rkda-10q_20170331.htm

Large accelerated filer

Accelerated filer

Non-accelerated filer

☐ (Do not check if a small reporting company)

Smaller reporting company

Emerging growth company

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ◻

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 28, 2017, the registrant had 42,664,821 shares of common stock, $0.001 par value per share, outstanding.

	March 31, 2017			December 31, 2016
Assets
Current assets:
Cash and cash equivalents	$	7,559		$	2,013
Short-term investments		40,966			48,547
Accounts receivable		284			349
Unbilled revenue		112			184
Inventories — current		242			252
Prepaid expenses and other current assets		1,281			877
Total current assets		50,444			52,222
Property and equipment, net		486			508
Inventories — noncurrent		1,276			1,327
Long-term investments		—			2,498
Other noncurrent assets		442			19
Total assets	$	52,648		$	56,574
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable and accrued expenses	$	2,183		$	2,359
Amounts due to related parties		20			30
Notes payable — current		2,083			—
Unearned revenue — current		885			740
Total current liabilities		5,171			3,129
Notes payable — noncurrent		23,092			25,127
Unearned revenue — noncurrent		3,014			3,120
Other noncurrent liabilities		3,000			3,000
Total liabilities		34,277			34,376
Stockholders’ equity:
Common stock, $0.001 par value—400,000,000 shares authorized as of March 31, 2017 and December 31, 2016; 42,664,821 and 44,487,678 shares issued and outstanding as of March 31, 2017 and December 31, 2016		43			44
Additional paid-in capital		174,114			173,723
Accumulated deficit		(155,766	)		(151,550	)
Accumulated other comprehensive loss		(20	)		(19	)
Total stockholders’ equity		18,371			22,198
Total liabilities and stockholders’ equity	$	52,648		$	56,574

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended March 31,
		2017			2016
Revenues:
Product	$	205		$	255
License		106			152
Contract research and government grants		707			445
Total revenues		1,018			852
Operating expenses:
Cost of product revenues		106			147
Research and development		1,823			2,202
Selling, general and administrative		3,052			3,436
Total operating expenses		4,981			5,785
Loss from operations		(3,963	)		(4,933	)
Interest expense		(339	)		(327	)
Other income, net		96			76
Net loss before income taxes		(4,206	)		(5,184	)
Income tax provision		(10	)		(6	)
Net loss and net loss attributable to common stockholders	$	(4,216	)	$	(5,190	)
Net loss per share attributable to common stockholders:
Basic and diluted	$	(0.10	)	$	(0.12	)
Weighted-average number of shares used in per share calculations:
Basic and diluted		44,360,189			44,215,156
Other comprehensive income (loss), net of tax
Unrealized gains (losses) on available-for-sale securities		(1	)		84
Other comprehensive income (loss)		(1	)		84
Comprehensive loss attributable to common stockholders	$	(4,217	)	$	(5,106	)

See accompanying notes to the unaudited condensed consolidated financial statements.

	Three Months Ended March 31,
		2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(4,216	)	$	(5,190	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		81			67
Gain on disposal of equipment		(3	)		—
Net amortization of investment premium and discount		(36	)		76
Stock-based compensation		371			221
Accretion of debt discount		49			48
Changes in operating assets and liabilities:
Accounts receivable		65			119
Unbilled revenue		72			(24	)
Inventories		62			14
Prepaid expenses and other current assets		(404	)		(641	)
Other noncurrent assets		(423	)		(152	)
Accounts payable and accrued expenses		(176	)		414
Amounts due to related parties		(10	)		(7	)
Unearned revenue		38			200
Net cash used in operating activities		(4,530	)		(4,855	)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment		4			—
Purchases of property and equipment		(57	)		(137	)
Purchases of investments		(4,582	)		—
Proceeds from sales and maturities of investments		14,695			10,465
Net cash provided by investing activities		10,060			10,328
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of debt issuance costs		—			(45	)
Proceeds from exercise of stock options and ESPP purchases		16			139
Net cash provided by financing activities		16			94
Net increase in cash and cash equivalents		5,546			5,567
Cash and cash equivalents — beginning of period		2,013			23,973
Cash and cash equivalents — end of period	$	7,559		$	29,540
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$	288		$	193
Cash paid for income taxes	$	—		$	1
NONCASH INVESTING AND FINANCING ACTIVITIES:
Exchange of membership interest in unconsolidated entity for common stock	$	2		$	—
Purchases of property and equipment included in accounts payable and accrued expenses	$	2		$	1

See accompanying notes to the unaudited condensed consolidated financial statements.

Arcadia Biosciences, Inc. (the “Company”) was incorporated in Arizona in 2002 and maintains its headquarters in Davis, California, with additional facilities in Phoenix, Arizona, and American Falls, Idaho. The Company was reincorporated in Delaware in March 2015.

The Company is an agricultural biotechnology trait company engaged in the development of traits that improve food, feed and fiber crops and enhance the value of the resulting agricultural products. The Company has an extensive and diversified portfolio of mid to late-stage crop productivity and product quality traits addressing multiple crops that supply the global food and feed markets. The Company’s traits are focused on high-value enhancements that increase crop yields by enabling plants to more efficiently manage environmental and nutrient stresses, and that enhance the quality and value of agricultural products.

In February 2012, the Company formed Verdeca LLC (“Verdeca,” see Note 6), which is jointly owned with Bioceres, Inc. (“Bioceres”), a U.S. wholly owned subsidiary of Bioceres, S.A., an Argentine corporation. Bioceres, S.A. is an agricultural investment and development cooperative. Verdeca, which is consolidated by the Company, was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and Verdeca in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (the “SEC”) in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. 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 Verdeca, which is a VIE. The Company evaluates its relationships with the VIEs upon the occurrence of certain significant events that affect the design, structure or other factors pertinent to the primary beneficiary determination. Interim results are not necessarily indicative of results for any other interim period or for the full fiscal year. The information included in these condensed consolidated financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the consolidated financial statements and notes thereto for the fiscal year ended December 31, 2016 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 8, 2017.

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of Effective Date, which defers the effective date of ASU No. 2014-09 by one year allowing early adoption as of the original effective date January 1, 2017. The deferral results in the new revenue standard being effective for the Company as of January 1, 2018. Additional ASUs have been issued to amend or clarify the new guidance in ASC Topic 606 as follows:

The standard permits the use of either the retrospective or cumulative effect transition method. The initial analysis identifying areas that will be impacted by the new guidance is substantially complete, and the Company is currently analyzing the potential impacts to its condensed consolidated financial statements and related disclosures. The Company believes there may be a potential material impact to license revenue with the adoption of the new revenue recognition guidance. Based on our ongoing review, we expect to adopt the requirements of the new standard in the first quarter of 2018 using the modified retrospective method. The Company has not concluded on the effect of the aforementioned updates on its condensed consolidated financial statements.

In August 2014, The FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which provides guidance on determining when and how to disclose going-concern uncertainties in the condensed consolidated financial statements. The new standard requires management to perform interim and annual assessments of an entity’s ability to continue as a going concern within one year of the date the condensed consolidated financial statements are issued. An entity must provide certain disclosure if “conditions or events raise substantial doubt about the entity’s ability to continue as a going concern.” The update applies to all entities and is effective for annual periods ending after December 15, 2016, and interim periods thereafter. The adoption of this guidance did not have a material impact on the condensed consolidated financial statements as management has not identified any conditions or events that raise substantial doubt about its ability to continue as a going concern for one year after the date of the condensed consolidated financial statements are available to be issued.

In January 2016, the FASB issued ASU No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments in this update impacts classification, additional fair value measurement, impairment assessment of equity investments and current required disclosures. This standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years, with early adoption permitted if the entity meets certain early application guidance. The Company is evaluating the impact of the adoption of ASU No. 2016-01 on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). Based on the new standard, lessees would recognize lease assets and lease liabilities for those leases classified as operating leases under previous GAAP. The standard is effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU No. 2016-02 on its condensed consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. The amendments in this update are effective for fiscal years beginning after December 15, 2019, including interim periods within those fiscal years. The Company is evaluating the impact of the adoption of ASU No. 2016-13 on its condensed consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. The amendments address cash flow issues such as debt prepayment or debt extinguishment costs and zero-coupon debt instruments. The amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early adoption is permitted, including adoption in an interim period. The amendments are to be applied using a retrospective transition method to each period presented. If it is impractical to retrospectively apply, it can be applied prospectively as of the earliest date practicable. The Company is evaluating the impact of the adoption of ASU No. 2016-15 on its condensed consolidated financial statements.

Raw materials inventories consist primarily of seed production costs incurred by the Company’s contracted cooperators. Finished goods inventories consist of GLA oil that is available for sale. Inventories consist of the following (in thousands):

The Company classified short-term and long-term investments as “available-for-sale.” Investments are free of trading restrictions. The investments are carried at fair value, based on quoted market prices or other readily available market information. Unrealized gains and losses, net of taxes, are included in accumulated other comprehensive loss, which is reflected as a separate component of stockholder’s equity (deficit) 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 available-for-sale investment securities portfolio at March 31, 2017 and December 31, 2016, and the corresponding amounts of unrealized gains and losses recognized in accumulated other comprehensive income (“AOCI”):


(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
March 31, 2017
Cash equivalents:
Commercial paper		2,996		—		—			2,996
Money market funds		3,867		—		—			3,867
Short-term investments:
Certificates of Deposit		2,402		—		(1	)		2,401
Commercial paper		16,076		—		—			16,076
U.S. government securities		17,508		—		(13	)		17,495
U.S. government agency securities		5,000		—		(6	)		4,994
Total Assets at Fair Value	$	47,849	$	—	$	(20	)	$	47,829

(Dollars in thousands)	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
December 31, 2016
Cash equivalents:
Money market funds	$	1,549	$	—	$	—		$	1,549
Short-term investments:
Certificates of Deposit		3,049		—		(2	)		3,047
Commercial paper		21,248		—		—			21,248
U.S. government securities		19,267		—		(9	)		19,258
U.S. government agency securities		5,000		—		(6	)		4,994
Long-term investments:
U.S. government securities		2,500		—		(2	)		2,498
Total Assets at Fair Value	$	52,613	$	—	$	(19	)	$	52,594

The Company did not have any investment categories that were in a continuous unrealized loss position for more than twelve months as of March 31, 2017. The unrealized gains and losses amounts above are included in AOCI. All short-term investments will mature in 2017 except for one in the amount of $2.5 million, which will mature in 2018.

As of March 31, 2017, for fixed income securities that were in unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of these investments, and (ii) it is not more likely than not that it will be required to sell any of these investments before recovery of the entire amortized cost basis. The Company anticipates that it will recover the entire amortized cost basis of such fixed income securities and has determined that no other-than-temporary impairments associated with credit losses were required to be recognized during the three months ended March 31, 2017.

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 condensed consolidated financial statements on a recurring basis. Assets and liabilities recorded at fair value in the condensed 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:

The carrying values of the Company’s financial instruments, including cash equivalents, accounts receivable, and accounts payable, approximated their fair values due to the short period of time to maturity or repayment.

The fair value of the available-for-sale investments at March 31, 2017 and December 31, 2016 were as follows:

	Fair Value Measurements at March 31, 2017
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets at Fair Value
Cash equivalents:
Commercial paper	$	—	$	2,996	$	—	$	2,996
Money market funds		3,867		—		—		3,867
Short-term investments:
Certificates of Deposit		—		2,402		—		2,402
Commercial paper		—		16,075		—		16,075
U.S. government securities		17,495		—		—		17,495
U.S. government agency securities		—		4,994		—		4,994
Total Assets at Fair Value	$	21,362	$	26,467	$	—	$	47,829

	Fair Value Measurements at December 31, 2016
(Dollars in thousands)	Level 1		Level 2		Level 3		Total
Assets at Fair Value
Cash equivalents:
Money market funds	$	1,549	$	—	$	—	$	1,549
Short-term investments:
Certificates of Deposit		—		3,047		—		3,047
Commercial paper		—		21,248		—		21,248
U.S. government securities		19,258		—		—		19,258
U.S. government agency securities		—		4,994		—		4,994
Long-term investments:
U.S. government securities		2,498		—		—		2,498
Total Assets at Fair Value	$	23,305	$	29,289	$	—	$	52,594

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2017 or 2016. The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, and debt instruments. For accounts receivable, accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of March 31, 2017 and 2016 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 carrying values of long-term debt, approximate fair value and is principally measured using Level 2 inputs based on quoted market prices or pricing models using current market rates.

At December 31, 2016, the Company owned a 35% ownership position in Limagrain Cereal Seeds LLC (“LCS”). The remaining 65% of LCS is owned by Vilmorin & Cie (“Limagrain”), a major global producer and marketer of field crop and vegetable seeds and affiliate of Groupe Limagrain, through its wholly owned subsidiary, Vilmorin USA (“VUSA”). LCS improves and develops new wheat and barley varieties utilizing genetic and breeding resources, as well as advanced technologies, from Groupe Limagrain and the Company. Historically, funding for LCS has come from an initial pro rata equity investment from each partner and with subsequent financing in the form of debt from VUSA. The Company’s investment in LCS has been reduced to $0 as a result of its equity method loss recognition since 2014.

On March 31, 2017, the Company and VUSA entered into a non-cash exchange agreement, which the Company transferred to VUSA the Company’s entire membership interest in LCS and VUSA transferred to the Company 1,843,888 shares of the Company’s common stock held by Limagrain. The Company recorded the retirement of the shares using the cost method, resulting in an equity reclassification between common stock par value and additional paid-in capital.

In February 2012, the Company formed Verdeca LLC (“Verdeca”), which is equally owned with Bioceres, Inc. (“Bioceres”), a U.S. wholly owned subsidiary of Bioceres, S.A., an Argentine corporation. Bioceres, S.A. is an agricultural investment and development cooperative owned by approximately 250 shareholders, including some of South America’s largest soybean growers. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies.

Both the Company and Bioceres incur expenses in support of specific agreed activities, as defined by joint work plans, which apply fair market value to each partner’s activities. Unequal contributions of services are equalized by the partners through cash payments. Verdeca is not the primary obligor for these activities performed by the Company or Bioceres. An agreement executed in conjunction with the formation of Verdeca specified that if Bioceres determines it requires cash to fund its contributed services (subject to certain annual limits), Bioceres, S.A. may elect to sell shares of its common stock to the Company for an amount not exceeding $5.0 million in the aggregate over a four-year period. The Company determined that its commitment to purchase common stock in Bioceres, S.A. as a means to provide capital to Verdeca resulted in a de facto agency relationship between the Company and Bioceres. The Company considers qualitative factors in assessing the primary beneficiary which include understanding the purpose and design of the VIE, associated risks that the VIE creates, activities that could be directed by the Company, and the expected relative impact of those activities on the economic performance of the VIE. Based on an evaluation of these factors, the Company concluded that it is the primary beneficiary of Verdeca.

As a result of the agreement to fund future contributions by Bioceres, Inc., the Company purchased common stock of Bioceres, S.A. in the aggregate amount of $2.0 million between January 2013 and August 2014. The Company’s maximum commitment to purchase stock in Bioceres, S.A. under the original funding agreement amounted to $2.0 million for 2014 and $1.2 million for 2015. In September 2014, the Company and Bioceres, S.A. entered into an agreement to reduce the annual commitment for 2014 to $500,000 and to eliminate the 2015 commitment. In consideration for these amendments, the Company surrendered 1,832 shares of Bioceres, S.A. held by the Company. The Company recorded a research and development expense of $1.5 million related to this agreement during the year ended December 31, 2014.

In addition, the Company had a right to require Bioceres, S.A. to repurchase any shares of common stock then owned by the Company upon the occurrence of certain events specified in the agreement, and similarly, Bioceres, S.A. had the right to require the Company to sell back any shares of common stock owned by the Company under certain circumstances. The Company entered into a subcontracted research agreement in 2015 with Bioceres S.A. and Bioceres Semillas, S.A., a subsidiary of Bioceres S.A. Per the agreement, the Company could pay for these services with a combination of cash and Bioceres S.A. shares. As of December 31, 2015, the liability for the aforementioned agreement was settled with $205,000 of cash and the remaining 632 Bioceres S.A. shares, with a fair value of $500,000, held by the Company, thus reducing the cost investment on the Company’s Condensed Consolidated Balance Sheet to $0.

Under the terms of the joint development agreement, the Company has incurred direct expenses and allocated overhead in the amounts of $92,000 and $40,000 for the three months ended March 31, 2017 and 2016, respectively.

In December 2015, the Company entered into a loan and security agreement (“Term Loan”) with Silicon Valley Bank (the “Bank”) providing for a senior secured term loan facility in the amount of $25.0 million, which proceeds were used to repay all existing debt.

The Term Loan accrues interest at a floating annual rate equal to nine tenths of one percentage point (0.90%) above the prime rate published from time to time in The Wall Street Journal. The agreement requires the Company to make monthly interest-only payments through December 2017. After this date, the Company is required to make thirty-six (36) equal monthly installments of principal, plus accrued interest. The Company’s final payment, due on the maturity date of December 1, 2020, shall include all outstanding principal and accrued and unpaid interest plus a final payment equal to $625,000. In the event the loan is repaid prior to its maturity, the Company is responsible for (i) all outstanding principal plus accrued and unpaid interest, (ii) a prepayment fee equal to 2% of the outstanding principal balance if prepayment occurs after December 29, 2016, but on or prior to December 29, 2017, and 1% of the outstanding principal amount if the prepayment occurs after December 29, 2017, (iii) the final payment of $625,000, and (iv) other bank expenses. The loan has been recorded on the Consolidated Balance Sheet, net of issuance fees.

This loan and security agreement contains customary events of default and covenants, including a financial covenant that requires the Company to maintain either a liquidity ratio (defined as the ratio of the Company’s cash, cash equivalents and net accounts receivable to the Company’s obligation owed to the Bank) of at least 1.4:1.0, or to cash collateralize 100% of the Company’s obligations to the Bank. The Company’s obligations to the Bank are secured by substantially all of the Company’s assets, excluding intellectual property. As of March 31, 2017, the Company is in compliance with all covenants.

The Company recognized interest expense of $339,000 and $327,000 for the three months ended March 31, 2017 and 2016, respectively. Of the total interest expense recognized, $49,000 was related to the amortization of the debt discount and end of term payment for both three months ended March 31, 2017 and 2016.

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 3,087,729 shares of common stock reserved for future issuance, which included 212,729 shares under the 2006 Plan 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 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 ISOs and NSOs will be granted at a price per share not less than the fair value at the date of grant. Options granted generally vest over a four-year period, with 25% vesting at the end of one year and the remaining vesting monthly thereafter. Options granted, once vested, are generally exercisable for up to 10 years after grant.

As of March 31, 2017, a total of 7,071,728 shares of common stock were reserved for issuance under the 2015 Plan, of which 5,458,292 shares of common stock are available for future grant. As of March 31, 2017, a total of 2,766,803 and 1,613,496 options are outstanding under the 2006 and 2015 Plans, respectively.

A summary of activity under the stock incentive plans is as follows (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, 2016		4,578,782		$	4.38	$	—
Options granted		—		N/A
Options exercised		—		N/A
Options cancelled and forfeited		(198,483	)		3.36
Outstanding — Balance at March 31, 2017		4,380,299		$	4.42	$	—
Vested and expected to vest — March 31, 2017		4,346,958		$	4.41	$	—
Exercisable —March 31, 2017		2,713,195		$	3.65	$	—

As of March 31, 2017, there was $1.6 million of unrecognized compensation cost related to unvested stock-based compensation grants that will be recognized over the weighted-average remaining recognition period of 2.87 years.

There were no options granted during both three months ended March 31, 2017 and 2016.

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 trading day of the offering period. As of March 31, 2017, the number of shares of common stock reserved for future issuance under the ESPP is 1,403,627. The ESPP provides for automatic annual increases in the shares available for purchase beginning on January 1, 2016. As of March 31, 2017, 96,373 shares had been issued under the ESPP. The Company recorded $4,000 and $30,000 of compensation expense for the three months ended March 31, 2017 and 2016, respectively.

On December 2013, the Company issued warrants to Mahyco International to purchase 75,666 shares of common stock, exercisable as of the issuance date, at an exercise price of $16.52 per share.

In connection with the Series D preferred stock financing in the first half of 2014, the Company issued warrants, exercisable as of the issuance date, to the Series D preferred stock investors to purchase an aggregate of 1,227,783 shares of common stock at an exercise price of $18.16 per share and to the placement agent to purchase 33,445 shares of common stock at $13.45.

Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date income, plus any significant unusual or infrequently occurring items that are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment including, but not limited to, the expected operating income for the year, projections of the proportion of income earned and taxed in various jurisdictions, permanent and temporary differences, and the likelihood of recovering deferred tax assets generated in the current year. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known, or as the tax environment changes.

The interim financial statement provision for income taxes expense is different from the amounts computed by applying the United States federal statutory income tax rate of 34%. The Company’s effective tax rate (ETR) was -0.2% and -0.1% for the three months ended March 31, 2017 and 2016, respectively. The difference between the effective tax rate and the federal statutory rate of 34% was primarily due to the full valuation allowance recorded on the Company’s net deferred tax assets and foreign withholding taxes.

As of March 31, 2017, there have been no material changes to the Company’s uncertain tax positions.

On June 15, 2005, the Company completed its agreement and plan of merger and reorganization with Anawah, Inc. (“Anawah” or “Sellers”), to purchase the Sellers’ 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. As of December 31, 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 the third quarter of 2016, one of the programs previously accrued for was abandoned and another program previously abandoned was reactivated. As of March 31, 2017, the Company continues to pursue a total of three development programs using this technology and believes that the contingent liability is probable. As a result, $3.0 million remains on the Consolidated Balance Sheet as an other noncurrent liability.

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 and warrants. 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 and conversion of convertible promissory notes, redeemable convertible preferred stock and convertible preferred stock. As the Company had net losses for the three months ended March 31, 2017 and 2016, all potentially dilutive common shares were determined to 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):

The Company’s related parties include MCC and Blue Horse Labs, Inc. (“BHL”). BHL is deemed a related party of the Company as MCC, the Company’s controlling stockholder, and BHL share common officers and directors.

Under a license agreement executed in 2003 and amended in 2009, BHL receives a singledigit 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 from BHL. Royalty fees due to BHL were $20,000 and $30,000 as of March 31, 2017 and December 31, 2016, respectively, and are included in the Condensed Consolidated Balance Sheets as amounts due to related parties.

The Company has reviewed and evaluated subsequent events through May 10, 2017, the date the condensed consolidated financial statements were available to be issued.

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, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those risks discussed under the section, “Risk Factors” in the most recent Annual Report on Form 10-K filed by the Company.

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.

We are an agricultural biotechnology trait company engaged in the development of traits that improve food, feed and fiber crops, and enhance the value of the resulting agricultural products. Our traits are focused on high-value enhancements that increase crop yields by enabling plants to more efficiently manage environmental and nutrient stresses, and that enhance the quality and value of agricultural products. Our distinct areas of focus are the improvement of crop yields by mitigating the impacts of abiotic stresses such as drought, heat, nutrient deficiency, water scarcity, and soil salinity and the enhancement of the nutritional quality of crops by changing the compositional quality of oilseeds and grains. Our target markets are several of the largest crops within the $40.5 billion global seed market and specific ingredients within the $140 billion global nutrition and supplements markets.

We have successfully developed and continue to advance a broad suite of potentially high value agricultural yield traits, such as Nitrogen Use Efficiency (NUE), Water Use Efficiency (WUE), and Drought Tolerance, in key food crops like corn, rice, wheat, and soybean. We have also commercialized and are marketing an omega-6 fatty acid nutritional supplement, SONOVA Gamma Linolenic Acid (GLA) oil.

Our business model is to access trait technologies that have already achieved proof of concept whether in a public research program or with commercial partners. We further develop these technologies by optimizing their function and validating their performance through intensive field trial testing in multiple crops under varying growing conditions, thereby better establishing commercial viability for resulting products. We then license our technologies to major seed and consumer product companies who perform additional testing and product development and, where needed, generate the requisite data to support regulatory submissions and approvals.

We use both genetically modified, or GM, and non-GM technologies to develop our traits. This approach allows us to select the most appropriate technology tools for development of a particular trait, crop and market. However, a key component of the development cycle of GM traits is local, or in some instances, global deregulation of the trait by one or more regulatory agencies may be required. As there continues to be a significant debate about the role of GM traits in agricultural crops, we have seen this issue begin to impact some regulatory agencies which exercise control over the pace of deregulation of our products. We have recently experienced delays in the review of many of our high value traits from certain of these government regulatory authorities. For example, in India, where regulators have not approved field trials for testing of GM traits for the last two years, we estimate the impact to the trait development and crop commercialization timelines of our license partner in India, Mahyco, could be at least two to three years.

We believe the fundamental value of these traits remains commercially significant and we, along with our development and commercialization partners, remain fully committed to their ultimate commercialization. However, to compensate for the near term impact of these regulatory delays on our anticipated commercialization revenue share, the Company completed a comprehensive strategic review in the second half of 2016 of its technology programs, product pipeline, partner progress, competitive landscape and market conditions in order to prioritize and appropriately resource its most promising products and opportunities. As a result, some programs were terminated or placed on hold while investments in other programs were accelerated with the aim of generating the highest potential near term value for the Company and its shareholders. We will continue to work with our partners to closely monitor the progress of deregulation activities affecting our GM traits, and at the same time, we are realigning our core capabilities and evolving our business model to accelerate the development and near-term commercialization of non-GM nutrition and quality traits.

Our highest near-term priorities include the expansion of the market for our SONOVA GLA products, bringing our non-GM traits in wheat quality and wheat yield to market, and working closely with our strategic partners to advance our yield trait in corn and soybeans. In the U.S, we have partnered with Dow AgroSciences and Becks Hybrids for the development of yield traits in corn. In South America, we formed Verdeca, a joint venture with Bioceres, a leading agricultural biotechnology company in Argentina, to develop, deregulate and commercialize stress-tolerant soybeans. Verdeca received its first regulatory approval in Argentina in 2015 and submitted regulatory applications in the U.S to the Food and Drug Administration (FDA) and in China to the Ministry of Agriculture (MOA) in 2016.

Balancing our near-term revenue goals with long-term value capture, we will continue to provide active support to our commercial partners working to advance our high value traits through development and deregulation for commercialization. Our trait license agreements contain two main types of financial components:

While we seek patent protection on our technologies and traits, we have structured our commercial agreements so that we receive our percentage of additional commercial value whether or not patent protection is in effect at any particular time or place. Nearly all of our agreements provide that access to our traits, and our right to receive a share of commercial value, continue for a set number of years after products containing our traits are commercialized. While the exclusive rights afforded by patents may enable our commercial partners to realize greater commercial value attributable to our traits, our right to receive a portion of that increased commercial value is not dependent on the existence of patent rights in a particular geography.

Most of our agreements include the grant of exclusive rights to a particular trait for use in a particular crop within a defined geography. To date, we have not granted exclusive rights to all of our traits for use in a particular crop to a single partner and, likewise, we have not granted exclusive rights to utilize a particular trait in all crops to a single partner. Our approach to selecting commercial partners involves careful consideration of their market channels and capabilities to ensure that they are well matched to the trait, crop, and geography that form the foundation of our commercial relationship.

Our business was built on the premise that mitigating the impact of environmental stresses, whether chronic or transient, would generate meaningful yield gains in the most important crops in the world. We believe our yield and stress pipeline holds significant promise, as evidenced by our internal data and data generated by our partners in experimental rice, wheat, soy, and corn. The commercial value of these types of traits will be fully unlocked as the traits are introgressed into elite germplasm by breeding partners and tested broadly in the field under different environments and agricultural practices. Therefore, while it is our view that the Arcadia pipeline is fairly advanced and as promising as any in the industry, significant development and testing is yet to be completed on several of our products.

Since our inception, we have devoted substantially all of our efforts to research and development activities, including the discovery, development, and testing of our traits and products in development incorporating our traits. To date, we have not generated revenues from sales of commercial products, other than limited revenues from our SONOVA products, and we do not anticipate generating any revenues from commercial product sales other than from sales of our SONOVA products for at least the next three to five years. We do receive revenues from fees associated with the licensing of our traits to commercial partners. Our long-term business plan and growth strategy is based in part on our expectation that revenues from products that incorporate our traits will comprise a significant portion of our future revenues.

We have never been profitable and had an accumulated deficit of $155.8 million as of March 31, 2017. We incurred net losses of $4.2 million and $5.2 million for the three months ended March 31, 2017 and 2016, respectively. We expect to incur substantial costs and expenses before we obtain any revenues from the sale of seeds incorporating our traits. As a result, our losses in future periods could become even more significant, and we may need additional funding to support our operating activities.

We derive our revenues from product revenues, licensing agreements, contract research agreements, and government grants. We expect that over the next several years, a substantial majority of our revenues will consist of pre-commercial license revenues, product revenues, contract research and government grant revenues until our license revenues increase with the introduction of our seed trait products to the market ensuing value-share payments, if and when they are commercially available. Further, we expect that our license revenues will vary as we enter into new license agreements and with the timing of milestone payments and recognition of deferred upfront license fees under existing license agreements.

Our product revenues to date have consisted solely of sales of our SONOVA products. We generally recognize revenue from product sales upon pick up by our third-party distributors or customers. Our revenues will fluctuate depending on the timing of orders from our customers and distributors.

Our license revenues to date consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our research and license agreements. We generally recognize nonrefundable up-front license fees and guaranteed, time-based payments as revenue proportionally over the expected development period. We recognize annual license fees proportionally over the related term subject to cancellation provisions.

We recognize milestone payments as revenue when the related performance criteria are achieved. Milestones typically consist of significant stages of development for our 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 our traits. Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and our license revenues are likely to fluctuate significantly from period to period.

Contract research revenues consist of amounts earned from performing contracted research primarily related to breeding programs or the genetic engineering of plants for third parties. We generally recognize revenue as these services are provided. In addition, we are entitled to receive a portion of the revenues generated from sales of products that incorporate our seed traits. Products expected to result from such contract research are in various stages of the product development cycle and we do not expect to generate any revenues from the sale of any such products for at least the next two to four years.

We receive payments from government entities in the form of government grants. Government grant revenues are recognized as eligible research and development expenses are incurred. Our obligation with respect to these agreements is to perform the research on a best-efforts basis. Given the nature and uncertain timing of receipt of government grants and timing of eligible research and development expenses, such revenues are likely to fluctuate significantly from period to period.

Cost of product revenues relates to the sale of our SONOVA products and consists of in-licensing and royalty fees, any adjustments to inventory, as well as the cost of raw materials, including inventory and third-party services costs related to procuring, processing, formulating, packaging, and shipping our SONOVA products.

Research and development expenses consist of costs incurred in the discovery, development, and testing of our products and products in development incorporating our traits. These expenses consist primarily of employee salaries and benefits, fees paid to subcontracted research providers, fees associated with in-licensing technology, land leased for field trials, chemicals and supplies, and other external expenses. These costs are expensed as incurred. Additionally, we are required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties. We expense these milestone payments at the time the milestone is achieved and deemed payable. We expect our research and development expenses to increase on an absolute dollar basis for the foreseeable future, although our research and development expenses may increase significantly if we choose to accelerate certain research and development programs or if we elect to take a greater role in the regulatory and commercialization process with respect to one or more of our seed traits or products in development incorporating our seed traits. Our research and development expenses may also fluctuate from period to period as a result of the timing of various research and development projects.

Selling, general, and administrative expenses consist primarily of employee costs, professional service fees, and overhead costs. Our selling, general, and administrative expenses may fluctuate from period to period.

Interest expense consists primarily of contractual interest and amortization of debt discount on our term loan.

Other income, net, consists of interest income and the amortization of investment premium and discount on our cash and cash equivalents and investments.

Our income tax benefit (provision) has not been historically significant, as we have incurred losses since our inception. The provision for income taxes consists of state and foreign income taxes. Due to cumulative losses, we maintain a full valuation allowance against our U.S. deferred tax assets. We consider all available evidence, both positive and negative, including but not limited to, earnings history, projected future outcomes, industry and market trends and the nature of each of the deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. deferred tax assets.

	Three Months Ended March 31,						$ Change			% Change
	2017			2016
	(In thousands except percentage)
Revenues:
Product	$	205		$	255		$	(50	)		(20	)%
License		106			152			(46	)		(30	)%
Contract research and government grants		707			445			262			59	%
Total revenues		1,018			852			166			19	%
Operating expenses:
Cost of product revenues		106			147			(41	)		(28	)%
Research and development		1,823			2,202			(379	)		(17	)%
Selling, general and administrative		3,052			3,436			(384	)		(11	)%
Total operating expenses		4,981			5,785			(804	)		(14	)%
Loss from operations		(3,963	)		(4,933	)		(970	)		(20	)%
Interest expense		(339	)		(327	)		12			4	%
Other income, net		96			76			20			26	%
Net loss before income taxes		(4,206	)		(5,184	)		(978	)		(19	)%
Income tax benefit (provision)		(10	)		(6	)		4			67	%
Net loss and net loss attributable to common stockholders	$	(4,216	)	$	(5,190	)	$	(974	)		(19	)%

Product revenues accounted for 20% and 30% of our total revenues in the three months ended March 31, 2017 and 2016, respectively. Our product revenues from sales of our SONOVA products decreased by $50,000, or 20%, in the quarter-to-quarter comparison, primarily as a function of the timing of orders.

License revenues accounted for 10% and 18% of our total revenues for three months ended March 31, 2017 and 2016, respectively. Our license revenues decreased by $46,000, or 30%, in the three months ended March 31, 2017 compared to revenues in the same period of 2016. The decrease in license revenue was primarily due to delays in the estimated launch date for a number of our out-licensed yield traits, thereby reducing the amount amortized into revenue each quarter thereafter.

Contract research and government grant revenues comprise a significant portion of our total revenues and accounted for 70% and 52% of our total revenues for the three months ended March 31, 2017 and 2016, respectively. Our contract research and government grant revenues increased by $262,000, or 59%, in the three months ended March 31, 2017 compared to the same period in 2016. The increase in grant and contract research revenue is primarily driven by a new contract research agreement in 2017. Contract research and government grant revenues can vary from quarter-to-quarter depending on the timing of contract research projects and the completion of services provided, and the timing of the award of government grants and eligible research and development expenses.

Cost of product revenues decreased by $41,000, or 28%, in the three months ended March 31, 2017 compared to the three months ended March 31, 2016 due to the decrease in sales when comparing the respective periods.

Research and development expenses decreased by $379,000, or 17%, in the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The decrease was primarily driven by lower salaries and benefits, mainly as a result of the reductions in our workforce that occurred in 2016, which was partially offset by increased expenses pertaining to Verdeca.

Selling, general, and administrative expenses decreased by $384,000, or 11%, in the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The decrease was primarily driven by lower salaries and benefits, mainly as a result of the reductions in our workforce in 2016.

Interest expense of $339,000 for the three months ended March 31, 2017 was relatively consistent when compared to $327,000 for the three months ended March 31, 2016.

Other income, net, of $96,000 for the three months ended March 31, 2017 was an increase of $20,000, or 26%, in income when compared to a net income of $76,000 for the three months ended March 31, 2016. The increase was primarily related to lower investment balances in 2017.

Income tax provision of $10,000 for the three months ended March 31, 2017 was relatively consistent when compared to the $6,000 for three months ended March 31, 2016.

We and our commercial partners operate in different geographies around the world and conduct field trials that are used for data generation, which must be conducted during the appropriate growing seasons for particular crops and markets. Often, there is only one crop-growing season per year for certain crops and markets. Similarly, climate conditions and other factors that may influence the sales of our products may vary from season to season and year to year. In particular, weather conditions, including natural disasters such as heavy rains, hurricanes, hail, floods, tornadoes, freezing conditions, drought, or fire, may affect the timing and outcome of field trials, which may delay milestone payments and the commercialization of products incorporating our seed traits. In the future, sales of commercial products that incorporate our seed traits will vary based on crop growing seasons and weather patterns in particular regions.

The level of seasonality in our business overall is difficult to evaluate at this time due to our relatively early stage of development, our relatively limited number of commercialized products, our expansion into new geographical markets, and our introduction of new products and traits.

We have funded our operations primarily with the net proceeds from our initial public offering and private placements of equity and debt securities, as well as proceeds from the sale of our SONOVA products and payments under license agreements, contract research agreements, and government grants. Our principal use of cash is to fund our operations, which are primarily focused on progressing our agricultural yield and product quality seed traits through the regulatory process and to commercialization. This includes conducting replicated field trials, coordinating with our partners on their development programs, and collecting, analyzing, and submitting field trial data to regulatory authorities. As of March 31, 2017, we had cash and cash equivalents of $7.5 million and short-term investments of $41.0 million.

In May 2015, we completed our initial public offering. In connection with this offering, we issued and sold 8,528,306 shares of common stock at a price to the public of $8.00 per share and received $58.4 million in net proceeds, after deducting underwriting discounts and commissions of $4.8 million and offering expenses of $5.0 million.

In December 2015, we obtained additional debt financing in the form of a $25.0 million senior secured term loan, allowing us to prepay all previous debt with a more favorable interest rate and maturity. Due to our anticipated cash needs and unless we renegotiate the terms of the existing agreement, we will not be able to meet the liquidity ratio covenant within the next twelve months. At such time, we would be required to pledge the minimum collateral of the outstanding balance of our term loan. Refer to Note 7 – Debt.

We believe that our existing cash, cash equivalents, and short-term investments will be sufficient to meet our anticipated cash requirements for at least the next 12 months.

We may seek to raise further funds through additional debt or equity financings, if necessary. We may also consider entering into additional partner arrangements or pursuing additional government grants. Our sale of additional equity would result in dilution to our stockholders. Our incurrence of additional debt would result in increased 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 may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned development programs. Any of these actions could materially harm our business, results of operations and financial condition.

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

Cash used in operating activities for the three months ended March 31, 2017 was $4.5 million. Our net loss of $4.2 million, net amortization of investment premiums and discounts of $36,000, and adjustments in our working capital accounts of $776,000 were partly offset by non-cash charges of $371,000 for stock-based compensation, $81,000 for depreciation and amortization, and $49,000 for accretion of debt discount.

Cash used in operating activities for the three months ended March 31, 2016 was $4.9 million. Our net loss of $5.2 million and adjustments in our working capital accounts of $77,000 were partly offset by non-cash charges of $221,000 for stock-based compensation, $76,000 for net amortization of investment premiums and $67,000 for depreciation and amortization. The decrease in cash associated with our net operating assets of $77,000 was primarily due to a $793,000 increase in the change of prepaid expenses and other current assets as a result of a license fee and annual contracted research fees paid at the beginning of the year, which was offset by a $414,000 decrease in accounts payable and accrued liabilities due to the timing of our payments on billings received, $200,000 decrease in unearned revenue due to the recognition of revenue, and a $119,000 decrease in accounts receivable as a result of a significant milestone payment which was invoiced in the fourth quarter of 2015 and received in the first quarter of 2016.

Cash provided by investing activities for the three months ended March 31, 2017 of $10.0 million primarily consisted of $14.7 million in proceeds from sales and maturities of investments, which was offset by $4.6 million in purchases of short-term investments.

Cash provided investing activities for the three months ended March 31, 2016 of $10.3 million primarily consisted of maturities of short-term investments, partially offset by purchases of property and equipment.

Cash provided by financing activities for the three months ended March 31, 2017 of $16,000 consisted of proceeds from the purchase of ESPP shares.

Cash provided by financing activities for the three months ended March 31, 2016 of $94,000 consisted of proceeds from the exercise of stock options and the purchase of ESPP shares.

There have been no other material changes in our contractual obligations since December 31, 2016.

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 is discussed in the notes to our condensed consolidated financial statements.

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 policies and estimates to be revenue recognition, inventories, income taxes, and stock-based compensation. There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2017 from those disclosed in our Annual Report on Form 10-K filed with the SEC on March 8, 2017.

We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Our disclosure controls and procedures have been designed to meet reasonable assurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based on their evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q, our President and Chief Executive Officer and our Chief Financial Officer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation identified above that occurred during the quarter ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

We currently are not a party to any material litigation or other material legal proceedings. From time to time, we may be subject to legal proceedings and claims in the ordinary course of business.

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2016, which could materially affect our business, financial condition, liquidity or future results. The risks described in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

A list of exhibits filed with this Quarterly Report on Form 10-Q or incorporated herein by reference is found in the Index to Exhibits immediately following the signature page of this report and is incorporated into this Item 6 by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Exhibit Number		Exhibit Description


31.1		Principal Executive Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Principal Financial Officer’s Certifications Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1(1)		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2(1)		Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS		XBRL Instance Document

101.SCH		XBRL Taxonomy Extension Schema Document

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		XBRL Taxonomy Extension Label Linkbase Document

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document


Delaware	81-0571538
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
202 Cousteau Place, Suite 105 Davis, CA	95618
(Address of Principal Executive Offices)	(Zip Code)

			Page
Part I —	Financial Information		1

	Item 1.	Condensed Consolidated Financial Statements:	1

		Condensed Consolidated Balance Sheets	1

		Condensed Consolidated Statements of Operations and Comprehensive Loss	2

		Condensed Consolidated Statements of Cash Flows	3

		Notes to Condensed Consolidated Financial Statements	4

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19

	Item 4.	Controls and Procedures	19

Part II —	Other Information		19

	Item 1.	Legal Proceedings	19

	Item 1A.	Risk Factors	19

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20

	Item 3.	Defaults Upon Senior Securities	20

	Item 4.	Mine Safety Disclosures	20

	Item 5.	Other Information	20

	Item 6.	Exhibits	20

	Three Months Ended March 31,
		2017	2016
Options to purchase common stock		4,380,299	3,371,795
Warrants to purchase common stock		1,336,894	1,336,894
Total		5,717,193	4,708,689

May 10, 2017	By:	/s/ MATTHEW T. PLAVAN
		Matthew T. Plavan
		Chief Financial Officer

	March 31, 2017		December 31, 2016
Raw materials	$	44	$	44
Finished goods		1,474		1,535
Inventories	$	1,518	$	1,579

	March 31, 2017			December 31, 2016
Notes payable	$	25,175		$	25,127
Total		25,175			25,127
Less current portion		(2,083	)		—
Long-term portion	$	23,092		$	25,127

	Arcadia Biosciences, Inc.

May 10, 2017	By:	/s/ RAJENDRA KETKAR
		Rajendra Ketkar
		President and Chief Executive Officer