Executive Summary / Key Takeaways

• Arcadia Biosciences (RKDA) is undergoing a significant transformation, pivoting from its legacy AgTech and underperforming Body Care brands to focus almost entirely on its high-growth Zola coconut water product line. This strategic shift aims to streamline operations and achieve profitability.
• Zola coconut water is demonstrating robust growth, with revenues increasing 90% year-over-year in Q1 2025 and outperforming the broader coconut water category by more than 2:1 in 2024, driven by significant distribution gains and strong consumer demand.
• The company has aggressively monetized its legacy intellectual property and exited non-core businesses, generating non-dilutive capital and eliminating substantial contingent liabilities, which has significantly reduced operating expenses and cash burn.
• Despite operational improvements and a reduced cash burn, Arcadia faces a "going concern" warning, with existing cash and cash equivalents insufficient for the next 12 months, exacerbated by a default on a $2 million promissory note payment from Above Food.
• A pending business combination with Roosevelt Resources LP, expected to close around August 15, 2025, is a critical near-term event that will significantly alter Arcadia's ownership structure and strategic direction, though it faces ongoing SEC review and shareholder scrutiny.

A Strategic Pivot: From Biotech Fields to Consumer Hydration

Arcadia Biosciences, Inc. (RKDA), founded in 2002, has embarked on a profound strategic transformation, shedding its historical identity as an agricultural biotechnology firm to emerge as a focused consumer wellness company. This pivot centers on its Zola coconut water brand, a move designed to simplify its business model, reduce operational complexities, and chart a clear path toward profitability. The company's journey, marked by significant divestitures and a sharpened focus, positions it within the rapidly expanding "better-for-you" beverage market, where consumer preferences increasingly favor natural hydration and electrolyte-rich options.

The coconut water industry itself is experiencing robust growth, outpacing many other beverage categories as health-conscious consumers seek natural alternatives. In 2024, the full-year growth of the coconut water category was double that of 2023, underscoring a strong market tailwind for Zola. Arcadia's strategy is to capitalize on this trend by leveraging Zola's established market presence and differentiated product attributes.

Competitive Landscape and Zola's Distinct Edge

In the competitive beverage market, Zola distinguishes itself through its product quality and strategic positioning. Zola coconut water is sourced and packaged directly at the source in Thailand, ensuring a crisp, clean, and naturally sweet taste. This commitment to quality has translated into tangible consumer preference, with taste tests showing Zola preferred to competitors by a two-to-one margin. This taste advantage is a critical differentiator in a crowded market, fostering strong end-customer demand.

Zola's market placement further enhances its competitive standing. Typically found in the produce section of conventional grocery retailers, Zola benefits from reduced competition compared to center-store aisles. This placement also aligns the brand with fresh, natural products, appealing to health-conscious consumers without requiring the substantial slotting investments common in other beverage categories. This strategic positioning allows Arcadia to maintain a significantly lower marketing investment, projected at around 5% of net sales for Zola, a stark contrast to the nearly dollar-for-dollar marketing spend previously required for the GoodWheat brand.

While precise, directly comparable market share figures for all niche competitors are not publicly detailed, Zola's growth rates consistently outpace the broader coconut water category. For instance, in the 13 weeks ended March 29, 2025, Zola's scan data sales surged 76%, more than three times faster than the category's 24% growth. This indicates strong market share gains and validates Zola's competitive advantages in product quality and strategic distribution.

The Transformative Journey: Shedding Legacy Assets

Arcadia's current focus on Zola is the culmination of a multi-year plan to divest its legacy AgTech and underperforming Body Care businesses. This strategic streamlining has involved a series of significant transactions designed to monetize intellectual property and reduce operational overhead.

In May 2024, Arcadia sold its non-GMO Resistant Starch (RS) durum wheat trait to longtime partner Corteva Agriscience (CTVA) for $4 million in cash, while retaining certain usage rights. This transaction provided non-dilutive capital and accelerated the monetization of its wheat technology. Concurrently, the GoodWheat brand, which had achieved over 3,500 points of distribution in categories like pasta and pancakes, was sold to Above Food Corp. for a $6 million promissory note. This divestiture, reported as a discontinued operation, was a strategic decision to exit a business requiring substantial investment to scale nationally, leading to significant cost savings, including a 50% reduction in salaries and benefits compared to early 2024.

Further solidifying its exit from AgTech, Arcadia entered into an agreement with Bioceres Crop Solutions Corp. (BIOX) on March 28, 2025. This deal saw BIOX transfer rights to certain soy traits back to Arcadia and pay $750,000, in exchange for Arcadia's reduced gluten and oxidative stability patents and the elimination of future royalties. This transaction, along with the abandonment of certain Anawah technologies and a License Termination and Patent Non-Assert Agreement with Bioseed Research India in May 2025, eliminated a total of $4 million in contingent liabilities from Arcadia's balance sheet. As a result, Arcadia no longer expects to receive license or royalty fees or incur significant future expenses related to its wheat-related intellectual property. The company now has only one remaining tomato patent licensed to a third party, representing a $1 million contingent liability, and is actively exploring options to remove this to fully conclude its legacy AgTech exit.

Financial Performance and Operational Discipline

Arcadia's financial performance in 2024 and 2025 reflects this strategic pivot and a renewed focus on operational efficiency. For the nine months ended September 30, 2025, product revenues, primarily from Zola, totaled $3.957 million. In Q1 2025, Zola revenues surged 90% year-over-year, driven by a 70% increase in new distribution. This momentum carried from 2024, where Zola sales increased 46% year-over-year, adding over 1,600 new stores and growing retail distribution by 86%.

The company has demonstrated strong cost controls. In Q1 2025, operating expenses saw a 16% year-over-year reduction, even with nearly half a million dollars in transaction-related fees. Research and development expenses decreased by 100% in Q3 2025, reflecting the strategy to leverage existing resources for Zola and minimize new investment. Selling, general, and administrative (SG&A) expenses also decreased by $671,000 for the three months ended September 30, 2025, compared to the same period in 2024, due to the absence of prior-year operating and employee-related costs.

Gross margins have remained robust, exceeding 30% for eleven consecutive quarters. While the gross margin rate in Q1 2025 was 43%, management anticipates a trend towards the low 30% range as Zola becomes the sole product line. This is consistent with Zola's gross margins of 33% in 2024.

Cash flow management has also seen significant improvement. The use of operating cash decreased 30% in the second half of 2024 compared to the first half, with the total cash used in operations for 2024 at its lowest level since Arcadia went public a decade ago. For the nine months ended September 30, 2025, net cash used in operations was $3.90 million, a reduction from $9.60 million for the full year 2024.

Strategic Outlook and Future Initiatives

Arcadia's outlook is firmly centered on Zola's continued growth and further cost optimization. The company expects product revenues in 2025 to be driven entirely by Zola, as GLA oil sales ceased at the end of 2024. Management projects that new distribution gains for Zola will offset the sales lost from GoodWheat, with full-year 2024 revenues expected to be in line with the $5.3 million reported in 2023. Gross margins are anticipated to be in the low 40s for 2024, yielding over $2 million in gross profit, with an operating expense run rate of approximately $2 million per quarter. This translates to an expected 50% decrease in cash use for 2024 compared to 2023.

Looking ahead, Arcadia is actively developing new Zola product offerings, with new innovation expected on shelves early next year. The company has a "healthy pipeline" of discussions with new customers and distributors, representing over 50% of its current customer base. Additionally, Arcadia was awarded an additional SKU at existing customers, covering more than 1,000 stores, or nearly one-third of its current distribution.

The company is also monitoring external factors such as tariffs. While a 10% baseline tariff went into effect in April 2025, Arcadia believes it will not have a significant impact due to identified cost savings opportunities.

A significant near-term event is the pending business combination with Roosevelt Resources LP, expected to close around August 15, 2025. An amendment to the exchange agreement fixed the equity share ratio at 90% for Roosevelt Limited Partners and 10% for Arcadia stockholders, providing greater ownership certainty.

Risks and Challenges

Despite the positive momentum, Arcadia faces substantial risks. The company issued a "going concern" warning, stating that its cash and cash equivalents of $1.10 million as of September 30, 2025, will not be sufficient to meet anticipated cash requirements for at least the next 12 months. This liquidity challenge is compounded by Above Food's default on a $2 million principal payment plus accrued interest on the promissory note due May 14, 2025. Substantial doubt exists regarding Above Food's ability to make future cash payments or issue additional shares to satisfy its obligations, which has materially affected Arcadia's near-term cash resources.

The Roosevelt Resources transaction, while strategic, is still under SEC review, and its completion is subject to uncertainties. Furthermore, the company is facing demand letters from purported stockholders alleging deficiencies in the preliminary proxy statement, including material misstatements and omissions, and possible breaches of fiduciary duties. Arcadia intends to vigorously defend itself against these allegations, but such legal matters could divert management attention and incur significant expenses.

Operational challenges include managing inventory due to longer lead times in the industry, which requires careful planning to support Zola's growth. The significant new distribution gains, while positive, also make forecasting challenging due to the difference between initial sell-in and ongoing reorder patterns.

Conclusion

Arcadia Biosciences is in the midst of a critical transformation, successfully shedding its complex AgTech past to embrace a focused future in consumer wellness with its Zola coconut water brand. The company's strategic divestitures have provided non-dilutive capital and significantly reduced its cost structure, while Zola's impressive growth rates and market share gains underscore its potential as a core growth engine. The commitment to operational discipline, evidenced by consistent gross margins and reduced cash burn, is a testament to management's execution of its strategic plan.

However, the "going concern" warning and the default on the Above Food promissory note highlight the urgent need for additional funding. The successful completion of the Roosevelt Resources business combination and the effective monetization of the AFII shares held by Arcadia will be crucial determinants of the company's near-term financial stability. For investors, Arcadia represents a high-risk, high-reward opportunity. The investment thesis hinges on Zola's ability to continue its rapid growth, the successful integration of the Roosevelt transaction, and the company's ability to secure sufficient liquidity to fund its operations. While the path ahead is challenging, the focused strategy and operational improvements offer a compelling narrative for those willing to consider the inherent risks.