Item 2. Management’s Discussion and Analysis
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 sale of food products, 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. Refer to Note 6 to the condensed consolidated financial statements for further details of the transaction.
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”) providing for the combination of the two companies in an all-stock transaction. 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 Arcadia agreed to issue shares of its common stock to the limited partners and to the sole member of the general partner of Roosevelt (together, the “Limited Partners”) in exchange for all of the limited partnership and other equity interests of Roosevelt (the “Exchange”). The Exchange Agreement, as amended, provided that upon completion of the Exchange, the Limited Partners and the Arcadia stockholders prior to the closing were to own 90% and 10%, respectively, of the shares of common stock of Arcadia immediately after the closing. On February 14, 2025, the Company filed a registration statement on Form S-4 with the Securities and Exchange Commission 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 to 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 amending the “Termination Date” provided for in one of the closing conditions described in the Exchange Agreement, which allowed a party to terminate the Exchange Agreement if the closing had not occurred by May 15, 2025, to be August 15, 2025 (the “Termination Provision”). On July 31, 2025, the Company filed with the SEC pre-effective Amendment No. 1 to the registration statement on Form S-4. On December 24, 2025, the Company received a notice from Roosevelt indicating that it was terminating the Exchange Agreement with immediate effect pursuant to the Termination Provision, as the closing of the Exchange had not occurred by the Termination Date specified in the Amendment.
19
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.
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.
Tariffs
Commencing in April 2025, the U.S. government announced and imposed a series of reciprocal tariffs on most U.S. trading partners in reliance on the International Economic Emergency Powers Act, or IEEPA. Effective August 7, 2025, the U.S. government implemented a 19% reciprocal tariff rate on goods originating from Thailand, where our coconut water is sourced and processed. In October 2025, the United States and Thailand reached a preliminary framework agreement on reciprocal trade, which maintains a 19% rate while identifying certain product categories that may be eligible for a zero percent reciprocal tariff rate, including 100% pure coconut water, which accounted for approximately 85% of our Zola net sales in 2025.
On February 20, 2026, the U.S. Supreme Court ruled that the use of the IEEPA to impose tariffs was not authorized by Congress, invalidating a significant portion of tariffs announced in April 2025. While the ruling struck down the IEEPA-based tariffs, it does not prevent the administration from imposing tariffs using other legal or statutory authorities. Following the decision, the administration issued a proclamation to impose new duties and announced a 10% global tariff on imports entering the United States (subject to certain exceptions) under Section 122 of the Trade Act of 1974, which provides for tariffs up to 15% for a period of up to 150 days unless extended by Congress. The temporary global tariff on imports under Section 122 of the Trade Act of 1974 expired on July 24, 2026. The administration has indicated its intention to pursue alternative statutory mechanisms to reinstate or impose new tariffs. As a result, substantial uncertainty remains regarding future tariff rates and the countries and products to which such tariffs would apply. We continue to evaluate the potential impact of these tariffs on our cost of goods sold, including opportunities for product classification optimization under applicable Harmonized Tariff Schedule codes. Together with our customs brokers, logistics partners, and importers of record, we began taking steps to seek refunds of duties paid under the invalidated IEEPA tariffs. In July 2026, the Company received $169,000 in refunds related to previously paid IEEPA tariffs.
Our Products
Zola Coconut Water
Zola Coconut Water joined the Arcadia family of brands in May 2021. Sourced from Thailand, where coconuts are grown, harvested, and packaged at origin, Zola delivers a pure, natural coconut water with a crisp, clean taste that is slightly sweet and refreshingly hydrating. Naturally rich in electrolytes, Non-GMO Project Verified, and only 60 calories per serving, Zola is the superior way to rehydrate, reset, and reenergize. Available in original, original with pulp, espresso, and pineapple flavors, Zola is sold through grocery retailers and foodservice distributors across the U.S.
Agronomic Wheat Traits
As a result of the various agreements and transactions described above, Arcadia no longer retains any effective commercialization rights to its portfolio of wheat patents. Therefore, the Company does not expect to receive any license or royalty fees in the future related to any wheat-based intellectual property rights.
20
Components of Our Statements of Operations Data
Revenues
Product revenues
Product revenues consist primarily of sales of Zola. We recognize revenue from product sales when control of the product is transferred to third-party distributors and retailers, 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 relates to the sale of Zola products and consists 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 2025.
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 (loss) income, net
Other (loss) income, net consists primarily of unrealized loss recognized subsequent to the receipt of the AFII common stock.
Loss on January 2026 Inducement Offer
Loss on January 2026 Inducement Offer includes the initial fair value of preferred investment options issued in connection with the induced exercise of existing warrants and options at a lower exercise price and the increase in fair value related to the reduction in exercise price of such warrants and options.
21
Valuation loss on June 2026 PIPE
Valuation loss on June 2026 PIPE includes the fair value in excess of gross proceeds.
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
Issuance and offering costs include placement agent, legal, advisory, accounting and filing fees related to the January 2026 Inducement Offer and June 2026 Private Placement.
Results of Operations
Comparison of the Three Months Ended June 30, 2026 and 2025
Three Months Ended June 30,
$ Change
% Change
2026
2025
(In thousands except percentage)
Revenues:
Product
$
1,443
$
1,455
$
(12
)
(1
)%
Total revenues
1,443
1,455
(12
)
(1
)%
Operating expenses (income):
Cost of revenues
812
824
(12
)
(1
)%
Research and development
—
9
(9
)
(100
)%
Change in fair value of contingent consideration
—
(1,000
)
1,000
100
%
Selling, general and administrative
1,127
2,123
(996
)
(47
)%
Total operating expenses
1,939
1,956
(17
)
(1
)%
(Loss) Income from continuing operations
(496
)
(501
)
5
(1
)%
Interest income
2
9
(7
)
(78
)%
Credit loss
—
(4,489
)
4,489
100
%
Other (loss) income, net
(2,781
)
1,071
(3,852
)
(360
)%
Valuation loss on June 2026 PIPE
(5,423
)
—
(5,423
)
(100
)%
Change in fair value of common stock warrant and option liabilities
3,083
(548
)
3,631
(663
)%
Issuance and offering costs
(651
)
—
(651
)
(100
)%
Net loss attributable to common stockholders
$
(6,266
)
$
(4,458
)
$
(1,808
)
41
%
Revenues
Product revenues, which consisted 100% of revenues from the sale of our Zola products, decreased $12,000, or 1%, during the three months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by lower sales volumes as well as low inventory and longer than expected shipping times during the three months ended June 30, 2026 compared to the same period in 2025.
Cost of revenues
Cost of revenues decreased $12,000, or 1%, during the three months ended June 30, 2026 compared to the same period in 2025, primarily driven by the lower Zola sales volume during the three months ended June 30, 2026.
Research and development
Research and development expenses were $0 and $9,000 during the three months ended June 30, 2026 and 2025, respectively.
22
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 abandon one of two remaining programs with respect to which a contingent liability was previously accrued. See Note 13 to the condensed consolidated financial statements for details. There was no change in fair value of contingent consideration during the same period in 2026.
Selling, general, and administrative
Selling, general, and administrative expenses decreased by $996,000, or 47%, during the three months ended June 30, 2026 compared to the same period in 2025, driven primarily by the absence of M&A expenses and lower employee costs in 2026.
Interest income
Interest income was $2,000 and $9,000 during the three months ended June 30, 2026 and 2025, respectively.
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 during the same period in 2026.
Other (loss) income, net
During the three months ended June 30, 2026, the Company recognized other loss, net of $2.8 million, primarily driven by an unrealized loss recognized subsequent to the receipt of the AFII common stock. During the same period in 2025, the Company recognized other income, net of $1.1 million, primarily driven by an unrealized gain recognized subsequent to the receipt of the AFII common stock.
Valuation loss on June 2026 PIPE
During the three months ended June 30, 2026, the Company recognized a $5.4 million valuation loss related to the June 2026 PIPE financing transaction. The valuation loss reflects the fair value of financial instruments issued in the financing transaction in excess of gross proceeds. There was no such loss during the same period in 2025.
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 $3.1 million and loss of $548,000 during the three months ended June 30, 2026 and 2025, respectively, related to the change in the estimated fair value of the liability classified preferred investment options.
Issuance and offering costs
Issuance and offering costs were $651,000 during the three months ended June 30, 2026 and consist of placement agent, legal, advisory, accounting and filing fees related to the June 2026 PIPE. There were no such costs recognized during the same period in 2025.
23
Comparison of the Six Months Ended June 30, 2026 and 2025
Six Months Ended June 30,
$ Change
% Change
2026
2025
(In thousands except percentage)
Revenues:
Product
$
2,543
$
2,655
$
(112
)
(4
)%
Total revenues
2,543
2,655
(112
)
(4
)%
Operating expenses (income):
Cost of revenues
1,512
1,506
6
0
%
Research and development
—
9
(9
)
(100
)%
Gain on sale of intangible assets
—
(750
)
750
(100
)%
Change in fair value of contingent consideration
—
(2,000
)
2,000
(100
)%
Selling, general and administrative
2,306
3,861
(1,555
)
(40
)%
Total operating expenses
3,818
2,626
1,192
45
%
(Loss) Income from continuing operations
(1,275
)
29
(1,304
)
(4497
)%
Interest income
7
216
(209
)
(97
)%
Credit loss
—
(4,489
)
4,489
(100
)%
Other (loss) income, net
(4,285
)
1,071
(5,356
)
(500
)%
Loss on January 2026 Inducement Offer
(2,877
)
—
(2,877
)
(100
)%
Valuation loss on June 2026 PIPE
(5,423
)
—
(5,423
)
(100
)%
Change in fair value of common stock warrant and option liabilities
4,274
1,314
2,960
225
%
Issuance and offering costs
(1,072
)
—
(1,072
)
(100
)%
Net loss attributable to common stockholders
$
(10,651
)
$
(1,859
)
$
(8,792
)
473
%
Revenues
Product revenues, which consisted 100% of sales of our Zola products, decreased $112,000, or 4%, during the six months ended June 30, 2026 compared to the same period in 2025. The decrease was primarily driven by lower sales volumes as well as low inventory and longer than expected shipping times during the six months ended June 30, 2026 compared to the same period in 2025.
Cost of revenues
Cost of revenues increased $6,000 during the six months ended June 30, 2026 compared to the same period in 2025 primarily driven by tariffs in 2026 that were absent in 2025.
Research and development
Research and development expenses were $0 and $9,000 during the six months ended June 30, 2026 and 2025, respectively.
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. There was no such gain during the same period in 2026.
24
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 13 to the condensed consolidated financial statements for details. There was no change in fair value of contingent consideration during the same period in 2026.
Selling, general, and administrative
Selling, general, and administrative expenses decreased by $1.6 million during the six months ended June 30, 2026 compared to the same period in 2025, driven primarily by the absence of M&A expenses and lower employee costs in 2026.
Interest income
During the six months ended June 30, 2026, the Company recognized interest income of $7,000. 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.
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 during the same period in 2026.
Other (loss) income, net
During the six months ended June 30, 2026, the Company recognized other loss, net of $4.3 million, primarily driven by an unrealized loss recognized subsequent to the receipt of the AFII common stock. During the same period in 2025, the Company recognized other income, net of $1.1 million, primarily driven by an unrealized gain recognized subsequent to the receipt of the AFII common stock.
Loss on January 2026 Inducement Offer
Loss on January 2026 Inducement Offer was $2.9 million during the six months ended June 30, 2026 and includes the initial fair value of preferred investment options issued in connection with the induced exercise of existing warrants and options at a lower exercise price and the increase in fair value related to the reduction in exercise price of such warrants and options. There was no such loss during the same period in 2025.
Valuation loss on June 2026 PIPE
During the six months ended June 30, 2026, the Company recognized a $5.4 million valuation loss related to the June 2026 PIPE financing transaction. The valuation loss reflects the fair value of financial instruments issued in the financing transaction in excess of gross proceeds. There was no such loss during the same period in 2025.
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 $4.3 million and $1.3 million during the six months ended June 30, 2026 and 2025, respectively, related to the change in the estimated fair value of the liability classified preferred investment options.
Issuance and offering costs
Issuance and offering costs were $1.1 million during the six months ended June 30, 2026 and consist of placement agent, legal, advisory, accounting and filing fees related to the June 2026 PIPE and January 2026 Inducement Offer. There were no such costs during the same period in 2025.
25
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. As of June 30, 2026, we had cash and cash equivalents of $4.2 million. For the six months ended June 30, 2026, the Company had net loss of $10.7 million and net cash used in operations of $1.4 million. For the twelve months ended December 31, 2025, the Company had net loss of $2.3 million and net cash used in operations of $4.7 million.
As discussed in Note 6 to the condensed consolidated financial statements, Above Food did not make the first $2.0 million principal payment plus accrued interest that was due in May 2025 on the promissory note given by Above Food to the Company ("Promissory Note") pursuant to the asset purchase agreement between the Company and Above Food relating to the sale of the GoodWheat brand and related assets to Above Food in May 2024, 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 had a material adverse effect on the Company's cash resources and financial position. In addition, although as described in Note 6, approximately 2.7 million 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 will be issued in satisfaction of Above Food's other obligations under the Promissory Note, when any Parent Shares will be able to be freely resold pursuant to Rule 144 or otherwise, or regarding the amount of net proceeds to Arcadia that might result from a sale of any such Parent Shares. On June 1 and June 2, 2026, AFII announced that The Nasdaq Stock Market LLC (“Nasdaq”) determined to delist AFII’s common stock and warrants from Nasdaq due to AFII’s failure to file audited financial statements and the associated Report on Form 20-F by the time period previously provided by Nasdaq, and that its common stock and warrants commenced trading on the Over-the-Counter Market. AFII indicated in a press release that it had submitted an appeal to Nasdaq of the delisting determination in accordance with Nasdaq listing rules.
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 condensed consolidated financial statements, which raises substantial doubt about the Company’s ability to continue as a going concern, and the audit opinion on our 2025 audited consolidated financial statements includes a going concern explanatory paragraph regarding substantial doubt about the Company’s ability to continue as a going concern. The condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
We will require additional funding to fund our business and the marketing and sale of our products and to provide working capital to fund other aspects of our business. We may seek to raise additional funds through debt or equity financings. There are no assurances that required funding will be available at all or will be available in sufficient amounts or on reasonable terms. In addition, as noted elsewhere in this Report under Item 1A, there are no assurances that our common stock will remain listed on the Nasdaq, and any delisting could adversely affect our ability to engage in a debt or equity financing. Any sale of additional equity would result in dilution, and could result in material dilution, to our stockholders. If we sought to raise funds through debt financing transactions, 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. 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 the Promissory Note, or whether additional Parent Shares may be issued to us in satisfaction of Above Food's obligations under the Promissory Note. If we are able to sell shares of AFII, the net proceeds from sales of AFII shares may provide a source of funding. However, the AFII shares are restricted securities, there are no assurances regarding whether at a future date we will be able to sell AFII shares or receive any significant proceeds from the sale of such shares. In addition, removal of restrictive legends applicable to the shares requires action by the issuer and its transfer agent in order to remove the legends and facilitate the public resale of the shares pursuant to Rule 144 or otherwise. Moreover, the market price of AFII common stock is very volatile. If from time to time in the future we seek to sell the AFII shares that we hold, there are no assurances regarding the amount of net proceeds to us that might result from such sales.
In addition, we are actively evaluating merger, acquisition or other strategic alternatives and may seek to enter into a merger, acquisition or other strategic transaction. If we are not able to secure adequate additional funding or engage in a merger, acquisition or other strategic transaction, we will be forced to further 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.
26
As noted above, through June 30, 2026, we have incurred substantial losses. In the absence of a merger, acquisition or other strategic transaction, we will be required to obtain additional cash resources 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 if we did not engage in a merger, acquisition or other strategic transaction, 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’s 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,
2026
2025
Current assets
$
5,739
$
6,356
Current liabilities
1,646
2,059
Working capital surplus
$
4,093
$
4,297
Cash Flows
The following table summarizes our cash flows for the periods indicated (in thousands):
Six Months Ended June 30,
2026
2025
Net cash (used in) provided by:
Operating activities
$
(1,418
)
$
(3,621
)
Investing activities
—
750
Financing activities
5,337
5
Net increase (decrease) in cash
$
3,919
$
(2,866
)
Cash flows from operating activities
Cash used in operating activities for the six months ended June 30, 2026, was $1.4 million. With respect to our net loss of $10.7 million, non-cash gain of $4.3 million related to the change in fair value of common stock warrant and option liabilities and adjustments in our working capital accounts of $206,000 were offset by issuance and offering costs of $1.1 million, valuation loss on June 2026 PIPE of $5.4 million, loss on January 2026 Inducement Offer of $2.9 million, depreciation of $8,000, unrealized loss on AFII common stock subsequent to receipt of $4.3 million, and stock-based compensation of $29,000.
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 flows from investing activities
There was no cash provided by investing activities for the six months ended June 30, 2026.
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.
27
Cash flows from financing activities
Cash provided by financing activities for the six months ended June 30, 2026 consisted of gross proceeds from the June 2026 PIPE of $4.0 million, gross proceeds from the January 2026 Inducement Offer of $2.1 million, which was offset by payments of offering costs of $395,000 related to the June 2026 PIPE and $350,000 related to the January 2026 Inducement Offer.
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.
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, fair value of preferred investment options, and allowance for credit losses.
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ITEM 3: QUANTITATIVE AND QUALITATI VE DISCLOSURES ABOUT MARKET RISK
Not Required.
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