What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-11-12 compared with 2024-08-13 · 72 added, 80 removed, 179 unchanged (46% of the section changed)

12 unchanged sentences

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.

We are a producer and marketer of innovative, plant-based products.

Our history as a leader in science-based approaches to developing high value crop improvements, primarily in wheat, has laid the foundation for our proprietary innovations, which we have commercialized through the sales of seed, grain, food ingredients and products, and through trait licensing and royalty agreements.

The acquisition of the assets of Live Zola, LLC ("Zola") in May 2021 added coconut water to our portfolio of products.

On May 16, 2024, the Company sold the GoodWheat brand to Above Food Corp.

Since acquiring the assets of Live Zola, LLC ("Zola") in May 2021, the Company has provided consumers with a great tasting way to rehydrate, reset, and reenergize with Zola coconut water products.

The company has leveraged its history as a leader in science-based approaches to develop high value products and drive innovation in the consumer goods industry.

Previously, the Company developed products primarily in wheat, which it commercialized through the sales of seed, grain and food ingredients and products, and through trait licensing and royalty agreements.

On May 16, 2024, the Company sold the GoodWheat brand to Above Food Ingredients Corp.

("Above Food") for net consideration of $3.7 million.

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Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait.

The Company received $4.0 million in cash payment from Corteva during the three months ended June 30, 2024 and recorded a gain of the same amount as the trait had no carrying value on the condensed consolidated statement of operations and comprehensive income (loss) related to the transaction.

The Company received $4.0 million in cash payment from Corteva during the nine months ended September 30, 2024 and recorded a gain of the same amount as the trait had no carrying value on the condensed consolidated statement of operations and comprehensive loss related to the transaction.

Refer to Note 8 to the condensed consolidated financial statements for further details of the partnership and transaction.

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Since required adherence to a gluten-free diet is extremely difficult to accomplish for average consumers, efforts to develop alternative approaches are needed.

Arcadia is continuing to advance a new wheat variety with reduced gluten levels.

Our proprietary, non-GMO wheat variety developed using advanced screening and plant breeding techniques have reduced allergenic glutens and increased essential amino acids such as lysine, along with all the other health benefits of high protein wheat.

Importantly, this variety also delivers impressively high fiber content at approximately 14 grams per serving compared to 2-3 grams per serving of traditional wheat, providing additional value to health-conscious consumers as well as optionality as we advance the commercialization of this wheat trait through licensees and research partners.

Improved Shelf Life of Whole Grain Flour

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Our improved stability and flavor wheat lines greatly reduced the production of rancid and bitter compounds in milled whole grain flour as it progresses through the supply chain.

Whole wheat flour from these lines is being tested further for sensory characteristics and improved shelf-life stability.

This new trait could help improve the shelf life and flavor profile of whole grain products, thus reducing formulation costs and increasing consumer preference and palatability for whole grains.

Discontinued Operations

As mentioned above, the Company exited the GoodWheat and body care brands.

In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets and the results of the discontinued operations as separate components on the condensed consolidated statements of operations and comprehensive income (loss) for all periods presented.

See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

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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 of interest income on our cash and cash equivalents and investments.

Other income (loss), net

Other income (loss), net consists of miscellaneous income or loss.

Interest income consists of interest income on our cash and cash equivalents, investments and note receivable.

Other income, net

Other income, net consists of miscellaneous income net of miscellaneous losses.

Valuation loss on March 2023 PIPE

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Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

Three Months Ended June 30,

Comparison of the Three Months Ended September 30, 2024 and 2023

Three Months Ended September 30,

(In thousands except percentage)

Total revenues

Operating expenses (income):

Operating expenses:

Cost of revenues

Research and development

Gain on sale of intangible assets

Selling, general and administrative

Total operating (income) expenses

Income (loss) from continuing operations

Total operating expenses

Loss from continuing operations

Interest income

Other income (loss), net

Other income, net

Change in fair value of common stock warrant and option liabilities

Net income from continuing operations before income taxes

Net loss from continuing operations before income taxes

Income tax provision

Net income from continuing operations

Net loss from continuing operations

Net loss from discontinued operations — Body Care

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Net loss attributable to non-controlling interest

Net income attributable to common stockholders

Product revenues accounted for 100% of total revenues during the three months ended June 30, 2024.

Product revenues increased $19,000, or 1%, during the three months ended June 30, 2024 compared to the same period in 2023 driven by an increase in Zola sales, which was offset by a decrease in GLA sales.

Net loss attributable to common stockholders

Product revenues accounted for 100% of total revenues during the three months ended September 30, 2024.

Product revenues increased $239,000, or 18%, during the three months ended September 30, 2024 compared to the same period in 2023 driven by an increase in Zola sales.

Cost of revenues

Cost of revenues decreased by $17,000, or 3%, during the three months ended June 30, 2024 compared to the same period in 2023 driven by lower freight cost.

Cost of revenues increased by $214,000, or 26%, during the three months ended September 30, 2024 compared to the same period in 2023 driven by higher revenues and input costs.

Research and development

Research and development expenses decreased by $17,000, or 63%, during the three months ended June 30, 2024 compared to the same period in 2023 primarily related to lower consulting fees.

Gain on sale of intangible assets

During the three months ended June 30, 2024, the Company realized a gain of $4.0 million related to the sale of its RS durum wheat trait to Corteva.

There was no such gain recorded during the three months ended June 30, 2023.

Research and development expenses increased by $9,000, or 60%, during the three months ended September 30, 2024 compared to the same period in 2023.

Selling, general, and administrative

Selling, general, and administrative expenses increased by $609,000, or 29%, during the three months ended June 30, 2024 compared to the same period in 2023 primarily driven by higher consulting and legal expenses related to the Corteva and Above Food transactions in 2024.

Selling, general, and administrative expenses increased by $379,000, or 20%, during the three months ended September 30, 2024 compared to the same period in 2023 primarily driven by employee severance expenses related to the change in management.

Interest income

During the three months ended June 30, 2024, the Company recognized interest income of $150,000, of which $96,000 was related to discount amortization and accrued interest on the promissory note from Above Food.

During the three months ended September 30, 2024, the Company recognized interest income of $233,000, of which $186,000 was related to discount amortization and accrued interest on the promissory note from Above Food.

The remaining difference was related to interest from investments.

During the three months ended June 30, 2023, the Company recognized interest income of $207,000 from investments.

Other income (loss), net

During the three months ended June 30, 2024, the Company recognized other income of $150,000, of which $117,000 was related to realized gains on investments.

During the three months ended June 30, 2023, the Company recognized other loss of $13,000.

During the three months ended September 30, 2023, the Company recognized interest income of $133,000 from investments.

Other income, net

During the three months ended September 30, 2024 and 2023, the Company recognized other income of $15,000 and $17,000, respectively.

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

The change in the estimated fair value of common stock warrant and option liabilities resulted in a loss of $430,000 during the three months ended June 30, 2024 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 resulted in a gain of $4.4 million during the three months ended June 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 resulted in a gain of $330,000 and $608,000 during the three months ended September 30, 2024 and 2023, respectively, related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions.

Net loss from discontinued operations

Net loss from discontinued operations for Body Care was $0 and $330,000 during the three months ended June 30, 2024 and 2023 respectively.

Net loss from discontinued operations for GoodWheat was $789,000 and $2.0 million during the three months ended June 30, 2024 and 2023, respectively.

Net loss from discontinued operations for Body Care was $83,000 during the three months ended September 30, 2023.

Net loss from discontinued operations for GoodWheat was $430,000 and $1.8 million during the three months ended September 30, 2024 and 2023, respectively.

See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

Comparison of the Six Months Ended June 30, 2024 and 2023

Six Months Ended June 30,

Comparison of the Nine Months Ended September 30, 2024 and 2023

Nine Months Ended September 30,

(In thousands except percentage)

Total revenues

Operating expenses (income):

Operating expenses:

Cost of revenues

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Selling, general and administrative

Total operating (income) expenses

Income (loss) from continuing operations

Total operating expenses

Loss from continuing operations

Interest income

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Issuance and offering costs allocated to liability classified options

Net income (loss) from continuing operations before income taxes

Net loss from continuing operations before income taxes

Income tax provision

Net income (loss) from continuing operations

Net loss from continuing operations

Net loss from discontinued operations — Body Care

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Net loss attributable to common stockholders

Product revenues accounted for 100% of total revenues during the six months ended June 30, 2024.

Product revenues decreased $76,000, or 3%, during the six months ended June 30, 2024 compared to the same period in 2023 driven by a decrease in GLA sales that was partially offset by an increase in Zola sales.

Product revenues accounted for 100% of total revenues during the nine months ended September 30, 2024.

Product revenues increased $162,000, or 4%, during the nine months ended September 30, 2024 compared to the same period in 2023 driven by an increase in Zola sales.

Cost of revenues

Cost of revenues decreased by $74,000, or 6%, during the six months ended June 30, 2024 compared to the same period in 2023 driven by lower freight cost.

Cost of revenues increased by $140,000, or 7%, during the nine months ended September 30, 2024 compared to the same period in 2023 driven by higher revenues and input costs.

Research and development

Research and development expenses decreased by $24,000, or 60%, during the six months ended June 30, 2024 compared to the same period in 2023 primarily related to lower consulting fees.

Research and development expenses decreased by $15,000, or 27%, during the nine months ended September 30, 2024 compared to the same period in 2023.

Gain on sale of intangible assets

During the six months ended June 30, 2024, the Company realized a gain of $4.0 million related to the sale of its RS durum wheat trait to Corteva.

There was no such gain recorded during the six months ended June 30, 2023.

During the nine months ended September 30, 2024, the Company realized a gain of $4.0 million related to the sale of its RS durum wheat trait to Corteva.

There was no such gain recorded during the nine months ended September 30, 2023.

Impairment of property and equipment

During the six months ended June 30, 2024, the Company recognized impairment of property and equipment held for sale of $36,000.

There was no such impairment of property and equipment during the six months ended June 30, 2023.

During the nine months ended September 30, 2024, the Company recognized impairment of property and equipment held for sale of $36,000.

There was no such impairment of property and equipment during the nine months ended September 30, 2023.

Selling, general, and administrative

Selling, general, and administrative expenses increased by $74,000, or 2%, during the six months ended June 30, 2024 compared to the same period in 2023 primarily driven by higher consulting and legal expenses related to the Corteva and Above Food transactions in 2024.

Selling, general, and administrative expenses increased by $451,000, or 7%, during the nine months ended September 30, 2024 compared to the same period in 2023 primarily driven by employee severance expenses related to the change in management as well as higher consulting and legal expenses.

Interest income

During the six months ended June 30, 2024, the Company recognized interest income of $195,000, of which $96,000 was related to discount amortization and accrued interest on the promissory note from Above Food.

During the nine months ended September 30, 2024, the Company recognized interest income of $428,000, of which $282,000 was related to discount amortization and accrued interest on the promissory note from Above Food.

The remaining difference was related to interest from investments.

During the six months ended June 30, 2023, the Company recognized interest income of $405,000 from investments.

During the nine months ended September 30, 2023, the Company recognized interest income of $538,000 from investments.

Other income, net

During the six months ended June 30, 2024, the Company recognized other income of $153,000, of which $117,000 was related to realized gains on investments.

During the six months ended June 30, 2023, the Company recognized other income of $19,000.

During the nine months ended September 30, 2024, the Company recognized other income of $168,000, of which $117,000 was related to realized gains on investments.

During the nine months ended September 30, 2023, the Company recognized other income of $36,000.

Valuation loss on March 2023 PIPE

During the six months ended June 30, 2023, the Company recognized a $6.1 million valuation loss related to the March 2023 PIPE financing transaction.

During the nine months ended September 30, 2023, the Company recognized a $6.1 million valuation loss related to the March 2023 PIPE financing transaction.

The valuation loss includes the fair value in excess of gross proceeds and the increase in fair value related to the re-pricing of existing warrants.

There was no such valuation loss during the nine months ended September 30, 2024.

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

The change in the estimated fair value of common stock warrant and option liabilities resulted in a gain of $163,000 and $5.4 million during the six months ended June 30, 2024 and 2023, respectively, related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions.

The change in the estimated fair value of common stock warrant and option liabilities resulted in a gain of $493,000 and $6.0 million during the nine months ended September 30, 2024 and 2023, respectively, related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions.

Issuance and offering costs allocated to liability classified options

Issuance and offering costs were $430,000 during the six months ended June 30, 2023 and were related to the liability classified options issued in the March 2023 PIPE financing transaction.

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

There were no such issuance and offering costs during the nine months ended September 30, 2024.

Net loss from discontinued operations

Net loss from discontinued operations for Body Care was $0 and $511,000 during the six months ended June 30, 2024 and 2023, respectively.

Net loss from discontinued operations for GoodWheat was $2.3 million and $3.8 million during the six months ended June 30, 2024 and 2023, respectively.

Net loss from discontinued operations for Body Care was $591,000 during the nine months ended September 30, 2023.

Net loss from discontinued operations for GoodWheat was $2.7 million and $5.7 million during the nine months ended September 30, 2024 and 2023, respectively.

See Note 1 to the condensed consolidated financial statements for further information on discontinued operations.

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.

The coconut water category, similar to other beverages, is seasonal.

Generally, sales volumes are highest during our second and third fiscal quarters when the weather is warmer.

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.

We have funded our operations primarily with the net proceeds from our private and public offerings of our equity securities as well as proceeds from the sale of our products and payments under license agreements.

Our principal use of cash is to fund our operations, which are primarily focused on commercializing our products.

Our contractual obligations are primarily related to our operating leases for facilities, land and equipment.

As of June 30, 2024, we had cash and cash equivalents of $5.5 million, short-term investments of $2.6 million and current note receivable of $1.8 million.

For the six months ended June 30, 2024, the Company had net losses of $1.4 million and net cash used in operations of $5.7 million.

As of September 30, 2024, we had cash and cash equivalents of $3.9 million, short-term investments of $2.6 million and current note receivable of $1.8 million.

For the nine months ended September 30, 2024, the Company had net losses of $3.0 million and net cash used in operations of $7.4 million.

For the twelve months ended December 31, 2023, the Company had net losses of $14.0 million and net cash used in operations of $15.3 million.

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

September 30,

Current assets

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

Six Months Ended June 30,

Nine Months Ended September 30,

Net cash (used in) provided by:

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Cash flows from operating activities

Cash used in operating activities for the six months ended June 30, 2024, was $5.7 million.

With respect to our net loss of $1.4 million, non-cash charges including $85,000 of depreciation, $240,000 of stock-based compensation, $352,000 of lease amortization, and $36,000 of impairment of property and equipment, were offset by the change in fair value of common stock warrant and option liabilities of $163,000, amortization of note receivable discount of $29,000, adjustments in our working capital accounts of $229,000, a gain on disposal of property and equipment of $89,000 and operating lease payments of $507,000.

Cash used in operating activities for the six months ended June 30, 2023, was $8.3 million.

Cash used in operating activities for the nine months ended September 30, 2024, was $7.4 million.

With respect to our net loss of $3.0 million, non-cash charges including $92,000 of depreciation, $502,000 of lease amortization, $395,000 of stock-based compensation, $154,000 of write-downs of inventory, and $36,000 of impairment of property and equipment, were offset by the change in fair value of common stock warrant and option liabilities of $493,000, amortization of note receivable discount of $90,000, a gain on disposal of property and equipment of $65,000, gain on sale of RS durum wheat trait of $4.0 million, adjustments in our working capital accounts of $297,000, and operating lease payments of $678,000.

Cash used in operating activities for the nine months ended September 30, 2023, was $11.1 million.

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

Cash flows from investing activities

Cash provided by investing activities for the six months ended June 30, 2024 consisted of proceeds of $162,000 from the sale of property and equipment, proceeds from the sale of investments of $2.5 million, proceeds from the sale of our RS durum wheat trait of $4.0 million, offset by cash paid related to the GoodWheat sale of $2.0 million and $16,000 of purchases of property and equipment.

Cash provided by investing activities for the six months ended June 30, 2023 consisted of proceeds of $37,000 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, 2024 consisted of proceeds of $342,000 from the sale of property and equipment, proceeds from the sale of investments of $2.5 million, proceeds from the sale of our RS durum wheat trait of $4.0 million, offset by cash paid related to the GoodWheat sale of $2.0 million and $16,000 of purchases of property and equipment.

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

Cash flows from financing activities

Cash provided by financing activities for the six months ended June 30, 2024 consisted of proceeds from the purchase of ESPP shares of $5,000.

Cash provided by financing activities for the six months ended June 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 $5,000, 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, 2024 consisted of proceeds from the purchase of ESPP shares of $9,000.

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

Off-Balance Sheet Arrangements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis