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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20172020

OR

Commission File Number 001-37383

Arcadia Biosciences, Inc.

(Exact name of Registrant as specified in its Charter)

(530) 756-7077

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrantregistrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ☐    NO  ☒

Indicate by check mark if the Registrantregistrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ☐    NO  ☒

Indicate by check mark whether the Registrant: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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.   Act☒.   ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.  ☐

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of June 30, 2017,2020, the last business day of the Registrant’s most recently completed second fiscal quarter, was approximately $4,900,000$33,300,000 (based on the closing price of $9.00$3.76 on June 30, 20172020 on the NASDAQ GlobalCapital Market).

The number of shares outstanding of the Registrant's common stock on March 1, 2018,19, 2021, was 2,136,03121,336,249 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Information required by Part III of this Annual Report on Form 10-K is incorporated by reference to the Registrant's Definitive Proxy Statement for its 20182021 Annual Meeting of Stockholders, which proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal year covered by this Form 10-K.

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INTRODUCTION

“Arcadia,” the “Company,” “we,” “our” and “us” are used interchangeably to refer to Arcadia Biosciences, Inc. and its subsidiary.subsidiaries.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K contains forward-looking statements within the meaning of the federal securities laws, which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events, our future financial or operating performance, growth strategies, anticipated trends in our industry, the anticipated impact of the novel coronavirus on our business, and our potential opportunities, plans, and objectives. In some cases, you can identify forward-looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential," or "continue" or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Annual Report on Form 10-K include, but are not limited to, statements about:

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Annual Report on Form 10-K.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled "Risk Factors" and elsewhere in this Annual Report on Form 10-K. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Annual Report on Form 10-K. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Annual Report on Form 10-K relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances or to reflect new information or the occurrence of unanticipated events, except as required by law.

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TABLE OF CONTENTSCONTENTS FOR FORM 10-K

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PART I

Item 1. Business.

Overview

Overview

We are a consumer-driven, agriculturalleader in science-based approaches to developing high value crop improvements primarily in wheat, soy and hemp, designed to enhance farm economics by improving the performance of crops in the field, as well as their value as food ingredient company.ingredients, health and wellness products, and their viability for industrial applications. We aim to create value across the agricultural production and supply chain beginning with enhanced crop productivity for farmers and ultimately to deliver accelerated innovation in nutritional quality consumer foods.  We use state of the art gene-editing technology andhave used advanced breeding techniques to naturally enhancedevelop these proprietary innovations which we are now commercializing through the nutritional qualitysales of grainsseed and oilseeds to address the rapidly evolving trends in consumer healthgrain food ingredients and nutrition. In addition, we have developed a broad pipeline of high value crop productivity traits designed to enhance farm economics.  products, hemp extracts, trait licensing and royalty agreements.

Consumers are demanding healthier, high quality foods, naturally and sustainably produced with greater ingredient simplicity and transparency from food companies.  Now more than ever, consumers are paying premium pricing to satisfy their dietary health requirements, such as higher fiber and lower gluten, healthier oils and fewer processed ingredients. Conventional and transgenic breeding processes can take between 9-13 years to bring new food varieties or quality traits to market, which has resulted in consumer food companies searching for alternative means to satisfy the evolving customer demands. Consumer demand for rapid product differentiation has created a premium food market opportunity that is becoming one of the fastest growing segments in the food industry.

To address this large and growing demand, we are building on our industry leading scientific expertise and advanced plant breeding technologies developed over the past 15 years to produce nutrient-dense crops for use in the major foods we eat. By employing gene editing technology using our proprietary TILLING platform, we believe we can reduce the time to market by half for novel trait ingredients, thereby providing consumer food companies a steady and reliable source of cost effective, healthy natural food options.

We are developing a suite of branded, high value, healthy ingredients in wheat. First to market will be our high fiber Resistant Starch (RS) wheat which has more dietary fiber than conventional wheat. Increased fiber consumption is well recognized as a way to improve gut health and to control excessive weight gain. Concurrently, we are developing three additional wheat traits, a reduced gluten wheat, an extended shelf life wheat and a superior yielding wheat. In the traditional American diet more than 500 calories a day come from wheat products, 25 percent of the FDA’s recommended daily caloric intake for women and 20 percent for men, which creates a natural market opportunity for our first two wheat products. We believe these varieties have broad application in the annual global wheat market which is estimated by the FDA to be 758 million metric tons or approximately $127 billion.

In years to come, we expect to achieve enhanced nutritional characteristics within a number of other broad acre crops, other than wheat, using advanced breeding and gene-editing techniques. Targets include but are not limited to higher fiber, longer shelf life and enhanced protein in crops other than wheat.          

An important aspect of our business is improving farmer productivity through the development of more robust crop varieties, by developing specific crop traits designed to counteract the detrimental impact of environmental stresses on harvest yields. Traditional genetic modification (GM) trait development has concentrated on crops where the combination of large acreage and high input costs (such as pest and weed control chemical costs) create significant economic value for herbicide or insecticidal traits. However, far more deleterious to crop yields are abiotic stresses, such as drought, heat, nutrient deficiency, water scarcity, and soil salinity. Mitigation of these abiotic stresses remain largely unpenetrated by the GM seed industry today. For example, industry estimates indicate greater than 80 percent of wheat yield loss and 65 percent of corn yield loss globally are lost due to abiotic factors. These stresses are prevalent in most agricultural environments with varying degrees of severity and often have material consequences on crop production, quality, and farmer incomes.

Phillips McDougall estimates the abiotic stress mitigation trait market to be worth several billion dollars. We devoted much of our early research to building the most comprehensive array of abiotic stress traits in the world. Furthermore, through broad out-licensing arrangements with our commercialization partners, many of our traits have been bred into several global crops, including rice, wheat, and soybeans, and we have demonstrated significant yield improvements in multiple years of field testing. Upon commercialization, our commercial value share is expected to range between 10% and 50%, depending upon the geography, crop and specific trait.

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Our commercial strategy is to migrate forward insatisfy consumer nutrition, health and wellness demands with the superior functional benefits our crops deliver directly from the farm, enabling us to share premium economics throughout the ag-food supply chain and to build a world-class estate of high value traits and varieties.

According to ResearchandMarkets.com, the global wheat flour market in 2019 totaled $181 billion and is expected to reach $220 billion by 2027. It is also estimated by the U.S. Department of Agriculture (“USDA”), that approximately one-quarter of the FDA recommended calories consumed by people in the US are from wheat. Therefore, the farmermarket opportunity for nutritional improvements in wheat are significant not only because the wheat market itself is vast, but also because of the “share of stomach” wheat represents. Considering that most people today are not getting enough fiber or protein in their daily diets, the superior nutrient density of our non-GM GoodWheat™ (“GoodWheat”) technology can improve the dietary intake of average consumers, by increasing their fiber and seed companyprotein consumption without changing the way they eat. We believe this proprietary advantage gives GoodWheat the potential to become a global standard in wheat.

We also believe the recent legalization of hemp in the U.S. and many other areas of the world has created a significant agricultural and financial opportunity that we can participate in meaningfully. The market has demonstrated broad demand for industrial, nutritional, health and wellness products from hemp, yet the genetics have not yet been optimized for industrial scale production setting up a vast, new opportunity for Arcadia to add value to the consumer food company. Due to our early stage focus on the development of abiotic stress traits, we have historically been commercially aligned with farmersindustry through  seed and seed companies. However, by also establishing commercial relationships with consumer food companies and developing consumer brand awareness of our high value premium ingredients, we expect to be better positioned to garner a greater shareextract offerings.

The passage of the market. U.S. Agriculture Improvement Act of 2018 – also known as the Farm Bill – confirmed the federal legalization of hemp, the term given to non-psychoactive cannabis containing less than 0.3% tetrahydrocannabinol (THC). It also included provisions for legalizing on a federal level hemp’s cultivation, transport and sale for the first time in more than 75 years. Hemp, not previously distinguished by the federal government from cannabis, a Schedule 1 drug and banned as an agricultural crop, lacks substantive plant biology research and is limited by suboptimal genetics, highly fragmented germplasm and performance inconsistencies. We are targeting hemp-based solutions that allow farmers to reliably and consistently achieve compliance with USDA regulations, through varieties with improved functionality and application of specific attributes such as select cannabinoid contents for health and wellness, enhanced proteins profiles for plant-based dietary applications and industrial applications such as clothing and hempcrete. Arcadia conducts its business in only federal and state markets in which its activities are legal.

In addition to bringing new hemp varieties to market, we also see an attractive opportunity to service the growing consumer demand for CBD and other hemp-derived cannabinoids. According to a New Frontier Data report issued in March 2020, U.S. consumer spending on CBD is projected to grow from an estimated $14B USD in 2020 to $26B USD in 2025 with global demand accelerating significantly as countries formalize regulatory frameworks for the industry. Backed by our own consumer survey data, we believe our premium Hawaiian grown hemp provides a unique value proposition to consumers that will enable us to rapidly gain traction in the marketplace as we grow our B2B and branded retail business channels.  

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Arcadia GoodWheat™

In 2018, we launched our GoodWheat brand, a non-genetically modified (non-GM) portfolio of wheat products that enables food manufacturers to differentiate their consumer-facing brands. Consumer food companies are looking to simplify their food ingredient formulations and consumers are demanding “clean labeling” in their foods, paying more for foods having fewer artificial ingredients and more natural, recognizable and healthy ingredients. Ninety-one per centA 2017 survey by PR agency Ingredient Communications found that 73% of U.S. consumers believeare happy to pay a higher retail price for a food and beverage optionsor drink product made with recognizable ingredients are healthier.they recognize. Because we engineerGoodWheat increases the nutrient density directly into staplein the primary grains and oils, we provideit provides the mechanism for food formulation simplification naturally and cost effectively and in a time-frame to meet evolving consumer demands.

This forward migrationThe brand launch is a key element of the company’s go-to-market strategy to achieve greater value for its innovations by participating in downstream consumer revenue opportunities. We designed the ag-food supply chain will require we build additional organizational capabilities and industry expertise. For instance, we are expanding our in-house commercial grain production and logistics resources for greater scale capacitybrand to bring our identity preservedmake an immediate connection with consumers that products to market. We are also developing product branding strategies to build customer brand recognition and loyalty.

Our Strengths

We believe we are well positioned among our peers to capitalize on the need to increase the efficiency, quality and speed of innovation in agricultural product differentiation tomade with GoodWheat meet the demandtheir demands for healthier food choices. Our combinationwheat options that also taste great. The GoodWheat brand encompasses our current and future non-GM wheat portfolio of technological innovation, assetshigh fiber Resistant Starch (RS) and experience is why we believe we are uniquely positioned to best meet this challenge by improving crop yields to enhancing crop nutrition:

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Our Growth Strategy

We believe there are significant opportunities to grow our business by executing the following elements of our strategy:

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Our Products and Product Development Pipeline

During 2017, we continued to rationalize program expensesWe have improved the quality and Company resources against a setnutritional value of near, mid-termplant-based ingredients while improving production efficiency using advanced plant breeding technologies and long-term priorities to supportaccelerating innovation through industry leading partners.  Our innovations address the challenges facing our growth strategy which provided further clarity on commercialization priorities for health and nutrition ingredient traits and deregulation priorities for our abiotic stress trait out-licenses.  Our current products and product candidates arefood systems as depicted below:

We believe our core competencies in plant genomics position Arcadia for unique innovations in new crops. We leverage a research and development team that has over 100 years of combined experience across best in class technology platforms. Our competitive advantages allow for accelerated discovery and market entry.

The development and commercialization staging of our health and nutrition ingredient traits reflect the time to market we expect based upon the remaining breeding and production requirements to achieve optimal market penetration. In 2017, we in-licensed the CRISPR-Cas9 technology, substantially augmenting the speed at which we can bring technologies discovered through our tilling technology platform to market as well as new versions of existing traits and entirely new discoveries. Our wheat portfolio development phases are depicted in table below, along with the estimated potential impact of CRISPR-Cas9 on our commercialization timelines:

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GoodWheat

Enhanced Quality Grains

Our GoodWheat brand redesigns wheat as a functional food adding value to the wheat supply chain by enabling a wider range of choices to meet consumer demands. We believe our GoodWheat products will allow consumers to enjoy unique health benefits in their favorite foods featuring wheat. Our GoodWheat product allows consumer food companies to deliver specialty products to discerning consumers. We have multiple programs aimed at developing wheat and other small grains with improved nutritional qualities. One such program generated multiple bread wheat and pasta wheat lines with very high levels of amylose, leading to increased levels of resistant starch. Resistant starch increases the total dietary fiber content of wheat and reduces its glycemic index, which are both desirable nutritional qualities that are important in the management of diabetes and healthy blood glucose levels. High fiber Resistant Starch wheat can deliver fiber and other benefits to great-tasting refined white flour products and also whole grain food products. In 2016, the FDA approved the use of qualified health claims for corn-based resistant starch in the risk reduction of type-2 diabetes, thus establishing a key precedent for the health benefits associated with this fiber. In 2012,According to the average American consumedUSDA’s What We Eat in America Survey of 2015-2016, only 40%5% of the U.S. population meets the recommended level of dietary fiber.  On average, Americans consume only 57% of the daily dietary fiber, with whole grain consumption representing only 15% of targeted fiber intake and 80% of teenagers eating no whole grains. Even so, grain products make up the largest fiber source in US adults. Improvingrecommended levels. We believe improving the fiber content of wheat is the ideal vehicle tocan deliver improved health benefits to a wide population.

A second program, in collaboration with Ardent Mills, aims at improving the flavor profile and shelf-life of whole wheat flour, and is funded by Ardent Mills, which combines the operations of ConAgra Mills and Horizon Milling, a Cargill-CHS joint venture.wheat. A third program funded by the National Institutes of Health, or NIH, is aimed at reducing gluten in wheat and other grains. This program additionally targets improved protein quality and amino acid profile in wheat. All three of these programs utilize our TILLING platform, and the resulting products are non-GM.

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High Fiber Resistant Starch Wheat

Our high fiber Resistant Starchresistant starch (RS) wheat provides a source of wheat with inherently high levels of resistant starch, increasing the total dietary fiber content of food products without the need for fiber additives from other sources. Currently, corn resistant starch is a product in two market segments: dietary fiber additives and modified starch additives. According to MarketsandMarkets, the global dietary fibers market is projected to reach $6.5 billion by 2022 and the modified starch market is projected to reach $12.4 billion in 2022. Major growth in these markets is being driven by the convenience health food sector and functional food sector. Flour from our RS wheat lines has resistant starch levels that are 12 to 20 times higher than the control wheat, and total dietary fiber, or TDF, which is more

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than eight times higher than the control. RS wheat flour has been tested in applications in bread, where loaf quality was comparable to bread made with conventional wheat flour, and pasta, where it had the highest consumer preference rankings in tests carried out by a major consumer products company.

Resistant Starch & TDF Content Levels by Wheat Line Refined Flour Resistant Starch Content (% by wt) 35% 30% 25% 20% 15% 10% 5% 0% 37.8% 15.1% 16.0% 29.0% 33.0% 40% 35% 30% 25% 20% 15% 10% 5% 0% Parent RS14 RS83 RS100 Whole Grain Flour Total Dietary Fiber Content (% by wt) Refined Flour Resistant Starch Whole Grain Flour TDF Parent ID 2014 RS14 CA 2013 RS 14 ID 2014 RS18 CA 2013 Bread made with 50% RS Bread Wheat

RS wheat flour is currently being introduced to North American bakery and CPG companies by our partners, Bay State Milling.  In markets outside North America, RS wheat is currently being tested in a range of additional bakery, ready-to-eat cereals and pasta products with industrial partners. We have many RS wheat lines that are being evaluated for optimal quality and agronomic characteristics.

Improved Shelf Life of Whole Grain Flour

The USDA recommends that “at least one serving of grains per day must be whole grain-rich” due to evidence that a diet containing whole grains provides a multitude of benefits, including lower risk of obesity, cardiovascular disease, and type-2 diabetes. Despite these health benefits, consumption of whole grain products is negatively affected by the bitter and rancid flavors and odors that accumulate in whole wheat flour after milling. Our improved stability and flavor wheat lines greatly reduced the production of rancid and bitter compounds in agedmilled whole grain flour.flour as it progresses through the supply chain. Whole wheat flour from these lines is being tested further for sensory characteristics and improved shelf life stability. This new trait could help improve the shelf life and flavor profile of whole grain products, thus reducing formulation costs and increasing consumer preference and palatability for whole grains.

Accelerated Aging Study of Whole Grain Flour Production of Rancid Product (ppm) 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 0 week 6week 8 week 16 week Control Accelerated Aging Original Line0 week 6week 8 week 16 week Control Accelerated Aging Arcadia Line

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Reduced Gluten (RG) Wheat

Many consumers are interested in reducing levels of gluten in their diet. Critically, for some, this is due to having Celiac disease (CD), an autoimmune disease that impacts many people worldwide with estimates from 1% of the population in Europe to 3.5% in Mexico. Furthermore, a non-celiac gluten sensitivity (NCGS) impacts an estimated additional 6% of the population. Both CD and NCGS are characterized by sensitivity to dietary gluten. The only effective treatment of CD and NCGS requires removal of gluten sources from the diet. Since required adherence to a gluten-free diet is extremely difficult to accomplish for average consumers, efforts to develop alternative approaches are needed.

Research conducted by the Connell Group in 2018 indicates there is a significant portion of consumers (26% of general population) that choose to reduce gluten levels in their diet despite not having Celiac disease.  Further internal qualitative research conducted in 2019 identified a valuable consumer segment recognized as “Gluten Reducers” who aspire to reduce gluten but are not strict gluten-free.

Arcadia is developingcontinuing to advance a new wheat variety with reduced gluten levels. Our proprietary, non-GM wheat variety developed using advanced screening and plant breeding techniques have reduced allergenic glutens and increased essential amino acids such as lysine, along with all the other health benefits of high protein wheat.  This newImportantly, this variety is beneficial for both food and feed applications. We’realso delivers impressively high fiber content at approximately 14 grams per serving compared to 2-3 grams per serving of traditional wheat, providing additional value to health-conscious consumers as well as optionality as we advance the commercialization of this project. We are breeding the trait into additional commercial wheat varieties and working with food processors to give people a choice to enjoy higher quality wheat in the products they love while reducing gluten in their diet.

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Innovative hemp varieties

GoodHemp is our commercial pipeline of superior non-GMO hemp seed varieties. The varieties improve plant quality and productivity, working within federal legal guidelines. GoodHemp products deliver superior emergence and growth characteristics and are available as both seeds and seedlings. Our seed and clone specifications meet compliance requirements because of their low THC profiles, in addition to a multitude of other beneficial characteristics.

With the acquisition of Industrial Seed Innovations (“ISI”) in August 2020, ISI’s portfolio of strong performing hemp varieties became part of Arcadia’s GoodHemp catalog. Umpqua is a CBD dominant variety that is designed to mature earlier than most existing varieties making it very attractive for northern latitudes. Rogue on the other hand is designed to mature later in the season resulting in ultra-high yielding plants in lower latitude geographies with longer growing seasons. We have since released Santiam, a CBD dominant variety designed for performance for the grower unique appeal to the consumer.

In February 2021 four GoodHemp varieties, Umpqua, Rogue, Santiam and Potomac were evaluated and received approval by the National Association of Official Seed Certifying Agencies (AOSCA) variety review board. This represented a significant milestone serving as independent validation that our GoodHemp varieties are distinct, uniform and genetically stable. This certification also enables these GoodHemp varieties to be exported and sold in Canada through our distribution partner Tritium 3H, pending approval from Health Canada.

Nutritional Oils

Gamma Linolenic Acid (GLA) Oil

Under a license agreement with Abbott Laboratories, we developed a new source of vegetable oil with very high levels of gamma linolenic acid, or GLA, an omega-6 fatty acid. To our knowledge, our GLA safflower oil product has the highest concentration of GLA available in any plant oil at 65%; conventional plant oils range from 10 to 22% GLA. We can sell the oil in the United States to manufacturers of dietary supplements, nutritional supplements, medical foods, dog food, and other products. GLA safflower oil is also approved in Canada as a natural health product. Our key customers include significant participants in those markets, such as GNC, Lindora Nutrition, JumpStart MDmarkets. As part of a series of transactions with Bioceres in November 2020, we extended an exclusive license for future GLA production and others.sales to Bioceres and will continue to sell the inventory we have on hand.

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GLA has multiple clinically-demonstratedclinically demonstrated nutritional and medical benefits, including anti-inflammatory effects, improving skin conditions such as atopic dermatitis and healthy weight management. Multiple parties have expressed commercial interest in incorporating an enhancedOur GLA oil may be beneficial when incorporating it into theircertain foods, dietary supplements, or medical products where conventional sources of GLA are not sufficiently concentrated to deliver amounts that are cost- and performance-effective.

AgainstJoint Ventures

Verdeca

In 2012, we partnered with Bioceres, an Argentina-based technology company, to form Verdeca, a commercial targetU.S.-based joint venture company to deploy next-generation soybean traits, of 40% GLA concentration,which we developed, deregulatedown 50%. We selected Bioceres as our partner in soybeans, the world’s fourth largest crop by area grown, due to their desirable trait portfolio, their presence in key South American markets, and commercialized GLA safflower oil containingthe significant presence of large soybean growers in their ownership structure. In November, 2020, we sold our membership interest in Verdeca to Bioceres in a transaction in which we received cash, shares of Bioceres stock and a royalty stream of up to 75% GLA concentration$10 million on HB4 soybean sales. An additional $2 million in fewer than six years. Thiscash is significantly shorter timeline than the 13 years it takes, on average, to commercialize an agricultural biotechnology product, according to Phillips McDougall. We produce GLA safflower oilbe paid upon achievement by contracting with farmers in Idaho and process the seed under contract with a manufacturer in California to make refined oil. We sell GLA safflower oil under the brand name, SONOVA, with multiple concentrations and formulations.Verdeca of specific regulatory or commercial milestones.

Archipelago Ventures Hawaii, LLC

In January 2017August 2019, we received notificationformed a new joint venture to serve the Hawaiian, North American and Asian hemp markets, Archipelago Ventures Hawaii, LLC (“Archipelago”). This new venture between Arcadia and Legacy Ventures Hawaii (“Legacy”) combines Arcadia’s extensive genetic expertise and seed innovation history with Legacy’s growth capital and strategic advisory expertise in the Hawaiian markets. Additionally, Legacy brings to the

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partnership years of proven success in extraction, product formulation and sales of cannabinol oil and distillate products through its equity partner, Vapen CBD. Legacy was originally formed to be a vehicle for its partners to pursue hemp opportunities within the Hawaiian Islands.

Archipelago creates a vertically integrated supply chain, from seed to sale, we believe the FDA thatfirst of its kind in Hawaii, and has three important strategic imperatives: (1) ensure a reliable supply chain during critical scale up of the global hemp market, a major risk mitigation for success, (2) ensure high quality throughout the supply chain, from genetics to the field and field to the customer, and (3) ensure being well-positioned to address the unique needs and opportunities of the Hawaiian market.

Research and Development

Product Development Platforms

With our GRAS petition (generally recognized as safe) forfood and wellness products now entering the usemarket, we are firmly in the commercialization phase of SONOVA GLAour corporate lifecycle. Moreover, our proven platform technologies in medicalwheat and hemp have broad application across multiple new food and product executions representing significant value enhancement potential. For example, our Three Farm Daughter’s pasta and flour products are just two out of potentially hundreds where our nutrition dense GoodWheat can meaningfully improve the nutrition panel and provide cleaner labels on foods like crackers, snack bars, pancakes, and nutritional beverages hadbreads, just to name a few. Therefore, we are de-emphasizing new trait discovery R&D and are increasing our focus on food-science innovation to fully leverage the value in our exiting superior wheat and hemp genetics. We are evolving our organizational capabilities to match this strategy progression to include in-house food formulation and CPG supply chain expertise.

Our R&D program to date has been accepted,centered around ArcaTech, our proprietary, rapid prototyping and product development pipeline, focused on trait discovery. It is from this system we developed the base platform traits and technologies which means that we can now marketleverage as the basis for innovating new food and sellwellness ingredients to serve the vast addressable markets in wheat and hemp. Therefore, the primary focus of our R&D platform will now be food science innovation, nutrition and wellness product innovation. We will still have residual breeding and introgression work to perform as we complete the agricultural requirements for traits existing in our R&D programs as well new food formulations require.

Food Formulation Innovation. We will expand the application of our innovation platform to build on our pipeline of products focused on health and wellness. Our innovation team is focused on using science-based solutions to leverage our wheat and hemp varieties to develop an array of food products and wellness ingredients. Because we are innovating from directly from our own well-established plant technology traits, we expect this product in a new market segment. In August 2017, the FDA published in the Federal Register a food additive regulation for the useextension of SONOVA GLA in dog food. These approvals and authorizations are generating additional revenue opportunities for our GLA business. In addition, a food additive petition for use of SONOVA GLA in cat food was filed in September 2017 and is currently pending.

Arachidonic Acid (ARA) Oil

Arachidonic Acid (ARA) Oil has high levelsinvolvement will provide more meaningful improvements. Through this extended application of the omega 6 fatty acid ARA, which is a key ingredient in more than 90% of U.S. infant nutrition products. ARA contributes to healthy infant eye and brain development. We estimate the global market for ARA at $160 million and believe that our ARA product will cost significantly less than currently available sources of this essential omega 6 fatty acid.

Our ARA Oil is being developed under agreements with Abbott and DuPont Pioneer, each of which licensed intellectual property to us for this program. In exchange for licenses to intellectual property, these agreements provide product access rights to Abbott and DuPont Pioneer, as well as certain royalty payments on product sales to third parties.

We currently have safflower lines with oil compositions that meet our partner specifications for being direct replacements for current sources of ARA in infant nutrition products. We are evaluating additional near term market distribution opportunities with our downstream partners.

Agriculture Productivity Traits, the Yield and Stress Pipeline

In 2017, we evaluated by licensee and geography where regulatory advancement and adoption of our abiotic productivity traits among regulators was most promising and where a lack of historical progress in trait deregulation appeared likely to persist into the foreseeable future. In regions where regulators are cooperating with our licensees to progress field trials and other deregulation activities, we continue active monitoring and providing our technical support when and where needed to ensure full resource support for ultimate commercialization. Where near term progress was not likely, we proceeded to cancel such licenses and are evaluating alternative deregulation strategies.

Arcadia is a recognized leader in the area of yield and abiotic stress and 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 rice, wheat, soy, corn and cotton varieties. The commercial value of these types of traits will be fully unlocked as the traits are introgressed into elite germplasm by breeding partners, tested broadly in the field under different environments and agricultural practices in order to obtain the approval for commercial sale by the relevant regulatory authorities.

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The following table summarizes our current product pipeline in 2017:

Nitrogen Use Efficiency (NUE)

Our NUE technology enables plants to utilize nitrogen fertilizer much more efficiently than conventional plants. This allows crops to achieve significantly higher yields under normally applied levels of nitrogen fertilizer, or to achieve the same yields as conventional crops while using 30 to 50% less nitrogen fertilizer.

Nitrogen fertilizer is a primary plant nutrient and key driver of crop yield. Nitrogen fertilizer is also a significant component of crop production cost. Plant Biotechnology Journal reported that only 30% to 50% of added nitrogen fertilizer is taken up by agricultural crops, with the remainder left unutilized and potentially becoming a significant environmental pollutant.

Our NUE technologyinnovation platform, was initially based on a trait discovered at the University of Alberta (Canada), and we hold an exclusive, global license to the technology for use in all crops, with unlimited sublicense rights. Efficacy of this NUE technology has recently been demonstrated in field-grown rice, wheat, and canola by multiple groups.  

The target crops and markets for NUE include all major agricultural crops and markets. Our NUE technology has now been incorporated, or is under evaluation by our commercial partners, in major global crops, including rice, wheat, cotton, sugarcane and eucalyptus. Field trial data to date in multiple major commodity crops has shown yield improvements greater than 10% attributable to our NUE trait. Additionally, NUE rice tests conducted by independent entities in multiple countries over multiple years have demonstrated that NUE rice lines produced significantly higher grain yield than controls at various nitrogen fertilizer rates. In the paddy low-land production environment, NUE rice lines showed an increase in grain yield of 29.5% at full nitrogen application rates when compared to the parental line. In the rainfed up-land production environment, the NUE rice lines demonstrated 33.8% grain increase at 50% nitrogen application rate.

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Water Use Efficiency and Drought Tolerance

Our Water Use Efficiency (WUE) trait enables plants to better tolerate two distinct types of stress: reduced or inconsistent water availability, and severe drought. The WUE trait has been demonstrated to improve crop yield under conditions of episodic water stress and to help crops recover from severe drought conditions. A related but distinct technology, Drought Tolerance, helps plants maintain yields under conditions of prolonged water stress.

Modern agriculture is highly water intensive, using approximately 70% of world water withdrawals, according to the United Nations Educational, Scientific, and Cultural Organization, or UNESCO. UNESCO also estimates that future global agricultural water consumption will increase by about 19% by 2050 and could be even higher if the efficiency of agricultural production does not improve dramatically. The irregular availability of suitable water is one the leading causes of reduced crop yield globally. Loss due to drought in the United States, as reported to the USDA Risk Management Agency, averaged $4.1 billion per year from 2012 through 2016.

Water-limiting conditions can result from prolonged drought, leading to severe reductions in crop yields, or can result from periodic dry conditions, leading to reduced crop yields. Whenever water limitations occur, economic losses and impairment of the food supply result.

Our WUE trait technology was jointly discovered by researchers at the University of California, Davis and Technion—Israel Institute of Technology. We hold an exclusive, global license to the technology, with sublicense rights, for use in all crops. Greenhouse and field trials of our WUE traits have been completed in agronomic crops such as rice, wheat, cotton, peanuts and alfalfa. We are currently working with collaborators in rice, potato, sugarcane, cotton and multiple tree species.

Our Drought Tolerance (DT) technology was discovered by researchers at National Scientific and Technical Research Council (Argentina), and further developed by Bioceres, S.A. Verdeca, our joint venture with Bioceres, Inc., holds exclusive global rights and is developing and commercializing this technology in soybeans.

Our Drought Tolerance technology is most advanced in soybeans. Multiple seasons of field trials in test germplasm in both North and South America have shown better or equal yield performance of the HB4 drought tolerant trait relative to controls. We expect the optimum performance of this trait will be in the drought stressed regions of South America.  Verdeca and seed company licensees are introgressing the trait into pre-commercial germplasm in Argentina to address this market. The Early Food Safety Evaluation process was completed in 2015 by the U.S. Food and Drug Administration (FDA) for the plant protein responsible for our Drought Tolerance trait. The trait has full approval for food safety and international commerce in Argentina (2015) and is pending approval in China. Regulatory approval application was submitted in 2016 to the FDA and the Agency completed its review in August 2017 thereby allowing for food and feed consumption in the US. USDA request for a Determination of Nonregulated Status was submitted in 2017 and is currently pending approval. Additionally, regulatory approval applications have been submitted in Uruguay and are pending final approval. Regulatory submissions were made in 2016 for import approval of Drought Tolerant HB4 soybeans into China. Further, we plan to submit for production approval in Brazil in 2018 and import approval in the European Union in 2018.

Salinity Tolerance

Our Salinity Tolerance trait allows plants to maintain yields under conditions of elevated salinity and is applicable to a wide range of crops, including wheat, rice, soybean, and cotton. The global cost of lost crop yield to salt-induced land degradation is estimated to be $27.3 billion per year according to the United Nations Natural Resources Forum. Of the current 230 million hectares of irrigated land, 45 million hectares, or about 20%, are salt-affected. Crops grown under salt-affected conditions may be inhibited in two ways. First, the presence of salt in the soil reduces the ability of the plant to take up water, leading to reductions in growth rate. Second, if excessive amounts of salt enter the plant, there can be injury to the cells, which may cause further reductions in growth. Modern agriculture is highly water intensive and the ability to manage crops in saline environments will reduce agricultural demand on critical fresh water supplies.

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Our most advanced Salinity Tolerance trait technology is based on technology from the University of Toronto, the University of California, Davis, and the National Institute of Agrobiological Sciences (Japan), all of which have granted us exclusive licenses for all crops. In addition, we are conducting research on additional salinity tolerance genes under a funded research agreement with the United States Agency for International Development, or USAID.

Target markets for the Salinity Tolerance trait are areas where water or soil salinity decrease crop yield. Such areas occur globally where irrigation is prevalent, where ground water supplies are salinized due to seawater intrusion and where soils are salinized due to mineral deposits. These conditions are common in North America, India, China, additional countries in Asia, Australia, and other major crop production countries. Our Salinity Tolerance trait has been licensed to partners in rice, wheat, cotton, and oilseeds.

Crops with tolerance to soil and water salinity are in various phases of development with our primary licensee and partner for the Salinity Tolerance trait technology. Our partner previously tested the most promising rice lines with our trait in a field in which controlled amounts of salt were applied to the replicated plots. In 2015, a field trial was executed on naturally high saline farmlands in India, where grain yields typically are very low, and we saw results similar to those in prior trials. Our partner has developed wheat lines that show significant salinity tolerance under greenhouse conditions, with some lines outperforming the controls by more than 30%, and additional wheat lines are in development to expand the scope of our partner’s first greenhouse evaluations. For salt tolerant cotton, our partner is preparing to conduct outdoor field trials in India.

Wheat Yield

Our non-transgenic wheat yield program, initially supported by USDA SBIR, aims to increase yield in wheat using TILLING, a non-GM reverse genetics tool, to identify novel alleles of candidate wheat yield genes in tetraploid and hexaploid wheat. These alleles are being evaluated for the ability to alter wheat architecture and improve yield in the field. As a non-GM technology, products from TILLING can rapidly advance to commercialization and do not face market or regulatory restrictions. With a conservative 5% increase in yield, the yearly value creation to the U.S. farmer is estimated at over $30 per hectare. In addition, the value of higher yielding wheat varieties to a seed company arising from this research in the U.S. alone is more than $40 million annually. By incorporating favorable alleles of plant architecture genes into a commercial wheat breeding program, we believe we can make a significant contribution to improving yield in this vital food crop.

Herbicide Tolerance

Our Herbicide Tolerance program is currently focused on wheat. We have developed a non-GM source of tolerance to glyphosate, a widely used non-selective herbicide. We believe that the discoveries under this program are applicable to other chemistries and are likely to result in similar opportunities in other major crops.

According to the International Service for the Acquisition of Agri-biotech Applications, or ISAAA, from 1996 to 2013, herbicide tolerant crops consistently occupied the largest planting area of biotech crops. In 2013 alone, herbicide tolerant crops occupied 99.4 million hectares, or 57%, of the 175.2 million hectares of biotech crops planted globally. For the first 17 years of commercialization (1996 to 2012), benefits from herbicide tolerant crops were valued at $47.7 billion, which accounted for 41% of global biotech crop value. For 2012 alone, herbicide tolerant crops were valued at $6.6 billion or 35% of global biotech crop value.

Our Herbicide Tolerance technology is in Phase 3 of development and was developed using our non-GM TILLING platform. This work is fully funded by a collaborator who has the option to obtain a non-exclusive commercial license to this trait in certain countries. We retain the right to further license this technology to additional collaborators in major wheat markets.

Testing results have shown tolerance in multiple lines to glyphosate application. This tolerance may be sufficient to control many weed species in certain wheat production areas. Individual glyphosate tolerant wheat lines are being combined via plant breeding to combine additional sources of tolerance and create products with increasing levels of tolerance.

Technology Evaluation

Our technology program teams include scientists who are leaders in their respective fields. These teams contribute to the initial evaluation of new opportunities and are responsible for development of technologies brought onboard or developed in-house. Each of our technology programs involves multiple gene, trait and crop targets, and our process focuses on rapid development of the most promising combinations. In the development of any particular trait, we carry out a series of steps including the direct evaluation of target gene function and the specific evaluation of results in key representative crop species. While common core scientific services are provided by functional groups, the technology program team manages overall progress and remains directly involved throughout the development cycle, internally as well as externally with our collaborators.

GM and Non-GM Product Development Platforms

Targeting Induced Local Lesions in Genomes (TILLING)—Non-GM Traits. Our advanced breeding TILLING platformit enables us to develop value-added crops withoutbe involved in multiple parts of the usevalue chain to ensure the final products adequately capture the spectrum of GM methods. The TILLING platform is managed by a dedicatedenriched performance. With our hyper-focused team of scientists, ableresearchers, technicians and chefs, we are positioned to apply TILLING to multiple crops with complex genomes. TILLING technology was originally invented by a member ofaccelerate our science team and utilizes specialized laboratory equipment to carry out high-throughput allele screening of DNA samples from genetic diversity populations created in major crops. Our populations include wheat, rice, soybean, and canola. These populations include numerous native and induced gene function alterations, which can be discovered and evaluated rapidly at low cost and with minimal regulatory requirements. While the TILLING approach is also practiced elsewhere, we believe that the combination of our background in the technology as the first to apply TILLING to crop plants suchreach as wheat and tomato, and our highly refined skills in developing and screening genetic diversity in plant populations makes us a leader in commercial applications of TILLING.

Transformation—GM Traits. For projects involving GM traits, the genetic constructhemp offer unique opportunities for insertion into plants is designed and built by our relevant program team, and then the gene transfer step is accomplished by our plant transformation functional group. This group has developed a complete physical and methodological infrastructure at our laboratory facility in Davis, California to efficiently transfer genetic materials into key crop species. Our team has demonstrated transformation capabilities in all primary and some secondary agricultural crops, including rice (japonica, indica and NERICA types), wheat, corn, canola, safflower, barley, sorghum, alfalfa, tomato, potato, tobacco and grapes.

Genome Editing. Our genome editing pipeline includes a cross disciplinary group of experienced molecular biologists and plant transformation experts with demonstrated capabilities in using both biological and physical methods of plant transformation. Our expertise in both transformation and TILLING in the application of genome editing has helped to accelerate newinnovative product development.launches.

In 2017, we obtained a license for research purposes for CRISPR- Cas9 from the Board Institute of MIT and Harvard. We believe this is the leading gene editing technology and using this technology will accelerate product development.

Controlled Growth Operationsplant growth. OurThe controlled plant growth operations group manages our growth chamber facilities, where plants are grown under precisely controlled conditions, and our greenhouse facility, consisting of approximately 26,000 square feet of high-quality greenhouse space.  They also carry out a number of essential functions to support breeding and prototype evaluation including the phenotypic evaluation of plants, controlled crosses, accelerated breeding protocols, rapid phenotyping as well as conducting seed increases for commercial sale. Additionally, for hemp projects, this team manages our cannabinoid chemistry pipeline, which enables high quality greenhouse space, whichthroughput characterization of cannabinoids and terpenes across all research hemp populations. Our growth chamber facilities are bothlocated at our headquarters in Davis, California. The controlled growth operations group uses these facilities to manage plant experimentsCalifornia, and grow-outs under rigorously controlled conditions. They also carry out the initial seed increases and first stages of plant breeding for some projects. For certain projects, such as those relating to oil quality and high fiber Resistant Starch wheat, this group also manages crop pre-breeding programs to develop plant varieties for the production of commercial products.our greenhouses are located nearby in Yolo county California.

13Molecular analysis and accelerated breeding. The molecular analysis team plays a critical role in enabling the rapid deployment of our traits into commercially relevant germplasm by deploying genetic markers to track our proprietary gene alleles as we introgress them into new germplasm. This enables us to rapidly develop and select lines for advancement into field evaluation and to expand the commercial offerings of our GoodWheat product lines.

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Research, Field Trials, and CommercialBreeder & Foundation Seed Production. Our trait evaluation and development group is based in Davis, California and managesconducts remote field operations in American Falls, IdahoIdaho; Yuma, Arizona; Brawley, California and Brawley, California. The group conducts field trials throughout the United States with specialized contractors,multiple locations in Montana, North Dakota, Oregon and elsewhere globally with our collaborators and joint venture partners.Washington. The trait evaluation and development group hashave extensive field and specialized statistical analytical capabilities that we deploy to support their field trial execution and data analysis internally and with our collaborators.

Our agricultural operations group manages efficacy Late-stage regional and regulatory field trials and, in the case of GLA safflower, commercial crop production. Late-stage fieldagronomic trials are intended to develop extensive data on a limited number of potential commercial plant varieties. These trials may be used to test new varieties developed by our collaborators containing our traits, and to test our owndevelop the best crop management practices suited for these commercial varieties for oil quality and grain quality programs.products. Similarly, regulatory trials develop data for use in submissions for regulatory review and may involve plant varieties developed by our collaborators or our own oil quality and grain quality programs.

Commercial Seed, and Grain Production.  The commercial development group is based in Davis, California. The group conducts grower field trials and manages the commercial seed and grain production throughout the United States working through seed production specialists and growers and elsewhere globally with our collaborators and joint venture partners.  Grower field evaluations are designed to test new commercial seed varieties for yield and agronomic performance and as well as characterizing performance of seed and grain quality attributes.

Regulatory Data Generation. Our Analytical Services and Regulatory Science group is located in Davis, California and provides automated DNA preparations, genomic blot analyses, lipid profiling, metabolomics and protein purification services and develops data for use in product selection and validation, certification of SONOVA, GoodWheat and other product specifications, and regulatory submissions. These data support regulatory submissions and provide core trait regulatory packages to our collaborators for use in their crop-specific regulatory applications.

Biological Materials Inventory and Tracking. Our proprietary Pedigree and Inventory Management System, or PIMS, tracks the genetic, phenotypic and location information for all our plant materials. PIMS encompasses genetic elements such as genes and promoters, GM seeds and plant material received by us, as well as seeds and plants developed by us and used in trait development. The performance of our plant materials is recorded through a variety of laboratory and field observations, and the data are stored within PIMS. The location of all plant materials is tracked throughout the plant life cycle. This includes specific seeds planted within a specific plot of a specific field trial, harvest, seed storage location and use by, or distribution of plant material to, our collaborators or elsewhere. PIMS interfaces with our Biotechnology Quality Management System, or BQMS, to manage all movement and release of regulated GM plant materials. This ensures that all of our plant materials are accounted for, tracked and inventoried, which enables us to maintain control over and documentation of all plant materials.

Regulatory Compliance and Stewardship

Our regulatory management team provides regulatory services for all of product development programs, as well as joint ventures and selected collaborations. These services include establishing standard operating procedures and best practices, completing regulatory permits and monitoring regulatory and stewardship compliance for all products at all stages. Our regulatory team includes key employees who are directly responsible for leading all global regulatory agency interactions and providing tactical and strategic regulatory direction. Our team collectively has more than 30 years of direct involvement in the development and approvals of GM crops. The key member of our regulatory team was responsible for completing the first FDA and USDA deregulation of a GM whole food. The interactions and processes associated with these first USDA and FDA processes established benchmarks for the regulation of GM products that remain applicable today.

Our regulatory management and compliance activities encompass three broad categories: deregulation, stewardship, and authorization. In the United States, these activities are regulated by various government agencies, including the USDA, the FDA and the U.S. Environmental Protection Agency (EPA). Our regulatory team has completed significant regulatory activities (new dietary ingredient review, food additive regulation, GRAS notice and GM food consultation) with the FDA Division of Dietary Supplement Programs, with the FDA Center for Food Safety and Applied Nutrition, with the FDA Center for Veterinary Medicine and with the Health Canada Natural Health Products Directorate.

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Deregulation

Our business is subject to regulations related to agriculture, food and the environment. Plant products produced using GM technology are subject to laws and regulations in countries where the plants are grown and in countries where the GM plant-derived food and feed are consumed by humans or animals. Commodity products utilizing our GM traits may require approvals in multiple countries prior to commercialization.

U.S. Regulatory Agencies:

U.S. Department of Agriculture. We must obtain USDA authorizations and permits in order to conduct the field releases of GM regulated materials that are necessary to advance the development of GM crops. Obtaining such authorizations and permits is generally routine and delays impacting the planned movement or release of GM material are uncommon. The USDA provides detailed regulations and guidance for obtaining a “Determination of Deregulated Status,” which authorizes the commercial and uncontained growing of GM plants. For regulated GM plants, the USDA requires that a company petition the agency to demonstrate that the product is unlikely to pose a risk. Based on the information provided, the USDA prepares an Environmental Assessment (EA) and/or an Environmental Impact Statement (EIS) in order to make its determination. These procedures afford the public an opportunity to submit written comments on the draft EA or EIS for consideration by the USDA before the final version of the EA or EIS is published. For any GM plant product, there may be delays or requests for additional information based on the USDA’s review or the public comments. As of February 2018, USDA has reached 123 Determinations of Nonregulated Status. Submissions received by the USDA from all applicants prior to 2011 averaged more than 3 years for approval. Since then, the USDA has significantly shortened the time to approval.

U.S. Food and Drug Administration. The FDA is responsible for food safety under the Federal Food, Drug and Cosmetic Act. The FDA recommended in its 1992 Statement of Policy: Foods Derived from New Plant Varieties that developers of GM plant products consult with the agency about the safety of GM products under development. In 1996, the FDA provided additional guidance to the industry on procedures for these consultations. These procedures require a developer intending to commercialize a food or feed product derived from a GM plant to first meet with the agency to identify and discuss relevant safety, nutritional and other regulatory issues regarding the product. Subsequently, the developer submits to the FDA a scientific and regulatory assessment supporting proposed product safety. The FDA evaluates the submission and engages with the developer to resolve any questions, requests for additional data or other informational requirements. Once the FDA has determined that all requirements have been satisfied, the FDA concludes the consultation process by issuing a letter to the developer acknowledging completion of the consultation process with the addition of the product to the list of completed consultations on the FDA website. The completed consultation acknowledges product safety for use as food and feed. To date, over 150 GM products have completed this process. This process may have delays if the FDA requires additional data and information for its consultation and to resolve any questions the FDA may have. The FDA completed 21 consultations from 2015 to 2017, with consultation time periods in 2017 ranging from 11 to 15 months and averaging just over one year from first submission to conclusion.

Environmental Protection Agency. Certain products may also be regulated by the EPA, including plants that contain a plant-incorporated protectant, such as a pesticides or herbicide, or plants engineered to be treated with industrial chemicals.

International Deregulation:

When products from GM crops are expected to be exported from the United States, commercialization of such crops in the United States will require approvals in those countries into which the crops or derivative products, such as grain, oil or meal, will be exported. The laws and regulations for GM plant products are well defined in most commercially significant countries, including Australia, South American countries, India, China, several African countries and the European Union. Typically, our collaborators are responsible for obtaining all regulatory permits and approvals relevant to product development and commercialization in their licensed countries and for generating crop and transformation event-specific data required by their countries of interest. We provide basic safety data on trait expression products in accordance with generally accepted standards. In addition, we may serve as a regulatory consultant and participate in the design of regulatory protocols, data generation and development of detailed regulatory submissions. In certain countries, we may develop strategic business relationships or employ independent consultants with country-specific knowledge and expertise to support and obtain required approvals.

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Stewardship

Stewardship, or the careful and responsible management of assets, forms the foundation of our regulatory compliance programs associated with GM plants. Our stewardship framework for GM plants is defined by government regulations and related internal policies and practices. In previous years, Arcadia’s Biotechnology Quality Management System (now identified as ABQMS) was developed by us and then audited/certified by the USDA Animal and Plant Health Inspection Service, Biotechnology Regulatory Service (APHIS BRS). Recently, USDA updated its BQMS program renaming it the Biotechnology Quality Management Support Program, discontinuing the mandatory auditing/certification standard.

Our ABQMS program was developed to address all conditions required under USDA authority to ensure containment of regulated plant material. The ABQMS includes standard operating procedures, or SOPs, recording and reporting forms, instructions for managing all compliance related activities, and training requirements for all individuals handling GM plant materials. SOPs are highly detailed and consider all elements of each relevant activity or process. Each field trial site is accompanied by a Field Compliance Guide and Record (GUIDE) containing multiple SOPs and associated forms for each activity. For example, a GM wheat trial requires 19 SOPs and associated verification forms. A GUIDE is completed for each regulated field trial and serves as a completed record to support compliance with government regulations. Example copies of the GUIDE have been provided to our collaborators for use in other countries where they conduct GM field trials.

Our ABQMS is audited annually by our compliance manager and previously by an independent auditor trained and supervised by the USDA. Since our ABQMS program was first recognized by the USDA in 2011, each annual independent audit conducted by USDA until discontinuation of their audit program confirmed that our program was functioning as intended. Our ABQMS manager has attended USDA BQMS training programs at the request of the USDA to assist in training personnel at other companies and organizations and to share our experience and the SOPs that form the basis of our program.

Compliance with the specific parameters of regulatory requirements is only one element of stewardship. Additional activities within each functional group throughout the company are integral to the overall stewardship program. Each of our employees is trained on, and must comply with, relevant stewardship guidelines as defined and described in our ABQMS.

Authorization

The USDA APHIS Biotechnology Regulatory Service (BRS) has legal and regulatory authority over the movement and release of GM plants and seeds. “Movement” includes movement of regulated GM plant material between states and the importation of regulated GM plant material into the United States. “Release” includes field trials of any size and any other use of regulated GM plant material outside of contained greenhouses.

We have obtained more than 200 authorizations from the BRS for the movement, importation or release of GM plants under development. General and specific conditions to maintain containment during all activities associated with the movement or release are a requirement of each authorization. These conditions are defined, applied and recorded in the GUIDE following our ABQMS program.

Intellectual Property

We rely on patents and other proprietary right protections, including trade secrets and contractual protection of our proprietary know-how and confidential information, to preserve our competitive position.

As of December 31, 2017,2020, and in summary, we owned or exclusively controlled 137109 issued patents and 4861 pending patent applications worldwide.  As of this date,These totals reflect the following:  (i) with respect to the U.S. territory, we owned 1020 and exclusively in-licensed 164 U.S. issued patents, and we owned eight10 U.S. patent applications relating to our trait technologies and business methods. Also, as of this date,methods; and (ii) in connection with foreign territories, we owned 1225 and exclusively in-licensed 9859 foreign issued patents, and owned 32 and exclusively in-licensed nine50 pending foreign patent applications.  With respect to all of the foregoing patent assets, our exclusive licenses afford us control over the prosecution and maintenance of the licensed patents and patent applications. These numbers do not include in-licensed patents for which we either do not have exclusive rights (such as certain enabling technology licenses), or for which we have exclusive rights only in a limited field of use or do not control prosecution and maintenance of the licensed patents.

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As of December 31, 2017,2020, we had eight registered trademarks in the United States. As of this date, weStates and also had eightsix registered trademarks in various other countries.  We also have entered into in-license agreements enabling the use and commercialization of our traits, including NUE, WUE and Salinity Tolerance, and certain products that we have commercialized or are under development, including GLA safflower oil and ARA safflower oil. Under these licensing arrangements, we are obligated to pay royalty fees on sublicense revenue and net product sales ranging between low single digit percentages and percentages in the mid-teens, subject in certain cases to aggregate dollar caps. The exclusivity and royalty provisions of these agreements are generally tied to the expiration of underlying patents. After the termination of these provisions, we and our collaborators may continue to produce and sell products utilizing the technology under the expired patents. While third parties thereafter may develop products using the technology under the expired patents, in many cases, we have incremental patent rights covering our most important technologies, which we believe mitigate the impact of the expiration of these patents, or the related exclusivity provisions, on our business. We also have numerous in-licenses relating to enabling technologies utilized in our development programs, such as transformation methods (e.g., Japan Tobacco, DuPont Pioneer), genome editing tools (e.g., Broad Institute), promoters (e.g., Corteva Agriscience formerly known as Dow AgroSciences, Louisiana State University) and selectable marker technologies (e.g., Bayer). These in-licenses are non-exclusive and include some combination of upfront and annual license fees, milestone fees, and commercial royalty obligations consisting of low percentages or a low dollar per acre fee.

Below is a summary of those in-license agreements that we believe are most significant for our more advanced product development programs.

University of Alberta. We hold an exclusive license from University of Alberta to the patent portfolio that formed the basis of our NUE program, which began in 2002. In exchange for an upfront license fee and royalties on sublicense revenues and net product sales (which are capped at an aggregate amount in the mid-seven figures), and subject to the University’s right to perform academic research using the technology, we exclusively control all research, development, commercialization, and sublicensing of the patented technology globally for all crops.

Blue Horse Labs. In conjunction with a sponsored research and development agreement entered into in 2003, we obtained an exclusive license from Blue Horse Labs, an affiliate entity of our majority stockholder, Moral Compass Corporation, for technology related to several of our development programs. Under the sponsored research and development agreement, Blue Horse Labs has an ownership right in patents covering technology that was developed using Blue Horse Labs funds, including certain NUE and GLA safflower patents. In the corresponding license agreement, in exchange for a single-digit royalty on net revenues and management of all aspects of the patent portfolio, we exclusively control all research, development, commercialization, and sublicensing of the patented technology globally for all crops.

University of California, Davis. Our WUE technology was developed under an exclusive option agreement with the University of California, Davis, pursuant to which we exercised our right to secure an exclusive license in 2010. We also hold an exclusive license from University of California, Davis, to the patent portfolio that forms the basis of our Salinity Tolerance program. In exchange for an upfront license fee, license maintenance fees, and royalties on sublicense revenues and net product sales, we exclusively control all for-profit research, development, commercialization, and sublicensing of the patented technology globally for all crops.

University of Toronto. We hold an exclusive license from University of Toronto to the patent portfolio that forms the basis of our Salinity Tolerance program. In exchange for an upfront license fee, a royalty on revenues, and payment of all costs associated with the patent portfolio, and subject to the University’s right to use the technology for research and teaching purposes, we exclusively control all for-profit research, development, commercialization and sublicensing of the patented technology globally for all crops.

Abbott. We entered into a license and development agreement with Abbott in 2003 under which we have been granted limited exclusive rights to Abbott’s portfolio of U.S. and foreign patents relating to the development of plant-based sources of GLA, ARA and essential fatty acids. Under this agreement, we provide Abbott with preferential access to commercial products from our GLA and ARA safflower programs, as well as the right to receive royalty payments on product sales to third parties, in exchange for the licenses to Abbott’s intellectual property rights.

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Key Collaborations

Since our founding in 2002, weWe have established numerous trait collaborations and have developed close relationships with industry-leading seed and consumer product companies. Our partnerships with global strategic seed and consumer product players enable us to further participate in the development and commercialization of innovative products that promise to play significant roles in improving global crop efficiency and enhancing human health. The results of these collaborations directly feed innovation and drive the progress of our ongoing programs. Moreover,We believe that the expertise and opportunities created by these collaborations represent important assets to our business. While our collaboration-focused business model has resulted in numerous strategically significant relationships, belowBelow is a summary of selected collaborative partnerships that we view as key to the achievement of our near-term and mid-term business objectives.

MahycoArdent Mills

We have multiple agreements with Mahyco covering numerous programs, using our most advanced traits in multiple major crops, and have been working with Mahyco as a key partner since 2007. Our agreements with Mahyco in NUE rice and salt tolerant rice are in advanced stages of development.

Under our various agreements relating to our NUE, WUE, and Salinity Tolerance traits, Mahyco has exclusive research and commercial rights in all licensed geographies and must timely meet certain diligence milestones in order to maintain their exclusivity. Each of our agreements with Mahyco includes an upfront technology access fee, technical and regulatory milestone fees, and, once products utilizing our traits are commercialized, we are entitled to receive a portion of the commercial value of seeds sold by Mahyco incorporating our traits. Rights to new intellectual property developed under an agreement are owned by the inventing party or parties.

In December 2017,November 2018, we reached agreementannounced our collaboration with Mahyco for the return of licensed geographies and crops for certain WUE, NUE & Salinity Tolerance traits where Mahyco either lacks the resources or expertise to effectively progress trait deregulation and commercialization. In addition, for other geographies where Mahyco has progressed trait development but does not possess the familiarity with, or influence on, the regulatory environment to affect deregulation, we have agreed we will endeavor to jointly pursue new incountry licensees we believe to be equipped and capable to achieve trait deregulation and commercialization. For those licenses terminated prior to December 31, 2017, the remaining balance of the upfront license fees previously deferred for such agreements has been released and recognized as revenue into the fourth quarter of 2017 totaling $528,000.

Vilmorin & Cie (Limagrain)

We selected Limagrain as our strategic partner and collaborator in wheat—the world’s largest crop by area grown and the third most valuable at $186.4 billion annual value—due to their position as the leading global breeder and marketer of wheat seeds. In 2009, we executed an agreement with Limagrain under which we partneredArdent Mills, LLC to develop and commercialize NUE wheat innovations.  Ardent Mills, LLC is North America’s leading flour-milling and ingredient company. Our first project focuses on extending the shelf life and improving the flavor of whole wheat products.

By using patented Arcadia trait technology, the storage life of whole wheat flour can be extended by slowing the enzymatic processes that reduce shelf life. Because milled flour from wheat carrying Arcadia’s trait technology oxidizes more slowly, it also minimizes the bitterness associated with most whole wheat products. This trait is expected to help improve the taste of whole wheat products and help reduce waste.

The extended shelf life wheat trait was developed using our proprietary non-GM wheat genetic diversity TILLING library, an extensive and exclusive resource of trait lines with high-density variations in all countries of the world except Australia, India, Pakistan, Bangladeshgenetic composition and Sri Lanka. Under our agreement, Limagrain has exclusive research and commercial rights in all licensed geographies except North America and South America, in which we retained co-exclusive rights, and Limagrain must timely meet diligence milestones to maintain exclusivity. Our agreement with Limagrain includes an upfront technology access fee, annual maintenance fees, and technical and regulatory milestone fees, and once an NUE wheat productgene function. Because it is commercialized, we are entitled to receive a portion of the commercial value ofnon-GM, the trait inhas wide application potential across both conventional and organic farming practices. We recently received a U.S. patent for the marketplace. We and Limagrain have since coordinated with collaborators in Australia to align development efforts in NUEtechnology which extends the storage life of whole wheat on a global basis.

Contemporaneously with Limagrain’s $25.0 million equity investmentflour by minimizing oxidation, the latest in our company, in 2010 we formed Limagrain Cereal Seedsportfolio of wheat trait improvements.  We will continue further collaboration with Ardent Mills, LLC a joint venture company focused on the development and commercialization of improved wheat seed in North America, of which a U.S. wholly owned subsidiary of Limagrain owns 65% and we own 35%.

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On March 31, 2017, the Company and Vilmorin USA(“VUSA”) entered into a noncash exchange agreement, whereby the Company transferred to VUSA the Company’s entire membership interest in Limagrain Cereal Seeds LLC (“LCS”) and VUSA transferred to the Company 92,195 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.

Bioceres

In 2012, we partnered with Bioceres, an Argentina-based technology company, to form Verdeca LLC, a U.S.-based joint venture company engaged in the development and deregulation of soybean traits, of which we own 50%. We selected Bioceres as our partner in soybeans—the world’s fourth largest crop by area grown and the fourth most valuable at $119.0 billion annual value—due to their desirable trait portfolio, their presence in key South American markets, and the significant presence of large soybean growers in their ownership structure.

Our joint venture agreement provides for each of the joint ventureuniversity partners to license itsbring this trait technologies to Verdeca for usecommercialization in soybeans, with product development and regulatory efforts equitably divided and managed by us and Bioceres under stand-alone service agreements that are executed annually. The first product in the Verdeca pipeline is a drought and abiotic stress tolerance trait that has already completed extensive validation trials and is now in the regulatory phase of development. This trait has been demonstrated to confer as high as a 14% yield advantage over conventional soybeans grown under the same suboptimal conditions. In April 2015, Verdeca received the first regulatory approval of its stress tolerance trait in soybeans in Argentina. This is the world’s first regulatory approval of an abiotic stress tolerance trait in soybeans, which we believe is an important initial step in pursuing additional regulatory approvals that Verdeca intends to seek in multiple geographies globally. Verdeca has successfully negotiated favorable market access in South America through established players and is working on adding market channel partners in the United States, India, and China.products.

In addition to those agreements with Bioceres directly associated with Verdeca, we also have negotiated exclusive access to Bioceres’ drought and abiotic stress tolerance trait for use globally, outside of South America, in wheat. Our agreement with Bioceres provides for sharing of trait value once a product is commercialized.

Dow AgroSciences

In December 2015, we entered into a strategic collaboration with Dow AgroSciences to develop and commercialize new yield traits and trait stacks in corn. In December 2017, after two years of work, the program had not met its primary performance characteristics sufficient to warrant additional investment. Instead, the parties agreed to terminate the strategic collaboration in favor of pursuing higher value, nearer term opportunities in the health and nutrition trait market.Corteva Agriscience

In August 2017, we announced entryentered into a new strategic collaboration with Dow AgroSciencesCorteva AgriScience to jointly develop and commercialize a breakthrough improved wheat quality trait in North America. The collaboration leverages our TILLING platform with Dow AgroSciences’Corteva Agriscience’s enabling technology platforms, high-quality elite germplasm and global commercial channels.

Under the collaboration, the companies will further develop and commercialize an improved wheat quality trait, which has completed initial field trials and is advancing to next-stage field trials. Dow AgroSciencesCorteva AgriScience will introgress Arcadia’s trait into its proprietary elite germplasm lines and manage all aspects related to the trait commercialization. Certain development costs will be co-funded, under the collaboration agreement, and we will share in the commercial value resulting from products produced.

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Scientific Advisory BoardArista Cereal Seeds Pty Ltd and Bay State Milling Company

In August 2019, we entered into a binding term sheet with Arista and BSM to resolve the parties’ disputes, including the Delaware Action and the 716 Interference proceeding.  Under the binding term sheet, Bay State Milling Company will become the exclusive commercial partner for our high fiber wheat in North America under Bay State Milling’s HealthSense™ brand portfolio, while Arista receives exclusive rights under our high fiber wheat intellectual property in certain geographies, including Australia and Europe.  We maintainwill continue to market our high fiber wheat under our GoodWheat portfolio of specialty wheat ingredients in other international markets. In December 2019, the three parties entered into a scientific advisory board consistingsettlement agreement reflecting the terms of the members identified below. Our scientific advisory board meets on a quarterly basis and is comprised of industry and academic experts that have extensive experience in the analysis, research and development, and commercialization of biotech plants, including experience relating to discovery, transformation, and field trials. We consult with our scientific advisory board on a variety of matters pertaining to our current and future pipeline of products in development, including, for example, trait selection and development, transformation and TILLING methodologies, field trials, regulatory matters, and intellectual property evaluation.

We currently have a scientific advisory board that consists of three members as follows:

Vicki Chandler, Ph.D. is Dean of Natural Sciences at Minerva Schools at Keck Graduate Institute, a new undergraduate liberal arts college. Prior to joining Minerva, she was Chief Program Officer, Science at the Gordon and Betty Moore Foundation. She studied biochemistry for her undergraduate and doctoral degrees at the University of California, Berkeley, and the University of California, San Francisco, respectively. She then pursued postdoctoral research at Stanford University in maize genetics and was on the faculty at the University of Oregon and the University of Arizona. Dr. Chandler’s research on paramutation, an epigenetic process, has implications not only for maize, which she used for the majority of her research, but also for animal and human genetics and genetic diseases. Dr. Chandler has been President of the Genetics Society of America, a member of the National Academy of Sciences, and a member of the National Science Board. Her many honors include the Presidential Young Investigator Award, Searle Scholar Award, and American Association for the Advancement of Science Fellow. She has served on advisory boards and panels for the National Research Council, National Science Foundation, Department of Energy, and National Institutes of Health. Dr. Chandler has chaired numerous conferences and served on the editorial boards of several journals, including Genetics, Plant Physiology, PNAS, and Science.

Luca Comai, Ph.D. is a professor of plant biology at the University of California, Davis Genome Center. Dr. Comai’s lab is involved in two areas pertinent to breeding. In the first, they study genome regulation, hybridization, and heterosis responses in chromosome copy number variants and interspecific hybridization. In the second, they develop methods and resources for functional genomic discovery, including TILLING, which allows targeted inactivation of genes in crop plants. The research combines plant genetics and genomics with the use of next-generation sequencing, bioinformatics and genome editing to identify genes responsible for traits of interest as well as to discover and use natural and induced variation. Dr. Comai is known for his pioneering work creating glyphosate tolerant crops, and as a founding scientist in Calgene Pacific, Targeted Growth, Inc. and Tilligen. He is a Fellow of the American Association for the Advancement of Science.

Peter Quail, Ph.D. is a professor of plant and microbial biology at the University of California, Berkeley where he also serves as Research Director of the Plant Gene Expression Center (U.S. Department of Agriculture/Albany, California). Dr. Quail has been a pioneer in the study of phytochromes, photoreceptor proteins that play a major regulatory role in plant growth and development. Dr. Quail was elected to the National Academy of Sciences in 2004, as a Fellow of the American Association of Science in 2004, and was the recipient of the Stephen Hales Prize, American Society of Plant Biologists, 2008. He received a B.S. and Ph.D. from the University of Sydney, Australia.binding term sheet.

Competition

The markets for seed traits and agricultural biotechnology products are highly competitive, and we face significant direct and indirect competition in several aspects of our business. Competition for improving plant

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genetics comes from conventional and advanced plant breeding techniques, as well as from the development of advanced biotechnology traits. Other potentially competitive sources of improvement in crop yields include improvements in crop protection chemicals, fertilizer formulations, farm mechanization, other biotechnology, and information management. Programs to improve genetics and chemistry are generally concentrated within a relatively small number of large companies, while non-genetic approaches are underway with broader set of companies.

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In general, we believe that our competitors generally fall into the following categories:

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21Employees

We believe that we are uniquely positioned at the nexus of basic research and commercial product development. Unlike many companies in our space, we generally do not compete in the area of basic research. Our focus is on development and validation and, therefore, we provide a value-added link by which basic research can be brought to market. While internal programs at the largest seed and technology companies are competitive with ours in some cases, we are technology providers to some of these companies, and we have numerous collaborations with many of them. To remain competitive, we are pursuing multiple strategies, including further building our non-GM pipeline of new technologies, increasing the scope and range of our field testing activities, and continuing to protect our intellectual property rights in key jurisdictions globally.

Research and Development

As of December 31, 2017,2020, we had 2311 full-time employees dedicated to research and development, five of whom are development and field personnel focused on demonstration and research field trials.development. Our research and development team haspossesses technical expertise in molecular biology, biochemistry, genetics, genetic engineering, analytical chemistry, and plant physiology. Our research and development activities are conducted principally at our Davis, California facility, with ongoing field trials conducted in American Falls, Idaho; Brawley, California,California; Yuma, Arizona; Molokai, Hawaii; and numerous other locations throughout the United States, as well as locations managed by our collaborators worldwide. We have made, and will continue to make, substantial investments in research and development. Our research and development expenses were $7.4$8.0 million and $8.7$7.1 million in the years ended December 31, 20172020 and 2016,2019, respectively.

Employees

As of December 31, 2017,2020, we had 4258 full-time employees, of whom 5four hold Ph.D.doctorate degrees. Approximately 2311 employees are engaged in research and development activities, twoand 47 in regulatory management, and 17 in management,operations, commercial operations, accounting/finance, legal and administration. We considerbelieve our employee relations to be good. None of our employees isare represented by a labor union or collective bargaining agreement.

Facilities

Our corporate headquarters are located in Davis, California, in a facility consisting of approximately 20,77521,480 square feet of office, laboratory and growth chamber space under a lease which was set to expireexpires on June 30, 2018 and has been extended pursuant to an option to renew the lease for an additional three-year term.March 31, 2030. This facility accommodates research and development, operations, commercial operations, analytical services, regulatory and administrative activities.  Our administrative offices in Phoenix, Arizona, consist of 2,976 square feet under a lease that expires on June 30, 2018 and accommodateDecember 31, 2021. The facility accommodates our finance legal and other administrative activities, as well as sales and marketing activities for our SONOVA products.activities.  We lease greenhouse space and farm landfarmland for agricultural use in Northern California and Oregon, as well as farmland in Idaho.Southern California, Idaho and Hawaii. We also lease office and warehouse space in Idaho under a lease that expires on December 31, 2021.  Our Seattle research location was closed in March 2017.2023.  

We believe that our leased facilities are adequate to meet our current needs and that, if needed, suitable additional or alternative space will be available to accommodate our operations.

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Item 1A. Risk Factors.

You should carefully consider the following risk factors, in addition to the other information contained in this report on Form 10­K,10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This report on Form 10­K10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward­lookingforward-looking statements as a result of factors that are described below and elsewhere in this report.

Risks Related to Our Hemp Business

We will be subject to a myriad of different laws and regulations governing hemp and our inability to comply with such laws in a cost-effective manner may have an adverse effect on our business and result of operations.

Laws and regulations governing the use of hemp in the United States are broad in scope, subject to evolving interpretations, and subject to enforcement by a myriad of regulatory agencies and law enforcement entities. Under the Agriculture Improvement Act of 2018, also known as the 2018 Farm Bill, a state or Indian tribe that desires to have primary regulatory authority over the production of hemp in the state or territory of the Indian tribe must submit a plan to monitor and regulate hemp production to the Secretary of the USDA. The Secretary must then approve the state or tribal plan after determining if the plan complies with the requirements set forth in the Agriculture Improvement Act of 2018. The Secretary may also audit the state or Indian tribe’s compliance with the federally-approved plan. If the Secretary does not approve the state or Indian tribe’s plan, then the production of hemp in that state or territory of that Indian tribe will be subject to a plan established by USDA. USDA published a final rule on January 19, 2021, that provided regulations for the production of hemp in the USA that went into effect on March 22, 2021. We anticipate that some states will seek to have primary regulatory authority over the production of hemp. States that seek such authority may create new laws and regulations that limit or restrict the use of hemp.

Federal and state laws and regulations on hemp may address production, monitoring, manufacturing, distribution, and laboratory testing to ensure that that the hemp has a delta-9 tetrahydrocannabinol concentration of not more than 0.3% on a dry weight basis. Federal laws and regulations may also address the transportation or shipment of hemp or hemp products, as the Agriculture Improvement Act of 2018 prohibits states and Indian tribes from prohibiting the transportation or shipment of hemp or hemp products produced in accordance with that law through the state or territory of the Indian tribe, as applicable. We may be subject to many different state-based regulatory regimens for hemp, all of which could require us to incur substantial costs associated with compliance requirements.  Our research and development operations will be restricted to only where such operations are legal on the local, state and federal levels.

The DEA issued an interim final rule to codify statutory amendments to the controlled substances act made by the 2018 farm bill. It is possible that the DEA will make additional changes in a final rule that may have a material impact on our hemp business and our ability to operate.

The Food and Drug Administration has published guidance related to the CBD and hemp-extract business but has not formally released a regulatory framework for the industry. It is possible that the FDA will provide additional guidance or implement future regulations that may have a material impact on our hemp business.

In addition, it is possible that additional regulations may be enacted in the future in the United States and globally that will be directly applicable to our research and development operations. We cannot predict the nature of any future laws, regulations, interpretations, or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business. 

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We may be forced to dispose of hemp we produce should a harvested crop test in excess of 0.3% THC levels.

The USDA’s Final Rule for hemp cultivation mandates that states test hemp crops and dispose of "hot" crops that exceed 0.3% THC. If a producer has produced cannabis exceeding the acceptable hemp THC level, the material must be disposed of in accordance with USDA regulations. Arcadia is responsible for the costs of disposal of non-compliant crops for which it is the producer, which could potentially be significant should a large number of acres test positive.

There is limited operating history in the legal hemp or cannabis industry, which makes it difficult to accurately assess our future growth prospects.  

The legal hemp and cannabis industry is an evolving industry that may not develop as expected. Furthermore, our operations continue to evolve as we continually assess new strategic opportunities for our business within this industry. Assessing the future prospects of this industry is challenging in light of both known and unknown risks and difficulties we may encounter. Growth prospects in the legal hemp and cannabis industry can be affected by a wide variety of factors including:

We may not be able to successfully address the above factors, which could negatively impact our intended business plans and financial statements.

Because we have only recently begun our legal hemp operations, we anticipate our operating expenses will increase prior to earning meaningful revenue from these operations.

As we execute our business plan with respect to legal hemp, we anticipate significant increases in our operating and production expenses, and we may not realize significant revenues from such operations.  As a result, the Company may incur significant financial losses with respect to such operations in the foreseeable future. There is no history upon which to base any assumption as to the likelihood that these operations will prove successful.

Negative press from being in the hemp/cannabis space could have a material adverse effect on our business, financial condition, and results of operations.

The hemp plant and the cannabis/marijuana plant are both part of the same cannabis sativa genus/species of plant, except that hemp, by definition, has less than 0.3% THC content, but the same plant with a higher THC content is cannabis/marijuana, which is legal under certain state laws, but which is not legal under federal law. The similarities between these plants can cause confusion, and our activities with legal hemp may be incorrectly perceived as us being involved in federally illegal cannabis. Also, despite growing support for the cannabis industry and legalization of cannabis in certain U.S. states, many individuals and businesses remain opposed to the cannabis industry. Any negative press resulting from any incorrect perception that we have entered into the cannabis space could result in a loss of current or future business.  It could also adversely affect the public’s perception of us and lead to reluctance by new parties to do business with us or to own our common stock. We cannot assure you that additional business partners, including but not limited to financial institutions and customers, will not attempt to end or curtail their relationships with us. Any such negative press or cessation of business could have a material adverse effect on our business, financial condition, and results of operations.

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Risks Related to Our Business and Our IndustryOther Industries

Unfavorable global economic or political conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. A global financial crisis or a global or regional political disruption could cause extreme volatility in the capital and credit markets. For example, outbreaks of epidemic, pandemic, or contagious diseases, such as the current COVID-19 pandemic, could disrupt our business. Business disruptions could include disruptions to the productivity of our employees working remotely and restrictions on their travel may hinder their ability to meet with potential customers and close transactions, as well as temporary closures of the facilities of suppliers or contract growers in our supply chain. While we’ve seen very recent signs of improvement, hemp growers have been slower to make decisions to purchase hemp seeds due to economic uncertainty and wheat consumer packaged goods companies have been heavily focused on production over R&D evaluation as demand for staples like pasta and flour have increased. In addition, the COVID-19 outbreak may result in a severe economic downturn and has already significantly affected the financial markets of many countries. A severe or prolonged economic downturn or political disruption could result in a variety of risks to our business, including our ability to raise capital when needed on acceptable terms, if at all. A weak or declining economy or political disruption could also strain our manufacturers or suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the political or economic climate and financial market conditions could adversely impact our business.

We or our collaboratorspartners may not be successful in developing commercial products that incorporate our traits.traits and for which there is consumer demand.

Our future growth depends on our ability to identify genesmonetize the trait assets we’ve created by bringing products to market that will improve selected cropincorporate our technology, as well as licensing these traits and license these genes to our collaborators to develop and commercialize seeds and products that contain the genes. Our long-term growth strategy is based on our expectation that revenues related to the sale of seeds containing our traits will comprise a significant portion of our future revenues. Pursuant to our collaboration agreements, we are entitled to share in the revenues from the sale of products that integrate our trait. We expect it will take several years before the first seeds integrating our agricultural yield traits complete the development process and become commercially available for sale, resulting in revenues for us. However, thetraits. The development process could take longer than we anticipate or could ultimately fail to succeed in commercializationachieve commercial success for any of the following reasons:

If products containing our traits are never commercialized or are commercialized on a slower timeline than we anticipate,not well-received in the marketplace, our ability to generate revenues and become profitable, as well as our long-term growth strategy, would be materially and adversely affected. For example, the development processes for several of our key agricultural yield traits have experienced delays related to regulatory matters, particularly in India, and we expect that these development processes may continue to face delays, which have negatively impacted the commercialization timelines for products containing such traits.

Even if we or our collaborators are successful in developing commercial products that incorporate our traits, such products may not achieve commercial success.

Our long-term growth strategy is dependent upon our or our collaborators’ ability to incorporate our traits into a wide range of crops with global scope. Even if we or our collaborators are able to develop commercial products that incorporate our traits, any such products may not achieve commercial success as quickly as we project, or at all, for one or more of the following reasons, among others:

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Our financial condition and results of operations could be materially and adversely affected if any of the above were to occur.

Our product development cycle is lengthy and uncertain, and we may never earn revenues from the sale of products containing our traits.

Research and development in the seed, agricultural biotechnology, and larger agriculture industries is expensive, prolonged, and entails considerable uncertainty. We and our collaborators may spend many years and dedicate significant financial and other resources, developing traits that will never be commercialized. The process of discovering, developing, and commercializing a seed trait through either genetic modification or advanced breeding involves multiple phases, and it may require from six to thirteen years or more from discovery to commercialization. The length of the process may vary depending on one or more of the complexity of the trait, the particular crop, and the intended geographical market involved. This long product development cycle is in large part attributable to the nature-driven breeding period for a commercial product, as well as a lengthy regulatory process.

There are currently multiple products in development incorporating our traits, each of which consists of the application of a specific seed trait to a specific crop. Although our SONOVA products are on the market currently, we expect that it will take at least several years before the first products containing our agricultural yield traits complete the development process and become commercially available. However, we have little to no certainty as to which, if any, of these products will eventually reach commercialization in this timeframe or at all. Because of the long product development cycle and the complexities and uncertainties associated with agricultural biotechnology research, there is significant uncertainty as to whether we will ever generate revenues from the sale of products containing one of our traits and, even if such products reach commercialization, any resulting revenues may come at a later time than we currently anticipate.

We have a history of significant losses, which we expect to continue, and we may never achieve or maintain profitability.

We have incurred significant net losses since our formation in 2002 and expect to continue to incur net losses for the foreseeable future. We incurred net losses of $15.7$6.0 million, and $19.6$28.9 million for the years ended December 31, 20172020 and 2016,2019, respectively. As of December 31, 2017,2020, we had an accumulated deficit of $167.3$211.8 million. Net cash used in operations was $30.2 million and $17.2 million for the years ended December 31, 2020 and 2019, respectively. We expect to continue to incur losses until we begin generating revenues from our collaborators’ sale of products containing traits we are currently developing, which we expect will not occur for several years, if at all.losses. Because we have incurred and will continue to incur significant costs and expenses for these efforts before we obtain any incremental revenues from the sale of seeds or products incorporating our traits, our losses in future periods could be even more significant. In addition, we may find our development and commercialization efforts are more expensive than we anticipate or that they do not generate revenues in the time period we anticipate, which would further increase our losses. If we are unable to adequately control the costs associated with operating our business, including costs of development and commercialization of our traits, our business, financial condition, operating results, and prospects will suffer.

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In addition, our ability to generate meaningful revenues and achieve and maintain profitability depends on our ability, alone or with strategic collaborators, to successfully complete the developmentTable of and complete the regulatory process to commercialize our traits. Most of our revenues since inception have consisted of upfront and milestone payments associated with our contract research and license agreements. Additional revenues from these agreements are largely dependent on successful development of our traits by us or our collaborators. To date, we have not generated any significant revenues from product sales other than from our SONOVA products, and we do not otherwise anticipate generating revenues from product sales other than from sales of our SONOVA products for the next several years. If products containing our traits fail to achieve market acceptance or generate significant revenues, we may never become profitable.Contents

We may require additional financing and may not be able to obtain such financing on favorable terms, if at all, which could force us to delay, reduce, or eliminate our research and development activities.

We will continue to need capital to fund our research and development projects, the commercialization of our products, and to provide working capital to fund other aspects of our business. If our capital resources are insufficient to meet our capital requirements, we will have to raise additional funds. If future financings involve the issuance of equity securities, our existing stockholders would suffer dilution. If we are able to raise additional debt financing, which will require the consent of our current debt holder, we may be subject to additional restrictive covenants that limit our operating flexibility. We may not be able to raise sufficient additional funds on terms that are favorable to us, if at all. If we fail to raise sufficient funds and continue to incur losses, our ability to fund our operations, take advantage of strategic opportunities, develop and commercialize products or technologies, or otherwise respond to competitive pressures could be significantly limited. If this happens, we may be forced to delay or terminate research and development programs or the commercialization of products or curtail operations. If adequate funds are not available, we will not be able to successfully execute on our business strategy or continue our business.

If ongoing or future field trials by us or

Our gross profit margins on the products we’ve recently introduced containing our collaborators are unsuccessful, weGoodWheat as an ingredient may be unableimpacted by a variety of factors, including but not limited to, completevariations in raw materials and packaging pricing, customer requirements, market acceptance rate and promotional support costs.

We expect that our gross profit as a percentage of net sales could fluctuate as a result of a number of factors, including product pricing, retail discounts, and the regulatory process for,availability and cost of ingredients and packaging. In addition, our gross profit margin may be impacted by shifts in the overall mix of products having a higher or commercialize,lower profit margin. If we are not able to increase our productsselling prices or reduce product sizes sufficiently, or in development on a timely basis.

The successful completion of field trials in United States and foreign locations is criticalmanner, to the success of product development and marketing efforts for products containing our traits. If our ongoingoffset increased raw material, packaging, or future field trials, or those of our collaborators, are unsuccessful or produce inconsistent results or unanticipated adverse effects on crops or on non-target organisms,other input costs, or if we or our collaborators are unable to collect reliable data, regulatory review of products in development containing our traitssales volume decreases significantly, there could be delayed or commercialization of products in development containing our traits may not be possible. In addition, more than one growing season may be required to collect sufficient data to develop or market a product containing our traits, and it may be necessary to collect data from different geographies to prove performance for customer adoption. Even in cases where field trials are successful, we cannot be certain that additional field trials conducted on a greater number of acres, or in different crops or geographies, will be successful. Generally, our collaborators conduct these field trials or we pay third parties, such as farmers, consultants, contractors, and universities, to conduct field trialsnegative impact on our behalf. Poor trial execution or data collection, failure to follow required agronomic practices, regulatory requirements, or mishandling of products in development by our collaborators or these third parties could impair the success of these field trials.

Many factors that may adversely affect the success of our field trials are beyond our control, including weather and climatic variations, such as drought or floods, severe heat or frost, hail, tornadoes and hurricanes, uncommon pests and diseases, or acts of protest or vandalism. For example, if there was prolonged or permanent disruption to the electricity, climate control, or water supply operating systems in our greenhouses or laboratories, the crops in which we or our collaborators are testing our traits and the samples we or our collaborators store in freezers, both of which are essential to our research and development activities, could be severely damaged or destroyed, adversely affecting these activities and thereby our businessfinancial condition and results of operations. Unfavorable weather conditions can also reduce both acreage planted and incidence, or timingShould the rate of certain crop diseases or pest infestations, eachmarket acceptance of which may halt or delay our field trials. We have also experienced crop failures in the past for then-unknown reasons, causing delays in our achievement of milestones and delivery of results and necessitating that we repeat the impacted field trials. Any field test failureproducts be slower than anticipated, we may experience may not be coveredincur additional expense by insurance and, therefore, could result in increased cost for the field trials and development of our traits, which may negatively impact our business and results of operations. Additionally, we are subject to U.S. Department of Agriculture, or USDA, regulations, which may require us to abandon a field trial or to purchase and destroy neighboring crops that

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are planted after our field trials have commenced. For example, while conducting early field trials for GLA safflower oil, we were forced to purchase and destroy an adjacent safflower crop when the placement of bee hives by a third party altered the required isolation distance between our crop and the neighboring crop, requiring us to either purchase and destroy the adjacent crop or abandon our field trial. In order to prevent the significant delays that would result from terminating our field trial, we decided to purchase and destroy the neighboring crop at a cost of approximately $30,000. Similar factors outside of our control can create substantial volatility relating to our business and results of operations.increasing promotional activities.

Competition in traits and seeds is intense and requires continuous technological development, and, if we are unable to compete effectively, our financial results will suffer.

We face significant competition in the markets in which we operate. The markets for traits and agricultural biotechnology products are intensely competitive and rapidly changing. In most segments of the seed and agricultural biotechnology market, the number of products available to consumers is steadily increasing as new products are introduced. At the same time, the expiration of patents covering existing products reduces the barriers to entry for competitors. We may be unable to compete successfully against our current and future competitors, which may result in price reductions, reduced margins and the inability to achieve market acceptance for products containing our traits. In addition, several of our competitors have substantially greater financial, marketing, sales, distribution, research and development, and technical resources than us, and some of our collaborators have more experience in research and development, regulatory matters, manufacturing, and marketing. We anticipate increased competition in the future as new companies enter the market and new technologies become available. Our technologies may be rendered obsolete or uneconomical by technological advances or entirely different approaches developed by one or more of our competitors, which will prevent or limit our ability to generate revenues from the commercialization of our traits being developed.

We derive a significant portion of our current revenues from government agencies, which may not continue in the future and which may expose us to government audits and potential penalties.

We historically have derived a significant portion of our revenues from grants from U.S. government agencies. Our ability to obtain grants is subject to the availability of funds under applicable government programs and approval of our applications to participate in such programs. The application process for these grants is highly competitive. We may not be successful in obtaining any additional grants. Once we successfully obtain a grant, the awarding U.S. government agency has the right to decrease or discontinue funding on such a grant at any time. The recent political focus on reducing spending at the U.S. federal and state levels may reduce the scope and amount of funds dedicated to seed and agricultural biotechnology innovations, if such funds continue to be available at all. To the extent that we are unsuccessful in obtaining any additional government grants in the future or if funding is discontinued on an existing grant, we would lose a significant source of our current revenues.

To the extent that we do not comply with the specific requirements of a grant, amounts we invoice may not be paid and any of our existing grants or new grants that we may obtain in the future may be terminated or modified. In addition, our activities funded by our government grants are subject to audits by U.S. government agencies. As part of an audit, these agencies may review our performance, cost structures and compliance with applicable laws, regulations and standards, and the terms and conditions of the grant. An audit could result in a material adjustment to our results of operations and financial condition. Moreover, if an audit uncovers improper or illegal activities, we may also be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, or fines, and we may be suspended or prohibited from doing business with the government. In addition, serious reputational harm or significant adverse financial effects could occur if allegations of impropriety are made against us, even if we are ultimately found to have done no wrong.

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A significant portionTable of our revenues to date are from a limited number of strategic collaborations, and the termination of these collaborations would have a material adverse effect on our results of operations.Contents

We derive a substantial amount of our revenues from a limited number of strategic collaborations, under which we generate revenues through licensing arrangements such as research and development payments, up-front payments, milestone payments, and, once a product is commercialized, a portion of the commercial value of the trait. A small number of commercial partners are expected to continue to account for a substantial amount of our revenues for the next several years, most notably among them, Mahyco. Our agreements with Mahyco are terminable by Mahyco at will upon 90 days’ notice. The termination or non-renewal of our arrangements with Mahyco or our other commercial partners would have a material adverse effect on our business, financial condition, results of operations, and prospects.

We expect to derive a substantial portion of our future revenues from commercial products sold outside the United States, which subjects us to additional business risks.

A significant number of our research and collaboration agreements include products under development for markets outside the United States. Our collaborators’ operations in these regions are subject to a variety of risks, including different regulatory requirements, uncertainty of contract and intellectual property rights, unstable political and regulatory environments, economic and fiscal instability, tariffs and other import and trade restrictions, restrictions on the ability to repatriate funds, business cultures accepting of various levels of corruption, and the impact of anti-corruption laws. These risks could result in additional cost, loss of materials, and delays in our commercialization timeline in international markets and have a negative effect on our operating results.

Revenues generated outside the United States could also be subject to increased difficulty in collecting delinquent or unpaid accounts receivables, adverse tax consequences, currency and exchange rate fluctuations, relatively high inflation, exchange control regulations, and governmental pricing directives. Acts of terror or war may impair our ability to operate in particular countries or regions and may impede the flow of goods and services between countries. Customers in these and other markets may be unable to purchase our products if their economies deteriorate, or it could become more expensive for them to purchase imported products in their local currency or sell their commodities at prevailing international prices, and we may be unable to collect receivables from such customers. If any of these risks materialize, our results of operations and profitability could be harmed.

We or our collaborators may fail to perform our respective obligations under contract research and collaboration agreements.

We are obligated under certain contract research agreements to perform research activities over a particular period of time. If we fail to perform our obligations under these agreements, in some cases our collaborators may terminate our agreements with them and in other cases our collaborators’ obligations may be reduced and, as a result, our anticipated revenues may decrease. In addition, any of our collaborators may fail to perform their obligations under the diligence timelines in our collaboration agreements, which may delay development and commercialization of products containing our traits and materially and adversely affect our future results of operations.

Furthermore, the various payments we receive from our collaborators are a significant source of our current revenues and are expected to be the largest source of our revenues in the future. If our collaborators do not make these payments, either due to financial hardship, disagreement as to whether such payments are owed under the relevant collaboration agreement, or for any other reason, our results of operations and business could be materially and adversely affected. If disagreements with a collaborator arise, any dispute with such collaborator may negatively affect our relationship with one or more of our other collaborators and may hinder our ability to enter into future collaboration agreements, each of which could negatively impact our business and results of operations.

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Our prospects for successful development and commercialization of our products are dependent upon the research, development, commercialization, and marketing efforts of our collaborators.

We primarily rely on third parties for research, development, commercialization, and marketing of our products and products in development. Other than as provided for in our collaboration agreements, we have no control over the resources, time and effort that our collaborators may devote to the development of products incorporating our traits and have limited access to information regarding or resulting from such programs. We are dependent on our third-party collaborators to fund and conduct the research and development of product candidates, to complete the regulatory process, and for the successful marketing and commercialization of one or more of such products or products in development. Such success will be subject to significant uncertainty.

Our ability to recognize revenues from successful collaborations may be impaired by multiple factors including:

If our collaborators do not perform in the manner we expect or fulfill their responsibilities in a timely manner, or at all, the development, regulatory, and commercialization process could be delayed, terminated, or otherwise unsuccessful. Conflicts between us and our collaborators may arise. In the event of termination of one or more of our collaboration agreements, it may become necessary for us to assume the responsibility for any terminated products or products in development at our own expense or seek new collaborators. In that event, we likely would be required to limit the size and scope of one or more of our independent programs or increase our expenditures and seek additional funding, which may not be available on acceptable terms or at all, and our business may be materially and adversely affected.

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We rely on third parties to conduct, monitor, support, and oversee field trials and commercial production and, in some cases, to maintain regulatory files for those products in development, and any performance issues by third parties, or our inability to engage third parties on acceptable terms, may impact our or our collaborators’ ability to complete the regulatory process for or commercialize such products.

We rely on third parties, including farmers, to conduct, monitor, support, and oversee field trials.trials and commercial production. As a result, we have less control over the timing and cost of these trialsactivities than if we conducted these trialsthem with our own personnel. If we are unable to maintain or enter into agreements with these third parties on acceptable terms, or if any such engagement is terminated prematurely, we may be unable to conduct and complete our trials and commercial production in the manner we anticipate. In addition, there is no guarantee that these third parties will devote adequate time and resources to our studiesactivities or perform as required by our contract or in accordance with regulatory requirements, including maintenance of field trial information regarding our products in development.or production information. If these third parties fail to meet expected deadlines, fail to transfer to us any regulatory or other information in a timely manner, fail to adhere to protocols, or fail to act in accordance with regulatory requirements or our agreements with them, or if they otherwise perform in a substandard manner or in a way that compromises the quality or accuracy of their activities or the data they obtain, then field trials and commercial production of our products in development may be extended or delayed with additional costs incurred, or our data may be rejected by the USDA the U.S. Food and Drug Administration, or FDA, the U.S. Environmental Protection Agency, or EPA, or other regulatory agencies. Ultimately, we are responsible for ensuring that each of our field trials and commercial production is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our responsibilities.

If our relationship with any of these third parties is terminated, we may be unable to enter into arrangements with alternative parties on commercially reasonable terms, or at all. Switching or adding farmersgrowers or other suppliers can involve substantial cost and require extensive management time and focus. In addition, there is a natural transition period when a new farmer or other third party commences work. As a result, delays may occur, which can materially impact our ability to meet our desired development or commercial timelines. If we are required to seek alternative supply arrangements, the resulting delays and potential inability to find a suitable replacement could materially and adversely impact our business.

In addition, recently there has been an increasing trend towards consolidation in the agricultural biotechnology industry. For example, in 2017, Dow and DuPont merged, as well as ChemChina and Syngenta. Other potential transactions, such as the proposed acquisition of Monsanto by Bayer, would further consolidate our industry if consummated. Consolidation among our competitors and third parties upon whom we rely could lead to a changing competitive landscape, capabilities, and market share allocations, which could have an adverse effect on our business and operations.

Most of our collaborators have significant resources and development capabilities and may develop their own products that compete with or negatively impact the advancement or sale of products containing our traits.

Most of our collaborators are significantly larger than us and may have substantially greater resources and development capabilities. As a result, we are subject to competition from many of our collaborators, who could develop or pursue competing products and traits that may ultimately prove more commercially viable than our traits. In addition, former collaborators, by virtue of having had access to our proprietary technology, may utilize this insight for their own development efforts, despite the fact that our collaboration agreements prohibit such use. The development or launch of a competing product by a collaborator may adversely affect the advancement and commercialization of any traits we develop and any associated research and development and milestone payments and value-sharing payments we receive from the sale of products containing our traits.

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Our joint venture agreements could present a number of challenges that may have a material adverse effect on our business, financial condition, and results of operations.

We currently participate in one joint venture, Verdeca LLC, which focuses on the development and deregulation of soybean traits.  We may enter into additional joint ventures in the future. Our joint venture arrangements may present financial, managerial, and operational challenges, including potential disputes, liabilities, or contingencies and may involve risks not otherwise present when operating independently, including:

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The risks described above or the failure to continue any joint venture or joint development arrangement or to resolve disagreements with our current or future joint venture partners could materially and adversely affect our ability to transact the business that is the subject of such joint venture, which would in turn negatively affect our financial condition and results of operations.

We and our collaborators may disagree over our right to receive payments under our collaboration agreements, potentially resulting in costly litigation and loss of reputation.

Our ability to receive payments under our collaboration agreements depends on our ability to clearly delineate our rights under those agreements. We typically license our intellectual property to our collaborators, who then develop and commercialize seeds with improved traits. However, a collaborator may use our intellectual property without our permission, dispute our ownership of certain intellectual property rights, or argue that our intellectual property does not cover, or add value to, their marketed product. If a dispute arises, it may result in costly patent office procedures and litigation, and our collaborator may refuse to pay us while the dispute is ongoing. Furthermore, regardless of any resort to legal action, a dispute with a collaborator over intellectual property rights may damage our relationship with that collaborator and may also harm our reputation in the industry.

Even if we are entitled to payments from our collaborators, we may not actually receive these payments, or we may experience difficulties in collecting the payments to which we believe we are entitled. After our collaborators launch commercial products containing our licensed traits, we will need to rely on the good faith of our collaborators to report to us the sales they earn from these products and to accurately calculate the payments we are entitled to, a process that will involve complicated and difficult calculations. Although we seek to address these concerns in our collaboration agreements by reserving our right to audit financial records, such provisions may not be effective.

Our business is subject to various government regulations and if we or our collaborators are unable to timely complete the regulatory process for our products in development, our or our collaborators’ ability to market our traits could be delayed, prevented or limited.

Our business is generally subject to two types of regulations: regulations that apply to how we and our collaborators operate and regulations that apply to products containing our traits. We apply for and maintain the regulatory permits necessary for our operations, particularly those covering our hemp seed breeding, seed production, and crop production operations or field trials, while we or our collaborators apply for and maintain regulatory approvals necessary for the commercialization of products containing our seed traits. The large-scale field trials that our collaborators conduct during advanced stages of product development are subject to regulations similar to those to which we are subject. Even if we and our collaborators make timely and appropriate applications for regulatory permits for our field trials, government delays

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in issuing such permits can significantly affect the development timelines for our products, particularly if the planting period for a crop growing season expires before the necessary permits are obtained. For example, our collaborator in India has encountered and continues to encounter delays in obtaining necessary regulatory permits for field trials, and these delays have had a negative impact on the commercialization timelines for certain of our products and may have additional future negative impacts. Pursuant to our collaboration agreements, our collaborators also apply for the requisite regulatory approvals prior to commercialization of products containing our traits. In most of our key target markets, regulatory approvals must be received prior to the importation of genetically modified products. These regulatory processes may be complex; for example, the U.S. federal government’s regulation of biotechnology is divided among the EPA, which regulates activity related to the use of plant pesticides and herbicides, the USDA, which regulates the import, field testing, interstate movement, and environmental release of specific technologies that may be used in the creation of genetically modified plants, and the FDA, which regulates foods derived from new plant varieties.

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In addition to regulation by the U.S. government, products containing our biotech traits may be subject to regulation in each country in which such products are tested or sold. International regulations may vary from country to country and from those of the United States. The difference in regulations under U.S. law and the laws of foreign countries may be significant and, in order to comply with the laws of foreign countries, we may have to implement global changes to our products or business practices. Such changes may result in additional expense to us and either reduce or delay product development or sales. Additionally, we or our collaborators may be required to obtain certifications or approvals by foreign governments to test and sell the products in foreign countries.

The regulatory process is expensive and time-consuming, and the time required to complete the process is difficult to predict and depends upon numerous factors, including the substantial discretion of the regulatory authorities. Other than for our SONOVA products, neither we nor our collaborators have completed all phases of the regulatory process for any of our products in development. Our traits could require a significantly longer time to complete the regulatory process than expected, or may never gain approval, even if we and our collaborators expend substantial time and resources seeking such approval. A delay or denial of regulatory approval could delay or prevent our ability to generate revenues and to achieve profitability. Changes in regulatory review policies during the development period of any of our traits, changes in, or the enactment of, additional regulations or statutes, or changes in regulatory review practices for a submitted product application may cause a delay in obtaining approval or result in the rejection of an application for regulatory approval. Regulatory approval, if obtained, may be made subject to limitations on the indicated uses for which we or our collaborators may market a product. These limitations could adversely affect our potential revenues. Failure to comply with applicable regulatory requirements may, among other things, result in fines, suspensions of regulatory approvals, product recalls, product seizures, operating restrictions, and criminal prosecution. We have on certain occasions notified the USDA of instances of noncompliance with regulations. Although these occasions did not result in any enforcement actions, we may have occasions of noncompliance in the future that result in USDA or other governmental agency enforcement action.

Consumer resistance to genetically modified organisms may negatively affect our public image and reduce sales of seeds containing our traits.

We are active in the field of agricultural biotechnology research and development in seeds and crop protection, including GM seeds. Foods made from such seeds are not accepted by many consumers due to concerns over such products’ effects on food safety and the environment. The high public profile of biotechnology in food production and lack of consumer acceptance of products to which we have devoted substantial resources could negatively affect our public image and results of operations. The current resistance from consumer groups, particularly in Europe, to GM crops not only limits our access to such markets, but also has the potential to spread to and influence the acceptance of products developed through biotechnology in other regions of the world. For example, we temporarily suspended certain initiatives in response to legislative requirements in Vermont related to labeling of food products containing GM ingredients until it was determined that there would be clarity and uniformity in nationwide food labeling requirements. Certain labeling-related initiatives have heightened consumer awareness of GM crops generally and may make consumers less likely to purchase food products containing GM ingredients, which could have a negative impact on the commercial success of products that incorporate our traits and materially and adversely affect our financial condition and results of operations.

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Governmental restrictions on the testing, production, and importation of GM crops may negatively affect our business and results of operations.

The production of certain GM crops is effectively prohibited in certain countries, including throughout the European Union, which limits our commercial opportunities and may influence regulators in other countries to limit or ban the testing, production, or importation of GM crops and products of GM crops. Our GM crops are grown principally in North America, South America, India and Australia, where there are fewer restrictions on the production of GM crops. If these or other countries where our GM crops are grown enact laws or regulations that ban the production of such crops or make regulations more stringent, we could experience a longer product development cycle for our products, encounter difficulty obtaining intellectual property protection, and may even have to abandon projects related to certain crops or geographies, any of which would negatively affect our business and results of operations. Furthermore, any changes in such laws and regulations or consumer acceptance of our GM crops and products made from these crops could negatively impact our collaborators, who in turn might terminate or reduce the scope of their collaborations with us or seek to alter the financial terms of our agreements with them.

Changes in laws and regulations to which we are subject, or to which we may become subject in the future, may materially increase our costs of operation, decrease our operating revenues, and disrupt our business.

Laws and regulatory standards and procedures that impact our business are continuously changing. Responding to these changes and meeting existing and new requirements may be costly and burdensome. Changes in laws and regulations could:

Any of these events could have a material adverse effect on our business, results of operations, and financial condition. Legislators and regulators have increased their focus on plant biotechnology in recent years, with particular attention paid to GM crops.

Our future growth relies on the ability of our collaborators to commercialize and market our products in development, and any restrictions on such activities could materially and adversely impact our business and results of operations. Any changes in regulations in countries where GM crops are grown or imported could result in our collaborators being unable or unwilling to develop, commercialize, or sell products that incorporate our traits. Any changes to these existing laws and regulations may also materially increase our costs of operation, decrease our operating revenues, and disrupt our business.

The unintended presence of our traits in other products or plants may negatively affect us.

Trace amounts of our traits may unintentionally be found outside our containment area in the products of third parties, which may result in negative publicity and claims of liability brought by such third parties against us. Furthermore, in the event of an unintended dissemination of our genetically engineered materials to the environment or the presence of unintended but unavoidable trace amounts, sometimes called “adventitious presence,” of our traits in conventional seed, or in the grain or products produced from conventional or organic crops, we could be subject to claims by multiple parties, including environmental advocacy groups, as well as governmental actions such as mandated crop destruction, product recalls, or additional stewardship practices and environmental cleanup or monitoring.

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Loss of or damage to our germplasm collection would significantly slow our product development efforts.

We have developed and maintain a comprehensive collection of germplasm through strategic collaborations with leading institutions, which we utilize in our non-GM programs. Germplasm comprises collections of genetic resources covering the diversity of a crop, the attributes of which are inherited from generation to generation. Germplasm is a key strategic asset since it forms the basis of seed development programs. To the extent that we lose access to such germplasm because of the termination or breach of our collaboration agreements, our product development capabilities would be severely limited. In addition, loss of or damage to these germplasm collections would significantly impair our research and development activities. Although we restrict access to our germplasm at our research facilities to protect this valuable resource, we cannot guarantee that our efforts to protect our germplasm collection will be successful. The destruction or theft of a significant portion of our germplasm collection would adversely affect our business and results of operations.

The regulatory environment outside the United States varies greatly from jurisdiction to jurisdiction and there is less certainty how some of our products will be regulated.

We may use gene-editing and TILLING technology to develop some of our product portfolio. The regulatory environment around gene-editing and TILLING in plants for food ingredients is greatly uncertain outside of the United States and varies greatly from jurisdiction to jurisdiction. Each jurisdiction may have its own regulatory framework regarding genetically modified foods, which may include restrictions and regulations on planting and growing genetically modified plants and in the consumption and labeling of genetically modified foods, and which may encapsulate our products. To the extent regulatory frameworks outside of the United States are not receptive to our gene-editing and TILLING technologies, this may limit our ability to expand into other global markets.

Complying with the regulatory requirements outside the United States will be costly and time-consuming, and there is no guarantee we will be able to commercialize our products outside the United States.

We cannot predict whether or when any jurisdiction will change its regulations with respect to our products. Advocacy groups have engaged in publicity campaigns and filed lawsuits in various countries against companies and regulatory authorities, seeking to halt regulatory approval or clearance activities or influence public opinion against genetically engineered and/or gene-edited products. In addition, governmental reaction to negative publicity concerning our products could result in greater regulation of genetic research and derivative products or regulatory costs that render our products cost prohibitive.

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The scale of the commodity food industry may make it difficult to monitor and control the distribution of our products. As a result, our products may be sold inadvertently within jurisdictions where they are not approved for distribution. Such sales may lead to regulatory challenges or lawsuits against us, which could result in significant expenses and management attention.

We depend on our key personnel and, if we are not able to attract and retain qualified scientific and business personnel, we may not be able to grow our business or develop and commercialize our products.

Our future performance depends on the continued services and contributions of our management team and other key employees, the loss of whose services might significantly delay or prevent the achievement of our scientific or business objectives. The replacement of any member of our management team involves significant time and costs and such loss could significantly delay or prevent the achievement of our business objectives. A member of our executiveleadership team who has been our employee for many years and therefore, has significant experience and understanding of our business, that would be difficult to replace.

Additionally, the vast majority of our workforce is involved in research, development and regulatorycommercial activities. Our business is therefore dependent on our ability to recruit and maintain a highly skilled and educated workforce with expertise in a range of disciplines, including molecular biology, biochemistry, plant genetics, agronomics, mathematics, agribusiness, marketing, and other subjects relevant to our operations. All of our current employees are at-will employees, and the failure to retain or hire skilled and highly educated personnel could limit our growth and hinder our research and development efforts.

Our business is subject to the risks of earthquakes, fire, flood, crop losses, epidemics, and other catastrophic natural events, and security breaches, including cybersecurity incidents.

Our headquarters, certain research and development operations and our seed storage warehouse are located in Davis, California. Production of hemp and wheat is conducted in California, Hawaii, Oregon, Idaho and other locations. Our seed, grain and hemp crops are vulnerable to adverse weather conditions, including windstorms, floods, drought and temperature extremes, which are common but difficult to predict. In addition, the crops are vulnerable to crop disease and to pests, which may vary in severity and effect, depending on the stage of production at the time of infection or infestation, the type of treatment applied and climatic conditions. Unfavorable growing conditions can reduce both crop size and quality. Weather conditions, disease or pest infestation could damage the crop in spite of precautions we would normally take to avoid such losses. Our production of our SONOVA products takes place at a single facility in Northern California, and theproduct inventory is stored in a single cold storage facility in Northern California. We take precautions to safeguard our facilities, including insurance, health and safety protocols, and off-site storage of critical research results and computer data. However, a natural disaster, such as a fire, flood, or earthquake, could cause substantial delays in our operations, damage or destroy our equipment, inventory, or development projects, and cause us to incur additional expenses. The insurance we maintain against natural disasters may not be adequate to cover our losses in any particular case.

We utilize and critically rely upon information technology systems in all aspects of our business, including increasingly large amounts of data to support our products and advance our research and development. Failure to effectively prevent, detect, and recover from the increasing number and sophistication of information security threats could result in theft, misuse, modification, and destruction of information, including trade secrets and confidential business information, and cause business disruptions, delays in research and development, and reputational damage, which could significantly affect our results of operations and financial condition.

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Disruption to our IT system could adversely affect our reputation and have a material adverse effect on our business and resultsA lack of operations.

Our technologies rely on our IT system to collect and analyze our genomic data, including TILLING and other experimental data, and manage our plant inventory system, which tracks every plant that we have ever produced. We can provide no assurance that our current IT system is fully protected against third-party intrusions, viruses, hacker attacks, information, or data theft, or other similar threats. Furthermore, we store significant amountsavailability of data and, though we have back-up storage for our stored data, we cannot assure you that our back-up storage arrangements will be effective if it becomes necessary to rely on them.

If our IT system does not function properly or proves incompatible with new technologies, we could experience interruptionswater in data transmissions and slow response times, preventing us from completing routine research and business activities. Furthermore, disruption or failureany of our IT system dueproduction areas could impact our business.

Adequate quantities and correct timing of the application of water are vital for most agriculture to technical reasons, natural disaster,thrive. Whether particular farms are experiencing water shortages depends, in large part, on their location. However, continuing drought conditions can threaten all farmland other than those properties with their own water sources. Domestic regulations regarding water usage and rights may also limit the availability of water. Moreover, if the farmers and others who purchase our seed to grow crops cannot get an adequate supply of water, or other unanticipated catastrophic events, including power interruptions, storms, fires, floods, earthquakes, terrorist attacks, and warsif the cost of water makes it uneconomical for the farmers to grow the crops, we may not be able to sell our seed, which could significantly impair our ability to deliver data related to our projects to our collaboratorshave an adverse impact on schedule and materially and adversely affect the outcome of our collaborations, our relationships with our collaborators, our business, and our results of operations.

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Our use of hazardous materials exposes us to potential liabilities.

Certain of our operations involve the storage and controlled use of hazardous materials, including laboratory chemicals, herbicides, and pesticides. This requires us to conduct our operations in compliance with applicable environmental and safety standards, and we cannot completely eliminate the risk of accidental contamination from hazardous materials. In the event of such contamination, we may be held liable for significant damages or fines, which could have a material adverse effect on our business and operating results.

Most of the licenses we grant to our collaborators to use our proprietary genes in certain crops are exclusive within certain jurisdictions, which limits our licensing opportunities.

Most of the licenses we grant our collaborators to use our proprietary genes in certain crops are exclusive within specified jurisdictions, so long as our collaborators comply with certain diligence requirements. That means that once genes are licensed to a collaborator in a specified crop or crops, we are generally prohibited from licensing those genes to any third party. The limitations imposed by these exclusive licenses could prevent us from expanding our business and increasing our product development initiatives with new collaborators, both of which could adversely affect our business and results of operations.

We are subject to the risk of becoming an investment company under the Investment Company Act of 1940.

On November 12, 2020, we acquired 1,875,000 shares of common stock of Bioceres Crop Solutions Corp. (“Biox Shares”) in connection with the sale of our membership interest in Verdeca to Bioceres, Inc. and our licensing of certain technology to Bioceres Inc. Our ownership of the Biox Shares could subject us to regulation under the Investment Company Act of 1940 (the “Investment Company Act”).

Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that “is engaged or proposes to engage in the business model for discovery of genesinvesting, reinvesting, owning, holding or trading in securities, and owns or proposes to acquire investment securities having a value exceeding 40% of the value of such issuer’s total assets (exclusive of U.S. government securities and cash items)” (the “40% Threshold”).  While we do not intend to engage primarily in the business of investing, reinvesting, owning, holding or trading in investment securities, the value of the Biox Shares relative to our other assets could change over time and cause us to exceed the 40% Threshold.  Rule 3a-2 under the Investment Company Act provides one-year relief from the registration requirements of the Investment Company Act to an issuer that, on a transient basis, is dependent on licensing patent rights from third parties, and any disruptiondeemed to be an investment company. The transient investment company exemption is available to a company no more than once every three years.  If we exceed the 40% Threshold because our ownership of this licensing process could adversely affect our competitive position and business prospects.

Our business model involves acquiring technologies that have achieved proofthe Biox Shares, we will need to dispose of concept through rigorous development and testing by third-party basic researchersa sufficient amount of the Bios Shares in order to avoidCompany with the significant risks and high costs associated with basic research. Only a small numberInvestment Company act.  Such disposal of the genes we evaluate for acquisition are likely to provide viable commercial candidates and an even more limited number, if any, are likely to be commercialized by us or our collaborators. A failure by us to continue identifying genes that improve specific crop traits could make it difficult to grow our business. If we are unable to identify additional genes, weBiox Shares may be unableon terms that are unfavorable to develop new traits, which may negativelyus and could adversely impact our ability to generate revenues.financial position and results of operations.  

If we are unable to comply with Rule 3a-2 and are deemed to be an investment company, the consequences of failing to register under the Investment Company Act would be significant. For example, investment companies that fail to register under the Investment Company Act are prohibited from conducting business in interstate commerce. The ramifications of registering as an investment company, both in terms of the restrictions imposed on us and the cost of compliance, would be significant. For example, in addition to expenses related to initially registering as an investment company, the Investment Company Act also would impose various restrictions with regard to our ability to enter into licensing arrangementsaffiliated transactions, the diversification of our assets, and our ability to acquire rightsborrow money. If we became subject to these potentially viable genes on favorable termsthe Investment Company Act at some point in the future, it may adversely affect our business. In addition, if the ownersability to continue pursuing our business plan would be severely limited.

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Our ownership of the patents we license do not properly maintain or enforce the patents underlying such licenses, our competitive position and business prospectsBiox Shares could be harmed. Without protection for the intellectual property we license, other companies might be able to offer substantially similar or identical products for sale, which could adversely affect our competitive business position and harm our business prospects.

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If we fail to comply with our obligations under license agreements, our counterparties may have the right to terminate these agreements, in which event we may not be able to develop, manufacture, register, or market, or may be forced to cease developing, manufacturing, registering, or marketing, any product that is covered by these agreements or may face other penalties under such agreements. Such an occurrence could materially adversely affectcause the value of our assets and our results of operation to vary significantly.

The value of the applicable products to us and have an adverse effectBiox Shares on our businessbalance sheet will be based upon the market value of the Biox Shares as of the end of each quarter.  As the Biox Shares trade on the NYSE American stock exchange, their value is subject to fluctuation over time.  This fluctuation could be significant, which would materially affect our total assets and resultresults of operations.operations from quarter to quarter, independent of the performance of our core business.

Our commercial success depends on our ability to protect our intellectual property and our proprietary technologies.technologies and on the ability to operate without infringing the patents and other proprietary rights of third parties.

Our commercial success depends,will depend in part on our ability to obtain and maintain patent protection both in the United States and trade secret protectionin other countries for any products we successfully develop. The patents and patent applications in our proprietary technologies, our traits,patent portfolio are either owned by us, exclusively licensed to us, or co-owned by us and their uses, as well as our abilityothers and exclusively licensed to operate without infringing upon the proprietary rights of others. If we do not adequately protect our intellectual property, competitors may be able to use our technologies and erode or negate any competitive advantage we may have, which could harm our business and ability to achieve profitability.

If we are unable to protect the confidentiality of our trade secrets, the value of our technology could be materially and adversely affected and our business could be harmed.

We treat our proprietary technologies, including unpatented know-how and other proprietary information, as trade secrets. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with any third parties who have access to them, such as our consultants, independent contractors, advisors, corporate collaborators, and outside scientific collaborators. We also enter into confidentiality and invention or patent assignment agreements with employees and certain consultants. Any party with whom we have executed such an agreement could breach that agreement and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time consuming, and the outcome is unpredictable. In addition, if any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent such third party, or those to whom they communicate such technology or information, from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, or if we otherwise lose protection for our trade secrets or proprietary know-how, the value of this information may be greatly reduced and our business and competitive position could be harmed.

Changes in U.S. patent law could diminish the value of patents in general, thereby impairing ourOur ability to protect ourany products in development.

As an agricultural biotechnology company, our success is heavily dependentwe successfully develop from unauthorized or infringing use by third parties depends substantially on intellectual property, particularly patents. Obtaining and enforcing patents involves technological and legal complexity, and is costly, time consuming, and inherently uncertain. In addition, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain and maintain valid and enforceable patents. Due to evolving legal standards relating to the patentability, validity and enforceability of patents covering biotechnology inventions and the scope of claims made under these patents, our ability to obtain and enforce patents is uncertain and involves complex legal and factual questions. Accordingly, rights under any issued patents may not provide us with sufficient protection for any products we successfully develop or provide sufficient protection to afford us a commercial advantage against our competitors or their competitive products or processes. In addition, we cannot guarantee that any patents will be issued from any pending or future patent applications owned by or licensed to us. Even if patents have been issued or will be issued, we cannot guarantee that the claims of these patents are, or will be, valid or enforceable, or provide us with any significant protection against competitive products or otherwise be commercially valuable to us.

The U.S. Congress passed the Leahy-Smith America Invents Act, or the America Invents Act, which was signed into law in September 2011. The America Invents Act reforms U.S. patent law in part by changing the standard for patent approval from a “first to invent” standard to a “first inventor to file” standard and developing a post-grant review system. This new legislation affects U.S. patent law in a manner that may impact our ability to obtain or maintain patent protection for current or future inventions in the U.S. or otherwise cause uncertainty as to our patent protection.

We may not have identified all patents, published applications or published literature that may affect our business, either by blocking our ability to commercialize our traits, by preventing the patentability of our traits by us, our licensors or co-owners, or by covering the same or similar technologies that may invalidate our patents, limiting the scope of our future this combination of events has created uncertainty with respectpatent claims or adversely affecting our ability to market our products. For example, patent applications are maintained in confidence for at least 18 months after their filing. In some cases, patent applications remain confidential in the value of patents once obtained. Depending on decisions by the U.S. Congress, the federal courts, and the U.S.United States Patent and Trademark Office (“USPTO”) for the laws and regulations governing patents could changeentire time prior to issuance of a U.S. patent. Patent applications filed in unpredictable ways that may weaken or undermine our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting, maintaining, and defending patents on products in development in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States are less extensive than thosenot typically published until at least 18 months from their first filing date. Similarly, publication of discoveries in the scientific or patent literature often lags behind actual discoveries. Therefore, we cannot be certain that we or our licensors or co-owners were the first to invent, or the first inventors to file, patent applications on our processes, products or their uses. In the event that another party has filed a U.S. patent application covering the same invention as one of our patent applications or patents, we may have to participate in an adversarial proceeding, known as an interference, declared by the USPTO to determine priority of invention in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. For example, several countries outside the United States prohibit patents on plants and seeds entirely. In addition, we may at times license third-party technologies for which limited international patent protection exists and for which the time period for filing international patent applications has passed. Consequently, we are unable to prevent third parties from using intellectual property we develop or license in all countries outside the United States, or from selling or importing products made using our intellectual property in and into the jurisdictions in which we do not have patent

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protection. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and we may be unable to prevent such competitors from importing those infringing products into territories where we have patent protection, but where enforcement is not as strong as in the United States. These products may compete with our products in development and our patents and other intellectual property rights may not be effective or sufficient to prevent them from competing in those jurisdictions. Moreover, farmers or others in the chain of commerce may raise legal challenges to our intellectual property rights or may infringe upon our intellectual property rights, including through means that may be difficult to prevent or detect, and local regulators may choose to not enforce our intellectual property rights.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions where we have filed patent applications. The legal systems of certain countries have not historically favored the enforcement of patents or other intellectual property rights, which could hinder us from preventing the infringement of our patents or other intellectual property rights and result in substantial risks to us. Proceedings to enforce our patent rights in the United States or foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert patent infringement or other claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful or even cover our associated legal costs. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license from third parties.

If we or one of our collaborators are sued for infringing the intellectual property rights of a third party, such litigation could be costly and time consuming and could prevent us or our collaborators from developing or commercializing our products.

Our ability to generate significant revenues from our products depends on our and our collaborators’ ability to develop, market and sell our products and utilize our proprietary technology without infringing the intellectual property and other rights of any third parties. In the United States and abroad there are numerous third-party patents and patent applications that may be applied toward our proprietary technology, business processes, or developed traits, some of which may be construed as containing claims that cover the subject matter of our products or intellectual property. Because of the rapid pace of technological change, the confidentiality of patent applications in some jurisdictions (including U.S. provisional patent applications), and the fact that patent applications can take

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many years to issue, there may be currently pending applications that are unknown to us that may later result in issued patents upon which our products in development or proprietary technologies infringe. Similarly, there may be issued patents relevant to our products in development of which we are not aware. These patents could reduce the value of the traits we develop or the genetically modified plants containing our traits or, to the extent they cover key technologies on which we have unknowingly relied, require that we seek to obtain licenses or cease using the technology, no matter how valuable to our business. We may not be able to obtain such a license on commercially reasonable terms. If any third partythird-party patent or patent application covers our intellectual property or proprietary rights and we are not able to obtain a license to it, we and our collaborators may be prevented from commercializing products containing our traits.

As the agricultural biotechnology industry continues to develop, we may become party to, or threatened with, litigation or other adverse proceedings regarding intellectual property or proprietary rights in our technology, processes, or developed traits. Third parties may assert claims based on existing or future intellectual property rights and the outcome of any proceedings is subject to uncertainties that cannot be adequately quantified in advance. Any litigation proceedings could be costly and time consuming, and negative outcomes could result in liability for monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a patent. There is also no guarantee that we would be able to obtain a license under such infringed intellectual property on commercially reasonable terms or at all. A finding of infringement could prevent us or our collaborators from developing, marketing or selling a product or force us to cease some or all of our business operations. Even if we are successful in these proceedings, we may incur substantial costs and the time and attention of our management and scientific personnel may be diverted as a result of these proceedings, which could have a material adverse effect on us. Claims that we have misappropriated the confidential information or trade secrets of third parties could similarly have a negative impact on our business.

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Our resultssuccess will depend in part on our ability to uphold and enforce patents or patent applications owned or co-owned by us or licensed to us, which cover products we successfully develop. Proceedings involving our patents or patent applications could result in adverse decisions regarding:

Even if we are required to pay to third parties.

We are a party to license agreements that require us to remit royalty payments and other payments related to in-licensed intellectual property. Under our in-license agreements,successful in these proceedings, we may pay up-front feesincur substantial costs and milestone paymentsdivert management’s time and be subject to future royalties. We cannot precisely predict the amount, if any, of royalties we will oweattention in the future, and if our calculations of royalty payments are incorrect, we may owe additional royalties,pursuing these proceedings, which could negatively affect our results of operations. As our product sales increase, we may, from time to time, disagree with our third-party collaborators as to the appropriate royalties owed and the resolution of such disputes may be costly and may consume management’s time. Furthermore, we may enter into additional license agreements in the future, which may also include royalty, milestone and other payments.have a material adverse effect on us.

We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.

Our products and products in development are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our products and technology must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges;privileges�� fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers.

In addition, changes in our products or solutions or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products and solutions in international markets, prevent our customers from deploying our products and solutions or, in some cases, prevent the export or import of our products and solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations, could also result in decreased use of our products and solutions, or in our decreased ability to export or sell our products and solutions to existing or potential customers. Any decreased use of our products and solutions or limitation on our ability to export or sell our products and solutions would likely adversely affect our business, financial condition and results of operations.

We are subject to anti-corruption and anti-money laundering laws with respect to both our domestic and international operations, and non-compliance with such laws can subject us to criminal and civil liability and harm our business.

We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit us and our collaborators from authorizing, offering, or directly or indirectly providing improper payments or benefits to recipients in the public or private sector. We or our collaborators may have direct and indirect interactions with government agencies and state-affiliated entities and universities in the course of our business. We may also have certain matters come before public international organizations such as the United Nations. We use third-party collaborators, joint venture and strategic partners, law firms, and other representatives for regulatory compliance, patent registration, lobbying, deregulation advocacy, field testing, and other purposes in a variety of countries, including those that are known to present a high corruption risk such as India, China, and Latin American countries. We can be held liable for the corrupt or other illegal activities of these third-party collaborators, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize such activities. In addition, although we have implemented policies and procedures to ensure compliance with anti-corruption and related laws, there can be no assurance that all of our employees, representatives, contractors, partners, or agents will comply with these laws at all times. Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and debarment from contracting with certain governments or other persons, the loss of export privileges, reputational

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harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, resultsTable of operations, and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations, and financial condition.Contents

Adverse outcomes in future legal proceedings could subject us to substantial damages and adversely affect our results of operations and profitability.

We may become party to legal proceedings, including matters involving personnel and employment issues, personal injury, environmental matters, and other proceedings. Some of these potential proceedings could result in substantial damages or payment awards that exceed our insurance coverage. We will estimate our exposure to any future legal proceedings and establish provisions for the estimated liabilities where it is reasonably possible to estimate and where an adverse outcome is probable. Assessing and predicting the outcome of these matters will involve substantial uncertainties. Furthermore, even if the outcome is ultimately in our favor, our costs associated with such litigation may be material. Adverse outcomes in future legal proceedings or the costs and expenses associated therewith could have an adverse effect on our results of operations.

We may be required to pay substantial damages as a result of product liability claims for which insurance coverage is not available.

We are subject to product liability claims with respect to our SONOVA and GoodWheat products, and as additional products integrating our traits reach commercialization, product liability claims willmay increasingly be a commercial risk for our business, particularly as we are involved in the supply of biotechnological products, some of which may be harmful to humans and the environment.business. Product liability claims against us or our collaborators selling products that contain our traits, or allegations of product liability relating to seeds containing traits developed by us, could damage our reputation, harm our relationships with our collaborators, and materially and adversely affect our business, results of operations, financial condition, and prospects. Furthermore, while our collaboration agreements typically require that our collaborators indemnify us for the cost of product liability claims brought against us as a result of our collaborator’s misconduct, such indemnification provisions may not always be enforced, and we may receive no indemnification if our own misconduct contributed to the claims.

We may seek to expand through acquisitions of and investments in other brands, businesses, and assets. These acquisition activities may be unsuccessful or divert management’s attention.

We may consider strategic and complementary acquisitions of and investments in other agricultural biotechnology brands, businesses or other assets, and such acquisitions or investments are subject to risks that could affect our business, including risks related to:

Revenues

Product revenues accounted for 13% and 21%70% of our total revenues for the years ended December 31, 20172020 and 2016,2019, respectively. The $155,000,$230,000, or 23%28%, decreaseincrease in product revenues from sales of our SONOVA products was primarily driven by larger volume distributoradditional pet food orders in 2016 that were not present in 2017..

License revenues accounted for 37%85% and 5%6% of our total revenues for the years ended years ended December 31, 2020 and 2019, respectively. The $6,734,000 increase in license revenues consists primarily of the amounts allocated to the licenses granted to Bioceres for certain intellectual property rights in connection with the November 2020 transaction. See Note 9. There were no license agreements executed in 2019.

Royalty revenues accounted for 1% and 0% of our total revenues for the years ended December 31, 20172020 and 2016,2019, respectively. The $1.3 million, or 921%,$83,000 increase in license revenue was due, in part, to the termination of several agreements in 2017 that resulted in the recognition of previously deferred upfront license fees. Also contributing to the increase was the delay in the estimated launch date determined in 2016 for a number of our out-licensed yield traits, thereby increasing the number of years over which these upfront licenseroyalty revenues represents minimum annual royalty fees are to be amortized, thereby reducing the amount amortized into revenue each year, as was the case in 2016.earned.

Contract research and government grant revenues comprise a significant portion of our total revenues, accountingaccounted for 51%1% and 74%25% of our total revenues for the years ended December 31, 20172020 and 2016,2019, respectively. The $333,000,$182,000, or 14%63%, decrease in contract research and government grant revenues was primarily driven by contracts that were completed in 2017, partially offset by a newthe completion of agreements and grants. Given our acute focus on selling our GoodWheat and GoodHemp products, we do not intend to continue pursuing contract research agreement in 2017.agreements and government grant projects.

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Cost of Product Revenues

Cost of product revenues decreasedincreased by $612,000,$4,314,000, or 68%487%, for the year ended December 31, 20172020 compared to the year ended December 31, 2016.2019. The decrease wasincrease is mainly due to anwrite-downs in the amounts of $1,600,000 for contracted hemp seed production which did not meet quality specifications, $1,300,000 for Archipelago inventory write-down recorded in 2016.due to regulatory changes, $850,000 for a net realizable value adjustment on seeds purchased from a third-party grower, and $397,000 for a net realizable value adjustment on wheat inventory.

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Research and Development

Research and development expenses decreasedincreased by $1.3 million,$900,000, or 14%12%, for the year ended December 31, 20172020 compared to the year ended December 31, 2016. 2019. The net decreaseincrease was primarily driven by higher employee-related expenses as we expanded our research teams, as well as external hemp-related costs. The increase was partially offset by the less pre-commercial soybean activity, partially attributed to the sale of our share of Verdeca in November 2020.

Gain on sale of Verdeca

The gain on sale of Verdeca is the gain recognized as part of the transaction executed in November 2020 in which we sold our membership interests in the Verdeca joint venture to our partner Bioceres. See Note 9.

Change in fair value of contingent consideration

There was no change in fair value of contingent consideration during the year ended December 31, 2020. During the year ended December 31, 2019, the change in the fair value of contingent consideration was due to $1.8the gain of $1.0 million associated with the reduction of lower salaries and benefits and $384,000 of reduced chemical and supply expenditures, mainlyour contingent liability as the result of the reductions in our workforcea decision to abandon a program that occurred in 2016.  Partially offsetting these decreases were a $1.1 million increase in subcontracting activity in support of Verdeca and $533,000 of license fee expense released from prepaid expenses upon the discontinuance of a license agreement in the fourth quarter of 2017.was previously accrued. See Note 15.

Selling, General, and Administrative

Selling, general, and administrative expenses decreasedincreased by $1.6$2.9 million, or 13%21%, for the year ended December 31, 20172020 compared to the year ended December 31, 2016. 2019. The decrease in SG&A costsincrease was primarily driven by $1.3 million of lower salaries and benefits resulting from reductions in our work force in 2016, along with $1.2 million of related severance costs in 2016 that were not present in 2017. There was a $742,000 increase in the amount of incentive and bonus expense recognized in 2017 as compared to 2016, along with higher consulting activity and fees related to our strategic review process.and consultants’ stock compensation expense, higher employee-related expenses including severance, higher insurance premiums, increased rent expense associated with additional leased space and increased marketing and public relations activities.

Interest Expense

Interest expense decreased $572,000, or 43%,was $47,000 for the year ended December 31, 2017 compared2020, due to new notes payable agreements entered into during 2020. There was $5,000 of interest expense for the year ended December 31, 2016. The decrease was driven by the extinguishment of debt in July 2017.  See Note 10.  2019.

Other Income, Net

Other income, net, decreased $60,000,increased $274,000, or 18%59%, for the year ended December 31, 20172020 compared to the year ended December 31, 2016. 2019. This decreasewas primarily consisted of lower net investment income due to the declining investment balance from 2016unrealized gain of corporate securities.

Change in the Estimated Fair Value of Common Stock Warrant Liabilities

Change in the estimated fair value of common stock warrant liabilities resulted in income of $6.6 million for the year ended December 31, 2020 due to 2017.the fair value remeasurement of the common stock warrant liabilities driven by a decrease in the stock price and risk-free rates, as well as a fewer number of warrants classified as liabilities outstanding at December 31, 2020 compared to December 31, 2019.

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Loss on Extinguishment of DebtWarrant Liability

TheIn connection with the May and July 2020 Warrant Exercise Transactions, the Company recognized a loss on extinguishment of debtwarrant liabilities of $900,000 wasapproximately $635,000 for the year ended December 31, 2020. There were no such transactions during the year ended December 31, 2019.

Offering costs

Offering costs decreased by $708,000 for the year ended December 31, 2020 as all financing transactions completed during the year qualified for equity treatment and the offering costs were accounted for as a reduction to equity. Offering costs for the year ended December 31, 2019 of $708,000 were comprised of the placement agent fees, placement agent warrants, advisory fees, and legal and accounting fees related to the debt payofffinancing transactions that occurred in July 2017. There was no such activity in 2016.qualified for liability treatment.

Income Tax Provision

The income tax provision remained relatively consistentresulted in a $124,000 benefit for the year ended December 31, 2020, compared to an income tax expense of $2,000 for the year ended December 31, 2019. A deferred tax liability arising from year to year.the difference between book purchase price allocation and tax basis has been assessed upon closing of the Industrial Seed Innovations acquisition completed in August 2020. See Note 7. The purchase accounting deferred tax liabilities enabled the realization of a portion of the existing deferred tax assets, thus allowing for a reduction in the valuation allowance in the amount of $107,000.

Seasonality

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 inwithin 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.

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Liquidity, Capital Resources and Going Concern

We have funded our operations primarily with the net proceeds from our initial public offering, and private placements of equity securities 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 progressingcompleting development and commercializing our agricultural yield and product quality seed traits through the regulatory process and to commercialization.traits. This includes replicating field trials, coordinating with our partners on their development programs and collecting, analyzing,scaling harvest production of wheat and submitting field trial data to regulatory authorities.hemp. As of December 31, 2017,2020, we had cash and cash equivalents of $9.1$14.0 million, restricted cash of $2.0 million and short-term investments of $3.9$11.6 million. For the years ended December 31, 2020 and 2019, the Company had net losses of $6.0 million and $28.9 million, respectively, and net cash used in operations of $30.2 million and $17.2 million, respectively.

As is disclosed in Note 23, on January 25, 2021, the Company entered into a securities purchase agreement with certain institutional and accredited investors relating to the issuance and sale in a private placement of shares of Company common stock and warrants for an aggregate of $25.1 million, exclusive of any related transaction fees.

As is disclosed in Note 12 and 13, the Company obtained funding through one common stock and warrant financing and two warrant exercise financings during 2020, and two common stock and warrant financings and two

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warrant exercise financings during 2019. On December 22, 2020, the Company entered into agreements with institutional investors through a registered direct offering in the amount of $8 million, exclusive of any related transaction fees. In May and July 2020, investors exercised warrants in the amount of $9.4 million, exclusive of transactions costs.

We believe that our existing cash, restricted cash, cash equivalents and short-term investments will not be sufficient to meet our anticipated cash requirements for at least the next 12 months, and thus raises substantial doubt about the Company’s ability to continue as a going concern.  See Note 1.months.

We may secureseek to raise additional required fundingfunds through debt or equity or debt financings, sales or out-licensing of intellectual property assets, seeking partnerships with other agriculture biotechnology companies or third parties to co-develop and fund research, development or commercialization efforts, or similar transactions. if necessary. We may also consider entering into additional partner arrangements. 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 do require additional funds and are not able to secure adequate additional funding, we may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned development programs. Any of these actions could materially harm our business, results of operations and financial condition.

Term Loans

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.  In July 2017, the Company repaid the $25.0 million Term Loan with Silicon Valley Bank, along with the $625,000 end-of-term fee and $500,000 prepayment fee.

The Term Loans’ prepayment and end of term fees of $1.1 million were recorded as a loss on extinguishment of debt, along with $41,000 of deferred loan issuance fees, partially offset by $267,000 of end of term fees previously amortized, netting to a loss of $900,000. As of the payoff date, the Company was in compliance with all covenants.

Cash Flows

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

Cash Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 20172020 was $14.0$30.2 million. Our net loss of $15.7$6.0 million, was partlyadjustments in our working capital accounts of $11.5 million, gain on sale of Verdeca of $8.8 million, corporate securities received in exchange for license agreement of $4.3 million, change in fair value of common stock warrant liabilities of $6.6 million, operating lease payments of $910,000, unrealized gain on corporate securities of $656,000 and net amortization of investment premium of $44,000 were partially offset by non-cash charges of $1.5$2.0 million for stock-based compensation, depreciation and amortization of $662,000, lease amortization of $1.0 million, loss on extinguishment of debtwarrant liability of $900,000, and depreciation and amortization$635,000, as well as $4.3 million of $279,000. These were partially offset by changes in net operating assets totaling ($921,000).inventory write-downs.

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Cash used in operating activities for the year ended December 31, 20162019 was $17.1$17.2 million. Our net loss of $19.6$28.9 million, was partlychange in fair value of contingent consideration of $1.0 million, operating lease payments of $715,000, and net amortization of investment premium and discount of $180,000 were partially offset by the change in fair value of common stock warrant liabilities and common stock adjustment feature liability of $9.2 million, non-cash charges of $1.1$2.3 million for stock-based compensation, $0.3 million for depreciation and amortization $0.2 million for accretion of debt discount, $0.9$194,000, lease amortization of $708,000, as well as $0.7 million of net operating assets,offering costs incurred in connection with financing activities and adjustments in our working capital accounts of $0.1 million of net amortization of investment premium.million.

Cash Flows from Investing Activities

Cash provided by investing activities for the year ended December 31, 20172020 of $47.2$17.3 million primarily consisted of $66.7$18.3 million of proceeds from sales and maturities of investments and $3.2 million of proceeds from the sale of Verdeca, partially offset by $19.4$2.3 million in purchases of property and equipment, $1.3 million of purchases of investments and $0.5 million of acquisitions, net investments purchased.of cash acquired.

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Cash used in investing activities for the year ended December 31, 20162019 of $5.3$8.4 million primarily consisted of $41.4$28.4 million in purchases of netshort term investments purchased and $0.2$1.5 million in purchases of property and equipment, purchases, which were partially offset by $36.3$21.5 million ofin proceeds from sales and maturities of investments.

Cash Flows from Financing Activities

Cash used inprovided by financing activities for the year ended December 31, 20172020 of $26.1$20.6 million consisted primarily of proceeds from the exercise of warrants of $9.4 million, proceeds from the issuance of stock and warrants relating to the December 2020 Offering of $8.0 million, proceeds from borrowings of $3.1 million, capital contributions from the non-controlling interest in our joint venture of $1.6 million and proceeds from the purchase of ESPP shares of $51,000.  Partially offsetting these proceeds were payments on notes payable and related debtof offering costs totaling $652,000 for the December 2020 Offering, as well payments of transaction costs relating to extinguishment costs.  See Note 10.of warrant liability of $863,000.

Cash provided by financing activities for the year ended December 31, 20162019 of $0.4$21.9 million was primarilyconsisted of proceeds from the issuance of stock and warrants relating to the June 2019 Offering of $7.5 million and from the September 2019 Offering of $10.0 million, proceeds from the exercise of stock options and purchases through our employee stock purchase plan (“ESPP”).

Contractual Obligations and Other Commitments

Our future contractual obligations at December 31, 2017 were as follows (in thousands):

We are obligated to make future payments to related and unrelated parties under in-license agreements, including certain license fees, royalties, and milestone fees. In addition, certain royalty payments rangingsome of the June 2019 warrants of $5.3 million, capital contributions from the low single digits to mid-teens are payable on net revenue amounts as definednon-controlling interest in the in-licensing agreements. Milestone payments under these agreements may also be payable upon the successful development or implementationour joint venture of various technologies. The amount$689,000 and timing of these payments are uncertain and have been excludedproceeds from the above table.purchase of ESPP shares of $21,000. Partially offsetting these proceeds were payments of offering costs totaling $798,000 and $663,000 for the September 2019 and June 2019 Offerings, respectively, as well as $24,000 in payments of offering costs for the June 2018 Offering.

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 entityentities, other than Verdeca, which is discussed inVerdeca. See Note 7 – Variable Interest Entity.9 for further detail.

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Critical Accounting Polices and 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 believe that theconsider our critical accounting policies discussed below are criticaland estimates to understanding our historicalbe revenue recognition, determination of the provision for income taxes, stock-based compensation, fair value of certain equity instruments, and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.net realizable value of inventory.

Revenue Recognition

We generate revenues through sales of product, license agreements, contract research agreements, and government grants. Revenue generated from our license agreements may include up-front, nonrefundable license fees, annual license fees, milestone payments, and future value-sharing payments subsequent to commercialization by our partners. We recognize revenue when the following criteria have been met: persuasive evidence of an arrangement with the customer exists, price and termscontrol of the arrangement are fixedpromised goods or determinable, deliveryservices is transferred to customers at an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. See Note 2 for further detail.

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Table of the product has occurred or the service has been performed in accordance with the terms of the arrangement, and collectability is reasonably assured.Contents

We generally recognize product revenues once passage of title has occurred.occurred, which is generally upon shipment. Shipping and handling costs charged to customers are recorded as revenues and included in cost of product revenues at the time the sale is recognized.

For revenue agreements with multiple-element arrangements, such as license and contract research agreements, we evaluate the arrangements to determine whether the deliverables can be separated or whether they must be accounted for as a single unit of accounting. This determination is generally based on whether any deliverable has stand-alone value to the customer. This analysis also establishes a selling price hierarchy for determining how to allocate arrangement consideration to identified units of accounting. When deliverables are separable, consideration received is allocated to the separate units of accounting based on the relative selling price method and the appropriate revenue recognition principles are applied to each unit. The selling price used for each unit of accounting is based on estimated selling price as neither vendor-specific nor third-party evidence is available. When we determine that an arrangement should be accounted for as a single unit of accounting, we must determine the period over which the performance obligations will be performed and revenue will be recognized over the performance period.

We have determined that, at the inception of each license agreement, there is only one deliverable for the license for, access to and assistance with the development of the specified intellectual property. We recognize revenue from upfront payments proportionally over the term of our estimated period of performance under the agreement. On a quarterly basis, we review our estimated period of performance for our license agreements based on the progress under the arrangementup-front and account for the impact of any changes on a prospective basis. We recognize annual license fees proportionally overin full when it is deemed probable to be earned. See Note 2 for further detail.

We recognize royalty revenue when the related term subject to cancellation provisions.  InCompany can reasonably determine the event a license is terminated prior to commercialization, the deferred balance of the unamortized up-front license is released to revenue on the effective date.amounts earned.

We recognize revenue related to milestone payments when it is probable that such amounts would not be reversed. See Note 2 for further detail.

Up-front license fees for newly executed agreements are recognized upon execution. Annual license fees and milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts would not be reversed.  The evaluation and analysis of such fees is performed and once the contractually specified performance obligations are achieved. Performance obligations typically consist of significant milestonesannual license or milestone fee is deemed probable to have been earned, it is recognized in the development life cycle of the related technology, such as achievement of specific technological targets, successful results from field trials, filingfull in that period. See Note 2 for approval with regulatory agencies, approvals granted by regulatory agencies and commercial launch of a product utilizing the licensed technology.further detail.

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Contract research revenue consists of amounts earned from performing contracted research activities for third parties. Activities performed are related to breeding programs or the genetic engineering of plants and are subject to an executed agreement. We generally recognize fees for research activities ratably over the contractually specified performance period.

Grant revenues are recognized as eligible research and development expenses are incurred using a proportional performance recognition methodology.

Deferred revenue is primary related to upfront license fee payments received that has not been recognized.

Inventories

Inventory costs are tracked on a lot-identified basis, valued at the lower of cost or net realizable value and are included as cost of product salesrevenues when sold. We compare the cost of inventories with market value and write down inventories to net realizable value, if lower. We provide write down inventory when conditions indicate that the net realizable value may be less than cost due to physical deterioration, obsolescence, changes in price levels or other factors. Additionally, we provide reserves for excess and slow-moving inventory to its estimated net realizable value. The inventory write-downs are based upon estimates about future demand from our customers and distributors and market conditions. Future events that could significantly influence our judgment and related estimates include conditions in target markets, introduction of new products or changes to current or future competitor products.

Stock BasedStock-Based Compensation

We recognize compensation expense related to the employee stock purchase plan and stock options granted to employees and directors based on the estimated fair value of the awards on the date of grant, net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.

We recognize compensation expense for equity instruments issued to non-employees based on the estimated fair value of the equity instrument. The fair value of the non-employee awards is subject to re-measurement at each reporting period until services required under the arrangement are completed, which is the vesting date.

We recorded stock-based compensation expense related to equity awards of $1.5$2.0 million and $1.1$2.3 million for the years ended December 31, 20172020 and 2016,2019, respectively.

In determining the fair value of stock-based awards, we use the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

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Expected Term—The expected term represents the period that stock-based awards are expected to be outstanding and was estimated based on a simplified method allowed by the SEC due to insufficient historical data, and anticipated future exercise activity.defines the term as the average of the contractual term of the options and the weighted-average vesting period for all open employee awards.

Expected Volatility—Since we were privately held and do not have sufficient trading history for our common stock, the expected volatility was estimated based on the average historical volatilities of common stock of comparable publicly traded entities over a period equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle, or area of specialty. We will continue to apply this process until a sufficient amount of historical information regarding the volatility of our own stock price becomes available.

Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

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Expected Dividend—We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, we used an expected dividend yield of zero.

For stock options and other equity awards, our board of directors determine the fair value of each share of underlying common stock based on the closing price of our common stock as reported on the NASDAQ Stock Market on the date of grant.

In addition to the Black-Scholes assumptions, we estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the adequacy of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. The impact from any forfeiture rate adjustment would be recognized in full in the period of adjustment and if the actual number of future forfeitures differs from our estimates, we might be required to record adjustments to stock-based compensation in future periods.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

Recent Accounting Pronouncements

For discussions of the adoption and potential impacts of recently issued accounting standards, refer to Note 3 – Recent Accounting Pronouncements to the accompanying consolidated financial statements..

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents and investments in a variety of securities of high credit quality. As of December 31, 2017, we had cash and cash equivalents of $9.1 million and short-term investments of $3.9 million consisting primarily of cash equivalents and other liquid investments deposited in highly rated financial institutions in the United States. A portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However, because our investments are primarily short­term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor changes in interest rates.Not applicable.

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Item 8. Financial StatementStatements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Arcadia Biosciences, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Arcadia Biosciences, Inc. and its subsidiarysubsidiaries (the "Company") as of December 31, 20172020 and 2016,2019, the related consolidated statements of operations and comprehensive loss, stockholders' equity, and cash flows, for each of the two years in the period ended December 31, 2017,2020, and the related notesnotes  (collectively referred to as the "financial"consolidated financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172020 and 2016,2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017,2020, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has suffered recurring losses from operations and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations, which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

GoodWheat and GoodHemp Inventory Valuation – Refer to Note 4 to the Consolidated Financial Statements

Critical Audit Matter Description

GoodWheat and GoodHemp inventories are recorded at the lower of cost or net realizable value. Management periodically evaluates the carrying value of inventories in relation to the forecasts of product demand, which takes into consideration the estimated marketability and salability of products. When quantities on hand exceed forecasted demand, regulatory changes occur, or quality specifications are not met, a write-down is recorded for such inventories. Changes in assumptions of forecasted product demand could have a significant impact on the amount of inventory valuation, and any related write-downs.

Given the significant judgments made by management in forecasting product demand, including the impact of product marketability and salability, auditing the reasonableness of management’s estimates and assumptions required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

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Our audit procedures over GoodWheat and GoodHemp inventory valuation included the following, among others:

/s/ Deloitte & Touche LLP

Phoenix, Arizona

March 20, 2018

31, 2021

We have served as the Company's auditor since 2007.

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Arcadia Biosciences, Inc.

Consolidated Balance Sheets

(In thousands, except share data)