunk) - The company also intends to evaluate potential acquisitions for vertical integration to enhance margin capture and speed up new product innovations[129](index=129&type=chunk) [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q3 2022 vs Q3 2021 Financial Comparison (in thousands) | | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $1,878 | $2,376 | $(498) | (21)% | | Cost of revenues | $1,344 | $2,511 | $(1,167) | (46)% | | Loss from operations | $(4,580) | $(8,713) | $4,133 | 47% | | Net loss attributable to common stockholders | $(2,867) | $(2,175) | $(692) | 32% | - The **20% decrease** in Q3 2022 product revenue was driven by a decrease in sales of body care products due to a focus on higher-margin products, the new licensing agreement for Saavy Naturals™, and the timing of GLA orders[158](index=158&type=chunk) Nine Months 2022 vs 2021 Financial Comparison (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total revenues | $8,956 | $4,609 | $4,347 | 94% | | Cost of revenues | $8,250 | $4,954 | $3,296 | 67% | | Loss from operations | $(12,985) | $(21,722) | $8,737 | (40)% | | Net loss attributable to common stockholders | $(11,132) | $(5,378) | $(5,754) | 107% | - The **77% increase** in product revenue for the nine-month period was primarily driven by higher sales of Zola coconut water and body care products from the May 2021 acquisition, along with **$2.1 million** of GoodWheat grain and pasta sales not present in 2021[168](index=168&type=chunk) [Liquidity, Capital Resources, and Going Concern](index=32&type=section&id=Liquidity%2C%20Capital%20Resources%2C%20and%20Going%20Concern) - As of September 30, 2022, the company had cash and cash equivalents of **$22.7 million**; management believes this is not sufficient to meet anticipated cash requirements for the next 12 months, raising substantial doubt about the company's ability to continue as a going concern[186](index=186&type=chunk)[187](index=187&type=chunk) - The company may seek to raise additional funds through debt or equity financings; failure to secure adequate funding may force spending reductions, asset liquidation, or suspension of planned programs[188](index=188&type=chunk) Cash Flow Summary (in thousands) | | Nine Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(11,621) | $(19,208) | | Net cash provided by investing activities | $1,136 | $16,678 | | Net cash provided by financing activities | $4,519 | $22,014 | [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) The company's President, CEO, and CFO concluded that as of September 30, 2022, the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting identified during the quarter - The President and Chief Executive Officer and the Chief Financial Officer concluded that the company's disclosure controls and procedures were **effective** at the reasonable assurance level as of September 30, 2022[202](index=202&type=chunk) - There were **no changes** in internal control over financial reporting during the quarter ended September 30, 2022, that have materially affected, or are reasonably likely to materially affect, internal controls[203](index=203&type=chunk) [Part II — Other Information](index=35&type=section&id=Part%20II%20%E2%80%94%20Other%20Information) [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material litigation or other material legal proceedings - As of the filing date, the company is **not a party** to any material litigation or other material legal proceedings[205](index=205&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) A key risk is the potential delisting of the company's common stock from The Nasdaq Capital Market, as on September 27, 2022, the company received a notice from Nasdaq for failing to maintain a minimum bid price of $1.00 per share, with a compliance deadline of March 27, 2023, requiring the stock to close at or above $1.00 for at least 10 consecutive business days - The company faces a risk of its common stock being **delisted from Nasdaq** for failing to meet the minimum bid price requirement[207](index=207&type=chunk) - On September 27, 2022, the company received a notice from Nasdaq because its closing bid price was **below $1.00** for 30 consecutive business days; the company has an initial 180-day period (until March 27, 2023) to regain compliance[208](index=208&type=chunk)

Financial Data and Key Metrics Changes - Q2 2022 revenues increased by 175% year-over-year, reaching $3.9 million compared to $1.4 million in Q2 2021 [5][36] - Year-to-date revenues for 2022 were $7.1 million, up 217% from $2.2 million in the same period of 2021 [36] - Total operating expenses decreased by 16% year-over-year, amounting to $7.6 million in Q2 2022 compared to $9.1 million in Q2 2021 [8][39] - Net loss attributable to common stockholders was $3.8 million in Q2 2022, an improvement from $5.3 million in Q2 2021 [45] Business Line Data and Key Metrics Changes - GoodWheat pasta was officially launched, contributing to a record level of consumer product sales [9][10] - ProVault brand saw a 4x increase in units and sales compared to Q2 last year, despite the topical pain relief category being flat [16] - Zola coconut water sales grew by 7.6%, although unit sales declined by 15% due to price increases [18] Market Data and Key Metrics Changes - The pasta category, where GoodWheat is positioned, saw a 25% increase in sales, with unit sales up 5% [14] - The topical pain relief category experienced a 1.3% decline in sales, primarily due to private label declines [16] - The coconut water category's sales growth was driven by price increases, despite a decline in unit sales [18] Company Strategy and Development Direction - The company is focusing on simplifying operations and exiting non-core businesses, such as GoodHemp and Archipelago [21][25] - Project Greenfield is a three-year plan aimed at establishing GoodWheat in retail categories worth over $10 billion [27][28] - The strategy includes expanding distribution for ProVault and Zola, leveraging partnerships for licensing revenue, and building an agile organization [30][31][33] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the growth potential of GoodWheat and its impact on the pasta category [14][20] - The company anticipates a slight dip in revenue and operating expenses in Q3 due to transitions but expects improvements in Q4 [26] - Management emphasized the importance of aligning resources with compelling opportunities to drive shareholder value [34] Other Important Information - The company recognized $862,000 in license revenue from Bioceres related to the Chinese approval of HB4 soy [5] - Significant write-downs and adjustments were included in total operating expenses, impacting financial results [8][40] Q&A Session Summary Question: Clarification on sequential improvement from Q1 to Q2 - The sequential improvement was primarily driven by product sales, excluding GoodWheat's contribution [50][52] Question: Update on GoodWheat retail locations - GoodWheat was in about 200 stores by the end of Q2 and is expected to double to 1,000 stores by the end of Q4 [53] Question: Net cash impact from divestitures - The company expects a net breakeven for the year from divestitures, with value anticipated in 2023 through reduced operating expenses and higher margins [55] Question: Benchmarks for the three-year plan - The plan relies heavily on GoodWheat's expansion and will provide more guidance in future quarters [58] Question: Geographic strategy for retail locations - The strategy involves aligning with mid- to large regional retailers across the nation, focusing on effective go-to-market models [61] Question: R&D efforts in product formulation - R&D is focused on GoodWheat and developing formulations for other categories beyond pasta [67]