Arcadia Biosciences, Inc. 10-Q

ITEM 2. 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 unaudited condensed consolidated financial statements and the related notes to those statements included herein. In addition to historical financial information, this report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in the most recent Annual Report on Form 10-K filed by the Company. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. Solely for convenience, the trademarks, service marks and trade names referred to in this report may appear without the ®, TM, or SM symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, or trade names. Overview 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. 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. 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 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 9 to the condensed consolidated financial statements for further details of the transaction. On May 16, 2024, Arcadia sold the GoodWheat™ brand to Above Food Corp. ("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 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 June 30, 2025 and 2024 reflect the GoodWheat disposition as a discontinued operation. The disposition of GoodWheat resulted in a loss of $1,500 during the second quarter of 2024. Refer to Notes 3 and 7 to the condensed consolidated financial statements for further details of the transaction. 20 On December 4, 2024, Arcadia, Roosevelt Resources LP (“Roosevelt” or the “Partnership”) and Elliott Roosevelt, Jr. and David A. Roosevelt, in their capacities as representatives of the limited partners of the Partnership entered into a Securities Exchange Agreement (as it may be amended from time to time, 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 (the "Closing"), Arcadia agreed to issue shares of its common stock to the limited partners of Roosevelt in exchange for all of the limited partnership interests of Roosevelt and to the sole member of the general partner of Roosevelt (together with the limited partners, referred to collectively as the “Limited Partners”) in exchange for its membership interest (together with the limited partnership interests of the Limited Partners, the “Partner Interests”) in the limited liability company that is the general partner of Roosevelt (such exchange, contributions and issuances referred to as the “Exchange”). 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, and based on the number of shares issuable pursuant to the Exchange Agreement (and assuming that no other shares are issuable to third parties in connection with the Closing), the Limited Partners and the Arcadia stockholders as of immediately prior to the Closing will own 90% and 10%, respectively, of the shares of common stock of Arcadia outstanding immediately after the Closing. On February 14, 2025, the Company filed a registration statement on Form S-4 with the SEC relating to the shares to be issued in the transaction. The registration statement also included a proxy statement/prospectus relating to a meeting of stockholders of the Company to be held to vote on proposals approve the issuance of shares pursuant to the Exchange Agreement and related proposals. On April 30, 2025, the parties to the Exchange Agreement entered into a First Amendment to Securities Exchange Agreement (the “Amendment”). The Amendment amended certain provisions of the Exchange Agreement, including without limitation the following: (i) the “Termination Date” provided for in one of the closing conditions described in the Exchange Agreement, which allows a party to terminate the Exchange Agreement if the Closing (as defined in the Exchange Agreement) has not occurred by May 15, 2015, was amended to be August 15, 2025; (ii) the provisions governing the number of shares of common stock that are issuable to the Limited Partners of Roosevelt were amended so that the number is calculated such that the number of shares to be issued to the Limited Partners equals 90% of the number of shares of common stock outstanding immediately after the Closing giving effect to the number of shares issuable to the Limited Partners (and ignoring and not giving effect to any other shares of common stock that may be issuable to any other persons in connection with or immediately after the Closing) (the “Exchange Shares”), without any possible upward or downward adjustments to the number of Exchange Shares to be issued based on the amount of cash and cash equivalents of the Company as of the Closing Date; and (iii) certain definitions related to determination of the Company’s cash amount at the Closing Date were eliminated. On March 28, 2025, Arcadia entered into an agreement with Bioceres Crop Solutions Corp. ("BIOX") pursuant to which BIOX agreed to transfer to the Company all rights and materials relating to certain soy traits that were included in licenses granted by the Company to BIOX in the November 2020 sale of Verdeca. In addition, BIOX agreed to pay a total of $750,000 to the Company. The Company agreed to transfer to BIOX all of the Company's granted patents, pending applications, related materials and documents related to the Company's reduced gluten and oxidative stability patents. In addition, the parties agreed to amend a previous agreement between the parties to eliminate any obligation to pay the Company future product royalties under the agreement. The Company recorded a gain of $750,000 on the condensed consolidated statement of operations and comprehensive income (loss) related to this transaction as the patents, pending applications and future product royalties have no carrying value. As of June 30, 2025, the Company has received full payment for the $750,000. On May 26, 2025, Arcadia entered into a License Termination and Patent Non-Assert Agreement (the "Bioseed Agreement") with Bioseed Research India, a division of DCM Shriram Limited ("Bioseed"). Pursuant to the Bioseed Agreement, the parties agreed to terminate a license agreement previously entered into by Arcadia and Bioseed in 2012, Arcadia agreed to not assert its rights under a patent held by Arcadia regarding certain products commercialized or that may be commercialized by Bioseed, and Bioseed agreed that if as a result of any such commercialization by Bioseed any amounts become payable to a third party pursuant to an agreement previously entered into between Arcadia and the third party, Bioseed will pay such amounts to the third party. As a result, the related $1.0 million contingent liability was eliminated from the condensed consolidated balance sheet as of June 30, 2025. Tariffs On April 9, 2025, baseline tariffs imposed by the U.S. government went into effect, and at this time, the U.S. government has delayed the effective date for additional country-specific tariffs until August 2025. The impact of tariffs on the Company remains uncertain, and it is possible that features of the tariff policy may change before the country-specific tariffs take effect. We are closely monitoring the tariff landscape and are in discussions with our business partners to explore ways to mitigate the impact of tariffs on the Company. For additional information regarding the potential impacts of tariffs on our business and results of operations, see Part I, "Item 1A. Risk Factors” in our Annual Report on Form 10-K, filed with the SEC on March 25, 2025. 21 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 As described in Note 1 to the condensed consolidated financial statements above, our March 2025 agreement transferred all of our patents, pending applications, related materials and documents related to the Company's reduced gluten and oxidative stability patents. In addition, due to various prior agreements and transactions, Arcadia no longer retains any effective commercialization rights to its resistant starch portfolio of patents. As a result, the Company does not expect to receive any license or royalty fees in the future related to any wheat-based intellectual property rights. Discontinued Operations As described above, Arcadia exited the GoodWheat brand. In accordance with the provisions of ASC 205-20, Arcadia has separately reported the assets and liabilities of the discontinued operations in the condensed consolidated balance sheets and the results of the discontinued operations as separate components on the condensed consolidated statements of operations and comprehensive income (loss) for all periods presented. See Note 3 to the condensed consolidated financial statements for further information on discontinued operations. Components of Our Statements of Operations Data Revenues Product revenues Product revenues consist primarily of sales of Zola and GLA products. GLA oil sales ceased as of the end of 2024. 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. 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. Gain on sale of intangible assets Gain on sale of intangible assets consists of the gain on sale of our reduced gluten and oxidative stability patent portfolios in March 2025. 22 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. Change in fair value of contingent consideration Change in the fair value of contingent consideration is comprised of the gain associated with the reduction of our contingent liability as the result of a decision to abandon, assign or transfer a program that was previously accrued. 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. Interest income Interest income consists of interest income on our cash and cash equivalents, investments and note receivable. Credit loss Credit loss consists of a reserve established related to the Above Food note receivable. Other income Other income consists primarily of a gain recognized related to the receipt of Above Food Ingredients, Inc. ("AFII") common stock. 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. Net loss from discontinued operations Net loss from discontinued operations represents results of operations related to the discontinued GoodWheat brand. See Note 3 to the condensed consolidated financial statements for further information on discontinued operations. 23 Results of Operations Comparison of the Three Months Ended June 30, 2025 and 2024 Three Months Ended June 30, $ Change % Change 2025 2024 (In thousands except percentage) Revenues: Product $ 1,455 $ 1,306 $ 149 11 % Total revenues 1,455 1,306 149 11 % Operating expenses (income): Cost of revenues 824 633 191 30 % Research and development 9 10 (1 ) (10 )% Gain on sale of intangible assets — (4,000 ) 4,000 (100 )% Change in fair value of contingent consideration (1,000 ) — (1,000 ) 100 % Selling, general and administrative 2,123 2,683 (560 ) (21 )% Total operating expenses 1,956 (674 ) 2,630 (390 )% (Loss) income from operations (501 ) 1,980 (2,481 ) (125 )% Interest income 9 150 (141 ) (94 )% Credit loss (4,489 ) — (4,489 ) (100 )% Other income 1,071 150 921 614 % Change in fair value of common stock warrant and option liabilities (548 ) (430 ) (118 ) 27 % Net (loss) income from continuing operations (4,458 ) 1,850 (6,308 ) (341 )% Net loss from discontinued operations — (789 ) 789 (100 )% Net (loss) income attributable to common stockholders $ (4,458 ) $ 1,061 $ (5,519 ) (520 )% Revenues Product revenues increased $149,000, or 11%, and consisted entirely of Zola coconut water sales during the three months ended June 30, 2025 compared to the same period in 2024. Zola revenues increased $280,000 or 24% during the three months ended June 30, 2025 compared to the same period in 2024. This was primarily driven by an increase in distribution resulting in higher sales volume. The Company did not implement any price increases during 2024 or the first half of 2025. Revenues for the three months ended June 30, 2024 included $130,000 from sales of GLA oil. Cost of revenues Total cost of revenues increased $191,000, or 30%, during the three months ended June 30, 2025 compared to the same period in 2024. Cost of revenues for the three months ended June 30, 2025 consisted entirely of Zola coconut water costs, with product and freight costs making up 99% of the total. Zola cost of revenues increased $204,000, or 33% during the three months ended June 30, 2025 compared to the same period in 2024. Cost of revenues for the same period in 2024 included $13,000 from GLA oil. Research and development Research and development expenses decreased by $1,000, or 10%, during the three months ended June 30, 2025 compared to the same period in 2024 reflecting our strategy to develop the Zola brand by leveraging our existing resources and minimizing new investment. Gain on sale of intangible assets During the three months ended June 30, 2024, the Company realized a gain of $4.0 million related to the sale of its RS durum wheat trait to Corteva. There was no such gain recorded during the three months ended June 30, 2025. 24 Change in fair value of contingent consideration During the three months ended June 30, 2025, the change in the fair value of contingent consideration was due to the gain of $1.0 million associated with the reduction of our contingent liability as the result of a decision to transfer a program with respect to which a contingent liability was previously accrued. See Note 14 to the condensed consolidated financial statements for details. There was no change in fair value of contingent consideration during the three months ended June 30, 2024. Selling, general, and administrative Selling, general, and administrative expenses decreased by $555,000 during the three months ended June 30, 2025 compared to the same period in 2024, driven primarily by operating costs and employee related costs in 2024 that were absent in 2025. Interest income During the three months ended June 30, 2025, the Company recognized interest income of $9,000. During the three months ended June 30, 2024, the Company recognized interest income of $150,000, of which $96,000 was related to discount amortization and accrued interest on the promissory note from Above Food. Credit loss During the three months ended June 30, 2025, the Company recognized credit loss of $4.5 million primarily related to the establishment of a reserve for the remaining $4.0 million principal amount of the Above Food note receivable, plus accrued interest of $421,000. There was no such loss recognized during the same period in 2024. Other income During the three months ended June 30, 2025, the Company recognized other income of $1.1 million primarily driven by a gain recognized related to the receipt of AFII common stock. During the three months ended June 30, 2024, the Company recognized other income of $150,000, of which $117,000 was related to realized gains on investments. Change in the estimated fair value of common stock warrant and option liabilities The change in the estimated fair value of common stock warrant and option liabilities resulted in a loss of $548,000 and $430,000 during the three months ended June 30, 2025 and 2024, respectively, related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions. Net loss from discontinued operations Net loss from discontinued operations for GoodWheat was $789,000 during the three months ended June 30, 2024, reflecting the sale of the GoodWheat brand and related assets to Above Food during the second quarter of 2024. See Note 3 to the condensed consolidated financial statements for further information on discontinued operations. 25 Comparison of the Six Months Ended June 30, 2025 and 2024 Six Months Ended June 30, $ Change % Change 2025 2024 (In thousands except percentage) Revenues: Product $ 2,655 $ 2,293 $ 362 16 % Total revenues 2,655 2,293 362 16 % Operating expenses (income): Cost of revenues 1,506 1,104 402 36 % Research and development 9 16 (7 ) (44 )% Gain on sale of intangible assets (750 ) (4,000 ) 3,250 (81 )% Impairment of property and equipment — 36 (36 ) 100 % Change in fair value of contingent consideration (2,000 ) — (2,000 ) 100 % Selling, general and administrative 3,861 4,745 (884 ) (19 )% Total operating expenses 2,626 1,901 725 38 % (Loss) income from operations 29 392 (363 ) (93 )% Interest income 216 195 21 11 % Credit loss (4,489 ) — (4,489 ) (100 )% Other income 1,071 153 918 600 % Change in fair value of common stock warrant and option liabilities 1,314 163 1,151 706 % Net (loss) income from continuing operations (1,859 ) 903 (2,762 ) (306 )% Net loss from discontinued operations — (2,265 ) 2,265 (100 )% Net (loss) income attributable to common stockholders $ (1,859 ) $ (1,362 ) $ (497 ) 36 % Revenues Product revenues increased $362,000, or 16%, and consisted entirely of Zola coconut water sales during the six months ended June 30, 2025 compared to the same period in 2024. Zola revenues increased $846,000, or 47% during the six months ended June 30, 2025 compared to the same period in 2024. This was primarily driven by an increase in distribution resulting in higher sales volume. The Company did not implement any price increases during 2024 or the first half of 2025. Revenues for the six months ended June 30, 2024 included $484,000 from sales of GLA oil. Cost of revenues Cost of revenues increased by $402,000, or 36%, and consisted entirely of Zola coconut water costs during the six months ended June 30, 2025 compared to the same period in 2024. Zola cost of revenues increased $448,000, or 42% during the six months ended June 30, 2025 compared to the same period in 2024 driven by the increase in Zola unit sales. Cost of revenues for the six months ended June 30, 2024 included $46,000 from GLA oil. Research and development Research and development expenses decreased by $7,000, or 44%, during the six months ended June 30, 2025 compared to the same period in 2024 reflecting our strategy to develop the Zola brand by leveraging our existing resources and minimizing new investment. Gain on sale of intangible assets During the six months ended June 30, 2025, the Company realized a gain of $750,000 related to the sale of our reduced gluten and oxidative stability patent portfolios in March 2025. During the six months ended June 30, 2024, the Company realized a gain of $4.0 million related to the sale of its RS durum wheat trait to Corteva. Impairment of property and equipment During the six months ended June 30, 2024, the Company recognized impairment of property and equipment held for sale of $36,000. There was no such impairment of property and equipment during the six months ended June 30, 2025. 26 Change in fair value of contingent consideration During the six months ended June 30, 2025, the change in the fair value of contingent consideration was due to the gain of $2.0 million associated with the reduction of our contingent liability as the result of a decision to abandon one of the two remaining programs and transfer the other to a third party with respect to which a contingent liability was previously accrued. See Note 14 to the condensed consolidated financial statements for details. There was no change in fair value of contingent consideration during the six months ended June 30, 2024. Selling, general, and administrative Selling, general, and administrative expenses decreased by $879,000 during the six months ended June 30, 2025 compared to the same period in 2024, driven primarily by operating costs and employee related costs in 2024 that were absent in 2025. Interest income During the six months ended June 30, 2025, the Company recognized interest income of $216,000, of which $180,000 was related to discount amortization and accrued interest on the promissory note from Above Food. During the six months ended June 30, 2024, the Company recognized interest income of $195,000, of which $96,000 was related to discount amortization and accrued interest on the promissory note from Above Food. The remaining difference was related to interest from investments. Credit loss During the six months ended June 30, 2025, the Company recognized credit loss of $4.5 million primarily related to the establishment of a reserve for the remaining $4.0 million principal amount of the Above Food note receivable, plus accrued interest of $421,000. There was no such loss recognized during the same period in 2024. Other income During the six months ended June 30, 2025, the Company recognized other income of $1.1 million primarily driven by a gain recognized related to the receipt of AFII common stock. During the six months ended June 30, 2024, the Company recognized other income of $153,000, of which $117,000 was related to realized gains on investments. Change in the estimated fair value of common stock warrant and option liabilities The change in the estimated fair value of common stock warrant and option liabilities resulted in a gain of $1.3 million and $163,000 during the six months ended June 30, 2025 and 2024, respectively, related to the change in the estimated fair value of the liability classified preferred investment options issued in connection with the March 2023 PIPE and August 2022 Registered Direct Offering financing transactions. Net loss from discontinued operations Net loss from discontinued operations for GoodWheat was $2.3 million during the six months ended June 30, 2024, reflecting the sale of the GoodWheat brand and related assets to Above Food during the second quarter of 2024. See Note 3 to the condensed 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 & Capital Resources We have funded our operations primarily with the net proceeds from our private and public offerings of our equity securities as well as proceeds from the sale of our products and payments under license agreements. Our principal use of cash is to fund our operations, which are primarily focused on commercializing our products. Our contractual obligations are primarily related to our operating leases. As of June 30, 2025, we had cash and cash equivalents of $1.4 million. For the six months ended June 30, 2025, the Company had net loss of $1.9 million and net cash used in operations of $3.6 million. For the twelve months ended December 31, 2024, the Company had net loss of $7.0 million and net cash used in operations of $9.6 million. 27 As discussed in Notes 1 and 7 to the condensed consolidated financial statements, Above Food did not make the first $2.0 million principal payment plus accrued interest on the promissory note given by Above Food to the Company ("Promissory Note") pursuant to the purchase agreement, and substantial doubt exists whether Above Food will make any cash payments with respect to the Promissory Note. Failure to make the first cash principal payment due under the Promissory Note has had a material adverse effect on the Company's near-term cash resources and financial position. In addition, although as described in Note 7, some shares of Above Food's parent company AFII ("Parent Shares") have been issued to the Company pursuant to a notice previously delivered by the Company, uncertainty exists regarding whether additional Parent Shares may be issued in satisfaction of Above Food's other obligations under the Promissory Note. 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 these financial statements, which 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. As noted above, Above Food defaulted on its obligations to pay us amounts due under its Promissory Note to the Company, including the first installment of the Promissory Note due May 14, 2025, and substantial doubt exists whether or when Above Food will be able to make any cash payments with respect to Promissory Note, or whether additional Parent Shares may be issued to us in satisfaction of Above Food's obligations under the Promissory Note. 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 or other transactions. 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 are not able to secure adequate additional funding, we will be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or initiate dissolution and liquidation or bankruptcy proceedings. Any of these actions would have a material adverse effect on our business, results of operations and financial condition. As noted above, through June 30, 2025, 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. No assurance can be given as to the timing or ultimate success of obtaining future funds. 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. In the event of dissolution and liquidation proceedings or bankruptcy proceedings, the creditors of Arcadia would have first claim on the value of the assets of Arcadia which, other than remaining cash, would most likely be liquidated in one or more transactions or a bankruptcy sale, and the common stock of Arcadia likely would have little or no value. Arcadia can give no assurance as to the magnitude of the net proceeds of such a sale and whether such proceeds and available cash would be sufficient to satisfy Arcadia’ obligations to its creditors, let alone to permit any distribution to its equity holders. Liquidity The following table summarizes total current assets, current liabilities and working capital for the dates indicated (in thousands): As of June 30, As of December 31, 2025 2024 Current assets $ 7,579 $ 9,242 Current liabilities 1,839 2,563 Working capital surplus $ 5,740 $ 6,679 28 Cash Flows The following table summarizes our cash flows for the periods indicated (in thousands): Six Months Ended June 30, 2025 2024 Net cash (used in) provided by: Operating activities $ (3,621 ) $ (5,666 ) Investing activities 750 4,647 Financing activities 5 5 Net decrease in cash $ (2,866 ) $ (1,014 ) Cash flows from operating activities Cash used in operating activities for the six months ended June 30, 2025, was $3.6 million. With respect to our net loss of $1.9 million, non-cash charges including the change in fair value of common stock warrant and option liabilities of $1.3 million, change in fair value of contingent consideration of $2.0 million, amortization of note receivable discount of $69,000, a gain on sale of intangible assets of $750,000, a gain on the receipt of AFII common stock of $1.1 million, adjustments in our working capital accounts of $1.2 million, and operating lease payments of $129,000 were offset by $28,000 of depreciation, $117,000 of lease amortization, $164,000 of stock-based compensation and $4.5 million of credit loss. Cash used in operating activities for the six months ended June 30, 2024, was $5.7 million. With respect to our net loss of $1.4 million, non-cash charges including $85,000 of depreciation, $240,000 of stock-based compensation, $352,000 of lease amortization, and $36,000 of impairment of property and equipment, were offset by the change in fair value of common stock warrant and option liabilities of $163,000, amortization of note receivable discount of $29,000, adjustments in our working capital accounts of $229,000, a gain on disposal of property and equipment of $89,000 and operating lease payments of $507,000. Cash flows from investing activities Cash provided by investing activities for the six months ended June 30, 2025 consisted of proceeds from the sale of intangible assets of $750,000. Cash provided by investing activities for the six months ended June 30, 2024 consisted of proceeds of $162,000 from the sale of property and equipment, proceeds from the sale of investments of $2.5 million, proceeds from the sale of our RS durum wheat trait of $4.0 million, offset by cash paid related to the GoodWheat sale of $2.0 million and $16,000 of purchases of property and equipment. Cash flows from financing activities Cash provided by financing activities for the six months ended June 30, 2025 consisted of proceeds from the purchase of ESPP shares of $5,000. Cash provided by financing activities for the six months ended June 30, 2024 consisted of proceeds from the purchase of ESPP shares of $5,000. Off-Balance Sheet Arrangements Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities other than Verdeca, which was disposed of in November 2020. Critical Accounting 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. 29 ITEM 3: QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK Not Required.