Arcadia Biosciences, Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. Special Note Regarding Forward-Looking Statements The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and the related notes to those statements included herein. In addition to historical financial information, this Report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this Report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below. Furthermore, such forward-looking statements speak only as of the date of this Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Solely for convenience, the trademarks, service marks and trade names referred to in this Report may appear without the ®, TM, or SM symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, or trade names. Overview Since acquiring the assets of Zola in May 2021, Arcadia has provided consumers with a way to rehydrate, reset, and reenergize with Zola coconut water products. Arcadia 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, Arcadia 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. In May 2021, Arcadia’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness”) acquired the businesses of Eko Holdings, LLC, Lief, LLC, and Zola. The acquisition included Saavy Naturals™, a line of natural body care products, Soul Spring™, a CBD-infused botanical therapy brand in the natural category, and ProVault™, a THC-free CBD sports performance formula made with natural ingredients, providing effective support and recovery for athletes (collectively, “body care brands”). Also included in the purchase was Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand. In July 2022, the Company entered into an agreement to license Saavy Naturals to Radiance Beauty and Wellness, Inc. (“Radiance Beauty”). In July 2023, Arcadia’s management made the decision to exit the remaining body care brands, Soul Spring and ProVault, as a result of continued pressure on the CBD market due to regulatory uncertainty. Body care operations ceased during the third quarter of 2023. On May 14, 2024, Arcadia sold its non-GMO Resistant Starch (“RS”) durum wheat trait to longtime partner Corteva Agriscience (“Corteva”) for total cash consideration of $4.0 million. Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait. Refer to Note 11 to the consolidated financial statements for further details of the transaction. On May 16, 2024, Arcadia sold the GoodWheat™ brand to Above Food for net consideration of $3.7 million. The strategic decision to sell GoodWheat enabled the Company to monetize its intellectual property early. The assets sold consisted primarily of grain and finished goods inventories, formulations and trademarks. The disposition of GoodWheat met the "held for sale" criteria per ASC 205-20-45-1B and represented a strategic shift that had a major effect on the Company's operations and financial results. As a result, the financial statements and related notes as of December 31, 2024 and 2023 reflect the GoodWheat disposition as a discontinued operation. The disposition of 15 Table of Contents GoodWheat resulted in a loss of $1,500 during the year ended December 31, 2024. Refer to Notes 4 and 8 to the consolidated financial statements for further details of the transaction. Our Products Zola Coconut Water Founded in 2002, Zola became part of the Arcadia family of brands in May 2021. Sourced from Thailand, Zola is a pure, natural, 100% coconut water with a crisp, clean taste that’s slightly sweet and refreshing. Naturally hydrating and rich in electrolytes, Zola is Non-GMO Project Verified and only contains 60 calories per serving. In taste tests, Zola beat competitors 2 to 1, and the Company believes that it is a superior way to rehydrate, reset and reenergize. Zola flavors include original, original with pulp, espresso, lime and pineapple. Agronomic Wheat Traits On average, Americans get approximately 20% of their daily calories from wheat. As a result, Arcadia developed a portfolio of non-GMO specialty wheat traits to offer healthier, nutrient-rich wheat options while providing the same baking quality, taste, and texture as traditional wheat. Arcadia’s non-GMO Reduced Gluten High Fiber Wheat has fewer allergenic glutens and higher fiber than traditional wheat while Arcadia’s non-GMO Extended Shelf-Life Wheat extends the shelf life of milled whole wheat flour. Arcadia believes that its proprietary intellectual property with multiple non-GMO wheat traits offer functional benefits and a compelling point of differentiation. We intend to seek to monetize our proprietary technology, including through possible asset sale transactions. Recent Developments As described elsewhere in this Report, on December 4, 2024, Arcadia, Roosevelt, and the LP Representatives entered into the Exchange Agreement. Subject to the terms of the Exchange Agreement and to the satisfaction or waiver of the conditions set forth in the Exchange Agreement, at the Closing of the transactions contemplated by the Exchange Agreement, Arcadia agreed to issue shares of its common stock to the Limited Partners of Roosevelt in exchange for all of the Partner Interests in Roosevelt. As a result of the Exchange, Arcadia will continue and Roosevelt will continue as a wholly owned subsidiary of Arcadia. Upon completion of the Exchange, we estimate that the Limited Partners and the Arcadia stockholders as of immediately prior to the Closing will collectively own approximately 90% and 10%, respectively, of the shares of common stock of Arcadia outstanding immediately after the Closing. These percentages are estimates, are subject to certain assumptions and are subject to potential adjustment prior to the Closing, including as a result of changes in the number of outstanding shares of Arcadia common stock. As a result, Arcadia stockholders and the former Roosevelt Limited Partners could own a greater, or a lesser, percentage of the outstanding shares of Arcadia immediately after the Closing than the estimates set forth above. Discontinued Operations As mentioned above, Arcadia exited the GoodWheat and body care brands. In accordance with the provisions of ASC 205-20, Arcadia has separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets and the results of the discontinued operations as separate components on the consolidated statements of operations and comprehensive loss for all periods presented. See Note 4 to the consolidated financial statements for further information on discontinued operations. 16 Table of Contents Components of Our Statements of Operations Data Revenues Product revenues Product revenues consist primarily of sales of Zola and GLA products. We recognize revenue from product sales when control of the product is transferred to third-party distributors and manufacturers, collectively “our customers,” which generally occurs upon delivery. Revenues fluctuate depending on the timing of shipments of product to our customers and are reported net of estimated chargebacks, returns and losses. Royalty Revenues Royalty revenues consist of amounts earned from the sale of commercial products that incorporate the Company's traits by third parties. Royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products. The Company recognizes the minimum annual royalty on a straight-line basis over the year, and recognizes royalty revenue resulting from the sale of products when the third parties transfer control of the product to their customers, which generally occurs upon shipment. Royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers. License revenues License revenues consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our license agreements. Revenue generated from up-front license fees are recognized upon execution of the agreement. We recognize annual license fees when it is probable that a material reversal will not occur. Operating Expenses Cost of revenues Cost of revenues primarily relates to the sale of Zola products and consists primarily of product and freight costs. Adjustments or write-downs to inventory are also included in cost of revenues. Research and development expenses ("R&D") Research and development expenses consist of costs incurred in the development and testing of our products. These expenses currently consist primarily of fees paid to product formulation consultants and are expensed as incurred. Additionally, the Company is required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties. The Company's research and development expenses may fluctuate from period to period. Gain on sale of intangible assets Gain on sale of intangible assets consists of the gain on sale of our RS durum wheat trait to Corteva. Gain on sale of property and equipment Gain on sale of fixed assets includes gains from the sale of tangible assets sold above their net book value. Impairment of property and equipment Impairment of property and equipment includes losses from tangible assets due to impairment or recoverability test charges to write down fixed assets to their fair value or recoverability value. 17 Table of Contents Impairment of right-of-use (“ROU”) asset Impairment of ROU assets includes losses from right-of-use assets due to impairment or recoverability test charges to write down the ROU asset to their fair value or recoverability value. Selling, general and administrative expenses Selling, general and administrative expenses consist primarily of employee costs, professional service fees, broker and sales commission fees, and overhead costs. Our selling, general, and administrative expenses may fluctuate from period to period. Interest income Interest income consists of interest income on our cash and cash equivalents, investments and note receivable. Other income, net Other income, net consists of miscellaneous income net of miscellaneous losses. Valuation loss on March 2023 PIPE Valuation loss on March 2023 PIPE includes the fair value in excess of gross proceeds and the increase in fair value related to the re-pricing of existing warrants. Change in the estimated fair value of common stock warrant and option liabilities Change in the estimated fair value of common stock warrant and option liabilities is comprised of the fair value remeasurement of the liabilities associated with our financing transactions. Issuance and offering costs allocated to liability classified options Issuance and offering costs generally include placement agent, legal, advisory, accounting and filing fees related to financing transactions. Net loss from discontinued operations Net loss from discontinued operations represents results of operations related to the discontinued GoodWheat and body care brands. See Note 4 to the consolidated financial statements for further information on discontinued operations. 18 Table of Contents Results of Operations Comparison of the Years Ended December 31, 2024 and 2023 Year Ended December 31, $ Change % Change 2024 2023 (in thousands) Revenues: Product $ 5,012 $ 4,437 $ 575 13 % License 7 17 (10 ) -59 % Royalty 26 — 26 100 % Total revenues 5,045 4,454 591 13 % Operating expenses (income): Cost of revenues 2,963 2,174 789 36 % Research and development 53 64 (11 ) -17 % Gain on sale of intangible assets (4,000 ) — (4,000 ) 100 % Gain on sale of property and equipment — (29 ) 29 100 % Impairment of property and equipment 36 — 36 100 % Impairment of ROU asset — 113 (113 ) -100 % Selling, general and administrative 9,641 8,234 1,407 17 % Total operating expenses 8,693 10,556 (1,863 ) -18 % Loss from operations (3,648 ) (6,102 ) 2,454 40 % Interest income 782 695 87 13 % Other income, net 31 48 (17 ) -35 % Valuation loss on March 2023 PIPE — (6,076 ) 6,076 100 % Change in fair value of common stock warrant and option liabilities (1,474 ) 6,544 (8,018 ) -123 % Issuance and offering costs allocated to liability classified options — (430 ) 430 100 % Net loss from continuing operations before income taxes (4,309 ) (5,321 ) 1,012 19 % Income tax expense (8 ) (8 ) — — Net loss from continuing operations (4,317 ) (5,329 ) 1,012 19 % Net loss from discontinued operations — Body Care — (821 ) 821 100 % Net loss from discontinued operations — GoodWheat (2,721 ) (7,836 ) 5,115 65 % Net loss (7,038 ) (13,986 ) 6,948 50 % Net loss attributable to non-controlling interest — (5 ) 5 100 % Net loss attributable to common stockholders $ (7,038 ) $ (13,981 ) $ 6,943 50 % 19 Table of Contents Revenues Product revenues accounted for 99% and 100% of our total revenues in 2024 and 2023, respectively. The $575,000, or 13%, increase in product revenues in 2024 compared to 2023 was driven by an increase in coconut water revenue of $1.3 million, resulting from higher sales volume, partially offset by a decline in sales of GLA oil. The Company did not implement any price increases in 2024. License revenues were $7,000 and $17,000 in 2024 and 2023, respectively. The decrease in license revenues resulted from fewer annual license fees. Royalty revenues were $26,000 in 2024 related to HB4 soybeans. There were no royalty revenues in 2023. Operating expenses (income) Cost of revenues Cost of revenues increased by $789,000, or 36%, in 2024 compared to 2023. This was driven by an increase in Zola units sales as product costs made up 84% of the total cost of revenues in 2024. Refer to Note 19 to the consolidated financial statements for details of cost of revenues. Research and development Research and development expenses decreased by $11,000, or 17%, in 2024 compared to 2023, reflecting our strategy to develop the Zola brand by leveraging our existing resources and minimizing new investment. Gain on sale of intangible assets During 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 2023. Gain on sale of property and equipment During 2023, the Company sold property and equipment for net proceeds exceeding book value by $29,000. There was no such gain from sale of property and equipment in 2024. Impairment of property and equipment During 2024, the Company recognized impairment of property and equipment held for sale related to Archipelago of $36,000 based on estimated market price. There was no such impairment of property and equipment during 2023. Impairment of ROU asset During 2023, the Company recognized $113,000 of impairment related to ROU assets. There was no impairment of ROU assets recognized during 2024. Selling, General, and Administrative Selling, general, and administrative expenses increased by $1.4 million, or 17%, in 2024 compared to 2023. This was driven by $1.4 million of transaction costs related to the sale of GoodWheat assets to Above Food as well as the 20 Table of Contents pending transaction with Roosevelt Resources, which included consulting and legal expenses. In addition, there was employee related costs of $600,000 related to the restructuring of the business. Interest income During 2024, the Company recognized interest income of $782,000, of which $310,000 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 2023, the Company recognized interest income of $695,000. Other income, net During 2024, the Company recognized other income of $31,000 as compared to $48,000 in 2023. Valuation loss on March 2023 PIPE During the year ended December 31, 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 in 2024. Change in 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 $1.5 million and a gain of $6.5 million during the year ended December 31, 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 options Issuance and offering costs were $430,000 during the year ended December 31, 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 in 2024. Income tax expense The income tax provision resulted in an expense of $8,000 during each of the years ended December 31, 2024 and 2023. Net loss from discontinued operations Net loss from discontinued operations for Body Care was $0 and $821,000 during 2024 and 2023, respectively. Net loss from discontinued operations for GoodWheat was $2.7 million and $7.8 million during 2024 and 2023, respectively. See Note 4 to the consolidated financial statements for further information on discontinued operations. Seasonality The coconut water category, similar to other beverages, is seasonal. Generally, sales volumes are highest during our second and third fiscal quarters when the weather is warmer. Liquidity and Capital Resources We have funded our operations primarily with the net proceeds from our private and public offerings of our equity securities and debt, as well as proceeds from the sale of our products and payments under license agreements. Our principal use of cash is to fund our operations, which are primarily focused on commercializing our products. Our contractual obligations are primarily related to our operating leases for facilities, land and equipment. Refer to Note 16 to the consolidated financial statements for details of our leasing arrangements. As of December 31, 2024, we had cash and cash equivalents of $4.2 million. For the years ended December 31, 2024 and 2023, the Company had 21 Table of Contents net losses of $7.0 million and $14.0 million, respectively, and net cash used in operations of $9.6 million and $15.3 million, respectively. Going Concern; Material Cash Requirements We believe that our existing cash and cash equivalents will not be sufficient to meet our anticipated cash requirements for at least the next 12 months from the issuance date of our 2024 financial statements, and thus raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. We will require additional funding in the near term to fund our business and the marketing and sale of our products and to provide working capital to fund other aspects of our business. There are no assurances that required funding will be available at all or will be available in sufficient amounts or on reasonable terms. We may seek to raise additional funds through debt or equity financings, if necessary. We may also consider entering into additional partner arrangements. Any sale of additional equity would result in dilution to our stockholders. Our incurrence of debt would result in debt service obligations, and the instruments governing our debt could provide for additional operating and financing covenants that would restrict our operations. If we require additional funds and are not able to secure adequate additional funding, we may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned product launches. Any of these actions could materially harm our business, results of operations and financial condition. As noted above, through December 31, 2024 , we have incurred substantial losses. We will be required to obtain additional cash resources in the near term in order to support our operations and activities. The availability of required additional funding cannot be assured. In addition, an adverse outcome in legal or regulatory proceedings in which we are or could become involved could adversely affect our liquidity and financial position. If we are not able to obtain additional required equity or debt funding, our cash resources would be significantly limited and could become depleted, and we could be required to materially reduce or suspend operations, or seek dissolution and liquidation, or bankruptcy protection. No assurance can be given as to the timing or ultimate success of obtaining future funds. Liquidity The following table summarizes total current assets, current liabilities and working capital for the dates indicated (in thousands): As of December 31, 2024 2023 Current assets $ 9,242 $ 14,972 Current liabilities 2,563 3,590 Working capital surplus $ 6,679 $ 11,382 Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Year Ended December 31, 2024 2023 Net cash (used in) provided by: Operating activities $ (9,627 ) $ (15,294 ) Investing activities 7,342 (4,344 ) Financing activities 9 5,512 Net decrease in cash and cash equivalents $ (2,276 ) $ (14,126 ) 22 Table of Contents Cash flows from operating activities Cash used in operating activities for the year ended December 31, 2024 was $9.6 million. With respect to our net loss of $7.0 million, non-cash charges including the change in fair value of common stock warrant and option liabilities of $1.5 million, $113,000 of depreciation, $652,000 of lease amortization, $512,000 of stock-based compensation, $154,000 of write-downs of inventory, $36,000 of impairment of property and equipment, offset by $157,000 of amortization of note receivable discount, a gain on disposal of property and equipment of $65,000, a gain on sale of our RS durum wheat trait of $4.0 million, adjustments in our working capital accounts of $596,000, and operating lease payments of $850,000. Cash used in operating activities for the year ended December 31, 2023 was $15.3 million. With respect to our net loss of $14.0 million, non-cash charges, including $430,000 of issuance and offering costs, $6.1 million of valuation loss recognized for the March 2023 PIPE, $717,000 of stock-based compensation, $697,000 of lease amortization, $287,000 of depreciation, $444,000 of write-downs of inventory and $113,000 of impairment of ROU assets, were offset by the change in fair value of common stock warrant and option liabilities of $6.5 million, adjustments in our working capital accounts of $2.7 million, a gain on disposal of property and equipment of $40,000, and operating lease payments of $764,000. Cash flows from investing activities Cash used in investing activities for the year ended December 31, 2024 consisted of proceeds of $334,000 from the sale of property and equipment, proceeds from the sale of investments of $5.0 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 year ended December 31, 2023 consisted of proceeds of $115,000 from the sale of property and equipment, proceeds of $569,000 from the sale of Verdeca, and proceeds of $2.5 million from the sale of investments, offset by $5,000 of purchases of property and equipment and $7.5 million of purchases of investments. Cash flows from financing activities Cash provided by financing activities for the year ended December 31, 2024 consisted of proceeds from the purchase of ESPP shares of $9,000. Cash provided by financing activities for the year ended December 31, 2023 consisted of gross proceeds of $6.0 million from the March 2023 PIPE financing transaction and proceeds from the purchase of ESPP shares of $12,000, which were offset by payments of transaction costs related to the March 2023 PIPE financing transaction of $497,000. Off-Balance Sheet Arrangements Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities or variable interest entities, other than Verdeca, a joint venture sold in November 2020. 23 Table of Contents Critical Accounting Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We consider our critical accounting estimates to be revenue recognition, determination of the provision for income taxes, and net realizable value of inventory. Revenue recognition We recognize revenue when control of the promised goods or services is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. See Note 2 for further detail on each of the below revenue streams. We generally recognize product revenues once passage of title has occurred, which is generally upon delivery. Shipping and handling costs charged to customers are recorded as revenues and included in cost of revenues at the time the sale is recognized. We have determined that, at the inception of each license agreement, there is only one deliverable for the license for access to and assistance with the development of the specified intellectual property. We recognize revenue up-front and annual license fees in full when it is deemed probable to be earned. We recognize royalty revenue when the Company can reasonably determine the amounts earned. We recognize revenue related to milestone payments when it is probable that such amounts would not be reversed. Determination of the provision for income taxes We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Net realizable value of inventory Inventory costs are tracked on a lot-identified basis, valued at the lower of cost or net realizable value and are included as cost of revenues when sold. We compare the cost of inventories with market value and write down inventories to net realizable value, if lower. We write down inventory when conditions indicate that the net realizable value may be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Additionally, we provide reserves for excess and slow-moving inventory to its estimated net realizable value. The inventory write-downs are based upon estimates about future demand from our customers and distributors and market conditions. Future events that could significantly influence our judgment and related estimates include conditions in target markets, introduction of new products or changes to current or future competitor products. Recent Accounting Pronouncements For discussions of the adoption and potential impacts of recently issued accounting standards, refer to Note 3 – Recent Accounting Pronouncements. 24 Table of Contents Item 7A. Quantitative and Qualitat ive Disclosures About Market Risk. Not applicable. 25 Table of Contents Item 8. Financial Statement s and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Registered Public Accounting Firm 27 Consolidated Balance Sheets 29 Consolidated Statements of Operations and Comprehensive Loss 30 Consolidated Statement of Stockholders’ Equity 31 Consolidated Statements of Cash Flows 32 Notes to Consolidated Financial Statements 33 26 Table of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the stockholders and the Board of Directors of Arcadia Biosciences, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Arcadia Biosciences, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes (collectively referred to as the "consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has an accumulated deficit, recurring net losses and net cash used in operations, and resources that will not be sufficient to meet its anticipated cash requirements, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 27 Table of Contents Identification and recognition of contingent features within note receivable – Refer to Note 8 to the financial statements Critical Audit Matter Description The Company sold its GoodWheat brand to Above Food Ingredients Corp (“Above Food”). As consideration for the sale, the Company received a promissory note during the year ended December 31, 2024. The promissory note contains contingent features, including an option that requires Above Food to cause its parent entity, Above Food Ingredients Inc. (“Parent Company”), to issue to the Company publicly traded stock of Parent Company in exchange for the cancellation of a portion of the principal of the promissory note, as well as default provisions. The Company bifurcated the contingent features of the promissory note in accordance with ASC 815, “Derivatives and Hedging”, and separately recognized the contingent features. We identified the accounting for the contingent features within the promissory note as a critical audit matter due to the significant judgement that were used by management in the initial identification and recognition of such contingent features. This required a high degree of auditor judgment, subjectivity, and effort, including the need to involve professionals in our firm with expertise in ASC 815 in performing procedures and evaluating audit evidence relating to management's initial identification and recognition of such contingent features. How the Critical Audit Matter Was Addressed in the Audit Our audit procedures over the promissory note recognition included the following, among others: • We obtained and reviewed the terms of the promissory note which included reviewing management's identification of the contingent features. • With the involvement of professionals in our firm with expertise in ASC 815, based on the terms of the promissory note, we evaluated the appropriateness of management's application of ASC 815, in the determination of the accounting and recognition of the promissory note’s contingent features. /s/ Deloitte & Touche LLP Tempe, Arizona March 25, 2025 We have served as the Company's auditor since 2007. 28 Table of Contents Arcadia Biosciences, Inc. Consolidated B alance Sheets (In thousands, except share data) As of December 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 4,242 $ 6,518 Short-term investments — 5,124 Accounts receivable and other receivables, net of allowance for doubtful accounts of $ 0 as of December 31, 2024 and 2023 1,175 506 Inventories, net — current 904 837 Assets held for sale — 51 Note receivable — current 1,894 — Prepaid expenses and other current assets 931 807 Current assets of discontinued operations — GoodWheat 96 1,129 Total current assets 9,242 14,972 Property and equipment, net 41 70 Right of use assets 137 792 Inventories, net — noncurrent — 196 Intangible assets, net 39 39 Note receivable — noncurrent 3,966 — Other noncurrent assets 92 164 Noncurrent assets of discontinued operations — GoodWheat — 3,472 Total assets $ 13,517 $ 19,705 Liabilities and stockholders’ equity Current liabilities: Accounts payable and accrued expenses $ 2,108 $ 1,910 Amounts due to related parties 30 58 Operating lease liability — current 155 852 Other current liabilities 270 270 Current liabilities of discontinued operations — GoodWheat — 500 Total current liabilities 2,563 3,590 Operating lease liability — noncurrent — 155 Common stock warrant and option liabilities 2,731 1,257 Other noncurrent liabilities 2,000 2,000 Total liabilities 7,294 7,002 Commitments and contingencies (Note 15) Stockholders’ equity: Common stock, $ 0.001 par value— 150,000,000 shares authorized as of December 31, 2024 and December 31, 2023; 1,364,940 and 1,285,337 shares issued and outstanding as of December 31, 2024 and December 31, 2023, respectively. 65 65 Additional paid-in capital 285,036 284,515 Accumulated other comprehensive income — 101 Accumulated deficit ( 278,878 ) ( 271,840 ) Total Arcadia Biosciences stockholders’ equity 6,223 12,841 Non-controlling interest — ( 138 ) Total stockholders' equity 6,223 12,703 Total liabilities and stockholders’ equity $ 13,517 $ 19,705 The accompanying notes are an integral part of these consolidated financial statements. 29 Table of Contents Arcadia Biosciences, Inc. Consolidated Statem ents of Operations and Comprehensive Loss (In thousands, except share and share data) Year Ended December 31, 2024 2023 Revenues: Product $ 5,012 $ 4,437 License 7 17 Royalty 26 — Total revenues 5,045 4,454 Operating expenses (income): Cost of revenues 2,963 2,174 Research and development 53 64 Gain on sale of intangible assets ( 4,000 ) — Gain on sale of property and equipment — ( 29 ) Impairment of property and equipment 36 — Impairment of ROU asset — 113 Selling, general and administrative 9,641 8,234 Total operating expenses 8,693 10,556 Loss from operations ( 3,648 ) ( 6,102 ) Interest income 782 695 Other income, net 31 48 Valuation loss on March 2023 PIPE — ( 6,076 ) Change in fair value of common stock warrant and option liabilities ( 1,474 ) 6,544 Issuance and offering costs allocated to liability classified options — ( 430 ) Net loss from continuing operations before income taxes ( 4,309 ) ( 5,321 ) Income tax expense ( 8 ) ( 8 ) Net loss from continuing operations ( 4,317 ) ( 5,329 ) Net loss from discontinued operations — Body Care — ( 821 ) Net loss from discontinued operations — GoodWheat ( 2,721 ) ( 7,836 ) Net loss ( 7,038 ) ( 13,986 ) Net loss attributable to non-controlling interest — ( 5 ) Net loss attributable to common stockholders $ ( 7,038 ) $ ( 13,981 ) Net loss per share attributable to common stockholders: Basic and diluted from continuing operations $ ( 3.17 ) $ ( 4.30 ) Basic and diluted from discontinued operations $ ( 2.00 ) $ ( 6.99 ) Net loss per basic and diluted share attributable to common stockholders $ ( 5.17 ) $ ( 11.29 ) Weighted-average number of shares used in per share calculations: Basic and diluted 1,363,303 1,236,934 Other comprehensive income, net of tax Unrealized gains on available-for-sale securities $ 127 $ 101 Reclassification adjustment for gains on available-for-sale securities included in net loss ( 228 ) — Change in unrealized gains on available-for-sale securities $ ( 101 ) $ 101 Comprehensive loss $ ( 7,139 ) $ ( 13,880 ) The accompanying notes are an integral part of these consolidated financial statements. 30 Table of Contents Arcadia Biosciences, Inc. Consolidated St atements of Stockholders’ Equity (In thousands, except share data) Common Stock Additional Paid-In Capital Accumulated Deficit Accumulated Other Comprehensive Income Non-controlling Interest Total Stockholders’ Equity Shares Amount Balance at December 31, 2022 616,079 $ 65 $ 278,827 $ ( 257,859 ) $ — $ ( 133 ) $ 20,900 Issuance of shares related to March 2023 PIPE 165,500 — 4,740 — — — 4,740 Modification of warrants related to March 2023 PIPE — — 219 — — — 219 Issuance of shares related to August 2022 pre-funded warrants exercise 56,813 — — — — — — Issuance of shares related to March 2023 pre-funded warrants exercise 425,834 — — — — — — Issuance of shares related to employee stock purchase plan 1,993 — 12 — — — 12 Issuance of shares related to reverse stock split 19,118 — — — — — — Stock-based compensation — — 717 — — — 717 Unrealized gains on available-for-sale securities — — — — 101 — 101 Net loss — — — ( 13,981 ) — ( 5 ) ( 13,986 ) Balance at December 31, 2023 1,285,337 $ 65 $ 284,515 $ ( 271,840 ) $ 101 $ ( 138 ) $ 12,703 Issuance of shares related to March 2023 pre-funded warrants exercise 75,000 — — — — — — Issuance of shares related to employee stock purchase plan 4,603 — 9 — — — 9 Stock-based compensation — — 512 — — — 512 Change in unrealized gains on available-for-sale securities — — — — ( 101 ) — ( 101 ) Write-down of non-controlling interest — — — — — 138 138 Net loss — — — ( 7,038 ) — — ( 7,038 ) Balance at December 31, 2024 1,364,940 $ 65 $ 285,036 $ ( 278,878 ) $ — $ — $ 6,223 The accompanying notes are an integral part of these consolidated financial statements. 31 Table of Contents Arcadia Biosciences, Inc. Consolidated Statem ents of Cash Flows (In thousands) Year Ended December 31, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ ( 7,038 ) $ ( 13,986 ) Adjustments to reconcile net loss to cash used in operating activities: Change in fair value of common stock warrant and option liabilities 1,474 ( 6,544 ) Issuance and offering costs allocated to liability classified options — 430 Valuation loss on March 2023 PIPE — 6,076 Depreciation 113 287 Lease amortization 652 697 Amortization of note receivable discount ( 157 ) — Gain on disposal of property and equipment ( 65 ) ( 40 ) Gain on sale of RS durum wheat trait ( 4,000 ) — Stock-based compensation 512 717 Bad debt expense — 20 Write-down of inventories 154 444 Impairment of property and equipment 36 — Impairment of ROU asset — 113 Write-down of non-controlling interest 138 — Changes in operating assets and liabilities: Accounts receivable and other receivables ( 762 ) 184 Inventories 550 ( 2,419 ) Prepaid expenses and other current assets ( 124 ) 1 Other noncurrent assets 72 2 Accounts payable and accrued expenses ( 303 ) ( 522 ) Amounts due to related parties ( 29 ) 10 Operating lease payments ( 850 ) ( 764 ) Net cash used in operating activities ( 9,627 ) ( 15,294 ) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of property and equipment 334 115 Proceeds from sale of Verdeca — earn-out received — 569 Proceeds from sale of investments 5,024 2,502 Proceeds from sale of RS durum wheat trait 4,000 — Cash paid related to sale of GoodWheat ( 2,000 ) — Purchases of property and equipment ( 16 ) ( 5 ) Purchases of investments — ( 7,525 ) Net cash provided by (used in) investing activities 7,342 ( 4,344 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock, pre-funded warrants and preferred investment options from March 2023 PIPE — 5,997 Payments of offering costs relating to March 2023 PIPE — ( 497 ) Proceeds from ESPP purchases 9 12 Net cash provided by financing activities 9 5,512 Net decrease in cash and cash equivalents ( 2,276 ) ( 14,126 ) Cash and cash equivalents — beginning of period 6,518 20,644 Cash and cash equivalents — end of period $ 4,242 $ 6,518 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: NONCASH TRANSACTIONS: Common stock options issued to placement agent and included in offering costs related to March 2023 PIPE $ — $ 212 Warrant and option modifications included in Valuation loss on March 2023 PIPE $ — $ 404 Proceeds from sale of property and equipment in accounts receivable and other receivables $ — $ 8 Right of use assets obtained in exchange for new operating lease liabilities $ 86 $ — Note receivable recognized from sale of GoodWheat $ 5,705 $ — The accompanying notes are an integral part of these consolidated financial statements. 32 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements Note 1. Description of Business Organization Arcadia Biosciences, Inc. (the "Company," "Arcadia" or "management"), was incorporated in Arizona in 2002 and maintains its headquarters in Dallas, Texas, with additional office space in Sacramento, California. The Company was reincorporated in Delaware in March 2015. Since acquiring the assets of Zola in May 2021, Arcadia has provided consumers with a way to rehydrate, reset, and reenergize with Zola coconut water products. Arcadia 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, Arcadia 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, Arcadia sold the GoodWheat™ brand to Above Food for net consideration of $ 3.7 million. The strategic decision to sell GoodWheat enabled the Company to monetize its intellectual property early. The assets sold consisted primarily of grain and finished goods inventories, formulations and trademarks. The disposition of GoodWheat met the "held for sale" criteria per ASC 205-20-45-1B and represented a strategic shift that had a major effect on the Company's operations and financial results. As a result, the financial statements and related notes as of December 31, 2024 and 2023 reflect the GoodWheat disposition as a discontinued operation. The disposition of GoodWheat resulted in a loss of $ 1,500 during the year ended December 31, 2024. Refer to Notes 4 and 8 to the consolidated financial statements for further details of the transaction. On May 14, 2024, Arcadia sold its non-GMO Resistant Starch (“RS”) durum wheat trait to longtime partner Corteva Agriscience (“Corteva”) for total cash consideration of $ 4.0 million. Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait. Refer to Note 11 to the consolidated financial statements for further details of the transaction. In May 2021, Arcadia’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness”) acquired the businesses of Eko Holdings, LLC, Lief, LLC, and Zola. The acquisition included Saavy Naturals™, a line of natural body care products, Soul Spring™, a CBD-infused botanical therapy brand in the natural category, and ProVault™, a THC-free CBD sports performance formula made with natural ingredients, providing effective support and recovery for athletes (collectively, “body care brands”). Also included in the purchase was Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand. In July 2022, the Company entered into an agreement to license Saavy Naturals to Radiance Beauty and Wellness, Inc. (“Radiance Beauty”). In July 2023, Arcadia’s management made the decision to exit the remaining body care brands, Soul Spring and ProVault, as a result of continued pressure on the CBD market due to regulatory uncertainty. Body care operations ceased during the third quarter of 2023. In August 2019, the Company entered into a joint venture agreement with Legacy Ventures Hawaii, LLC (“Legacy,” see Note 9) to grow, extract, and sell hemp products. The partnership Archipelago Ventures Hawaii, LLC (“Archipelago”), combined the Company’s genetic expertise and resources with Legacy’s experience in hemp extraction and sales. In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to regulatory challenges and a saturated hemp market. In February 2012, the Company formed Verdeca, which was equally owned with Bioceres. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies. In November 2020, Arcadia sold its membership interest in Verdeca to Bioceres in a transaction in which Arcadia received cash, shares of Bioceres stock and a royalty stream of up to $ 10.0 million on sales of Haab 4 soybeans (“HB4”). An additional $ 2.0 million in cash is to be paid to Arcadia upon Verdeca of achieving commercial plantings of at least 200,000 hectares of HB4 or China approving the HB4 soybean trait for “food and feed”. During 2022, Bioceres received China's approval of the HB4 soybean trait and as a result, Arcadia recorded license revenue of $ 862,000 and a gain on sale of Verdeca of $ 1.1 million on the consolidated statements of operations and comprehensive loss. The Company received the full payment of $ 2.0 million as of December 31, 2023. Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Reverse Stock Split In February 2023, the Company’s board of directors approved a reverse split of 40:1 on the Company’s issued and outstanding common stock. On F ebruary 15, 2023, the Company’s stockholders approved the certificate of amendment to the Company’s certificate of incorporation, which the Company filed on February 27, 2023 with the Secretary of State of Delaware to effect the reverse split on March 1, 2023. As a result of the reverse stock split, 19,118 additional shares of common stock were issued in lieu of fractional shares. All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statements have been retroactively adjusted to reflect the reverse stock split for all periods presented. Liquidity, Capital Resources, and Going Concern The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. Since inception, the Company has financed its operations primarily through equity and debt financings. As of December 31, 2024, the Company had an accumulated deficit of $ 278.9 million and cash and cash equivalents of $ 4.2 million. For the years ended December 31, 2024 and 2023, the Company had net losses of $ 7.0 million and $ 14.0 million, respectively, and net cash used in operations of $ 9.6 million and $ 15.3 million, respectively. The Company believes that its existing cash and cash equivalents will not be sufficient to meet its anticipated cash requirements for at least the next 12 months from the issuance date of these financial statements, and thus raises substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. The Company may seek to raise additional funds through debt or equity financings. The Company may also consider entering into additional partner arrangements. The sale of additional equity would result in dilution to the Company’s stockholders. The incurrence of debt would result in debt service obligations, and the instruments governing such debt could provide for additional operating and financing covenants that would restrict operations. If the Company requires additional funds and is unable to secure adequate additional funding at terms agreeable to the Company, the Company may be forced to reduce spending, extend payment terms with suppliers, liquidate assets, or suspend or curtail planned product launches. Any of these actions could materially harm the business, results of operations and financial condition. 34 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 2. Summary of Significant Accounting Policies Basis of Presentation and Principles of Consolidation The consolidated financial statements include the accounts of the Company and Archipelago. All intercompany balances and transactions have been eliminated in consolidation. The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, or U.S. GAAP (“GAAP”), and with the rules of the Securities and Exchange Commission. The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities ("VIEs"). This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE. For all periods presented, the Company has determined that it is the primary beneficiary of Archipelago, a joint venture, as it has a controlling interest in Archipelago. Accordingly, the Company consolidates Archipelago in the consolidated financial statements after eliminating intercompany transactions. For consolidated joint ventures, the non-controlling partner’s share of the assets, liabilities and operations of the joint venture is included in non-controlling interest as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage of Archipelago. Net loss attributable to non-controlling interest of $ 0 and $ 5,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the years ended December 31, 2024 and 2023, respectively. The non-controlling partner’s equity interest is presented as non-controlling interest on the consolidated balance sheets as of December 31, 2024 and 2023. Non-controlling interest on the consolidated balance sheet was fully written-off as of December 31, 2024. Reclassifications Certain previously reported financial information has been reclassified to conform to the current year presentation. See Note 4 to the consolidated financial statements for a discussion of the reclassification of the financial presentation of our former GoodWheat and body care brands reported as discontinued operations. Unless otherwise noted, amounts and disclosures throughout these notes to consolidated financial statements relate solely to continuing operations and exclude all discontinued operations. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in the Company’s consolidated financial statements and notes thereto. Significant estimates and assumptions made by management included the determination of revenue recognition, the provision for income taxes, net realizable value of inventory, and fair value of the preferred investment option and contingent liabilities. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual results could differ from those estimates. Cash and cash equivalents The Company considers any liquid investment with a stated maturity of three months or less at the date of purchase to be a cash equivalent. Cash and cash equivalents consist of cash on deposit with banks and money-market funds. The Company limits cash investments to financial institutions with high credit standings; therefore, management believes that there is no significant exposure to any credit risk in the Company’s cash and cash equivalents. 35 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Investments in debt and equity securities Investments in debt and equity securities are carried at fair value and classified as short-term investments. Unrealized gains and losses are included in accumulated other comprehensive income, which is reflected as a separate component of stockholder’s equity in the consolidated balance sheets. Gains and losses are recognized when realized in the consolidated statements of operations and comprehensive loss. Investment securities are reported as cash and cash equivalent, short-term investments or long-term investments in the consolidated balance sheets based on the nature of the investments and maturity period. Short-term investments have maturities of less than a year and long-term investments have maturities of a year and greater from the balance sheet date. Other-than-temporary impairments on investments The Company regularly reviews each of its investments for impairment by determining if the investment has sustained an other-than-temporary decline in its value, in which case the investment is written down to its fair value by a charge to earnings. Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include (i) the market value of the investment in relation to its cost basis, (ii) the financial condition of the investment, and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery of the market value of the investment. As of December 31, 2024 and 2023, there was no impairment of the Company’s investments. Accounts receivable and other receivables Accounts receivable represents amounts owed to the Company from product sales, licenses, and royalties. Other receivables represent amounts owed to the Company for miscellaneous non-trade activities including the sale of property and equipment. The carrying value of the Company’s receivables represents estimated net realizable values. The Company generally does not require collateral and estimates any required allowance for doubtful accounts based on historical collection trends, the age of outstanding receivables, and existing economic conditions. If events or changes in circumstances indicate that specific receivable balances may be impaired, further consideration is given to the collectability of those balances and the allowance is recorded accordingly. Past-due receivable balances are written off when the Company’s internal collection efforts have been unsuccessful in collecting the amounts due. The Company had $ 0 amounts reserved for doubtful accounts at December 31, 2024 and 2023, and the allowance activity during each of the years ended December 31, 2024 and 2023, was immaterial. Inventory Inventory costs are tracked on a lot-identified basis and are included as cost of revenues when sold. Inventories are stated at the lower of cost or net realizable value. The Company makes adjustments to inventory when conditions indicate that the net realizable value may be less than cost due to physical deterioration, obsolescence, changes in price levels, or other factors. Additional adjustments to inventory are made for excess and slow-moving inventory on hand that is not expected to be sold within a reasonable timeframe to reduce the carrying amount to its estimated net realizable value . Inventories mainly consist of coconut water imported from Thailand and freight costs. The inventories—current line item on the balance sheet represents inventory forecasted to be sold or used in production in the next 12 months, as of the balance sheet date, and consist primarily of Zola Coconut water. Raw materials inventories consists of in-transit Zola Coconut Water. Finished goods inventories consist of Zola Coconut Water that are available for sale. 36 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note receivable In connection with the sale of GoodWheat to Above Food, the Company received a $ 6.0 million promissory note dated May 14, 2024. The promissory note has a term of three years and accrues interest at the Wall Street Journal prime rate . On each of the first, second and third anniversaries of the promissory note, accrued interest and $ 2.0 million of principal are payable to Arcadia. The first installment payment due in 2025 is classified as current and the remaining installment payments due in 2026 and 2027 are classified as noncurrent on the consolidated balance sheet. The promissory note was assessed using the current expected credit loss (“CECL”) model under ASC 326-20. Based on the information available, the Company determined that no allowance for credit loss was needed regarding the promissory note as of December 31, 2024. Refer to Note 8 for more information on the note receivable. Property and equipment Property and equipment acquisitions are recorded at cost. Provisions for depreciation are calculated using the straight-line method over the following average estimated useful lives of the assets: Years Software and computer equipment 3 Machinery and equipment 2 - 20 Furniture and fixtures 7 Leasehold improvements 2 - 10 * *Leasehold improvements are depreciated over the shorter of the estimated life of the asset or the remaining life of the lease. The Company evaluates if events and circumstances have occurred that indicate the remaining estimated useful life of fixed assets may warrant revision or that the remaining balance of these assets may not be recoverable. In evaluating for recoverability, the Company estimates the future undiscounted cash flows expected to result from the use of the assets and their eventual disposition. In the event that the balance of any asset exceeds the future undiscounted cash flow estimate, impairment is recognized based on the excess of the carrying amounts of the asset above its estimated fair value. Fair value of financial instruments Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis. Assets and liabilities recorded at fair value in the consolidated financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels, which are directly related to the amount of subjectivity associated with the inputs to the valuation of these assets or liabilities, are as follows: • Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Company can access at the measurement date. • Level 2 inputs are observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level 3 inputs are unobservable inputs for the asset or liability. 37 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Concentration of risk Cash and cash equivalents are maintained with several financial institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally, these deposits may be redeemed upon demand and are maintained with financial institutions with reputable credit and therefore bear minimal credit risk. The Company seeks to mitigate its credit risks by spreading such risks across multiple counterparties and monitoring the risk profiles of these counterparties. Customer concentration Significant customers are those that represent greater than 10% of the Company’s total revenues or gross accounts receivable balance at each respective balance sheet date. Customers representing greater than 10% of accounts receivable were as follows (in percentages): As of December 31, 2024 2023 Customer B — 21 Customer D 13 — Customer E 10 — Customers representing greater than 10% of total revenues were as follows (in percentages): For Year Ended December 31, 2024 2023 Customer B 10 — Customer C 18 13 Customer F 10 — Stock-based compensation The Company recognizes compensation expense related to its employee stock purchase plan and the cost of stock-based compensation awards on a straight-line basis over the requisite service period, net of estimated forfeitures. Judgment is required in estimating the amount of stock-based awards that will be forfeited prior to vesting. Compensation expense could be revised in subsequent periods if actual forfeitures differ from those estimates. The Company has selected the Black-Scholes option-pricing model and various inputs to estimate the fair value of its stock-based awards. See Note 14 for additional information. Amounts recognized in the consolidated statements of operations and comprehensive loss were as follows (in thousands): Year Ended December 31, 2024 2023 Research and development $ 1 $ 3 Selling, general and administrative 511 714 Total stock-based compensation $ 512 $ 717 Income taxes The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences 38 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Net loss per share Basic net loss per share, which excludes dilution, is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share reflects the potential dilution that could occur if securities or other contracts to issue common stock, such as stock options, convertible promissory notes, convertible preferred stock, redeemable convertible preferred stock and warrants, result in the issuance of common stock which share in the losses of the Company. Certain potential shares of common stock have been excluded from the computation of diluted net loss per share as their effect would be anti-dilutive. Such potentially dilutive shares are excluded when the effect would be to reduce the loss per share. Due to net losses, there is no impact on earnings per share calculation in applying the two-class method since the participating securities have no legal requirement to share in any losses. Revenue recognition The Company derives its revenues from product sales, licensing agreements and royalty fees. Product revenues Product revenues consist primarily of Zola and GLA products. We recognize revenue from product sales when control of the product is transferred to third-party distributors and manufacturers, collectively “our customers,” which generally occurs upon delivery. The Company's revenues fluctuate depending on the timing of shipments of product to our customers and are reported net of estimated chargebacks, returns and losses. License revenues License revenues to date consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that the Company receives under the Company’s research and license agreements. The Company recognizes revenue generated from up-front, nonrefundable license fees upon execution of the agreement and recognizes annual license fees when it is probable that a material reversal will not occur. Milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts would not be reversed. The Company assesses when achievement of milestones is probable to determine the timing of revenue recognition for milestone fees. Milestones typically consist of significant stages of development for the Company’s traits in a potential commercial product, such as achievement of specific technological targets, completion of field trials, filing with regulatory agencies, completion of the regulatory process, and commercial launch of a product containing the Company’s traits. Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and the Company’s license revenues are likely to fluctuate significantly from period to period. Royalty revenues Royalty revenues consist of amounts earned from the sale of commercial products that incorporate the Company's traits by third parties. Royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products. The Company recognizes the minimum annual royalty on a straight-line basis over the year, and the Company recognizes royalty revenue resulting from the sale of products when the third parties transfer control of the 39 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) product to their customers, which generally occurs upon shipment. Royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers. Unearned revenue The Company defers revenue to the extent that cash received in conjunction with a license agreement is not yet earned in accordance with the Company policies. The opening and closing accounts and other receivables balances for the year ended December 31, 2024 were $ 506,000 and $ 1.2 million, respectively. The opening and closing accounts and other receivables balances for the year ended December 31, 2023 were $ 1.2 million and $ 506,000 , respectively. Cost of revenues Cost of revenues primarily relates to the sale of Zola products and consists primarily of product and freight costs. Adjustments or write-downs to inventory are also included in cost of revenues. Research and development expenses Research and development expenses consist of costs incurred in the development and testing of the Company's products. These expenses currently consist primarily of fees paid to product formulation consultants and are expensed as incurred. Additionally, the Company is required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties. The Company's research and development expenses may fluctuate from period to period. Change in the estimated fair value of common stock warrant and option liabilities Change in the estimated fair value of common stock warrant and option liabilities is comprised of the fair value remeasurement of liability classified common stock warrants and options. See Note 7. Note 3. Recent Accounting Pronouncements In November 2023, the Financial Accounting Standards Board ("FASB") issued ASU No. 2023-07, Segment Reporting (Topic 280) — Improvements to Reportable Segment Disclosures. The amendments in this update improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses. The new guidance is effective retrospectively for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The Company adopted ASU No. 2023-07 on January 1, 2024 with an immaterial impact on the Company’s disclosures. In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) — Improvements to Income Tax Disclosures. The amendments in this update require additional income tax disclosures primarily related to the rate reconciliation and income taxes paid. The new guidance is effective either prospectively or retrospectively, for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the impact of this update on our income tax disclosures. In November 2024, the FASB issued ASU No. 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40). The amendments in this update, among other things, requires quantitative disclosures for employee compensation, selling expenses and purchases of inventory. The new guidance is effective for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027, with early adoption permitted. The Company is currently evaluating the impact of this update on our financial statements and disclosures. 40 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 4. Discontinued Operations On May 16, 2024, the Company sold the GoodWheat brand to Above Food. GoodWheat operations ceased during the second quarter of 2024. In July 2023, management made the decision to exit its body care brands as a result of continued pressure on the CBD market due to regulatory uncertainty. Body care operations ceased during the third quarter of 2023. In accordance with the provisions of ASC 205-20, the Company has separately reported the assets and liabilities of the discontinued operations in the consolidated balance sheets and the results of the discontinued operations as separate components on the consolidated statements of operations and comprehensive loss for all periods presented. Major classes of line items constituting the balance sheet of discontinued operations: GoodWheat (In thousands) December 31, 2024 December 31, 2023 Assets Accounts receivable and other receivables $ 96 $ 8 Inventories, net — current — 1,121 Property and equipment, net — 314 Inventories, net — noncurrent — 3,158 Total assets $ 96 $ 4,601 Liabilities Accounts payable and accrued expenses $ — $ 500 Total liabilities $ — $ 500 Major classes of line items constituting net loss from discontinued operations: GoodWheat Body Care Year Ended December 31, Year Ended December 31, 2024 2023 2024 2023 (In thousands) Product revenue $ 372 $ 876 $ — $ 357 Cost of revenues ( 691 ) ( 1,126 ) — ( 314 ) Research and development ( 400 ) ( 1,323 ) — — Gain on sale of property and equipment 65 11 — — Selling, general and administrative ( 2,067 ) ( 6,274 ) — ( 864 ) Net loss from discontinued operations $ ( 2,721 ) $ ( 7,836 ) $ — $ ( 821 ) 41 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) The following table presents significant cash and non-cash items of discontinued operations: GoodWheat Body Care Year Ended December 31, Year Ended December 31, (In thousands) 2024 2023 2024 2023 Depreciation $ 45 $ 151 $ — $ 24 Write-down of inventories $ — $ 275 $ — $ — Gain on disposal of property and equipment $ ( 65 ) $ ( 11 ) $ — $ — Accounts receivable and other receivables $ ( 88 ) $ ( 8 ) $ — $ 66 Inventories $ ( 575 ) $ ( 2,969 ) $ — $ 250 Prepaid expenses and other current assets $ — $ — $ — $ 14 Accounts payable and accrued expenses $ ( 501 ) $ 26 $ — $ ( 26 ) Proceeds from sale of property and equipment $ 334 $ 48 $ — $ — There were no other significant operating or investing cash or non-cash items for the years ended December 31, 2024 and 2023. Note 5. Inventory Inventory costs are tracked on a lot-identified basis and are included as cost of revenues when sold. Inventories are stated at the lower of cost or net realizable value. The Company makes adjustments to inventory when conditions indicate that the net realizable value may be less than cost due to physical deterioration, obsolescence, changes in price levels, or other factors. Additional adjustments to inventory are made for excess and slow-moving inventory on hand that is not expected to be sold within a reasonable timeframe to reduce the carrying amount to its estimated net realizable value. The write-downs to inventory are included in cost of revenues and are based upon estimates about future demand from the Company’s customers and distributors and market conditions. The Company recorded a write-down of $ 154,000 related to hemp and GoodWheat seed during the year ended December 31, 2024. The Company recorded inventory write-downs of $ 444,000 related to packaging materials, hemp seed and GoodWheat during the year ended December 31, 2023. If there are significant changes in demand and market conditions, substantial future write-downs of inventory may be required, which would materially increase the Company’s expenses in the period the write down is taken and materially affect the Company’s operating results. Inventories, net consist of the following (in thousands): December 31, 2024 December 31, 2023 Raw materials $ 289 $ 373 Finished goods 615 660 Inventories $ 904 $ 1,033 42 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 6. Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): As of December 31, 2024 2023 Software and computer equipment 291 349 Machinery and equipment — 34 Furniture and fixtures 32 39 Leasehold improvements 1,584 1,590 Property and equipment, gross 1,907 2,012 Less accumulated depreciation and amortization ( 1,866 ) ( 1,942 ) Property and equipment, net $ 41 $ 70 Depreciation expense was $ 58,000 and $ 111,000 for the years ended December 31, 2024 and 2023, respectively. Property and equipment are considered assets held for sale when management approves and commits to a plan to dispose of a property or group of properties. The property and equipment held for sale prior to the sale date is separately presented, within current assets, on the consolidated balance sheet as assets held for sale. During the year ended December 31, 2023, management initiated the sale of property and equipment related to Archipelago. The Company completed the sale of such property and equipment with a net gain on sale of property and equipment in the amount of $ 29,000 recorded on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2023. The proceeds related to the sale of property and equipment during the year ended December 31, 2023 were $ 65,000 . Property and equipment related to Archipelago of $ 51,000 were classified as assets held for sale as of December 31, 2023. During the first quarter of 2024, the Company recorded an impairment of $ 36,000 related to these assets. During the second quarter of 2024, all Archipelago property and equipment previously held for sale were sold. Note 7. Investments and Fair Value Instruments Investments The investments are carried at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses are included in accumulated other comprehensive income, which is reflected as a separate component of stockholder’s equity in the consolidated balance sheets. Gains and losses are recognized when realized in the consolidated statements of operations and comprehensive loss. The following tables summarize the amortized cost and fair value of the investment securities portfolio at December 31, 2024 and 2023: (Dollars in thousands) Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value December 31, 2024 Cash equivalents: Money market funds $ 2,757 $ — $ — $ 2,757 Total Assets at Fair Value $ 2,757 $ — $ — $ 2,757 43 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) (Dollars in thousands) Amortized Cost Unrealized Gains Unrealized Losses Estimated Fair Value December 31, 2023 Cash equivalents: Money market funds $ 4,925 $ — $ — $ 4,925 Short-term investments: Treasury bills $ 5,023 $ 101 $ — $ 5,124 Total Assets at Fair Value $ 9,948 $ 101 $ — $ 10,049 The Company did no t have any investment categories that were in a continuous unrealized loss position for more than twelve months as of December 31, 2024 and 2023. Fair Value Measurement The fair value of the investment securities at December 31, 2024 were as follows: Fair Value Measurements at December 31, 2024 (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets at Fair Value Cash equivalents: Money market funds $ 2,757 $ — $ — $ 2,757 Total Assets at Fair Value $ 2,757 $ — $ — $ 2,757 The fair value of the investment securities at December 31, 2023 were as follows: Fair Value Measurements at December 31, 2023 (Dollars in thousands) Level 1 Level 2 Level 3 Total Assets at Fair Value Cash equivalents: Money market funds $ 4,925 $ — $ — $ 4,925 Short-term investments: Treasury bills $ 5,124 $ — $ — $ 5,124 Total Assets at Fair Value $ 10,049 $ — $ — $ 10,049 The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2024 or 2023. The Company’s financial instruments consist primarily of cash and cash equivalents, short-term investments, accounts receivable and other receivables, note receivable, accounts payable and accrued liabilities. For short-term investments, accounts receivable and other receivables, accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of December 31, 2024 and December 31, 2023 were considered representative of their fair values due to their short term to maturity or repayment. Cash equivalents are carried at cost, which approximates their fair value. The note receivable is recorded at amortized cost. The amortized cost of the note receivable is considered approximate fair value due to its variable interest rate. The Company’s Level 3 liabilities consist of a contingent liability resulting from the Anawah, Inc. ("Anawah") acquisition as described in Note 15, as well as preferred investment options related to the March 2023 Private Placement offering discussed in Note 12. The contingent liability related to the Anawah acquisition was measured and recorded on a recurring basis as of December 31, 2024 and 2023, using unobservable inputs, namely the Company’s ability and intent to pursue certain specific products developed using technology acquired in the purchase. A significant deviation in the Company’s ability and/or intent to pursue the technology acquired in the purchase could result in a significantly lower (higher) fair value measurement. 44 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) The preferred investment option liabilities were measured and recorded on a recurring basis using the Black-Scholes Model with the following assumptions at December 31, 2024 and 2023: March 2023 Options - Series A & March 2023 Placement Agent Options March 2023 Options - Series B August 2022 Options & August 2022 Placement Agent Options December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 December 31, 2024 December 31, 2023 Remaining term (in years) 3.14 4.16 — 0.61 2.67 3.67 Expected volatility 101.7 % 91.7 % — 78.7 % 95.9 % 90.5 % Risk-free interest rate 4.3 % 3.9 % — 5.2 % 4.3 % 4.0 % Expected dividend yield — — — — — — The significant unobservable input used in the fair value measurement of the Company’s Level 3 warrant liabilities is volatility. A significant increase (decrease) in volatility could result in a significantly higher (lower) fair value measurement. The following table sets forth the establishment of the Company’s Level 3 liabilities, as well as a summary of the changes in the fair value and other adjustments (in thousands): (Dollars in thousands) March 2023 Options - Series A March 2023 Options - Series B March 2023 Placement Agent Options August 2022 Options August 2022 Placement Agent Options Note Receivable Bifurcated Derivatives Contingent Liabilities Total Balance as of December 31, 2023 $ 1,008 $ 41 $ 46 $ 159 $ 3 $ — $ 2,000 $ 3,257 Initial recognition — — — — — 250 — 250 Change in fair value and other adjustments 1,277 ( 41 ) 44 190 4 — — 1,474 Balance as of December 31, 2024 $ 2,285 $ — $ 90 $ 349 $ 7 $ 250 $ 2,000 $ 4,981 Assets classified as held for sale were recorded at fair value as of December 31, 2023. The Company has classified the fair value measurements as a Level 3 measurement in the fair value hierarchy as the fair value has been estimated using publicly available prices for some of the assets, and business partners' estimates for assets with prices not readily available, due to the relatively small size of the industry in which they can be used. Note 8. Note Receivable and Embedded Derivatives On May 16, 2024, the Company sold the GoodWheat brand to Above Food for net consideration of $ 3.7 million. The assets sold consisted primarily of grain and finished goods inventories, formulations and trademarks. A loss of $ 1,500 was recognized in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2024, related to the sale. In connection with the transaction, Arcadia paid to Above Food $ 2.0 million and received a $ 6.0 million promissory note dated May 14, 2024. The promissory note has a term of three years and accrues interest at the Wall Street Journal prime rate . On each of the first, second and third anniversaries of the promissory note, accrued interest and $ 2.0 million of principal are payable to Arcadia. The promissory note contains contingent features, including an option that requires Above Food to cause its parent entity, Above Food Ingredients Inc. (“Parent Company”), to issue to the Company publicly traded stock of Parent Company in exchange for the cancellation of a portion of the principal of the promissory note, as well as default provisions. The Company accounted for the promissory note as a note receivable in accordance with ASC 310. The Company did not elect the fair value option and since the Company intends to and has the ability to hold the promissory note to maturity, it has been classified as held for investment and is reported on the consolidated balance sheet at amortized cost. The first installment payment due in 2025 is classified as current and the remaining installment payments due in 2026 and 2027 are classified as noncurrent on the consolidated balance sheet. 45 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) The promissory note was recorded at a discount of $ 545,000, which is being amortized over the term of the promissory note using the effective interest method. The Company recognized discount amortization and accrued interest of $ 157,000 and $ 310,000 in the consolidated statements of operations and comprehensive loss during the year ended December 31, 2024, respectively. Embedded Derivatives The contingent features of the promissory note were evaluated for bifurcation in accordance with ASC 815. The contingent features requiring bifurcation had an estimated fair value of $ 250,000 as of the transaction date and as of December 31, 2024. The estimated fair value of the contingent features is reported in note receivable – noncurrent on the consolidated balance sheet as of December 31, 2024. Note 9. Consolidated Joint Venture In 2019, the Company and Legacy Ventures Hawaii, LLC, a Nevada limited liability company (“Legacy”), formed Archipelago Ventures Hawaii, LLC, a Delaware limited liability company and entered into a Limited Liability Company Operating Agreement (the “Operating Agreement”). The Company and Legacy formed Archipelago to develop, extract and commercialize hemp-derived products from industrial hemp grown in Hawaii. Pursuant to the Operating Agreement, a joint operating committee consisting of two individuals appointed by the Company and two individuals appointed by Legacy will manage Archipelago. As of December 31, 2024, the Company and Legacy hold 50.75 % and 49.25 % interests in Archipelago, respectively, and have made capital contributions to Archipelago of $ 3.1 million and $ 3.0 million, respectively, as determined by the joint operating committee. The Operating Agreement includes indemnification rights, non-competition obligations, and certain rights and obligations in connection with the transfer of membership interests, including rights of first refusal. The Company consolidates Archipelago in the consolidated financial statements after eliminating intercompany transactions. Net loss attributable to non-controlling interest of $ 0 and $ 5,000 was recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the years ended December 31, 2024 and 2023, respectively. Legacy’s equity interests are presented as non-controlling interests on the consolidated balance sheets. Refer to Note 2 for basis of presentation. In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to regulatory challenges and a saturated hemp market. Note 10. Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of the following (in thousands): As of December 31, 2024 2023 Accounts payable - trade $ 703 $ 485 Payroll and benefits 962 1,119 Royalty fees due to unrelated parties 5 4 Audit and tax fees 225 218 Legal 41 40 Other 172 44 Total accounts payable and accrued expenses $ 2,108 $ 1,910 46 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 11. Collaborative Arrangements In August 2017 , the Company entered into a collaborative arrangement for the research, development and commercialization of an improved wheat quality trait in North America. This collaborative arrangement is a contractual agreement with Corteva and involves a joint operating activity where both Arcadia and Corteva are active participants in the activities of the collaboration. Arcadia and Corteva participate in the research and development, and Arcadia has the primary responsibility for the intellectual property strategy while Corteva will generally lead the marketing and commercialization efforts. Both parties are exposed to significant risks and rewards of the collaboration and the agreement includes both cost sharing and profit sharing. The activities are performed with no guarantee of either technological or commercial success. The Company accounts for research and development (“R&D”) costs in accordance ASC 730, Research and Development , which states R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results are achieved. On May 14, 2024, the Company sold its RS durum wheat trait to Corteva. Under the terms of the agreement, Arcadia retained certain rights to use the RS durum wheat trait. The Company received $ 4.0 million in cash payment from Corteva during the year ended December 31, 2024 and recorded a gain of the same amount as the trait had no carrying value on the consolidated statement of operations and comprehensive loss related to the transaction. Note 12. Equity Financing March 2023 Private Placement In March 2023, the Company issued in a private placement offering (the “March 2023 Private Placement”) pursuant to a securities purchase agreement (“March 2023 Purchase Agreement”) (i) 165,500 shares of its common stock, (ii) pre-funded common stock purchase warrants (the “March 2023 Pre-Funded Warrants”) to purchase up to 500,834 shares of common stock, at an exercise price of $ 0.0001 per share, (iii) Series A preferred investment options (the “March 2023 Options - Series A") to purchase up to a total of 666,334 shares of common stock, at an exercise price of $ 9.00 per share, and (iv) Series B preferred investment options (the “March 2023 Options - Series B”, and together with the March 2023 Options - Series A, the "March 2023 Options") to purchase up to a total of 666,334 shares of common stock, at an exercise price of $ 9.00 per share, and raised total gross proceeds of $ 6.0 million. The March 2023 Private Placement closed on March 6, 2023. The March 2023 Pre-Funded Warrants became exercisable upon issuance and were fully exercised as of December 31, 2024. The March 2023 Options - Series A are exercisable at any time at the option of the holder and expire 5 years from the date of issuance. The March 2023 Options - Series B are exercisable at any time at the option of the holder and expire 1.5 years from the date of issuance. During the year ended December 31, 2023, 425,834 Pre-Funded Warrants were exercised. In connection with the March 2023 Private Placement, the Company entered into preferred investment option amendment agreements (the “Option Amendment Agreements”) with certain investors. Under the Option Amendment Agreements, the Company agreed to amend certain existing warrants and preferred investment options to purchase up to a total of 178,132 shares of common stock that were previously issued to the investors in September 2019, May 2020, July 2020, December 2020, January 2021 and August 2022, with exercise prices of $ 300.80 , $ 191.00 , $ 154.00 , $ 120.00 , $ 125.20 and $ 37.35 per share, respectively (the “Existing Warrants”). Under the Option Amendment Agreements, the Company agreed to lower the exercise price of the Existing Warrants to $ 9.00 per share. In addition, the Company granted to a placement agent preferred investment options to purchase a total of 33,317 shares of Common Stock (the “March 2023 Placement Agent Options”) that have an exercise price per share equal to $ 11.25 and a term of 5 years from the date of issuance. The re-pricing of the Existing Warrants resulted in an increase in fair value of $ 404,000 , of which $ 185,000 of the increase in fair value was related to the August 2022 liability classified options. The increase in fair value related to the re-pricing of Existing Warrants was recognized in Valuation Loss on March 2023 PIPE on the consolidated statements of operations and comprehensive loss. 47 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) The March 2023 Options and March 2023 Placement Agent Options are classified as liabilities within Level 3 due to certain early settlement provisions that preclude them from equity classification. The Company utilized the Black-Scholes Model on March 6, 2023 with the following assumptions for the Series A Investment Options: volatility of 128.55 %, stock price of $ 7.61 and risk-free rate of 4.27 %. The following assumptions were utilized for the Series B Investment Options: volatility of 103.33 %, stock price of $ 7.61 and risk-free rate of 4.97 %. The estimated fair value of the liability classified March 2023 Options issued was $ 6.6 million. The estimated fair value of the common stock option liabilities was subsequently remeasured at December 31, 2023 with the changes recorded on the Company’s consolidated statements of operations and comprehensive loss. The estimated fair value of the common stock issued and March 2023 Pre-Funded Warrants was $ 5.1 million. The total estimated fair value of the common stock issued, March 2023 Pre-Funded Warrants and March 2023 Options as of March 6, 2023 exceeded the gross proceeds of the March 2023 Private Placement by $ 5.7 million and this amount was recognized in Valuation Loss on March 2023 PIPE on the consolidated statements of operations and comprehensive loss. The March 2023 Placement Agent Options were issued for services performed by the placement agent as part of the March 2023 Private Placement and were treated as offering costs. The value of the March 2023 Placement Agent Options was determined to be $ 212,000 , calculated using the Black-Scholes Model. The Company incurred additional offering costs totaling $ 548,000 that consist of direct incremental legal, advisory, accounting and filing fees relating to the March 2023 Private Placement. A total of $ 430,000 was allocated to the common stock option liabilities and expensed while the remaining $ 330,000 was allocated to the common stock and March 2023 Pre-Funded Warrants and offset to additional paid in capital. 48 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 13. Warrants and Options Equity Classified Common Stock Warrants The Company issued the following warrants to purchase shares of its common stock, which are outstanding as of December 31, 2024 and 2023, respectively. These warrants are exercisable any time at the option of the holder until their expiration date. Issuance Date Term Exercise Price Per Share Exercised during the Year Ended December 31, 2023 Outstanding at December 31, 2023 Exercised during the Year Ended December 31, 2024 Outstanding at December 31, 2024 March 2023 Pre-Funded Warrants Mar-23 perpetual $ — ( 425,834 ) 75,000 ( 75,000 ) — December 2022 Service and Performance Warrants (1) Dec-22 5 years $ 11.20 — 1,000 — 1,000 October 2022 Service and Performance Warrants (1) Oct-22 5 years $ 16.00 — 1,000 — 1,000 August 2022 Pre-Funded Warrants Aug-22 perpetual $ — ( 56,813 ) — — — January 2021 Placement Agent Warrants Jan-21 5.5 years $ 159.60 — 9,846 — 9,846 December 2020 Warrants (2) Dec-20 5.5 years $ 9.0 0 — 16,367 — 16,367 December 2020 Warrants Dec-20 5.5 years $ 120.00 — 49,100 — 49,100 December 2020 Placement Agent Warrants Dec-20 5 years $ 152.80 — 3,274 — 3,274 July 2020 Warrants (2) Jul-20 5.5 years $ 9.00 — 16,036 — 16,036 July 2020 Placement Agent Warrants Jul-20 5.5 years $ 198.80 — 802 — 802 May 2020 Warrants (2) May-20 5 years $ 9.00 — 9,946 — 9,946 May 2020 Warrants May-20 5 years $ 191.20 — 24,863 — 24,863 May 2020 Placement Agent Warrants May-20 5 years $ 245.20 — 1,741 — 1,741 September 2019 Placement Agent Warrants (3) Sep-19 5 years $ 379.20 — 1,649 — — June 2019 Placement Agent Warrants (3) Jun-19 5 years $ 251.60 — 1,862 — — April 2019 Service and Performance Warrants (1)(3) Apr-19 5 years $ 247.20 — 3,629 — — January 2021 Warrants (2) Jan-21 5.5 years $ 9.00 — 7,831 — 7,831 January 2021 Warrants Jan-21 5.5 years $ 125.20 — 90,629 — 90,629 September 2019 Warrants (2) Sep-19 5.5 years $ 9.00 — 9,892 — 9,892 September 2019 Warrants Sep-19 5.5 years $ 300.80 — 6,594 — 6,594 June 2019 Warrants Jun-19 5.5 years $ 200.00 — 10,896 — 10,896 Total ( 482,647 ) 341,957 ( 75,000 ) 259,817 (1) The Company issued service and performance warrants (“Service and Performance Warrants”) in connection with professional services agreements with non-affiliated third party entities. (2) These warrants were repriced as part of the March 2023 Private Placement offering. (3) These warrants expired during the year ended December 31, 2024. Liability Classified Preferred Investment Options The preferred investment options issued in connection with the March 2023 Private Placement and August 2022 Registered Direct offerings contain certain early settlement provisions that preclude them from equity classification and therefore were accounted for as liabilities at the date of issuance and are adjusted to fair value at each balance sheet date. The change in fair value of the options liabilities is recorded as change in fair value of common stock 49 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) warrant and option liabilities in the consolidated statements of operations and comprehensive loss. The key terms and activity of the liability classified preferred investment options are summarized as follows: Issuance Date Term Exercise Price Per Share Exercised during the Year Ended December 31, 2023 Outstanding at December 31, 2023 Exercised during the Year Ended December 31, 2024 Outstanding at December 31, 2024 March 2023 Options - Series A March 2023 5 years $ 9.00 — 666,334 — 666,334 March 2023 Options - Series B March 2023 1.5 years $ 9.00 — 666,334 — — March 2023 Placement Agent Options March 2023 5 years $ 11.25 — 33,317 — 33,317 August 2022 Options (1) August 2022 5 years $ 9.00 — 118,063 — 118,063 August 2022 Placement Agent Options August 2022 5 years $ 52.80 — 5,904 — 5,904 Total — 1,489,952 — 823,618 See Note 7 for the Black-Scholes option-pricing model and weighted-average assumptions used to estimate the fair value of the preferred investment options liabilities. Note 14. Stock-Based Compensation and Employee Stock Purchase Program Stock Incentive Plans The Company has two equity incentive plans: the 2006 Stock Plan (“2006 Plan”) and the 2015 Omnibus Equity Incentive Plan (“2015 Plan”). In 2006, the Company adopted the 2006 Plan, which provided for the granting of stock options to executives, employees, and other service providers under terms and provisions established by the Board of Directors. The Company granted non-statutory stock options (“NSOs”) under the 2006 Plan until May 2015, when it was terminated as to future awards, although it continues to govern the terms of options that remain outstanding and were issued under the 2006 Plan. The 2015 Plan became effective upon the Company’s IPO in May 2015 and all shares that were reserved, but not issued, under the 2006 Plan were assumed by the 2015 Plan. Upon effectiveness, the 2015 Plan had 3,860 shares of common stock reserved for future issuance, which included 259 that were transferred to and assumed by the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant. In addition, shares subject to awards under the 2006 Plan that are forfeited or canceled will be added to the 2015 Plan. The maximum number of shares that may be awarded to any individual employee, including our directors and officers, during any calendar year was 9,375 shares. The 2015 Plan provides for the grant of incentive stock options (“ISOs”), NSOs, restricted stock awards, stock units, stock appreciation rights, and other forms of equity compensation, all of which may be granted to employees, officers, non-employee directors, and consultants. The exercise price for ISOs and NSOs will be granted at a price per share not less than the fair value of our common stock at the date of grant. Options granted generally vest over a four-year period; however, there might be alternative vesting schedules, as approved by the Board. Options granted, once vested, are generally exercisable for up to 10 years, after grant to the extent vested. On June 25, 2024, the shareholders approved an amendment to the Company’s 2015 Plan that increased the number of shares of common stock that may be issued under the 2015 Plan by 200,000 shares and increased the maximum number of shares of common stock issuable to employees, including our officers and directors, in any fiscal year from 9,375 shares to 50,000 shares. On February 2, 2022, former president and chief executive officer of the Company, Stanley Jacot Jr. was hired. The Company granted Mr. Jacot an inducement stock option to purchase 7,902 shares of the Company’s common stock pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The Company filed a registration statement on Form S-8 to register the issuance of shares upon exercise of this inducement stock option. The inducement options grants were issued outside of the 2015 Plan, but are subject to the terms and conditions of the 2015 Plan. As of December 31, 2024, a total of 338,310 shares of common stock were 50 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) reserved for issuance under the 2015 Plan, of which 133,074 shares of common stock are available for future grant. As of December 31, 2024, a total of 40 and 205,236 options were outstanding under the 2006 and 2015 Plans, respectively. As of December 31, 2023, a total of 102 and 71,609 options were outstanding under the 2006 and 2015 Plans, respectively. A total of 199 and 8,366 inducement options were outstanding as of December 31, 2024 and 2023, respectively. The following is a summary of stock option information and weighted average exercise prices under the Company’s stock incentive plans (in thousands, except share data and price per share): Shares Subject to Outstanding Options Weighted- Average Exercise Price Per Share Aggregate Intrinsic Value Outstanding — Balance at December 31, 2022 60,002 $ 115 $ — Options granted 26,021 6 — Options exercised — — — Options forfeited ( 5,644 ) 30 39,062 Options expired ( 301 ) 121 — Outstanding — Balance at December 31, 2023 80,078 85 — Options granted 158,000 3 — Options exercised — — — Options forfeited ( 11,197 ) 24 397 Options expired ( 21,406 ) 129 — Outstanding — Balance at December 31, 2024 205,475 21 516,378 Vested and expected to vest — December 31, 2024 188,554 22 463,513 Exercisable —December 31, 2024 43,059 $ 86 $ 9,533 Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock determined by its Board of Directors for each of the respective periods. As of December 31, 2024, there was $ 317,000 of unrecognized compensation cost related to unvested stock-based compensation grants that will be recognized over the weighted-average remaining recognition period of 1.2 years. In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine. Expected Term— The expected term is the estimated period of time outstanding for stock options granted and was estimated based on a simplified method allowed by the SEC, and defines the term as the average of the contractual term of the options and the weighted-average vesting period for all open employee awards. Expected Volatility— The historical volatility data was computed using the daily closing prices for the Company’s shares during the equivalent period of the calculated expected term of the stock-based awards. Risk-Free Interest Rate— The risk-free interest rate is based on the interest rate of U.S. Treasuries of comparable maturities on the date the options were granted. Expected Dividend— The expected dividend yield is based on the Company’s expectation of future dividend payouts to common stockholders. The fair value of stock option awards was estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumption: 51 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Year Ended December 31, Assumptions 2024 2023 Expected term (years) 8.04 7.06 Expected volatility 101 % 124 % Risk-free interest rate 3.77 % 3.61 % Expected dividend yield — — The weighted-average, estimated grant date fair value of employee stock options granted during the years ended December 31, 2024 and 2023 was $ 2.33 and $ 5.72 , respectively. The Company recognized $ 512,000 and $ 717,000 of compensation expense for stock options awards for the years ended December 31, 2024 and 2023, respectively. Employee Stock Purchase Plan The Company’s 2015 Employee Stock Purchase Plan (“ESPP”) became effective on May 14, 2015. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of up to 15 % of their eligible compensation through payroll deductions, subject to any plan limitations. After the first offering period, which began on May 14, 2015 and ended on February 1, 2016 , the ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85 % of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. As of December 31, 2024 , the number of shares of common stock reserved for future issuance under the ESPP were 3,208 . The ESPP provides for automatic annual increases in the shares available for purchase beginning on January 1, 2016. As of December 31, 2024 , 8,071 shares had been issued under the ESPP. The Company recorded $ 7,000 and $ 6,000 of ESPP related compensation expense for the years ended December 31, 2024 and 2023 , respectively. 52 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 15. Commitments and Contingencies Leases The Company leases office and laboratory space, warehouse space, and equipment under operating lease agreements having initial lease terms ranging from one to five years , including certain renewal options available to the Company at market rates. See Note 16. Legal Matters From time to time, in the ordinary course of business, the Company may become involved in certain legal proceedings. The Company currently is not a party to any material litigation or other material legal proceedings. Refer to Note 22 for more information. Contingent Liability Related to the Anawah Acquisition In June 2005 , the Company completed its agreement and plan of merger and reorganization with Anawah to purchase the Anawah’s food and agricultural research company through a non-cash stock purchase. Pursuant to the merger with Anawah, the Company incurred a contingent liability not to exceed $ 5.0 million. This liability represents amounts to be paid to Anawah’s previous stockholders for cash collected on revenue recognized by the Company upon commercial sale of certain specific products developed using technology acquired in the purchase. During 2010, the Company ceased activities relating to three of the six Anawah product programs thus, the contingent liability was reduced to $ 3.0 million. During 2016, one of the programs previously accrued for was abandoned and another program previously abandoned was reactivated. During 2019, the Company determined that one of the technologies was no longer active and decided to abandon the previously accrued program. As of December 31, 2024, the Company continues to pursue or are otherwise liable for a total of two development programs using this technology and believes that the contingent liability is probable. As a result, $ 2.0 million remains on the consolidated balance sheet as an other noncurrent liability. Contracts The Company has entered into contract research agreements with unrelated parties that require the Company to pay certain funding commitments. The initial terms of these agreements range from one to three years in duration and in certain cases are cancelable. The Company licenses certain technologies via executed agreements (“In-Licensing Agreements”) that are used to develop and advance the Company’s own technologies. The Company has entered into various In-Licensing Agreements with related and unrelated parties that require the Company to pay certain license fees, royalties, and/or milestone fees. In addition, certain royalty payments ranging from 2 % to 15 % of net revenue amounts as defined in the In-Licensing Agreements are or will be due. The Company could be adversely affected by certain actions by the government as it relates to government contract revenue received in prior years. Government agencies, such as the Defense Contract Audit Agency routinely audit and investigate government contractors. These agencies review a contractor’s performance under its agreements; cost structure; and compliance with applicable laws, regulations and standards. The agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. While the Company’s management anticipates no adverse result from an audit, should any costs be found to be improperly allocated to a government agreement, such costs will not be reimbursed, or if already reimbursed, may need to be refunded. If an audit uncovers improper or illegal activities, civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments or fines, and suspension or prohibition from doing business with the government could occur. In addition, serious reputational harm or significant adverse financial effects could occur if allegations of impropriety were made against the Company. There currently are routine audits in process relating to government grant revenues. 53 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 16. Leases Operating Leases As of December 31, 2024, the Company leases office space in Dallas, TX, Davis and Sacramento, CA, as well as additional buildings, land and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these short-term leases on a straight-line basis. The Company subleases the Davis office to third parties. Some leases (the Dallas and Davis offices, a warehouse, and a copy machine) include one or more options to renew , with renewal terms that can extend the lease term from one to six years . The exercise of lease renewal options is at the Company’s sole discretion. In January 2024, the Company exercised it's option to renew the facility lease in American Falls, Idaho for one year through December 31, 2024. The lease renewal resulted in recognition of additional right-of-use asset and lease liability of $ 86,000 on the consolidated balance sheet. The Company subsequently terminated the facility lease in American Falls, Idaho effective July 2024. The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or material restrictive covenants. Leases consisted of the following (in thousands): Leases Classification December 31, 2024 December 31, 2023 Assets Operating lease assets Right of use asset $ 137 $ 792 Total leased assets $ 137 $ 792 Liabilities Current - Operating Operating lease liability - current $ 155 $ 852 Noncurrent - Operating Operating lease liability - noncurrent — 155 Total leased liabilities $ 155 $ 1,007 Lease Cost Classification For the Year Ended December 31, 2024 For the Year Ended December 31, 2023 Operating lease cost SG&A and R&D Expenses $ 850 $ 763 Short term lease cost SG&A and R&D Expenses 13 13 Sublease income (1) SG&A and R&D Expenses ( 547 ) ( 450 ) Net lease cost $ 316 $ 326 (1) Sublease income is recorded as a reduction to lease expense. Lease Term and Discount Rate December 31, 2024 December 31, 2023 Weighted-average remaining lease term (years) 0.6 2.3 Weighted-average discount rate 6.5 % 6.0 % The maturities of the operating lease liabilities as of December 31, 2024 are as follows (in thousands): Years Ending December 31, Amounts 2025 155 Total current operating lease payments $ 155 54 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 17. Income Taxes The components of loss before income taxes are as follows (in thousands): Year Ended December 31, 2024 2023 Domestic $ ( 7,030 ) $ ( 13,978 ) Foreign — — Loss before income taxes $ ( 7,030 ) $ ( 13,978 ) The total income tax provision for each of the years ended December 31, 2024 and 2023 was expense of $ 8,000 and is comprised of current state taxes and current foreign taxes withheld by governmental agencies outside of the United States, as follows (in thousands): Year Ended December 31, 2024 2023 Current: Federal $ — $ — State ( 8 ) ( 7 ) Foreign — ( 1 ) Total current tax (expense) ( 8 ) ( 8 ) Deferred: Federal — — State — — Foreign — — Total deferred tax (expense) — — Total tax (expense) $ ( 8 ) $ ( 8 ) The Company operates in only one federal jurisdiction, the United States. The following is a reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows: Year Ended December 31, 2024 2023 Expected income tax provision at the federal statutory rate 21.0 % 21.0 % State taxes, net of federal benefits ( 1.2 )% 5.0 % Change in valuation allowance ( 15.5 )% ( 26.6 )% Derivative liability ( 4.4 )% 9.8 % PIPE Transactions — ( 9.8 )% Other — 0.5 % Income tax provision ( 0.1 )% ( 0.1 )% 55 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, net operating loss carryforwards (“NOLs”) and other tax credits. Significant components of the Company’s deferred tax assets and liabilities are as follows (in thousands): As of December 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 25,336 $ 23,160 Stock-based compensation 932 4,654 Accrued payroll and benefits 47 342 Research and development credits 16 16 Fixed asset basis difference 106 87 Inventory reserve 3 102 Charitable contributions 3 3 Income from partnerships 217 231 Lease liability 42 261 Other accounts receivable reserve 101 147 Amortized intangibles 725 755 Goodwill 344 358 Section 174 Capitalization 566 583 Total deferred tax assets 28,438 30,699 Deferred tax liabilities: Right of use asset ( 68 ) ( 205 ) Total deferred tax liabilities ( 68 ) ( 205 ) Less valuation allowance ( 28,370 ) ( 30,494 ) Net deferred tax assets $ — $ — Realization of the deferred tax assets is dependent upon future taxable income, if any, the amount and timing of which are uncertain. Accordingly, the net deferred tax assets have been offset by a valuation allowance. The net valuation allowance increased by $ 2.1 million and $ 3.7 million during the years ended December 31, 2024 and 2023, respectively. At December 31, 2024 , the Company had federal and state NOLs aggregating approximately $ 101.5 million and $ 69.1 million, respectively. At December 31, 2024, the utilization of a portion of the federal NOLs is subject to an annual limitation under Section 382 of the Internal Revenue Code (IRC). Of the $ 235.6 million of federal NOLs available, approximately $ 134.1 million are unavailable due to ownership changes as defined in IRC Section 382. If not utilized, the federal and state NOLs will continue to expire in 2025. IRC Section 382 may also limit NOLs generated after 2022 and in future years. The Company evaluates deferred tax assets, including the benefit from NOLs, to determine if a valuation allowance is required. Such evaluation is based on consideration of all available evidence using a “more likely than not” standard with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency, and severity of current and cumulative losses; forecasts of future profitability; the length of statutory carryforward periods; the Company’s experience with operating losses; and tax-planning alternatives. The significant piece of objective negative evidence evaluated was the cumulative loss incurred through the year ended December 31, 2024 . Given this evidence and the expectation to incur operating losses in the foreseeable future, a full valuation allowance has been recorded against the net deferred tax asset. The Company will continue to maintain a full valuation allowance against the entire amount of its net deferred tax asset, until such time as the Company has determined that the weight of the objectively verifiable positive evidence exceeds that of the negative evidence. Although the Company has established a full valuation allowance on its net deferred tax asset, for Federal tax losses before 2018 and for all state tax losses, it has not forfeited the right to carryforward tax losses and apply such tax losses against future taxable income, thereby reducing its future tax 56 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) obligations. Federal tax losses generated in 2018 and later do not expire. The Company is subject to taxation in the United States and various state jurisdictions. As of December 31, 2024 , the Company’s tax years for 2005 through 2023 are generally subject to examination by the tax authorities. The years are open back to 2005 to the extent the NOLs being carried forward were generated then. The Company had the following unrecognized tax benefits (in thousands), none of which, if recognized, would impact the Company’s effective tax rate: Year Ended December 31, 2024 2023 Unrecognized tax benefit beginning balance $ 16 $ 16 Increases for tax positions taken in prior years — — Decreases for tax positions taken in prior years — — Increases for tax positions taken in current years — — Settlements — — Unrecognized tax benefit ending balance $ 16 $ 16 The Company does not anticipate its total unrecognized tax benefits as of December 31, 2024 will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months. The Company is currently unaware of any uncertain tax positions that could result in significant additional payments, accruals or other material deviation in this estimate over the next 12 months. The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in the provision for income taxes. As of December 31, 2024, the Company has no t recognized any interest and penalties related to uncertain tax positions. In February 2023, the Company received notification from the Internal Revenue Service that our Archipelago joint venture was selected for audit for the 2021 tax year. The Company received the IRS Notice of Proposed Partnership Adjustment during the third quarter of 2024, accepted the adjustments, and submitted the push out election forms during the first quarter of 2025, to push the audit adjustments to the partners. Arcadia will adjust their balance of available tax net operating losses with the filing of their 2024 income tax returns, which have already been adjusted for financial statements purposes, and expects to incur no penalties or interest due. The Company is currently not under audit for state purposes. 57 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 18. Retirement Benefits The Company has a 401(k) retirement plan (the “Plan”) available for participation by all regular full-time employees who have completed three months of service with the Company. The Company established the Plan in 2008. The Plan provides for a discretionary matching contribution equal to 50 % of the amount of the employee’s salary deduction, not to exceed 3 % of the salary per employee. Highly compensated employees are excluded from receiving any discretionary matching contribution. Employees’ rights to employer contributions vest on the one-year anniversary of their date of employment. The Company has the option to make discretionary matching contributions. The Company did no t make discretionary matching contributions during the years ended December 31, 2024 and 2023 . Note 19. Segment Reporting The Company has one operating and reportable segment, which derives revenue primarily from the sale of Zola coconut water. The Company's Chief Executive Officer is the Company’s chief operating decision maker ("CODM"). T he CODM uses net loss for purposes of evaluating performance, forecasting future period financial results, allocating resources and setting incentive targets. The CODM evaluates segment business performance based primarily on consolidated net loss (from continuing operations) as reported on the consolidated statements of operations and comprehensive loss . The CODM considers budget-to-actual variances on a monthly basis for net loss when making decisions. Segment assets provided to the CODM are consistent with those reported on the consolidated balance sheets. Information about the Company’s segment operations as of and for the years ended December 31, 2024 and 2023, are as follows (in thousands): Year Ended December 31, 2024 2023 Total revenues $ 5,045 $ 4,454 Product COGS ( 2,484 ) ( 2,023 ) Other Adjustments ( 479 ) ( 151 ) Human capital & technology ( 4,222 ) ( 3,598 ) Corporate expenses ( 1,323 ) ( 1,568 ) Advertising & marketing ( 51 ) ( 195 ) Outside services ( 3,133 ) ( 2,094 ) Depreciation ( 113 ) ( 287 ) Other SG&A ( 799 ) ( 492 ) Interest income 782 695 Income tax expense ( 8 ) ( 8 ) Change in fair value of common stock warrant and option liabilities ( 1,474 ) 6,544 Other segment items 3,942 ( 6,606 ) Net loss from continuing operations $ ( 4,317 ) $ ( 5,329 ) 58 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Other segment items consist of research and development expenses, gain on sale of intangible assets, gain on sale of property and equipment, impairment of property and equipment, impairment of ROU asset, other income, valuation loss on March 2023 PIPE and issuance and offering costs allocated to liability classified options. Geographic Data Revenues based on the location of the customers, are as follows (in thousands): Year Ended December 31, 2024 2023 United States $ 4,903 $ 4,156 Argentina $ 26 — India 7 7 Canada 109 291 Total $ 5,045 $ 4,454 Note 20. Net Loss per Share Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period and excludes any dilutive effects of stock-based awards, warrants and options. Diluted net loss per share attributable to common stockholders is computed giving effect to all potentially dilutive common shares, including common stock issuable upon exercise of stock options and warrants. Dilutive securities are not included in the computation of net loss per share when the impact would be anti-dilutive. Securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in shares): Year Ended December 31, 2024 2023 Options to purchase common stock 205,475 80,078 Warrants to purchase common stock 259,817 266,957 Preferred investment options 823,618 1,489,952 Total 1,288,910 1,836,987 59 Table of Contents Arcadia Biosciences, Inc. Notes to Consolidated Financial Statements. (Continued) Note 21. Related Party Transactions The Company’s related parties include Moral Compass Corporation (“MCC”) and the John Sperling Foundation (“JSF”). The rights to the intellectual property owned by Blue Horse Labs, Inc. (“BHL”) were assigned to its sole shareholder, the John Sperling Revocable Trust (“JSRT”) due to BHL’s dissolution and then subsequently to the JSF. The JSF is deemed a related party of the Company because MCC, one of the Company’s largest stockholders, and the JSF share common officers and directors. JSF receives a single digit royalty from the Company when revenue has been collected on product sales or for license payments from third parties that involve certain intellectual property developed under research funding originally from BHL. Royalty fees due to JSF were $ 29,000 and $ 58,000 as of December 31, 2024 and December 31, 2023 , respectively, and are included in the consolidated balance sheets as amounts due to related parties. Note 22. Subsequent Events As disclosed in Item 3, "Legal Proceedings," on December 4, 2024, the Company entered into the Exchange Agreement with Roosevelt providing for the Exchange transaction, and on February 14, 2025, the Company filed a registration statement on Form S-4 with the SEC, including a preliminary proxy statement/prospectus, relating to shares to be issued in the transaction and a special meeting of stockholders of the Company to be held to approve the issuance of shares in the transaction and related proposals. Since the date of filing of the registration statement, the Company has received several letters (the "Demand Letters") from counsel to purported stockholders of the Company. Each letter asserts that the preliminary proxy statement included in the registration statement was deficient and demanded that the alleged deficiencies be rectified. The Demand Letters allege, among other matters, that corrective disclosures are required to be included in the registration statement to address alleged material misstatements and omissions in the registration statement and that the proxy statement/prospectus contains materially incomplete and misleading information concerning, among other matters, financial projections, financial analysis performed by the entity that provided a fairness opinion to the Company's board of directors in connection with the transaction, potential conflicts of interest involving the Company's financial advisor in connection with the transaction and the Company's insiders, and possible breach of fiduciary duties by the directors of executive officers of the Company in connection with the transaction. Certain of the Demand Letter include a request for inspection of certain books and records of the Company pursuant to Delaware corporate law. It is possible that additional, similar letters may be received, or complaints filed. If this occurs, except as may be required by law, the Company does not intend to announce the filing of any such additional demand letter or any such complaint. The Company believes that the allegations in the Demand Letters are without merit and intends to vigorously defend itself against any complaint that may be filed. 60 Table of Contents Item 9. Changes in and Disagreements With Accou ntants on Accounting and Financial Disclosure. None.