UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 20212022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37383

Arcadia Biosciences, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

81-0571538

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

202 Cousteau Place, Suite 105

Davis, CA

95618

(Address of Principal Executive Offices)

(Zip Code)

Registrant’s telephone number, including area code: (530) 756-7077

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

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common

RKDA

NASDAQ CAPITAL MARKET

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes No ☐

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

Large accelerated filer

 

Accelerated filer

 ☐

Non-accelerated filer

 

 

Smaller reporting company

Emerging growth company

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

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

As of November 8, 2021,7, 2022, the registrant had 22,184,23524,642,960 shares of common stock outstanding, $0.001 par value per share.


Arcadia Biosciences, Inc.

FORM 10-Q FOR THE QUARTER ENDED September 30, 20212022

INDEX

 

 

 

 

 

Page

Part I —

 

Financial Information (Unaudited)

 

Item 1.

 

Condensed Consolidated Financial Statements:

1

 

 

Condensed Consolidated Balance Sheets

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statements of Stockholders’ Equity

3

 

 

Condensed Consolidated Statements of Cash Flows

4

 

 

Notes to Condensed Consolidated Financial Statements

5

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

2322

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

3432

 

Item 4.

 

Controls and Procedures

3432

Part II —

 

Other Information

3533

 

Item 1.

 

Legal Proceedings

3533

 

Item 1A.

 

Risk Factors

3533

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

3534

 

Item 3.

 

Defaults Upon Senior Securities

3534

 

Item 4.

 

Mine Safety Disclosures

3534

 

Item 5.

 

Other Information

3534

 

Item 6.

 

Exhibits

3635

SIGNATURES

3736


ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Arcadia Biosciences, Inc.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share data)

 

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

35,526

 

 

$

14,042

 

 

$

22,719

 

 

$

28,685

 

Short-term investments

 

 

 

 

11,625

 

Accounts receivable

 

1,453

 

 

 

1,406

 

Accounts receivable and other receivables, net of allowance for doubtful accounts of
$
13 and $76 as of September 30, 2022 and December 31, 2021, respectively

 

 

2,726

 

 

 

1,370

 

Inventories, net — current

 

5,447

 

 

 

3,812

 

 

 

3,342

 

 

 

4,433

 

Assets held for sale

 

 

254

 

 

 

 

Prepaid expenses and other current assets

 

 

1,408

 

 

 

811

 

 

 

990

 

 

 

900

 

Total current assets

 

43,834

 

 

 

31,696

 

 

 

30,031

 

 

 

35,388

 

Restricted cash

 

 

 

 

2,001

 

Property and equipment, net

 

2,634

 

 

 

3,539

 

 

 

848

 

 

 

2,291

 

Right of use asset

 

3,486

 

 

 

5,826

 

 

 

2,073

 

 

 

3,081

 

Inventories, net — noncurrent

 

3,539

 

 

 

3,485

 

 

 

984

 

 

 

2,494

 

Goodwill

 

1,648

 

 

 

408

 

Intangible assets, net

 

3,905

 

 

 

370

 

 

 

373

 

 

 

484

 

Other noncurrent assets

 

 

182

 

 

 

23

 

 

 

165

 

 

 

180

 

Total assets

 

$

59,228

 

 

$

47,348

 

 

$

34,474

 

 

$

43,918

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

 

 

 

Accounts payable and accrued expenses

 

$

5,004

 

 

$

4,105

 

 

$

2,748

 

 

$

3,638

 

Amounts due to related parties

 

51

 

 

 

80

 

 

 

47

 

 

 

64

 

Debt — current

 

36

 

 

 

1,141

 

Unearned revenue — current

 

 

 

 

8

 

Operating lease liability — current

 

1,134

 

 

 

717

 

 

 

986

 

 

 

1,074

 

Other current liabilities

 

 

264

 

 

 

263

 

 

 

270

 

 

 

264

 

Total current liabilities

 

6,489

 

 

 

6,314

 

 

 

4,051

 

 

 

5,040

 

Debt — noncurrent

 

78

 

 

 

2,105

 

Operating lease liability — noncurrent

 

2,562

 

 

 

5,389

 

 

 

1,269

 

 

 

2,220

 

Common stock warrant liabilities

 

7,736

 

 

 

2,708

 

Common stock warrant and option liabilities

 

 

2,135

 

 

 

3,392

 

Other noncurrent liabilities

 

 

2,140

 

 

 

2,280

 

 

 

2,000

 

 

 

2,070

 

Total liabilities

 

 

19,005

 

 

 

18,796

 

 

 

9,455

 

 

 

12,722

 

Commitments and contingencies (Note 17)

 

 

 

 

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value—150,000,000 shares authorized as
of September 30, 2021 and December 31, 2020;
22,184,235
and
13,450,861 shares issued and outstanding as of September 30,
2021 and December 31, 2020, respectively

 

63

 

 

 

54

 

Common stock, $0.001 par value—150,000,000 shares authorized as
of September 30, 2022 and December 31, 2021;
24,642,960
and
22,184,235 shares issued and outstanding as of September 30,
2022 and December 31, 2021, respectively

 

 

65

 

 

 

63

 

Additional paid-in capital

 

257,009

 

 

 

239,496

 

 

 

278,618

 

 

 

257,515

 

Accumulated other comprehensive income

 

(24

)

 

 

 

Accumulated deficit

 

 

(217,203

)

 

 

(211,825

)

 

 

(253,615

)

 

 

(226,485

)

Total Arcadia Biosciences stockholders’ equity

 

39,845

 

 

 

27,725

 

Total stockholders’ equity

 

 

25,068

 

 

 

31,093

 

Non-controlling interest

 

 

378

 

 

 

827

 

 

 

(49

)

 

 

103

 

Total stockholders' equity

 

 

40,223

 

 

 

28,552

 

 

 

25,019

 

 

 

31,196

 

Total liabilities and stockholders’ equity

 

$

59,228

 

 

$

47,348

 

 

$

34,474

 

 

$

43,918

 

See accompanying notes to the unaudited condensed consolidated financial statements.

1


Arcadia Biosciences, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited)

(In thousands, except share and per share data)

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

2,324

 

$

245

 

$

4,506

 

$

630

 

 

$

1,851

 

 

$

2,324

 

 

$

7,967

 

 

$

4,506

 

Royalty

 

 

17

 

 

 

35

 

 

 

117

 

 

 

86

 

License

 

17

 

10

 

17

 

110

 

 

 

10

 

 

 

17

 

 

 

872

 

 

 

17

 

Royalty

 

35

 

16

 

86

 

58

 

Contract research and government grants

 

 

 

 

43

 

 

 

 

106

 

Total revenues

 

2,376

 

314

 

4,609

 

904

 

 

 

1,878

 

 

 

2,376

 

 

 

8,956

 

 

 

4,609

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

2,511

 

1,841

 

4,954

 

3,463

 

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

1,344

 

 

 

2,511

 

 

 

8,250

 

 

 

4,954

 

Research and development

 

1,038

 

1,762

 

3,328

 

5,999

 

 

 

255

 

 

 

1,038

 

 

 

1,009

 

 

 

3,328

 

Gain on sale of Verdeca

 

 

 

 

 

 

 

 

(1,138

)

 

 

 

Impairment of intangible assets

 

120

 

 

120

 

 

 

 

 

 

 

120

 

 

 

72

 

 

 

120

 

Change in fair value of contingent consideration

 

 

 

(140

)

 

 

 

 

 

 

 

 

 

 

(70

)

 

 

(140

)

Write-down of fixed assets

 

1,108

 

 

1,319

 

 

Impairment of property and equipment

 

 

24

 

 

 

1,108

 

 

 

370

 

 

 

1,319

 

(Gain) loss on sale of property and equipment

 

 

 

 

 

 

 

 

(386

)

 

 

17

 

Selling, general and administrative

 

 

6,312

 

 

4,292

 

 

16,750

 

 

11,689

 

 

 

4,835

 

 

 

6,312

 

 

 

13,834

 

 

 

16,733

 

Total operating expenses

 

 

11,089

 

 

7,895

 

 

26,331

 

 

21,151

 

 

 

6,458

 

 

 

11,089

 

 

 

21,941

 

 

 

26,331

 

Loss from operations

 

(8,713

)

 

(7,581

)

 

(21,722

)

 

(20,247

)

 

 

(4,580

)

 

 

(8,713

)

 

 

(12,985

)

 

 

(21,722

)

Interest expense

 

(15

)

 

(23

)

 

(23

)

 

(32

)

Other (expense) income, net

 

(7

)

 

 

10,214

 

83

 

Change in fair value of common stock warrant liabilities

 

4,777

 

1,130

 

4,601

 

6,212

 

Loss on extinguishment of warrant liability

 

 

(682

)

 

 

(635

)

Interest income (expense)

 

 

95

 

 

 

(15

)

 

 

123

 

 

 

(23

)

Other income (expense), net

 

 

43

 

 

 

(7

)

 

 

13

 

 

 

10,214

 

Change in fair value of common stock warrant and option liabilities

 

 

1,880

 

 

 

4,777

 

 

 

1,880

 

 

 

4,601

 

Gain on extinguishment of PPP loan

 

1,123

 

 

1,123

 

 

 

 

 

 

 

1,123

 

 

 

 

 

 

1,123

 

Issuance and offering costs

 

 

 

 

 

 

(769

)

 

 

 

 

 

(314

)

 

 

 

 

 

(314

)

 

 

(769

)

Net loss before income taxes

 

(2,835

)

 

(7,156

)

 

(6,576

)

 

(14,619

)

 

 

(2,876

)

 

 

(2,835

)

 

 

(11,283

)

 

 

(6,576

)

Income tax provision

 

 

(1

)

 

 

(9

)

 

 

(1

)

 

 

(15

)

 

 

(1

)

 

 

(1

)

 

 

(1

)

 

 

(1

)

Net loss

 

(2,836

)

 

(7,165

)

 

(6,577

)

 

(14,634

)

 

 

(2,877

)

 

 

(2,836

)

 

 

(11,284

)

 

 

(6,577

)

Net loss attributable to non-controlling interest

 

 

(661

)

 

 

(774

)

 

 

(1,199

)

 

 

(1,081

)

 

 

(10

)

 

 

(661

)

 

 

(152

)

 

 

(1,199

)

Net loss attributable to common stockholders

 

$

(2,175

)

 

$

(6,391

)

 

$

(5,378

)

 

$

(13,553

)

 

$

(2,867

)

 

$

(2,175

)

 

$

(11,132

)

 

$

(5,378

)

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.10

)

 

$

(0.60

)

 

$

(0.26

)

 

$

(1.42

)

 

$

(0.12

)

 

$

(0.10

)

 

$

(0.48

)

 

$

(0.26

)

Weighted-average number of shares used in per share
calculations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

22,177,423

 

 

10,719,618

 

 

20,976,105

 

 

9,570,259

 

 

 

24,552,543

 

 

 

22,177,423

 

 

 

22,984,816

 

 

 

20,976,105

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses on investment securities

 

 

 

 

(1

)

Foreign currency translation adjustment

 

 

(12

)

 

 

 

 

(24

)

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(24

)

Other comprehensive loss

 

 

(12

)

 

 

 

 

 

(24

)

 

 

(1

)

 

 

 

 

 

(12

)

 

 

 

 

 

(24

)

Comprehensive loss attributable to common stockholders

 

$

(2,187

)

 

$

(6,391

)

 

$

(5,402

)

 

$

(13,554

)

 

$

(2,867

)

 

$

(2,187

)

 

$

(11,132

)

 

$

(5,402

)

See accompanying notes to the unaudited condensed consolidated financial statements.

2


Arcadia Biosciences, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Non-
Controlling

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Interest

 

 

Equity

 

Balance at December 31, 2020

 

 

13,450,861

 

 

$

54

 

 

$

239,496

 

 

$

(211,825

)

 

$

 

 

$

827

 

 

$

28,552

 

Issuance of shares related to the
   January 2021 PIPE

 

 

7,876,784

 

 

 

8

 

 

 

15,508

 

 

 

 

 

 

 

 

 

 

 

 

15,516

 

Offering costs related to the January 2021 PIPE

 

 

 

 

 

 

 

 

(2,084

)

 

 

 

 

 

 

 

 

 

 

 

(2,084

)

Issuance of placement agent warrants related to
   issuance of January 2021 PIPE

 

 

 

 

 

 

 

 

942

 

 

 

 

 

 

 

 

 

 

 

 

942

 

Issuance of shares related to employee stock
   purchase plan

 

 

8,604

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

21

 

Non-controlling interest capital contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

750

 

 

 

750

 

Stock-based compensation

 

 

 

 

 

 

 

 

325

 

 

 

 

 

 

 

 

 

 

 

 

325

 

Net income

 

 

 

 

 

 

 

 

 

 

 

2,058

 

 

 

 

 

 

(377

)

 

 

1,681

 

Balance at March 31, 2021

 

 

21,336,249

 

 

$

62

 

 

$

254,208

 

 

$

(209,767

)

 

$

 

 

$

1,200

 

 

$

45,704

 

Issuance of shares at closing of
   Arcadia Wellness acquisition

 

 

827,401

 

 

 

1

 

 

 

2,052

 

 

 

 

 

 

 

 

 

 

 

 

2,053

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Stock-based compensation

 

 

 

 

 

 

 

 

356

 

 

 

 

 

 

 

 

 

 

 

 

356

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,261

)

 

 

 

 

 

(161

)

 

 

(5,422

)

Balance at June 30, 2021

 

 

22,163,650

 

 

$

63

 

 

$

256,616

 

 

$

(215,028

)

 

$

(12

)

 

$

1,039

 

 

$

42,678

 

Issuance of shares related to employee stock
   purchase plan

 

 

6,585

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Stock-based compensation

 

 

 

 

 

 

 

 

354

 

 

 

 

 

 

 

 

 

 

 

 

354

 

Issuance of shares related to exercise of Service
   and Performance Warrants

 

 

14,000

 

 

 

 

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

22

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,175

)

 

 

 

 

 

(661

)

 

 

(2,836

)

Balance at September 30, 2021

 

 

22,184,235

 

 

$

63

 

 

$

257,009

 

 

$

(217,203

)

 

$

(24

)

 

$

378

 

 

$

40,223

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Non-
Controlling

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Interest

 

 

Equity

 

Balance at December 31, 2021

 

 

22,184,235

 

 

$

63

 

 

$

257,515

 

 

$

(226,485

)

 

$

103

 

 

$

31,196

 

Reclassification upon adoption of ASU 2020-06

 

 

 

 

 

 

 

 

19,390

 

 

 

(15,998

)

 

 

 

 

 

3,392

 

Issuance of shares related to employee stock
   purchase plan

 

 

4,683

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

4

 

Stock-based compensation

 

 

 

 

 

 

 

 

260

 

 

 

 

 

 

 

 

 

260

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(4,488

)

 

 

(122

)

 

 

(4,610

)

Balance at March 31, 2022

 

 

22,188,918

 

 

$

63

 

 

$

277,169

 

 

$

(246,971

)

 

$

(19

)

 

$

30,242

 

Stock-based compensation

 

 

 

 

 

 

 

 

323

 

 

 

 

 

 

 

 

 

323

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(3,777

)

 

 

(20

)

 

 

(3,797

)

Balance at June 30, 2022

 

 

22,188,918

 

 

$

63

 

 

$

277,492

 

 

$

(250,748

)

 

$

(39

)

 

$

26,768

 

Issuance of shares related to August 2022 Offering

 

 

2,450,000

 

 

 

2

 

 

 

1,174

 

 

 

 

 

 

 

 

 

1,176

 

Offering costs related to August 2022 Offering

 

 

 

 

 

 

 

 

(365

)

 

 

 

 

 

 

 

 

(365

)

Issuance of shares related to employee stock
   purchase plan

 

 

4,042

 

 

 

 

 

 

3

 

 

 

 

 

 

 

 

 

3

 

Stock-based compensation

 

 

 

 

 

 

 

 

314

 

 

 

 

 

 

 

 

 

314

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,867

)

 

 

(10

)

 

 

(2,877

)

Balance at September 30, 2022

 

 

24,642,960

 

 

$

65

 

 

$

278,618

 

 

$

(253,615

)

 

$

(49

)

 

$

25,019

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

Non-
Controlling

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

(Loss) Income

 

 

Interest

 

 

Equity

 

Balance at December 31, 2019

 

 

8,646,149

 

 

$

49

 

 

$

214,826

 

 

$

(207,171

)

 

$

1

 

 

$

621

 

 

$

8,326

 

Issuance of shares related to employee stock
   purchase plan

 

 

7,946

 

 

 

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

14

 

Stock-based compensation

 

 

 

 

 

 

 

 

772

 

 

 

 

 

 

 

 

 

 

 

 

772

 

Unrealized losses on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Non-controlling interest contributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

689

 

 

 

689

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

2,525

 

 

 

 

 

 

(102

)

 

 

2,423

 

Balance at March 31, 2020

 

 

8,654,095

 

 

$

49

 

 

$

215,612

 

 

$

(204,646

)

 

$

 

 

$

1,208

 

 

$

12,223

 

Issuance of shares related to exercise of
   June 2018 Warrants

 

 

1,392,345

 

 

 

1

 

 

 

5,568

 

 

 

 

 

 

 

 

 

 

 

 

5,569

 

Issuance of investor warrants related to
   May 2020 Warrant Transaction

 

 

 

 

 

 

 

 

4,415

 

 

 

 

 

 

 

 

 

 

 

 

4,415

 

Issuance of placement agent warrants related to
   issuance of May 2020 Warrants

 

 

 

 

 

 

 

 

215

 

 

 

 

 

 

 

 

 

 

 

 

215

 

Stock-based compensation

 

 

 

 

 

 

 

 

595

 

 

 

 

 

 

 

 

 

 

 

 

595

 

Non-controlling interest contributions

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

493

 

 

 

493

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(9,688

)

 

 

 

 

 

(205

)

 

 

(9,893

)

Balance at June 30, 2020

 

 

10,046,440

 

 

$

50

 

 

$

226,405

 

 

$

(214,334

)

 

$

 

 

$

1,496

 

 

$

13,617

 

Issuance of shares related to exercise of
   March 2018 PIPE

 

 

641,416

 

 

 

1

 

 

 

2,443

 

 

 

 

 

 

 

 

 

 

 

 

2,444

 

Issuance of investor warrants related to
   July 2020 Warrant Transaction

 

 

 

 

 

 

 

 

2,059

 

 

 

 

 

 

 

 

 

 

 

 

2,059

 

Issuance of placement agent warrants related to
   issuance of July 2020 Warrants

 

 

 

 

 

 

 

 

101

 

 

 

 

 

 

 

 

 

 

 

 

101

 

Issuance of shares related to employee stock
   purchase plan

 

 

11,721

 

 

 

 

 

 

37

 

 

 

 

 

 

 

 

 

 

 

 

37

 

Stock-based compensation

 

 

 

 

 

 

 

 

477

 

 

 

 

 

 

 

 

 

 

 

 

477

 

Shares of common stock issued at closing of ISI
   transaction

 

 

132,626

 

 

 

 

 

 

432

 

 

 

 

 

 

 

 

 

 

 

 

432

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,391

)

 

 

 

 

 

(774

)

 

 

(7,165

)

Balance at September 30, 2020

 

 

10,832,203

 

 

$

51

 

 

$

231,954

 

 

$

(220,725

)

 

$

 

 

$

722

 

 

$

12,002

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Accumulated Other Comprehensive

 

 

Non-
Controlling

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Interest

 

 

Equity

 

Balance at December 31, 2020

 

 

13,450,861

 

 

$

54

 

 

$

239,496

 

 

$

(211,825

)

 

$

 

 

$

827

 

 

$

28,552

 

Issuance of shares related to the
   January 2021 PIPE

 

 

7,876,784

 

 

 

8

 

 

 

15,508

 

 

 

 

 

 

 

 

 

 

 

 

15,516

 

Offering costs related to the January 2021 PIPE

 

 

 

 

 

 

 

 

(2,084

)

 

 

 

 

 

 

 

 

 

 

 

(2,084

)

Issuance of placement agent warrants related to
   issuance of January 2021 PIPE

 

 

 

 

 

 

 

 

942

 

 

 

 

 

 

 

 

 

 

 

 

942

 

Issuance of shares related to employee stock
   purchase plan

 

 

8,604

 

 

 

 

 

 

21

 

 

 

 

 

 

 

 

 

 

 

 

21

 

Non-controlling interest capital contribution

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

750

 

 

 

750

 

Stock-based compensation

 

 

 

 

 

 

 

 

325

 

 

 

 

 

 

 

 

 

 

 

 

325

 

Net income (loss)

 

 

 

 

 

 

 

 

 

 

 

2,058

 

 

 

 

 

 

(377

)

 

 

1,681

 

Balance at March 31, 2021

 

 

21,336,249

 

 

$

62

 

 

$

254,208

 

 

$

(209,767

)

 

$

 

 

$

1,200

 

 

$

45,703

 

Issuance of shares at closing of Arcadia Wellness acquisition

 

 

827,401

 

 

 

1

 

 

 

2,052

 

 

 

 

 

 

 

 

 

 

 

 

2,053

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Stock-based compensation

 

 

 

 

 

 

 

 

356

 

 

 

 

 

 

 

 

 

 

 

 

356

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(5,261

)

 

 

 

 

 

(161

)

 

 

(5,422

)

Balance at June 30, 2021

 

 

22,163,650

 

 

$

63

 

 

$

256,616

 

 

$

(215,028

)

 

$

(12

)

 

$

1,039

 

 

$

42,678

 

Issuance of shares related to employee stock
   purchase plan

 

 

6,585

 

 

 

 

 

 

17

 

 

 

 

 

 

 

 

 

 

 

 

17

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12

)

 

 

 

 

 

(12

)

Stock-based compensation

 

 

 

 

 

 

 

 

354

 

 

 

 

 

 

 

 

 

 

 

 

354

 

Issuance of shares related to exercise of Service
   and Performance Warrants

 

 

14,000

 

 

 

 

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

22

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(2,175

)

 

 

 

 

 

(661

)

 

 

(2,836

)

Balance at September 30, 2021

 

 

22,184,235

 

 

$

63

 

 

$

257,009

 

 

$

(217,203

)

 

$

(24

)

 

$

378

 

 

$

40,223

 

See accompanying notes to the unaudited condensed consolidated financial statements.

3


Arcadia Biosciences, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)

 

Nine Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

 

2022

 

 

 

2021

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(6,577

)

 

$

(14,634

)

 

$

(11,284

)

 

$

(6,577

)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

Change in fair value of common stock warrant liabilities

 

(4,601

)

 

 

(6,212

)

Loss (gain) on extinguishment of warrant liability

 

 

 

 

635

 

Change in fair value of common stock warrant and option liabilities

 

 

(1,880

)

 

 

(4,601

)

Change in fair value of contingent consideration

 

(140

)

 

 

 

 

 

(70

)

 

 

(140

)

Issuance and offering costs

 

769

 

 

 

 

 

 

314

 

 

 

769

 

Depreciation

 

737

 

 

 

395

 

 

 

354

 

 

 

737

 

Amortization of intangible assets

 

99

 

 

 

 

 

 

39

 

 

 

99

 

Lease amortization

 

914

 

 

 

745

 

 

 

686

 

 

 

914

 

Impairment of intangible assets

 

120

 

 

 

 

 

 

72

 

 

 

120

 

Loss (gain) on disposal of fixed assets

 

17

 

 

 

(8

)

Net amortization of investment premium

 

 

 

 

(44

)

(Gain) loss on disposal of property and equipment

 

 

(386

)

 

 

17

 

Stock-based compensation

 

1,035

 

 

 

1,844

 

 

 

897

 

 

 

1,035

 

Bad debt expense

 

 

32

 

 

 

 

Realized gain on corporate securities

 

(10,222

)

 

 

 

 

 

 

 

 

(10,222

)

Write-down of fixed assets

 

1,319

 

 

 

 

Write-down of inventory and prepaid production costs

 

1,802

 

 

 

3,063

 

Impairment of property and equipment

 

 

370

 

 

 

1,319

 

Write-down of inventories

 

 

1,530

 

 

 

1,802

 

Gain on extinguishment of PPP loan

 

(1,123

)

 

 

 

 

 

 

 

 

(1,123

)

Gain on sale of Verdeca

 

 

(1,138

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

 

 

Accounts receivable

 

(47

)

 

 

229

 

Accounts receivable and other receivables

 

 

(534

)

 

 

(47

)

Inventories

 

(2,651

)

 

 

(9,609

)

 

 

1,071

 

 

 

(2,651

)

Prepaid expenses and other current assets

 

(452

)

 

 

(1,157

)

 

 

(90

)

 

 

(452

)

Other noncurrent assets

 

(159

)

 

 

(15

)

 

 

15

 

 

 

(159

)

Accounts payable and accrued expenses

 

972

 

 

 

2,026

 

 

 

(890

)

 

 

972

 

Amounts due to related parties

 

(29

)

 

 

(11

)

 

 

(17

)

 

 

(29

)

Unearned revenue

 

(8

)

 

 

(42

)

 

 

 

 

 

(8

)

Other current liabilities

 

1

 

 

 

(43

)

 

 

6

 

 

 

1

 

Operating lease payments

 

 

(984

)

 

 

(629

)

Operating lease liabilities

 

 

(718

)

 

 

(984

)

Net cash used in operating activities

 

 

(19,208

)

 

 

(23,467

)

 

 

(11,621

)

 

 

(19,208

)

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from sale of property and equipment

 

2

 

 

 

8

 

 

 

897

 

 

 

2

 

Proceeds from sale of Verdeca — earn-out received

 

 

285

 

 

 

 

Purchases of property and equipment

 

(919

)

 

 

(2,038

)

 

 

(46

)

 

 

(919

)

Acquisitions, net of cash acquired

 

(4,250

)

 

 

(500

)

 

 

 

 

 

(4,250

)

Purchases of investments

 

 

 

 

(1,292

)

Proceeds from sales and maturities of investments

 

 

21,845

 

 

 

18,250

 

 

 

 

 

 

21,845

 

Net cash provided by investing activities

 

 

16,678

 

 

 

14,428

 

Net cash provided by (used in) investing activities

 

 

1,136

 

 

 

16,678

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, pre-funded warrants and
preferred investment options from August 2022 Offering

 

 

5,000

 

 

 

 

Payments of offering costs relating to August 2022 Offering

 

 

(488

)

 

 

 

Proceeds from issuance of common stock and warrants from
January 2021 PIPE securities purchase agreement

 

25,147

 

 

 

 

 

 

 

 

 

25,147

 

Payments of offering costs relating to January 2021 PIPE
securities purchase agreement

 

(1,912

)

 

 

 

 

 

 

 

 

(1,912

)

Proceeds from the exercise of warrants

 

22

 

 

 

9,372

 

 

 

 

 

 

22

 

Proceeds from borrowings

 

 

 

 

3,108

 

Payment of transaction costs relating to extinguishment of warrant liability

 

 

 

 

(863

)

Principal payments on debt

 

(2,032

)

 

 

(26

)

 

 

 

 

 

(2,032

)

Proceeds from ESPP purchases

 

39

 

 

 

51

 

 

 

7

 

 

 

39

 

Capital contributions received from non-controlling interest

 

 

750

 

 

 

1,182

 

 

 

 

 

 

750

 

Net cash provided by financing activities

 

 

22,014

 

 

 

12,824

 

 

 

4,519

 

 

 

22,014

 

Effects of foreign currency translation on cash and cash equivalents

 

 

(1

)

 

 

 

 

 

 

 

 

(1

)

Net increase in cash, cash equivalents and restricted cash

 

19,483

 

 

 

3,785

 

Cash, cash equivalents and restricted cash — beginning of period

 

 

16,043

 

 

 

8,417

 

Cash, cash equivalents and restricted cash — end of period

 

$

35,526

 

 

$

12,202

 

Net (decrease) increase in cash and cash equivalents

 

 

(5,966

)

 

 

19,483

 

Cash and cash equivalents — beginning of period

 

 

28,685

 

 

 

16,043

 

Cash and cash equivalents — end of period

 

$

22,719

 

 

$

35,526

 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

 

 

 

 

 

 

 

 

 

 

Cash paid for income taxes

 

$

1

 

 

$

1

 

 

$

 

 

$

1

 

Cash paid for interest

 

$

25

 

 

$

7

 

 

$

1

 

 

$

25

 

NONCASH INVESTING AND FINANCING ACTIVITIES:

 

 

 

 

 

 

 

 

 

 

Fixed assets acquired with notes payable

 

$

 

 

$

37

 

Common stock warrants issued to placement agent and included in offering costs
related to May 2020 Warrant Transaction

 

$

 

 

$

215

 

Common stock warrants issued to placement agent and included in offering costs related to
July 2020 Warrant Transaction

 

$

 

 

$

101

 

Shares of common stock issued at closing of Arcadia Wellness transaction

 

$

2,053

 

 

$

 

 

$

 

 

$

2,053

 

Common stock warrant liabilities reclassified to equity upon adoption of ASU 2020-06

 

$

3,392

 

 

$

 

Common stock options issued to placement agent and included in offering
costs related to August 2022 RDO securities purchase agreement

 

$

191

 

 

$

 

Common stock warrants issued to placement agent and included in offering
costs related to January 2021 PIPE securities purchase agreement

 

$

942

 

 

$

 

 

$

 

 

$

942

 

Right of use assets obtained in exchange for new operating lease liabilities

 

$

1,662

 

 

$

4,157

 

 

$

114

 

 

$

1,662

 

Purchases of fixed assets included in accounts payable and accrued expenses

 

$

 

 

$

 

Proceeds from sale of Verdeca in accounts receivable and other receivables

 

$

854

 

 

$

 

See accompanying notes to the unaudited condensed consolidated financial statements.

4


Arcadia Biosciences, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business and Basis of Presentation

Organization

Arcadia Biosciences, Inc. (the “Company”"Company," "Arcadia" or "management"), was incorporated in Arizona in 2002 and maintains its headquarters in Davis, California, with additional office space in Dallas, TX, and additional facilities in Phoenix, Arizona, American Falls, Idaho, Molokai, Hawaii, Albany, Oregon, Chatsworth, California, and Barcelona, Spain.Idaho. The Company was reincorporated in Delaware in March 2015.

The Company is a producer and marketer of innovative, plant-based health and wellness products. Its history as a leader in science-based approaches to developing high-value crop improvements, designed to ameliorate farm economics by enhancing the performance of crops in the field, as well as their value asnutritionally enhanced food ingredients and health and wellness products, has laid the foundation for its path forward. The Company used advanced breeding techniques to develop these proprietary innovations which are now being commercialized through the sales of seed and grain, as well as food ingredients and products. The recent acquisition of the assetsbusinesses of Lief Holdings, LLC (“Lief”), EKO Holdings, LLC (“Eko”) and Live Zola, LLC (“Zola”) addsadded bath and body care products, as well as coconut water, to the Company’s portfolio.

In May 2021, the Company’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness” or “AW”, see Note 7)6), acquired the businesses of Eko, Lief, and Zola. The acquisition includesincluded consumer CBD brands like Soul Spring™, a CBD-infused botanical therapy brand in the natural category, Saavy Naturals™, a line of all-naturalnatural body care products and Provault™ProVault™, a CBD-infused sports performance formula made with natural ingredients, providing effective support and recovery for athletes. Also included in the purchase is Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand. Key personnel have joined Arcadia Wellness.

On July 8, 2022, the Company entered into an agreement to license Saavy Naturals™ to Radiance Beauty and Wellness, Inc. ("Radiance Beauty"). See Note 6 for a discussion of the licensing agreement.

In April 2021, the Company’s wholly owned subsidiary Arcadia SPA, S.L. (“Arcadia Spain” or “ASPA”), acquired the assets of Agrasys S.A. (“Agrasys”), a food ingredients company based in Barcelona, Spain. The physical and intellectual property assets enable Arcadia to commercialize Tritordeum, a proprietary cereal grain that is a combination of durum wheat and wild barley, resulting in a nutritious grain high in fiber, protein and lutein. The Company completed the transaction through Arcadia SPA, S.L., a newly formed company based in Spain, and key Agrasys personnel have joined Arcadia Spain to operate the Tritordeum business in Europe.

On August 9, 2019, the Company entered into a joint venture agreement with Legacy Ventures Hawaii, LLC (“Legacy,” see Note 9)8) to grow, extract, and sell hemp products. The partnership Archipelago Ventures Hawaii, LLC (“Archipelago”), combines the Company’s extensive genetic expertise and resources with Legacy’s experience in hemp extraction and sales. During the three months ended September 30,In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to theregulatory challenges and a saturated hemp market.

In February 2012, the Company formed Verdeca, which was equally owned with Bioceres. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies. In November 2020, Arcadia sold its membership interest in Verdeca to Bioceres in a transaction in which Arcadia received cash, shares of Bioceres stock and a royalty stream of up to $10.0 million on sales of Haab 4 soybeans (“HB4”) soybean. An additional $2.0 million in cash is to be paid upon achievement by Verdeca of reaching commercial plantings of at least 200,000 hectares of HB4 or China approving the HB4 soybean trait for “food and feed”. During the second quarter of 2022, Bioceres received China's approval of the HB4 soybean trait and as a result, Arcadia recorded license revenue of $862,000 and a gain on sale of Verdeca of $1.1 million on the condensed consolidated statements of operations and comprehensive loss. As of September 30, 2022, the Company received payment of $500,000 with the remaining $1.5 million in accounts receivable and other receivables, which the Company anticipates to receive over the next six months pursuant to the agreement.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial statements and are in the form prescribed by the Securities and Exchange Commission (the “SEC”) in instructions to Form 10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair statement of the Company’s financial position, results of operations and cash flows for the periods indicated. All material intercompany accounts and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements include the accounts of the Company, Arcadia Wellness, Arcadia Spain, and Archipelago.

The Company uses a qualitative approach in assessing the consolidation requirement for variable interest entities ("VIEs"). This approach focuses on determining whether the Company has the power to direct the activities of the VIE that most significantly affect the VIE’s economic performance and whether the Company has the obligation to absorb losses, or the right to receive benefits, that could potentially be significant to the VIE.

5


For all periods presented, the Company has determined that it is the primary beneficiary of Archipelago, a joint venture, as it has a controlling interest in Archipelago. Accordingly, the Company consolidates Archipelago in the condensed consolidated financial statements after eliminating intercompany transactions. For consolidated joint ventures, the non-controlling partner’s share of the assets, liabilities and operations of the joint venture is included in non-controlling interests as equity of the Company. The non-controlling partner’s interest is generally computed as the joint venture partner’s ownership percentage of Archipelago. Net loss attributable to non-controlling interest of $661,00010,000 and $1,199,000152,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the three and nine months ended September 30, 2022, respectively. Net loss attributable to non-controlling interest for the three and nine months ended September 30, 2021 was $661,000 and $1.2 million, respectively. The non-controlling partner’s equity interests are presented as non-controlling interests on the condensed consolidated balance sheets as of September 30, 2021.

The functional currency of the foreign subsidiary Arcadia Spain is its local currency (i.e., the Euro). Accordingly, period-end exchange rates are applied to translate its assets and liabilities and average transaction exchange rates to translate its revenues, expenses, gains, and losses into U.S. dollars. Gains and losses arising from the remeasurement of assets and liabilities were $12,000 and $24,000 for the three and nine months ended September 30, 2021, and $0 for the three and nine months ended September 30, 2020.sheets.

The information included in these condensed consolidated financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations included herein and Management’s Discussion and Analysis of Financial Condition and Results of Operations and the condensed consolidated financial statements and notes thereto for the fiscal year ended December 31, 20202021 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 31, 2021.2022.

Liquidity, Capital Resources, and Going Concern

The accompanying condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities during the normal course of business. Since inception, the Company has financed its operations primarily through equity and debt financings. As of September 30, 2021,2022, the Company had an accumulated deficit of $217.2253.6 million, and cash and cash equivalents of $35.522.7 million. For the nine months ended September 30, 2021,2022, the Company had a net loss of $6.611.3 million and net cash used in operations of $19.211.6 million. For the twelve months ended December 31, 2020,2021, the Company had net losses of $6.016.1 million and net cash used in operations of $30.225.9 million.

With cash and cash equivalents of $35.522.7 million as of September 30, 2021,2022, the Company believes that its existing cash and cash equivalents will not be sufficient to meet its anticipated cash requirements for at least through November 2022.

As is disclosed in Notesthe next 12 and 13, on January 25, 2021, the Company entered into a securities purchase agreement with certain institutional and accredited investors relating tomonths from the issuance date of these financial statements, and sale inthus raises substantial doubt about the Company’s ability to continue as a private placementgoing concern. The financial statements do not include any adjustments that might result from the outcome of shares of Company common stock and warrants for an aggregate of $25.1 million, exclusive of any related transaction fees.

The Company sold all of the 1,875,000 shares of Bioceres (“BIOX”) stock acquired in the November 2020 Bioceres transaction. All of the shares of BIOX were sold in June 2021 and generated a one-time impact on liquidity in the amount of $22.2 million of gross proceeds.this uncertainty.

The Company may seek to raise additional funds through debt or equity financings. The Company may also consider entering into additional partner arrangements. The sale of additional equity would result in dilution to the Company’s stockholders. The incurrence of debt would result in debt service obligations, and the instruments governing such debt could provide for additional operating and financing covenants that would restrict operations. If the Company does require additional funds and is unable to secure adequate additional funding at terms agreeable to the Company, the Company may be forced to reduce spending, extend payment terms with suppliers, liquidate assets, or suspend or curtail planned development programs. Any of these actions could materially harm the business, results of operations and financial condition.

2. Recent Accounting Pronouncements

In June 2016, the FASBFinancial Accounting Standards Board ("FASB") issued ASUAccounting Standards Update ("ASU") No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. Additionally, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326 in April 2019 and ASU 2019-05, Financial Instruments — Credit Losses (Topic 326) — Targeted Transition Relief in May 2019. The amendments affect loans, debt securities, trade receivables, net investments in leases, off-balance-sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope that have the contractual right to receive cash. In November 2019, the FASB issued ASU No. 2019-10, which defers the effective date of ASU No. 2016-13 for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption of ASU No. 2016-13 on the condensed consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The amendments simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and clarifying other areas of existing guidance. The amendments are effective for all entities for fiscal years beginning after

6


December 15, 2020. The Company adopted ASU No. 2019-12 on January 1, 2021 with an immaterial impact on the Company’s disclosures.

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40). The FASB Board is issuing this Update to address issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. In addressing the complexity, the FASB Board focused on amending the guidance on convertible instruments and the guidance on the derivatives scope exception for contracts in an entity’s own equity. ASU 2020-06 is effective for public business entities that meet the definition of a Securities and Exchange Commission (SEC) filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The amendments in this Update are effective for public business entities that meet the definition of a smaller reporting company, as defined by the SEC, for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently evaluatingearly adopted ASU No. 2020-06 on January 1, 2022, using the impact ofmodified retrospective method. Prior to the adoption of ASU No. 2020-06, the Company had liability classified awards due to the existence of certain contingent cash payment feature. Upon adoption, these clauses no longer preclude equity classification. Under the modified retrospective method, the historical mark-to-market adjustments related to outstanding awards were reversed through retained earnings and the original carrying value of the awards were reclassified to additional paid-in capital. Adoption of the new standard resulted in an increase to accumulated deficit of $16.0 million, an increase to additional paid-in capital of $19.4 million, and a decrease to common stock warrant liabilities of $3.4 million, on the condensed consolidated financial statements.balance sheets.

6


In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. Options. The amendments in this Update clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange.The amendments in this Update affect all entities that issue freestanding written call options that are classified in equity. The amendments in this Update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The Company is currently evaluating the impact of the adoption ofadopted ASU No. 2021-04 on January 1, 2022 with an immaterial impact on the consolidated financial statements.Company’s disclosures.

3. Inventory

Inventory costs are tracked on a lot-identified basis and are included as cost of product revenues when sold. Inventories are stated at the lower of cost or net realizable value. The Company makes adjustments to 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. Additional adjustments to inventory are made for excess and slow-moving inventory on hand that is not expected to be sold within a reasonable timeframe to reduce the carrying amount to its estimated net realizable value. The write-downs to inventory are included in cost of product revenues and are based upon estimates about future demand from the Company’s customers and distributors and market conditions. The Company recorded write-downs of CBD oil of $15,000 during the three months ended September 30, 2022 and of wheat, hemp seed, CBD oil and body care inventories of $1.5 million during the nine months ended September 30, 2022. Of inventories write-downs during the nine months ended September 30, 2022, $394,000 is related to the Radiance Beauty licensing agreement discussed in Note 6. The Company recorded write-downs of wheat and hemp seed inventories of $818,000 and $1.8 million during the three and nine months ended September 30, 2021, respectively. The Company recorded write-downs of wheat inventories, hemp seed inventories, and prepaid production costs of $1.5 million and $3.1 million for the three and nine months ended September 30, 2020, respectively. If there are significant changes in demand and market conditions, substantial future write-downs of inventory may be required, which would materially increase the Company’s expenses in the period the write down is taken and materially affect the Company’s operating results.

Inventories, net consist of the following (in thousands):

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

Raw materials

 

$

2,465

 

$

966

 

 

$

1,119

 

 

$

1,851

 

Goods in process

 

982

 

1,921

 

 

 

92

 

 

 

842

 

Finished goods

 

 

5,539

 

 

4,410

 

 

 

3,115

 

 

 

4,234

 

Inventories

 

$

8,986

 

$

7,297

 

 

$

4,326

 

 

$

6,927

 

4. Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

 

September 30, 2021

 

December 31, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

Laboratory equipment

 

$

2,771

 

$

2,951

 

 

$

1,688

 

 

$

2,659

 

Software and computer equipment

 

605

 

591

 

 

 

559

 

 

 

548

 

Machinery and equipment

 

1,805

 

2,046

 

 

 

653

 

 

 

1,809

 

Furniture and fixtures

 

213

 

181

 

 

 

108

 

 

 

211

 

Vehicles

 

478

 

428

 

 

 

333

 

 

 

417

 

Leasehold improvements

 

 

2,263

 

 

2,229

 

 

 

2,203

 

 

 

2,306

 

Property and equipment, gross

 

8,135

 

8,426

 

 

 

5,544

 

 

 

7,950

 

Less accumulated depreciation and amortization

 

 

(5,501

)

 

 

(4,887

)

Less: accumulated depreciation and amortization

 

 

(4,696

)

 

 

(5,659

)

Property and equipment, net

 

$

2,634

 

$

3,539

 

 

$

848

 

 

$

2,291

 

Depreciation expense was $737,000354,000 and $395,000737,000 for the nine months ended September 30, 2022 and 2021, and 2020, respectively.

7


As of September 30, 2021,2022, and December 31, 2020,2021, respectively, there was $312,00010,000 and $239,000267,000 of construction in progress included in property and equipment that had not been placed into service and was not subject to depreciation.

Property and equipment are considered assets held for sale when management approves and commits to a plan to dispose of a property or group of properties. The property and equipment held for sale prior to the sale date is separately presented, within current assets, on the condensed consolidated balance sheet as assets held for sale.

During the three and nine months ended March 31, 2021,September 30, 2022, management initiated the Statesale of Hawaii’s Senate decidedproperty and equipment related to the Davis laboratory and Archipelago. The Company completed the sale of such property and equipment with a gain on sale of property and equipment in the amount of $0 and $386,000 recorded on the condensed consolidated statements of operations and comprehensive

7


loss during the three and nine months ended September 30, 2022, respectively. The proceeds related to the sale of property and equipment during the three and nine months ended September 30, 2022 are $5,000 and $897,000, respectively. The Company had no sales of assets held for sale during the three and nine months ended September 30, 2021. Property and equipment related to Archipelago, in the amount of $254,000, have been classified as assets held for sale, and are recorded at fair value as of September 30, 2022. The fair value has been estimated using publicly available prices for some of the assets, and business partners' estimates for assets with prices not readily available, due to vote on a CBD processing billthe relatively small size of the industry in 2021, hence the earliest vote could happen in 2022, and its effectiveness into law will most likelywhich they can be pushed to 2023. used.

During the three and nine months ended September 30, 2022, the Company recorded write-downs of property and equipment of $24,000 and $370,000, respectively. During the nine months ended September 30, 2022, write-downs of $320,000 were related to the Radiance Beauty licensing agreement. See Note 6 for further discussion of the licensing agreement. During the three and nine months ended September 30, 2021, Arcadiathe Company recorded a write-down of property and Legacy mutually agreedequipment related to wind down the cultivation activities of Archipelago due to the saturated hemp market. As a result of the regulatory challenges and unfavorable market conditions, we assessed Archipelago’s fixed assets for impairment through an asset recoverability test, and recorded write-downs in the amount of $1.1 million and $1.3 million, for the three and nine months ended September 30, 2021, calculating the fair value using prices for similar assets.respectively.

5. Investments and Fair Value Instruments

Investments

The investments are carried at fair value, based on quoted market prices or other readily available market information. Unrealized and realized gains and losses are recognized as other income in the condensed consolidated statements of operations and comprehensive loss.

The Company classified its investments in corporate securities of BIOX as short-term investments. The Company recorded realized gains of $10.2 million for the nine months ended September 30, 2021, associated with the sale of all corporate securities in other income, net, in the condensed consolidated statements of operations and comprehensive loss.

The following tables summarize the amortized cost and fair value of the investment securities portfolio at September 30, 20212022 and December 31, 2020.2021.

(Dollars in thousands)

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

32,440

 

 

 

 

 

 

32,440

 

 

$

20,477

 

 

$

 

 

$

 

 

$

20,477

 

Total Assets at Fair Value

 

$

32,440

 

$

 

$

 

$

32,440

 

 

$

20,477

 

 

$

 

 

$

 

 

$

20,477

 

(Dollars in thousands)

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

 

Amortized
Cost

 

 

Unrealized
Gains

 

 

Unrealized
Losses

 

 

Estimated
Fair Value

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

12,082

 

$

 

$

 

$

12,082

 

 

$

26,842

 

 

$

 

 

$

 

 

$

26,842

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

 

10,969

 

 

656

 

 

 

 

11,625

 

Total Assets at Fair Value

 

$

23,051

 

$

656

 

$

 

$

23,707

 

 

$

26,842

 

 

$

 

 

$

 

 

$

26,842

 

The Company did 0not have any investment categories that were in a continuous unrealized loss position for more than twelve months as of September 30, 2021.2022.

 

Fair Value Measurement

The fair value of the investment securities at September 30, 20212022 were as follows:

 

Fair Value Measurements at September 30, 2021

 

 

Fair Value Measurements at September 30, 2022

 

(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets at Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

32,440

 

 

 

 

 

 

32,440

 

 

$

20,477

 

 

$

 

 

$

 

 

$

20,477

 

Total Assets at Fair Value

 

$

32,440

 

$

 

$

 

$

32,440

 

 

$

20,477

 

 

$

 

 

$

 

 

$

20,477

 

8


The fair value of the investment securities at December 31, 20202021 were as follows:

 

Fair Value Measurements at December 31, 2020

 

 

Fair Value Measurements at December 31, 2021

 

(Dollars in thousands)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets at Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

12,082

 

$

 

$

 

$

12,082

 

 

$

26,842

 

 

$

 

 

$

 

 

$

26,842

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

Corporate securities

 

 

11,625

 

 

 

 

 

 

11,625

 

Total Assets at Fair Value

 

$

23,707

 

$

 

$

 

$

23,707

 

 

$

26,842

 

 

$

 

 

$

 

 

$

26,842

 

8


The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 20212022 or 2020.2021. The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable and other receivables, accounts payable, accrued liabilities, and notes payable. For accounts receivable and other receivables, accounts payable, accrued liabilities, and notes payable the carrying amounts of these financial instruments as of September 30, 20212022 and December 31, 20202021 were considered representative of their fair values due to their short term to maturity or repayment. Cash equivalents are carried at cost, which approximates their fair value.

The Company’s Level 3 liabilities consist of a contingent liability resulting from the Anawah, Inc. ("Anawah") acquisition as described in Note 17, a contingent liability resulting from15, as well as preferred investment options related to the Industrial Seed Innovations acquisition, asAugust 2022 Registered Direct Offering described in Note 6, and11. As of December 31, 2021, the Company also had common stock warrant liabilities related to the March 2018, the June 2019, the September 2019, and the January 2021 Offerings, described in Note 13.

11, which were reclassified to additional paid-in capital upon adoption of ASU 2020-06, as of January 1, 2022. See Note 2 for details of the adoption of ASU 2020-06.

The contingent liability related to the Anawah acquisition was measured and recorded on a recurring basis as of September 30, 20212022 and December 31, 2020,2021, using unobservable inputs, namely the Company’s ability and intent to pursue certain specific products developed using technology acquired in the purchase. A significant deviation in the Company’s ability and/or intent to pursue the technology acquired in the purchase could result in a significantly lower (higher) fair value measurement. The contingent liability related to the Industrial Seed Innovations (“ISI”) acquisition was measured and recorded on a recurring basis as of September 30, 2021 and December 31, 2020, using unobservable inputs, namely ISI’s forecasted revenue. A significant deviation in ISI’s forecasted revenue could result in a significantly lower (higher) fair value measurement.

The warrantpreferred investment option liabilities were measured and recorded on a recurring basis using the Black-Scholes Model with the following assumptions at September 30, 2021 and December 31, 2020:2022:


 

January 2021 Warrants

 

 

September 2019 Warrants

 

 

June 2019 Warrants

 

March 2018 Warrants

 

 

September 30,
2021

 

 

December 31,
2020

 

 

September 30,
2021

 

 

December 31,
2020

 

 

September 30,
2021

 

 

December 31,
2020

 

September 30,
2021

 

 

December 31,
2020

 

 

August 2022 Options

 

August 2022 Placement Agent Options

 

Remaining term (in years)

 

4.83

 

 

3.45

 

4.20

 

3.21

 

3.96

 

 

 

1.47

 

2.22

 

 

 

4.92

 

4.92

 

Expected volatility

 

126.9

%

 

 

109.3

%

 

135.0

%

 

108.4

%

 

135.0

%

 

 

81.0

%

 

130.0

%

 

 

128.5

%

 

128.5

%

Risk-free interest rate

 

0.9

%

 

 

0.6

%

 

0.3

%

 

0.6

%

 

0.3

%

 

 

0.2

%

 

0.1

%

 

 

4.1

%

 

4.1

%

Expected dividend yield

 

0

%

 

 

0

%

 

0

%

 

0

%

 

0

%

 

 

0

%

 

0

%

 

 

0

%

 

0

%

The significant input used in the fair value measurement of the Company’s Level 3 warrantoptions liabilities is volatility. A significant increase (decrease) in volatility could result in a significantly higher (lower) fair value measurement.

The following table sets forth the establishment of the Company’s Level 3 liabilities, as well as a summary of the changes in the fair value and other adjustments (in thousands):

 

 

 

 

(Dollars in thousands)

 

Common Stock
Warrant
Liability -
March
2018
Purchase
Agreement

 

 

Common
Stock
Warrant
Liability -
June
2019
Offering

 

 

Common
Stock
Warrant
Liability -
September
2019
Offering

 

 

Common
Stock
Warrant
Liability -
January 2021
Offering

 

 

Contingent
Liabilities

 

 

Total

 

Balance as of December 31, 2020

 

$

662

 

 

$

832

 

 

$

1,214

 

 

$

-

 

 

$

2,280

 

 

$

4,987

 

Initial recognition

 

 

 

 

 

 

 

 

 

 

 

9,631

 

 

 

 

 

$

9,631

 

Change in fair value and
   other adjustments

 

 

(611

)

 

 

(368

)

 

 

(570

)

 

 

(3,054

)

 

 

(140

)

 

$

(4,742

)

Balance as of September 30, 2021

 

$

51

 

 

$

464

 

 

$

644

 

 

$

6,577

 

 

$

2,140

 

 

$

9,876

 

 

 

 

 

(Dollars in thousands)

 

Common Stock
Warrant
Liability -
March
2018
Purchase
Agreement

 

 

Common
Stock
Warrant
Liability -
June
2019
Offering

 

 

Common
Stock
Warrant
Liability -
September
2019
Offering

 

 

Common
Stock
Warrant
Liability -
January 2021
Offering

 

 

August 2022
Options

 

 

August 2022
Placement Agent Options

 

 

Contingent
Liabilities

 

 

Total

 

Balance as of December 31, 2021

 

$

7

 

 

$

170

 

 

$

223

 

 

$

2,993

 

 

$

 

 

$

 

 

$

2,070

 

 

$

5,463

 

Reclassification upon adoption
    of ASU 2020-06

 

 

(7

)

 

 

(170

)

 

 

(223

)

 

 

(2,993

)

 

 

 

 

 

 

 

 

 

 

 

(3,392

)

Initial recognition

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,824

 

 

 

191

 

 

 

 

 

 

4,015

 

Change in fair value and other adjustments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,791

)

 

 

(89

)

 

 

(70

)

 

 

(1,950

)

Balance as of September 30, 2022

 

$

 

 

$

 

 

$

 

 

$

 

 

$

2,033

 

 

$

102

 

 

$

2,000

 

 

$

4,135

 

9


6. Industrial Seed Innovations Acquisition

The Company recorded aggregate impairment charges of $

In August 2020,442,000 and $1.4 million during the nine months ended September 30, 2022 and 2021, respectively, related to intangible assets and other long-lived assets. The Company acquired by merger Industrial Seed Innovations (“ISI”), an Oregon-based industrial hemp breeding and seed company. Ashas classified the fair value measurements as a result of the acquisition, the Company acquired ISI’s commercial and genetic assets, including seed varieties, germplasm library and intellectual property. ISI’s Rogue and Umpqua seed varieties are now part of Arcadia’s portfolio, alongside the Company’s GoodHemp line of genetically superior hemp seeds, transplants, and extracts. The acquisition has significantly broadened and accelerated commercialization of Arcadia’s hemp-related breeding platform, as well as established a breeding research and development facilityLevel 3 measurement in the Pacific Northwest, a key production area in the hemp industry.

The acquisition wasfair value hierarchy because they involve significant unobservable inputs such as cash flow projections, discount rates and management assumptions.



Assets classified as held for sale are
recorded as a business combination, in accordance with ASC Topic 805. The purchase price consideration for the acquisition totaled an estimated $
1,212,000, of which $500,000 in cash and $432,000, in the form of 132,626 shares of the Company’s common stock, was paid during the month of August 2020. The remaining amount of $280,000 will be recognized in 2 annual installments, each of up to 132,626 shares of the Company’s common stock, subject to the achievement of revenue milestones in 2021 and 2022, and is recorded as a contingent liability at fair value in the condensed consolidated balance sheets as of September 30, 2021.2022. The cash consideration paid forCompany has classified the acquisition was funded by cash on hand.

Acquisition costs are not includedfair value measurements as components of consideration transferred and instead are accounted for as expensesa Level 3 measurement in the periodfair value hierarchy as the fair value has been estimated using publicly available prices for some of the assets, and business partners' estimates for assets with prices not readily available, due to the relatively small size of the industry in which the costs are incurred. The Company incurred costs related to the ISI acquisition of approximately $67,000 included in selling, general and administrative expenses in the Company's condensed consolidated statements of operations and comprehensive loss for the quarter ended September 30, 2020.

The pro forma impact of the acquisition to the historical financial results was determined not tothey can be significant.

The following table presents the allocation of the purchase price of ISI assets acquired, based on their fair values.

 

 

Purchase Price
Allocation

 

Inventory

 

$

511

 

Intangible assets, net

 

 

400

 

Goodwill

 

 

408

 

Deferred tax liability

 

 

(107

)

Total consideration allocated

 

$

1,212

 

A deferred tax liability arising from the difference between book purchase price allocation and tax basis has been assessed in the amount of $107,000. Deferred tax liabilities are required to be recorded in purchase accounting independently of whether the acquiror has a valuation allowance on its own net deferred tax assets. As a result, the combined entity now has additional deferred tax liabilities available to reduce the amount of valuation allowance necessary. Future reversals of existing taxable temporary differences are an objective source of future taxable income. Accordingly, 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. The reduction in the valuation allowance is not accounted for as part of the purchase accounting but is recognized in the condensed consolidated statements of operations and comprehensive loss as a discrete tax benefit in the income tax provision.

10


The former shareholders of ISI remain responsible for ISI’s pre-acquisition liabilities. Pursuant to the definitive acquisition agreement, the Company entered into a lease agreement with ISI for the use of land, equipment, greenhouses and buildings. The lease was effective upon the execution of the definitive acquisition agreement and has a term of 3 years with the option to renew for 3 additional 3-year terms.used.

7.6. Arcadia Wellness Acquisition

On May 17, 2021, the Company’s wholly owned subsidiary Arcadia Wellness, acquired the assets of Eko, Lief, and Zola. The acquisition included consumer CBD brands likeof bath and body care products such as Soul Spring™,Spring, the CBD-infused botanical therapy brand, Saavy Naturals™,Naturals, a line of all-naturalnatural body care products and Provault™,ProVault, a CBD-infused sports performance formula. Also included in the purchase was Zola, a coconut water sourced from Thailand. Key personnel have joined Arcadia Wellness.

The acquisition was recorded as a business combination, in accordance with ASC Topic 805. The purchase price consideration for the acquisition totaled an estimated $6.1 million, of which $4.0 million in cash and $2.1 million in the form of 827,401 shares of the Company’s common stock, was paid during the month of May 2021. The cash consideration paid for the acquisition was funded by cash on hand.

Acquisition costs are not included as components of consideration transferred and instead are accounted for as expenses in the period in which the costs are incurred. The Company incurred costs related to the Arcadia Wellness acquisition of approximately $850,000 included in selling, general and administrative expenses in the Company's condensed consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2021.

The Company performed a preliminaryan allocation of purchase price as of the acquisition date based on management's estimates of fair value. The Company believes its estimates and assumptions are reasonable; however, the initial estimated purchase price allocation is subject to change as the Company finalizes its determination relating to the valuation of the assets acquired, finalization of key assumptions, approaches and judgments with respect to intangible assets acquired. Accordingly, future adjustments may impact the initial estimated amount of goodwill and other allocated amounts represented in the table below. The final determination of the fair value of the assets acquired will be completed as soon as the necessary information is available, but no later than one year from the acquisition date.reasonable.

The following table presents the preliminary allocation of the purchase price of the assets acquired based on theirat fair valuesvalue at September 30, 2021.the acquisition date:

 

 

Purchase Price
Allocation

 

Inventory

 

$

840

 

Prepaid and other current assets

 

 

62

 

Fixed assets

 

 

308

 

Deposits

 

 

82

 

Customer list

 

 

360

 

Trade names and trademarks

 

 

2,900

 

Formulations

 

 

260

 

Goodwill

 

 

1,240

 

Total consideration allocated

 

$

6,052

 

 

The former shareholders of Eko, Lief, and Zola remain responsible for their pre-acquisition liabilities. FollowingIn connection with the definitive acquisition, agreement, the Company entered into a lease agreement for the use of offices, production equipment acquired, and storage warehouses. The lease was effective on May 17, 2021 and has a term of 3 years.

For the period from January 1, 2022 to September 30, 2022, the Company recognized approximately $5.6 million of revenue and $1.3 million of net loss relating to Arcadia Wellness, which included charges related to the Radiance Beauty licensing agreement discussed below, as well as the amortization of acquired intangible assets.

For the period from May 17, 2021 to September 30,December 31, 2021, the Company recognized approximately $2.64.3 million of revenue and $1.07.5 million of net loss relating to Arcadia Wellness, which included charges for the amortization of acquired intangible assets.

Acquired intangible assets of $3.5 million include trade names and trademarks of $2.9 million (indefinite useful life), customer list of $360,000 (fifteen-year useful life) and formulations of $260,000 (ten-yearuseful life). For impairments related to the acquired intangible assets see Note 7.

10


The total weighted average amortization period for the acquired intangibles is 12.9 years.

11


The acquisition produced $1.2 million of goodwill. The goodwill, is attributable to a combination of Arcadia Wellness’s expectation regarding a more meaningful engagement bywhich was fully impaired during the customersyear ended December 31, 2021, due to the scaleweakness in some of the newly acquired consumer product margins, combined Company,with a volatile economic climate and other synergies. Goodwill will be tested for impairment at least annually (more frequently if certain indicators are present).higher than normal inflation. Goodwill arising from the Arcadia Wellness acquisition iswas not deductible for tax purposes.

On July 8, 2022, the Company entered into a licensing agreement with Radiance Beauty. Under the terms of the licensing agreement, Radiance Beauty was granted an exclusive, transferable, sublicensable, perpetual, worldwide license to use the Saavy Naturals™ mark and to modify, manufacture, distribute, market and sell related products. In addition, as part of the licensing agreement, Radiance Beauty received the remaining accounts receivables and inventory balances after July 31, 2022, certain equipment, as well as three months of salaries in the amount of $355,000 and rent, maintenance and utilities in the amount of $19,000. Radiance Beauty is subleasing space from the Company and will pay the Company a 4% royalty of gross sales of products beginning January 1, 2023. During the nine months ended September 30, 2022, accounts receivables and inventories of $21,000 and $394,000, respectively, were written down. In addition, property and equipment and intangible assets were written down by $320,000 and $72,000, respectively, during the nine months ended September 30, 2022.

Supplemental Pro-Forma Results of Operations (Unaudited)

The following unaudited pro-forma condensed consolidated results of operations for the three and nine months ended September 30, 20212022 and 2020,2021, have been prepared as if the acquisition of Arcadia Wellness had occurred on January 1, 20202021 and includes adjustments for amortization of intangibles, and the addition to basic and diluted weighted average number of shares outstanding.

 

For the three months
ended September 30,

 

 

For the nine months
ended September 30,

 

 

For the Three Months
Ended September 30,

 

 

For the Nine Months
Ended September 30,

 

 

2021
(Pro forma)

 

2020
(Pro forma)

 

 

2021
(Pro forma)

 

2020
(Pro forma)

 

 

2022
(Pro forma)

 

 

2021
(Pro forma)

 

 

2022
(Pro forma)

 

 

2021
(Pro forma)

 

Total revenues

 

$

2,376

 

 

$

2,461

 

 

$

6,892

 

 

$

6,323

 

 

$

1,878

 

 

$

2,376

 

 

$

8,956

 

 

$

6,892

 

Net income (loss)

 

 

(2,836

)

 

 

(7,523

)

 

 

(8,296

)

 

 

(15,601

)

Net income (loss) attributable to common stockholders

 

$

(2,175

)

 

$

(6,749

)

 

$

(7,109

)

 

$

(14,520

)

Net loss

 

 

(2,877

)

 

 

(2,836

)

 

 

(11,284

)

 

 

(8,296

)

Net loss attributable to common stockholders

 

$

(2,867

)

 

$

(2,175

)

 

$

(11,132

)

 

$

(7,109

)

Weighted average shares - Basic and diluted

 

22,177,423

 

 

 

11,547,018

 

 

 

21,286,380

 

 

 

10,397,659

 

 

 

24,552,543

 

 

 

22,175,423

 

 

 

22,984,816

 

 

 

21,286,380

 

Net income (loss) per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

Net loss per share attributable to common stockholders:

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.10

)

 

$

(0.58

)

 

$

(0.33

)

 

$

(1.40

)

 

$

(0.12

)

 

$

(0.10

)

 

$

(0.48

)

 

$

(0.33

)

8.7. Intangible assets, net

The Company’s intangible assets, net, as of September 30, 2021, consist of the following:

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

 

Gross
Carrying
Amount

 

 

Accumulated Amortization and Impairment (1)

 

 

Net Carrying
Amount

 

 

Gross
Carrying
Amount

 

 

Accumulated Amortization

 

 

Net Carrying
Amount

 

 

Gross
Carrying
Amount (2)

 

 

Accumulated Amortization

 

 

Net Carrying
Amount

 

 

Gross
Carrying
Amount (1)

 

 

Accumulated Amortization

 

 

Net Carrying
Amount

 

Amortized intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intellectual property

 

$

796

 

$

191

 

$

605

 

$

310

 

$

27

 

$

283

 

 

$

254

 

 

$

141

 

 

$

113

 

 

$

258

 

 

$

107

 

 

$

151

 

Customer lists

 

 

400

 

 

31

 

 

369

 

 

40

 

 

3

 

 

37

 

 

 

64

 

 

 

32

 

 

 

32

 

 

 

71

 

 

 

26

 

 

 

45

 

Total amortizable intangible assets

 

$

1,196

 

 

$

222

 

 

$

974

 

 

$

350

 

 

$

30

 

 

$

320

 

 

$

318

 

 

$

173

 

 

$

145

 

 

$

329

 

 

$

133

 

 

$

196

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Indefinite-lived intangible assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Brands and trademarks

 

$

2,950

 

 

$

19

 

 

$

2,931

 

 

$

50

 

 

$

 

 

$

50

 

 

$

228

 

 

$

 

 

$

228

 

 

$

288

 

 

$

 

 

$

288

 

Total intangible asset, net

 

$

4,146

 

 

$

241

 

 

$

3,905

 

 

$

400

 

 

$

30

 

 

$

370

 

 

$

546

 

 

$

173

 

 

$

373

 

 

$

617

 

 

$

133

 

 

$

484

 

(1) During The gross carrying amounts included in this table reflect the three monthseffects of the impairments of intangible assets recorded during the year ended September 30,December 31, 2021, wewhen the Company estimated an overall decrease in ourthe sales forecast for AW products, due to an inventory item rationalization, in addition to a decrease in the sales forecast of ISI seeds, related to the saturated hemp seed market. As a result, weArcadia performed a quantitative intangible assets recoverabilityimpairment test. WeThe Company used an undiscounteda discounted cash flow approach to develop the estimated fair value of ourthe acquired intellectual property, customer lists, brands and trademarks. As a result of this assessment, weArcadia recorded an impairment of intangible assets in the amount of $120,0003.3 million in the condensed consolidated statements of operations and comprehensive loss for the threeyear ended December 31, 2021.

(2) The Company recorded an impairment of intangible assets in the amount of $72,000 during the nine months ended September 30, 2021.2022 related to the Radiance Beauty licensing agreement.

1211


Intellectual property and customer lists will be amortized based on their useful lives ranging between 4 and 15 years. As of September 30, 2021,2022, future amortization of intellectual property and customer lists is as follows:

Year Ending December 31,

 

 

 

 

 

 

2021 (excluding the nine months ended September 30, 2021)

 

$

30

 

2022

 

122

 

2022 (excluding the nine months ended September 30, 2022)

 

$

13

 

2023

 

122

 

 

 

53

 

2024

 

122

 

 

 

53

 

2025

 

73

 

 

 

4

 

2026

 

 

4

 

Thereafter

 

 

505

 

 

 

18

 

Total

 

$

974

 

 

$

145

 

9.8. Consolidated Joint Venture

In 2019, the Company and Legacy Ventures Hawaii, LLC, a Nevada limited liability company (“Legacy”), formed Archipelago Ventures Hawaii, LLC, a Delaware limited liability company and entered into a Limited Liability Company Operating Agreement (the “Operating Agreement”). The Company and Legacy formed Archipelago to develop, extract and commercialize hemp-derived products from industrial hemp grown in Hawaii.

Pursuant to the Operating Agreement, a joint operating committee consisting of 2two individuals appointed by the Company and 2two individuals appointed by Legacy will manage Archipelago. As of September 30, 2021,2022, the Company and Legacy hold 55.1050.75% and 44.9049.25% interests in Archipelago, respectively, and have made capital contributions to Archipelago of $3,701,0003.1 million and $3,016,0003.0, million, respectively, as determined by the joint operating committee. The Operating Agreement includes indemnification rights, non-competition obligations, and certain rights and obligations in connection with the transfer of membership interests, including rights of first refusal.

The Company consolidates Archipelago in the condensed consolidated financial statements after eliminating intercompany transactions. Net loss attributable to non-controlling interest of $10,000 and $152,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the three and nine months ended September 30, 2022, respectively. Net loss attributable to non-controlling interest of $661,000 and $1,199,0001.2 ismillion was recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the three and nine months ended September 30, 2021, respectively. Legacy’s equity interests are presented as non-controlling interests on the condensed consolidated balance sheets. Refer to Note 1 for basis of presentation.

In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to the weakregulatory challenges and a saturated hemp market demand and to the sufficient internal ingredient supply for the foreseeable future. See Note 4, for the related impairment of fixed assets.market.

10.9. Collaborative Arrangements

In August 2017, the Company entered into a collaborative arrangement for the research, development and commercialization of an improved wheat quality trait in North America. This collaborative arrangement is a contractual agreement with Corteva AgriScience (“Corteva”) and involves a joint operating activity where both Arcadia and Corteva are active participants in the activities of the collaboration. Arcadia and Corteva participate in the research and development, and Arcadia has the primary responsibility for the intellectual property strategy while Corteva will generally lead the marketing and commercialization efforts. Both parties are exposed to significant risks and rewards of the collaboration and the agreement includes both cost sharing and profit sharing. The activities are performed with no guarantee of either technological or commercial success.

The Company accounts for research and development (“R&D”) costs in accordance ASC 730, Research and Development, which states R&D costs must be charged to expense as incurred. Accordingly, internal R&D costs are expensed as incurred. Third-party R&D costs are expensed when the contracted work has been performed or as milestone results are achieved.

1312


11.10. Leases

Operating Leases

As of September 30, 2021,2022, the Company leases office space in Davis, CA, Phoenix, AZ, Molokai, HI, Chatsworth, CA, and Chesterfield, MODallas, TX, as well as additional buildings, land and equipment. Leases with an initial term of 12 months or less are not recorded on the balance sheet; the Company recognizes lease expense for these short-term leases on a straight-line basis. The Company subleases a portion of the Davis office lease to third parties. In May 2022, the Company terminated its lease for office space in Chesterfield, MO effective September 30, 2022. The original lease term was scheduled to expire in May 2024. As a third party.result, the Company paid $47,000 in early termination fees during the nine months ended September 30, 2022. In addition, the Company subleased the facility in Chatsworth, CA to Radiance Beauty as part of the licensing agreement beginning November 1, 2022 for the remainder of the lease term. During the nine months ended September 30, 2021,2022, the Company entered into two leases foran agreement to lease office space in Chesterfield, MO, and for office space and production in Chatsworth, CA, both with aDallas, TX. The new lease term of 35 months following the commencement date and no renewal option. The leases commenced in April and May of 2021, respectively. There are no other leases that have not yet commenced as of September 30, 2021.July 2022.

Some leases (the Davis office,and Dallas offices, a warehouse, greenhouses and a copy machine) include one or more options to renew, with renewal terms that can extend the lease term from one to six years. The exercise of lease renewal options is at the Company’s sole discretion. During the three months ended March 31, 2020, the Company entered into a lease amendment that provided for additional office space in Davis, CA, and extended the term through April 2025, with one option to renew for an additional five-year term. The Company initially expected to exercise its options to renew, and in accordance with ASC 842 Leases, accounted for the amendment and expected renewal as a lease modification and remeasured the operating lease liability. During the three months ended September 30, 2021, the Company re-assessed its post-COVID long-term strategy regarding office spaces, and determined that the expectation to exercise its option to renew for an additional five-year term after April 2025 is no longer reasonable. In accordance with ASC 842, the Company accounted for the change that resulted in a decrease of $2.8 million for the operating lease liability and of $2.6 million for the right of use asset.

The Company’s lease agreements do not contain any material variable lease payments, material residual value guarantees or material restrictive covenants. Leases consisted of the following (in thousands):

Leases

 

Classification

 

September 30, 2021

 

 

December 31, 2020

 

 

Classification

 

September 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Operating lease assets

 

 Right of use asset

 

$

3,486

 

$

5,826

 

 

 Right of use asset

 

$

2,073

 

 

$

3,081

 

Total leased assets

 

$

3,486

 

$

5,826

 

 

$

2,073

 

 

$

3,081

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Current - Operating

 

 Operating lease liability- current

 

$

1,134

 

$

717

 

 

 Operating lease liability- current

 

$

986

 

 

$

1,074

 

Noncurrent - Operating

 

 Operating lease liability- noncurrent

 

 

2,562

 

 

5,389

 

 

 Operating lease liability- noncurrent

 

 

1,269

 

 

 

2,220

 

Total leased liabilities

 

$

3,696

 

$

6,106

 

 

$

2,255

 

 

$

3,294

 

Lease Cost

 

Classification

 

For the Three
Months Ended
September 30, 2021

 

 

For the Three
Months Ended
September 30, 2020

 

 

For the Nine
Months Ended
September 30, 2021

 

 

For the Nine
Months Ended
September 30, 2020

 

 

Classification

 

Three
Months Ended
September 30, 2022

 

 

Three
Months Ended
September 30, 2021

 

 

Nine
Months Ended
September 30, 2022

 

 

Nine
Months Ended
September 30, 2021

 

Operating lease cost

 

 SG&A and R&D Expenses

 

$

319

 

$

261

 

$

955

 

$

745

 

 

 SG&A and R&D Expenses

 

$

271

 

 

$

319

 

 

$

815

 

 

$

955

 

Short term lease cost (1)

 

 R&D Expenses

 

37

 

109

 

67

 

303

 

 

 R&D Expenses

 

 

(7

)

 

 

37

 

 

 

4

 

 

 

67

 

Short term lease cost

 

 SG&A Expenses

 

14

 

 

29

 

3

 

 

 SG&A Expenses

 

 

 

 

 

14

 

 

 

0

 

 

 

29

 

Sublease income (2)

 

 SG&A and R&D Expenses

 

 

(10

)

 

 

(12

)

 

 

(43

)

 

 

(34

)

 

 SG&A and R&D Expenses

 

 

(99

)

 

 

(10

)

 

 

(276

)

 

 

(43

)

Net lease cost

 

$

360

 

$

358

 

$

1,008

 

$

1,017

 

 

$

165

 

 

$

360

 

 

$

543

 

 

$

1,008

 

(1)
Short term lease cost consists of field trial lease agreements with a lease term of 12 months or less.
(2)
Sublease income is recorded as a reduction to lease expense.

Lease Term
and Discount Rate

 

September 30, 2021

 

 

December 31, 2020

 

 

September 30, 2022

 

 

December 31, 2021

 

Weighted-average remaining
lease term (years)

 

2.6

 

5.0

 

 

 

2.3

 

 

 

2.7

 

Weighted-average discount rate

 

6.4

%

 

6.0

%

 

 

6.4

%

 

 

6.0

%

14


12.11. Equity Financing

Private Placements

In January 2021, the Company issued in a private placement offering (the “January 2021 Private Placement”) pursuant to a securities purchase agreement (“January 2021 Purchase Agreement”) (i) 7,876,784 shares of its common stock, and (ii) warrants to purchase up to 3,938,392 shares of common stock at an exercise price of $3.13 per share (the “January 2021 Warrants”) and raised total gross proceeds of $25.1 million. The January 2021 Warrants are exercisable at any time at the option of the holder and expire 5.5 years from the date of issuance. In connection with the January 2021 Private Placement, the Company granted to a placement agent warrants to purchase a total of 393,839 shares of Common Stock (the “January 2021 Placement Agent Warrants”) that have an exercise price per share equal to $3.99 and a term of 5.5 years from the date of issuance.

13


The common stock warrants are classified as a liability within Level 3 due to a contingent cash payment feature. The Company utilized a Black Scholes Merton model on January 28, 2021 with the following assumptions: volatility of 123.8 percent,%, stock price of $2.88 and risk-free rate of 0.5%. The estimated fair value of the common stock warrant liability was subsequently remeasured at September 30,December 31, 2021 with the changes recorded on the Company’s condensed consolidated statements of operations and comprehensive loss. See Note 5.

The January 2021 Placement Agent Warrants were issued for services performed by the placement agent as part of the January 2021 Private Placement and were treated as offering costs. The value of the January 2021 Placement Agent Warrants was determined to be $942,000, calculated using thea Black-Scholes Model with input assumptions including the Company’s stock price, expected life of the warrants, stock price volatility determined from the Company’s historical stock prices, and the risk-free interest rate for the term of the warrants.Model. The Company incurred additional offering costs totaling $1.9 million that consist of direct incremental legal, advisory, accounting and filing fees relating to the January 2021 Private Placement. The offering costs, inclusive of the January 2021 Placement Agent Warrants, totaled $2.8 million and allocated to the common stock warrant liability and the common stock using their relative fair values. A total of $769,000 was allocated to the common stock warrant liability and expensed and the remaining $2.0 million was allocated to the common stock and offset to additional paid in capital.

In March 2018, the Company issued in a private placement offering (the “March 2018 Private Placement”) pursuant to a securities purchase agreement (“March 2018 Purchase Agreement”) (i) 300,752 shares of its common stock and (ii) warrants to purchase up to 300,752 shares of common stock at an initial exercise price equal to $45.75 (the “March 2018 Warrants”) and raised total gross proceeds of $10.0 million. The March 2018 Warrants are exercisable at any time at the option of the holder and expire five years from the date of issuance. In connection with the March 2018 Private Placement, the Company granted to a placement agent warrants to purchase a total of 15,038 shares of Common Stock (the “March 2018 Placement Agent Warrants”) that have an exercise price per share equal to $41.5625 and a term of five years from the date of issuance.

The number of shares of common stock and the number and exercise price of the March 2018 Warrants issued in the March 2018 Private Placement were subject to adjustments as provided in the March 2018 Purchase Agreement. Following the adjustments as provided in the March 2018 Purchase Agreement, the number of shares issued to the purchasers was 1,201,634, the total number of shares issuable upon exercise of the March 2018 Warrants was 1,282,832 and the per share exercise price of the March 2018 Warrants was $10.7258.

Registered Direct Offerings

On May 11, 2018, the Company filed a shelf Registration Statement on Form S-3 with the SEC which was declared effective on June 8, 2018 (“2018 Shelf Registration Statement”). ThisOn April 21, 2022, the Company filed a shelf registration processRegistration Statement on Form S-3 with the SEC which was declared effective on May 12, 2022 (“2022 Shelf Registration Statement”). Each of the 2018 Shelf Registration Statement and the 2022 Shelf Registration Statement allows the Company to sell any combination of common stock, preferred stock, warrants and units consisting of such securities in one or more offerings from time to time having aggregate offering prices of up to $5050.0 million. The Company ceased being able to use the 2018 Shelf Registration Statement after June 8, 2021, the three-year anniversary of its effective date. The 2022 Shelf Registration Statement may no longer be used after May 12, 2025, the three-year anniversary of its effective date.

In June 2018,August 2022, the Company entered into a securities purchase agreement (the “June 2018“August 2022 Purchase Agreement”) pursuant to which it sold (i) 1,392,3452,450,000 registered shares of its common stock, pursuant to the 2022 Shelf Registration Statement, (ii) pre-funded common stock purchase warrants (the “Pre-Funded Warrants”) to purchase up to 2,272,506 shares of common stock, at an exercise price of $0.0001 per share, which Pre-Funded Warrants were registered under the 2022 Shelf Registration Statement, and (iii) unregistered preferred investment options (the "August 2022 Options") to purchase up to 4,722,506 shares of common stock, at an exercise price of $0.93376 per share, in a private placement, for total gross proceeds of $5.0 million (the “August 2022 Registered Direct Offering”). The August 2022 Registered Direct Offering closed on August 16, 2022. The August 2022 Pre-Funded Warrants became exercisable upon issuance and are exercisable until exercised in full. The August 2022 Options became exercisable upon issuance and expire 5 years after the date of issuance. In connection with the August 2022 Registered Direct Offering, the Company granted to a placement agent preferred investment options ("August 2022 Placement Agent Options") to purchase a total of 236,125 shares of common stock that have an exercise price per share equal to $1.32 and a term of five years.

The August 2022 Options and August 2022 Placement Agent Options are classified as liabilities within Level 3 due to a certain early settlement provisions that preclude them from equity classification. The Company utilized a Black-Scholes Merton model on August 16, 2022 with the following assumptions: volatility of 128.46%, stock price of $0.94, risk-free rate of 2.97% and a term of 5 years. The estimated fair value of the common stock option liabilities was subsequently remeasured at September 30, 2022 with the changes recorded on the Company’s consolidated statements of operations and comprehensive loss.

The August 2022 Placement Agent Options were issued for services performed by the placement agent as part of the August 2022 Registered Direct Offering and were treated as offering costs. The value of the August 2022 Placement Agent Options was determined to be $191,000, calculated using a Black-Scholes Model. The Company incurred additional offering costs totaling $488,000 that consist of direct incremental legal, advisory, accounting and filing fees relating to the August 2022 Registered Direct Offering. The offering costs, inclusive of the August 2022 Placement Agent Options, totaled $679,000 and were allocated to the common stock option liabilities, the common stock and Pre-Funded Warrants using their relative fair values. A total of $314,000 was allocated to the common stock option liabilities and expensed while the remaining $365,000 was allocated to the common stock and Pre-Funded Warrants and offset to additional paid in capital.

14


In December 2020, the Company entered into a securities purchase agreement (the “December 2020 Purchase Agreement”) pursuant to which it sold (i) 2,618,658 registered shares of its common stock pursuant to the 2018 Shelf Registration Statement and (ii) unregistered warrants to purchase 1,392,3452,618,658 shares of its common stock (the “June 2018“December 2020 Warrants”) in a private placement, for total gross proceeds of $14.08.0 million (the “June 2018“December 2020 Registered Direct Offering”). The June 2018December 2020 Registered Direct Offering closed on June 14, 2018December 22, 2020. The June 2018December 2020 Warrants have an exercise price of $9.943.00 per share, became exercisable upon issuance and expire 5.5 years after the date of issuance. In connection with the June 2018December 2020 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a total of 69,617130,933 shares of common stock (“June 2018December 2020 Placement Agent Warrants”) that have an exercise price per share equal to $12.568 and a term of five years.

In June 2019, the Company entered into a securities purchase agreement (the “June 2019 Purchase Agreement”) pursuant to which it sold (i) 1,489,575 registered shares of its common stock pursuant to the Shelf Registration Statement and (ii) unregistered warrants to purchase 1,489,575 shares of its common stock (the “June 2019 Warrants”) in a private placement, for total gross proceeds of $7.5 million (the “June 2019 Registered Direct Offering”). The June 2019 Registered Direct Offering closed on June 14, 2019. The June 2019 Warrants have an exercise price of $5.00 per share, became exercisable upon issuance and expire 5.5 years after the date of

15


issuance. In connection with the June 2019 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a total of 74,479 shares of common stock (“June 2019 Placement Agent Warrants”) that have an exercise price per share equal to $6.29383.8188 and a term of five years.

In September 2019, the Company entered into a securities purchase agreement (the “September 2019 Purchase Agreement”) pursuant to which it sold (i) 1,318,828 registered shares of its common stock pursuant to the 2018 Shelf Registration Statement and (ii) unregistered warrants to purchase 659,414 shares of its common stock (the “September 2019 Warrants”) in a private placement, for total gross proceeds of $10.0 million (the “September 2019 Registered Direct Offering”). The September 2019 Registered Direct Offering closed on September 5, 2019. The September 2019 Warrants have an exercise price of $7.52 per share, became exercisable upon issuance and expire 5.5 years after the date of issuance. In connection with the September 2019 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a total of 65,942 shares of common stock (“September 2019 Placement Agent Warrants”) that have an exercise price per share equal to $9.4781 and a term of five years.

In December 2020,June 2019, the Company entered into a securities purchase agreement (the “December 2020“June 2019 Purchase Agreement”) pursuant to which it sold (i) 2,618,6581,489,575 registered shares of its common stock pursuant to the 2018 Shelf Registration Statement and (ii) unregistered warrants to purchase 2,618,6581,489,575 shares of its common stock (the “December 2020“June 2019 Warrants”) in a private placement, for total gross proceeds of $8.07.5 million (the “December 2020“June 2019 Registered Direct Offering”). The December 2020June 2019 Registered Direct Offering closed on December 22, 2020June 14, 2019. The December 2020June 2019 Warrants have an exercise price of $3.005.00 per share, became exercisable upon issuance and expire 5.5 years after the date of issuance. In connection with the December 2020June 2019 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a total of 130,93374,479 shares of common stock (“December 2020June 2019 Placement Agent Warrants”) that have an exercise price per share equal to $3.81886.2938 and a term of five years. See Note 13.

15


13. Warrants

Common Stock Warrant transactions

In May 2020, several existing accredited investors exercised the June 2018, Warrantsthe Company entered into a securities purchase agreement (the “May 2020 Warrant Exercise Transaction”“June 2018 Purchase Agreement”) pursuant to which it sold (i) 1,392,345 registered shares of its common stock pursuant to the 2018 Shelf Registration Statement and (ii) unregistered warrants to purchase up to an aggregate of 1,392,345 shares of the Company’sits common stock at(the “June 2018 Warrants”) in a reduced exercise price of $4.90 per shareprivate placement, for total gross proceeds of $6.814.0 million. As consideration for the exercise of themillion (the “June 2018 Registered Direct Offering”). The June 2018 Registered Direct Offering closed on June 14, 2018. The June 2018 Warrants the Company issued new unregistered warrants to purchase up to 1,392,345 shares of common stock (the “May 2020 Warrants”) athave an exercise price of $4.7759.94 per share, with an exercise period ofbecame exercisable upon issuance and expire five years5.5 fromyears after the date of issuance. The May 2020 Warrants were valued at $4.4 million, which was calculated using the Black-Scholes Model with the following assumptions: volatility of 128 percent, stock price of $3.81, and risk-free rate of 0.38%. In connection with the May 2020 Warrant Exercise Transaction,June 2018 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a total of 69,617 shares of common stock (the “May 2020(“June 2018 Placement Agent Warrants”) that have an exercise price per share equal to $6.12512.568 and a term of five years. The value of the May 2020 Placement Agent

12. Warrants was determined to be $215,000 using the Black-Scholes Model. The Company recognized a gain on extinguishment of warrant liability in the amount of $47,000 associated with this transaction, during the quarter ended June 30, 2020.

In July 2020, an existing accredited investor exercised its March 2018 Warrants (the “July 2020 Warrant Exercise Transaction”) to purchase up to an aggregate of 641,416 shares of the Company’s common stock at a reduced exercise price of $3.975 per share for gross proceeds of $2.6 million. As consideration for the exercise of these March 2018 Warrants, the Company issued new unregistered warrants to purchase up to 641,416 shares of common stock (the “July 2020 Warrants”) at an exercise price of $3.85 per share with an exercise period of 5.5 years from the date of issuance. The July 2020 Warrants were valued at $2.1 million, which was calculated using the Black-Scholes Model with the following assumptions: volatility of 126 percent, stock price of $3.73, and risk-free rate of 0.35%. In connection with the July 2020 Warrant Exercise Transaction, the Company granted to a placement agent warrants to purchase a total of 32,071 shares of common stock (the “July 2020 Placement Agent Warrants”) that have an exercise price per share equal to $4.969 and a term of 5.5 years. The value of the July 2020 Placement Agent Warrants was determined to be $101,000 using the Black-Scholes Model. The Company recognized a loss on extinguishment of warrant liability in the amount of $682,000 associated with this transaction, during the quarter ended September 30, 2020.Options

Equity Classified Common Stock Warrants

In connection with professional services agreements with non-affiliated third party entities, during the nine months ended September 30, 2021 and the year ended December 31, 2020, the Company issued service and performance warrants (“Service and Performance Warrants”).

16


As of September 30, 2021, theThe Company issued the following warrants to purchase shares of its common stock.stock, which are outstanding as of September 30, 2022 or December 31, 2021, respectively. These warrants are exercisable any time at the option of the holder until their expiration date.

 

 

Issuance Date

 

Term

 

Exercise
Price Per
Share

 

 

Warrants
Exercised
during the
Year Ended
December 31,
2020

 

 

Warrants
Outstanding at
December 31,
2020

 

 

Warrants
Exercised
during the
Nine
Months Ended
September 30,
2021

 

 

Warrants
Outstanding at
September 30,
2021

 

January 2021 Placement Agent Warrants

 

January 2021

 

5.5 years

 

$

3.99

 

 

 

 

 

 

 

 

 

 

 

 

393,839

 

January 2021 Service and Performance Warrants

 

January 2021

 

2 years

 

$

3.08

 

 

 

 

 

 

 

 

 

 

 

 

7,500

 

December 2020 Warrants

 

December 2020

 

5.5 years

 

$

3.00

 

 

 

 

 

 

2,618,658

 

 

 

 

 

 

2,618,658

 

December 2020 Placement Agent Warrants

 

December 2020

 

5 years

 

$

3.82

 

 

 

 

 

 

130,933

 

 

 

 

 

 

130,933

 

July 2020 Warrants

 

July 2020

 

5.5 years

 

$

3.85

 

 

 

 

 

 

641,416

 

 

 

 

 

 

641,416

 

July 2020 Placement Agent Warrants

 

July 2020

 

5.5 years

 

$

4.97

 

 

 

 

 

 

32,071

 

 

 

 

 

 

32,071

 

May 2020 Warrants

 

May 2020

 

5 years

 

$

4.78

 

 

 

 

 

 

1,392,345

 

 

 

 

 

 

1,392,345

 

May 2020 Placement Agent Warrants

 

May 2020

 

5 years

 

$

6.13

 

 

 

 

 

 

69,617

 

 

 

 

 

 

69,617

 

March 2020 Service and Performance Warrants

 

March 2020

 

3 years

 

$

2.50

 

 

 

 

 

 

18,350

 

 

 

 

 

 

18,350

 

February 12, 2020 Service and Performance Warrants

 

February 2020

 

2 years

 

$

4.71

 

 

 

 

 

 

150,000

 

 

 

 

 

 

150,000

 

February 3, 2020 Service and Performance Warrants

 

February 2020

 

2 years

 

$

4.91

 

 

 

 

 

 

10,000

 

 

 

 

 

 

10,000

 

September 2019 Placement Agent Warrants

 

September 2019

 

5 years

 

$

9.48

 

 

 

 

 

 

65,942

 

 

 

 

 

 

65,942

 

August 2019 Service and Performance Warrants

 

August 2019

 

2 years

 

$

1.92

 

 

 

 

 

 

20,000

 

 

 

(20,000

)

 

 

 

July 2019 Service and Performance Warrants

 

July 2019

 

2 years

 

$

2.19

 

 

 

 

 

 

10,000

 

 

 

(10,000

)

 

 

 

June 2019 Placement Agent Warrants

 

June 2019

 

5 years

 

$

6.29

 

 

 

 

 

 

74,479

 

 

 

 

 

 

74,479

 

April 2019 Service and Performance Warrants

 

April 2019

 

5 years

 

$

6.18

 

 

 

 

 

 

145,154

 

 

 

 

 

 

145,154

 

June 2018 Placement Agent Warrants

 

June 2018

 

5 years

 

$

12.57

 

 

 

 

 

 

69,617

 

 

 

 

 

 

69,617

 

March 2018 Placement Agent Warrants

 

March 2018

 

5 years

 

$

41.56

 

 

 

 

 

 

15,038

 

 

 

 

 

 

15,038

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

5,463,620

 

 

 

(30,000

)

 

 

5,834,959

 

 

 

Issuance Date

 

Term

 

Exercise
Price Per
Share

 

 

Exercised
during the
Year Ended
December 31,
2021

 

 

Outstanding at
December 31,
2021

 

 

Exercised
during the
Nine
Months Ended
September 30,
2022

 

 

Outstanding at
September 30,
2022

 

August 2022 Pre-Funded Warrants

 

August 2022

 

perpetual

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

2,272,506

 

January 2021 Placement Agent Warrants

 

January 2021

 

5.5 years

 

$

3.99

 

 

 

 

 

 

393,839

 

 

 

 

 

 

393,839

 

January 2021 Service and Performance Warrants (1)

 

January 2021

 

2 years

 

$

3.08

 

 

 

 

 

 

7,500

 

 

 

 

 

 

7,500

 

December 2020 Warrants

 

December 2020

 

5.5 years

 

$

3.00

 

 

 

 

 

 

2,618,658

 

 

 

 

 

 

2,618,658

 

December 2020 Placement Agent Warrants

 

December 2020

 

5 years

 

$

3.82

 

 

 

 

 

 

130,933

 

 

 

 

 

 

130,933

 

July 2020 Warrants

 

July 2020

 

5.5 years

 

$

3.85

 

 

 

 

 

 

641,416

 

 

 

 

 

 

641,416

 

July 2020 Placement Agent Warrants

 

July 2020

 

5.5 years

 

$

4.97

 

 

 

 

 

 

32,071

 

 

 

 

 

 

32,071

 

May 2020 Warrants

 

May 2020

 

5 years

 

$

4.78

 

 

 

 

 

 

1,392,345

 

 

 

 

 

 

1,392,345

 

May 2020 Placement Agent Warrants

 

May 2020

 

5 years

 

$

6.13

 

 

 

 

 

 

69,617

 

 

 

 

 

 

69,617

 

March 2020 Service and Performance Warrants (1)

 

March 2020

 

3 years

 

$

2.50

 

 

 

 

 

 

18,350

 

 

 

 

 

 

18,350

 

February 12, 2020 Service and Performance Warrants (1)(3)

 

February 2020

 

2 years

 

$

4.71

 

 

 

 

 

 

150,000

 

 

 

 

 

 

 

February 3, 2020 Service and Performance Warrants (1)(3)

 

February 2020

 

2 years

 

$

4.91

 

 

 

 

 

 

10,000

 

 

 

 

 

 

 

September 2019 Placement Agent Warrants

 

September 2019

 

5 years

 

$

9.48

 

 

 

 

 

 

65,942

 

 

 

 

 

 

65,942

 

June 2019 Placement Agent Warrants

 

June 2019

 

5 years

 

$

6.29

 

 

 

 

 

 

74,479

 

 

 

 

 

 

74,479

 

April 2019 Service and Performance Warrants (1)

 

April 2019

 

5 years

 

$

6.18

 

 

 

 

 

 

145,154

 

 

 

 

 

 

145,154

 

June 2018 Placement Agent Warrants

 

June 2018

 

5 years

 

$

12.57

 

 

 

 

 

 

69,617

 

 

 

 

 

 

69,617

 

March 2018 Placement Agent Warrants

 

March 2018

 

5 years

 

$

41.56

 

 

 

 

 

 

15,038

 

 

 

 

 

 

15,038

 

January 2021 Warrants (2)

 

January 2021

 

5.5 years

 

$

3.13

 

 

 

 

 

 

3,938,392

 

 

 

 

 

 

3,938,392

 

September 2019 Warrants (2)

 

September 2019

 

5.5 years

 

$

7.52

 

 

 

 

 

 

659,414

 

 

 

 

 

 

659,414

 

June 2019 Warrants (2)

 

June 2019

 

5.5 years

 

$

5.00

 

 

 

 

 

 

435,830

 

 

 

 

 

 

435,830

 

June 2018 Warrants (2)

 

June 2018

 

5.5 years

 

$

9.94

 

 

 

 

 

 

 

 

 

 

 

 

 

March 2018 Warrants (2)

 

March 2018

 

5 years

 

$

10.73

 

 

 

 

 

 

641,416

 

 

 

 

 

 

641,416

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

11,510,011

 

 

 

 

 

 

13,622,517

 

(1) The Company issued service and performance warrants (“Service and Performance Warrants”) in connection with professional services agreements with non-affiliated third party entities.

Liability Classified Common Stock Warrants(2)

Certain warrants contain a contingent cash payment feature and therefore were accounted for as a liability at the date of issuance and were adjusted to fair value at each balance sheet date. Upon adoption of ASU No. 2020-06 on January 1, 2022, all of the common stock warrant liabilities have been reclassified to equity classified common stock warrants, due to the elimination of the contingent cash payments as criteria for liability classification.

(3) These warrants expired in February 2022.

Liability Classified Preferred Investment Options

The preferred investment options issued in connection with the August 2022 Registered Direct Offering contain certain early settlement provisions that preclude them from equity classification and therefore were accounted for as liabilities at the date of

16


issuance and are adjusted to fair value at each balance sheet date. The change in fair value of the warrant liabilityoptions liabilities is recorded as change in fair value of common stock warrant and option liabilities in the condensed consolidated statements of operations and comprehensive loss. The key terms and activity of the liability classified common stock warrantspreferred investment options are summarized as follows:

 

 

Issuance Date

 

Term

 

Exercise
Price Per
Share

 

 

Warrants
Exercised
during the
Year Ended
December 31,
2020

 

 

Warrants
Outstanding at
December 31,
2020

 

 

Warrants
Exercised
during the
Nine
Months Ended
September 30,
2021

 

 

Warrants
Outstanding at
September 30,
2021

 

January 2021 Warrants

 

January 2021

 

5.5 years

 

$

3.13

 

 

 

 

 

 

 

 

 

 

 

 

3,938,392

 

September 2019 Warrants

 

September 2019

 

5.5 years

 

$

7.52

 

 

 

 

 

 

659,414

 

 

 

 

 

 

659,414

 

June 2019 Warrants

 

June 2019

 

5.5 years

 

$

5.00

 

 

 

 

 

 

435,830

 

 

 

 

 

 

435,830

 

June 2018 Warrants

 

June 2018

 

5.5 years

 

$

9.94

 

 

 

1,392,345

 

 

 

 

 

 

 

 

 

 

March 2018 Warrants

 

March 2018

 

5 years

 

$

10.73

 

 

 

641,416

 

 

 

641,416

 

 

 

 

 

 

641,416

 

Total

 

 

 

 

 

 

 

 

 

2,033,761

 

 

 

1,736,660

 

 

 

 

 

 

5,675,052

 

 

 

Issuance Date

 

Term

 

Exercise
Price Per
Share

 

 

Exercised
during the
Year Ended
December 31,
2021

 

 

Outstanding at
December 31,
2021

 

 

Exercised
during the
Nine
Months Ended
September 30,
2022

 

 

Outstanding at
September 30,
2022

 

August 2022 Options

 

August 2022

 

5 years

 

$

0.93

 

 

 

 

 

 

 

 

 

 

 

 

4,722,506

 

August 2022 Placement Agent Options

 

August 2022

 

5 years

 

$

1.32

 

 

 

 

 

 

 

 

 

 

 

 

236,125

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,958,631

 

See Note 5 for the Black-Scholes option-pricing model and weighted-average assumptions used to estimate the fair value of the warrant liabilities.

14.13. Stock-Based Compensation and Employee Stock Purchase Program

Stock Incentive Plans

The Company has 2two equity incentive plans: the 2006 Stock Plan (“2006 Plan”) and the 2015 Omnibus Equity Incentive Plan (“2015 Plan”).

In 2006, the Company adopted the 2006 Plan, which provided for the granting of stock options to executives, employees, and other service providers under terms and provisions established by the Board of Directors. The Company granted non-statutory stock options (“NSOs”) under the 2006 Plan until May 2015, when it was terminated as to future awards, although it continues to govern the terms of options that remain outstanding and were issued under the 2006 Plan. The 2015 Plan became effective upon the Company’s IPO in May 2015 and all shares that were reserved, but not issued, under the 2006 Plan were assumed by the 2015 Plan. Upon effectiveness, the 2015 Plan had 154,387 shares of common stock reserved for future issuance, which included 10,637 that were

17


transferred to and assumed by the 2015 Plan. The 2015 Plan provides for automatic annual increases in shares available for grant. In addition, shares subject to awards under the 2006 Plan that are forfeited or canceled will be added to the 2015 Plan. The 2015 Plan provides for the grant of incentive stock options (“ISOs”), NSOs, restricted stock awards, stock units, stock appreciation rights, and other forms of equity compensation, all of which may be granted to employees, officers, non-employee directors, and consultants. The exercise price for ISOs and NSOs will be granted at a price per share not less than the fair value of our common stock at the date of grant. Options granted generally vest over a four-year period; however, there might be alternative vesting schedules, as approved by the options granted in the third quarter of 2018 vest over two-year period, vesting monthly on a pro-rated basis.Board. Options granted, once vested, are generally exercisable for up to 10 years, after grant to the extent vested.

In June 2019, the shareholders approved an amendment to the Company’s 2015 Plan for a one-time increase to the number of shares of common stock that may be issued under the 2015 Plan by 120,000 shares. On May 17, 2021, upon completion of the Arcadia Wellness transaction, the Company granted 248,000 inducement stock option pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. On May 28, 2021, the Company filed a registration statement on Form S-8 to register the issuance of shares upon exercise of these inducement stock options. On February 2, 2022, Stanley Jacot, Jr. was hired as the new president and chief executive officer of the Company. The Company granted Mr. Jacot an inducement stock option to purchase 316,108 shares of the Company’s common stock pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules. The Company has not filed a registration statement on Form S-8 to register the issuance of shares upon exercise of this inducement stock option. The inducement options grants have been issued outside of the 2015 Plan, but the options are subject to the terms and conditions of the 2015 Plan. As of September 30, 2021,2022, a total of 1,595,8762,484,005 shares of common stock were reserved for issuance under the 2015 Plan, of which 297,540439,867 shares of common stock are available for future grant. As of September 30, 2021,2022, a total of 8,5737,813 and 1,298,3362,044,138 options are outstanding under the 2006 and 2015 Plans, respectively. As of December 31, 2020,2021, a total of 19,1728,240 and 870,5871,345,955 options arewere outstanding under the 2006 and 2015 Plans, respectively. As of September 30, 2022 a total of 349,783 inducement options are outstanding.

17


The following is a summary of stock option information and weighted average exercise prices under the Company’s stock incentive plans (in thousands, except share data and price per share):

 

Shares
Subject to
Outstanding
Options

 

Weighted-
Average
Exercise
Price Per
Share

 

Aggregate
Intrinsic
Value

 

 

Shares
Subject to
Outstanding
Options

 

 

Weighted-
Average
Exercise
Price Per
Share

 

 

Aggregate
Intrinsic
Value

 

Outstanding — Balance at December 31, 2020

 

889,759

 

$

14.46

 

$

240

 

Outstanding — Balance at December 31, 2021

 

 

1,422,195

 

 

$

5.28

 

 

$

 

Options granted

 

1,111,042

 

2.85

 

 

 

 

 

1,320,322

 

 

 

1.11

 

 

 

297.00

 

Options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Options forfeited

 

(233,558

)

 

3.51

 

 

 

 

 

(266,347

)

 

 

2.29

 

 

 

 

Options expired

 

 

(212,334

)

 

 

33.38

 

 

 

 

 

(74,436

)

 

 

6.04

 

 

 

 

Outstanding — Balance at September 30, 2021

 

 

1,554,909

 

$

5.22

 

$

240

 

Vested and expected to vest — September 30, 2021

 

 

1,535,209

 

$

5.23

 

$

240

 

Exercisable — September 30, 2021

 

 

501,417

 

$

9.82

 

$

 

Outstanding — Balance at September 30, 2022

 

 

2,401,734

 

 

$

3.29

 

 

 

 

Vested and expected to vest — September 30, 2022

 

 

2,115,782

 

 

$

3.55

 

 

 

 

Exercisable — September 30, 2022

 

 

873,633

 

 

$

6.59

 

 

$

 

Aggregate intrinsic value represents the difference between the exercise price of the options and the estimated fair value of the Company’s common stock determined by our Board of Directors for each of the respective periods. The intrinsic value of options exercised was $0 for both quarters ended September 30, 20212022 and 2020.2021.

As of September 30, 2021,2022, there was $2.31.3 million of unrecognized compensation cost related to unvested stock-based compensation grants that will be recognized over the weighted-average remaining recognition period of 3.172.5 years.

On December 14, 2021, Matt Plavan provided notice to the Company of his resignation as Arcadia’s president, chief executive officer and director, effective as of December 31, 2021. On December 19, 2021, Arcadia and Mr. Plavan entered into a Separation and Release Agreement (the “Separation Agreement”) which provided that the vesting of all unvested options previously issued to Mr. Plavan accelerated pursuant to the terms of the Separation Agreement. In addition, the Separation Agreement extended the post-termination exercise period of the accelerated options from 90 days to up to two and one-half years. The stock compensation expense related to the modification of Mr. Plavan’s stock options was $154,000 and it was recognized in selling, general and administrative expenses during the year ended December 31, 2021.

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

Expected Term—The expected term is the estimated period of time outstanding for stock options granted and was estimated based on a simplified method allowed by the SEC, due to insufficient historical data, and 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—The historical volatility data was computed using the daily closing prices for the Company’s shares during the equivalent period of the calculated expected term of the stock-based awards.

Risk-Free Interest Rate—The risk-free interest rate is based on the interest rate of U.S. Treasuries of comparable maturities on the date the options were granted.

Expected Dividend—The expected dividend yield is based on the Company’s expectation of future dividend payouts to common stockholders.

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The fair value of stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumption:

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Expected term (years)

 

 

6.08

 

 

 

6.01

 

 

 

6.34

 

 

 

6.50

 

 

 

5.69

 

 

 

6.08

 

 

 

6.41

 

 

 

6.34

 

Expected volatility

 

 

121

%

 

 

230

%

 

 

122

%

 

 

133

%

 

 

122

%

 

 

121

%

 

 

122

%

 

 

122

%

Risk-free interest rate

 

 

0.97

%

 

 

0.38

%

 

 

0.83

%

 

 

1.03

%

 

 

2.99

%

 

 

0.97

%

 

 

2.59

%

 

 

0.83

%

Dividend yield

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company recognized $0.4314,000 million and $0.5897,000 of compensation expense for stock options awards for the three and nine months ended September 30, 2022, respectively. The Company recognized $354,000 and $1.0 million of compensation expense for stock options awards for the three months ended September 30, 2021 and 2020, respectively. The Company recognized $1.0 million and $1.8 million of compensation expense for stock options awards for the nine months ended September 30, 2021, and 2020, respectively.

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Employee Stock Purchase Plan

The Company’s 2015 Employee Stock Purchase Plan (“ESPP”) became effective on May 14, 2015. The ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount of up to 15% of their eligible compensation through payroll deductions, subject to any plan limitations. After the first offering period, which began on May 14, 2015 and ended on February 1, 2016, the ESPP provides for six-month offering periods, and at the end of each offering period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the last day of the offering period. As of September 30, 2021,2022, the number of shares of common stock reserved for future issuance under the ESPP is 111,722128,914. The ESPP provides for automatic annual increases in the shares available for purchase beginning on January 1, 2016. As of September 30, 2021,2022, 50,24558,970 shares had been issued under the ESPP. The Company recorded $1,000 and $3,000 of ESPP related compensation expense for the three and nine months ended September 30, 2022, respectively. The Company recorded $4,000 and $12,000 of ESPP related compensation expense for the quarters ended September 30, 2021three and 2020, respectively. The Company recorded $12,000 and $41,000 of ESPP related compensation expense for the nine months ended September 30, 2021, and 2020, respectively.

15. Debt

Vehicle Loans

The Company entered into notes payable agreements to finance the purchase of company vehicles. The Company has various vehicle loans that mature in 2024 and have interest rates that range from 7.64% to 8.00%. As of September 30, 2021, the outstanding balance of vehicle loans was $114,000.

Paycheck Protection Program Note

On April 16, 2020, the Company borrowed $1.1 million through MidFirst Bank, a federally chartered savings association (the "Lender"), and entered into a promissory note for the same amount under the Paycheck Protection Program (“PPP”) that was established under the Coronavirus Aid Relief, and Economic Security Act (“CARES Act”) of 2020. During the quarter ended June 30, 2021 the Company applied for full PPP loan forgiveness, and in August 2021, the lender notified Arcadia that the SBA had forgiven the original loan in full. During the three months ended September 30, 2021, the amount forgiven has been recorded as gain on extinguishment of PPP loan on the condensed consolidated statements of operations and comprehensive loss, as the Company has been legally released from being the primary obligor in accordance with ASC 405-20, Liabilities – Extinguishment of Liabilities.

Promissory Note

On June 26, 2020, the Company executed a promissory note (the “Note") in the amount of $2.0 million, payable to MidFirst Bank, a federally chartered savings association (the "Lender"). The Note was issued in accordance with the terms of a Loan Agreement dated as of May 18, 2020 entered into by the Company and the Lender (the “Loan Agreement”) in which the Lender agreed to make advances to the Company from time to time, at any amount up to but not to exceed $2.0 million. Pursuant to the Loan Agreement, the Note accrued interest, adjusted monthly, at a rate equal to the greater of (i) 3.25% and (ii) the sum of (a) the quotient of the LIBOR Index divided by (one minus the reserve requirement set by the Federal Reserve), and (b) 2.50%. The Company was required to make monthly interest payments on the Note to the Lender and pay the full principal amount plus any accrued but unpaid interest outstanding under the Note no later than May 18, 2023. The Company and the Lender also entered into a Pledge and Security Agreement dated as of May 18, 2020 whereby the Company agreed to secure the Note by granting a security interest to the Lender for the Company’s deposit account held with and controlled by the Lender. Due to the lender’s control of the deposit account, the balance of $2.0 million is included in restricted cash on the condensed consolidated balance sheets as of December 31, 2020. As of

19


September 30, 2021, there was 0 outstanding balance of the Note. On February 26, 2021, the Company repaid the full balance of $2.0 million, and on March 31, 2021, the line of credit was closed.

Maturities of current and noncurrent debt as of September 30, 2021, are as follows (in thousands):

Years ending December 31,

 

Amounts

 

Remainder of 2021

 

$

9

 

2022

 

 

36

 

2023

 

 

39

 

2024

 

 

30

 

Thereafter

 

 

 

Total

 

$

114

 

16.14. Income Taxes

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

The interim financial statement provision for income taxes is different from the amounts computed by applying the United States federal statutory income tax rate of 21%. The Company’s effective tax rate was 0.00% for each of the three and nine months ended September 30, 2022, and was -0.04% and -0.010.02% for the three months ended September 30, 2021 and 2020, respectively. The Company’s effective tax rate was -0.02% and -0.01% for the nine months ended September 30, 2021 and 2020, respectively.2021. The difference between the effective tax rate and the federal statutory rate of 21%21% was primarily due to the full valuation allowance recorded on the Company’s net deferred tax assets.

The Company experienced an ownership change under IRC Section 382 as a result of the common shares issued in connection with the June 2018January 2021 Offering. This ownership change limited the Company’s ability to utilize its net operating loss carryforwards prior to expiration and certain net operating loss carryforwards were written off as a result. The Company is currently conducting additional analysis regarding the valuation of the Company at the time of the ownership change to assess what, if any, portion of the limitation may be reversed. Any adjustment to the amount of limitation will not impact the deferred tax asset balance due to the full valuation allowance. Further, the Company may have experienced an ownership change under IRC Section 382 as a result of the common shares issued in connection with the December 2020 Purchase Agreement or in the January 2021 Purchase Agreement. Such an ownership change could limit the Company’s ability to utilize its NOL carryforwards prior to expiration but would not impact the net deferred tax asset recorded given the full valuation allowance.

During the nine months ended September 30, 2021,2022, there were 0no material changes to the Company’s uncertain tax positions.

17.15. Commitments and Contingencies

Leases

The Company leases office and laboratory space, greenhouse space, grain storage bins, warehouse space, farmland, and equipment under operating lease agreements having initial lease terms ranging from one to five years, including certain renewal options available to the Company at market rates. The Company also leases land for field trials on a short-term basis. See Note 11.10.

Legal Matters

From time to time, in the ordinary course of business, the Company may become involved in certain legal proceedings. The Company currently is not a party to any material litigation or other material legal proceedings.

Contingent Liability Related to the Anawah Acquisition

In June 2005, the Company completed its agreement and plan of merger and reorganization with Anawah, Inc. (“Anawah”), to purchase the Anawah’s food and agricultural research company through a non-cash stock purchase. Pursuant to the merger with Anawah, and in accordance with the ASC 805 - Business Combinations, the Company incurred a contingent liability not to exceed $5.0 million. This liability represents amounts to be paid to Anawah’s previous stockholders for cash collected on revenue recognized by the Company upon commercial sale of certain specific products developed using technology acquired in the purchase. As of December 31, 2010, the Company ceased activities relating to three of the six Anawah product programs thus, the contingent liability was reduced to $3.0 million. During the third quarter of 2016, one of the programs previously accrued for was abandoned and another program previously abandoned was reactivated. During the fourth quarter of 2019, the Company determined that one of the technologies was no longer active and decided to abandon the previously accrued program. As of September 30, 2021,2022, the Company continues to pursue a total of two development programs using this technology and believes that the

20


contingent liability is probable. As a result, $2.0 million remains on the condensed consolidated balance sheetssheet as an other noncurrent liability.

19


Contingent Liability Related to the ISI Acquisition

In August 2020, the Company acquired by merger Industrial Seed Innovations (ISI).ISI. A portion of the purchase price consideration for the acquisition in the amount of $280,000$280,000 will be recognized in 2two annual installments, each of up to 132,626 shares of the Company’s common stock, subject to the achievement of revenue milestones in 2021 and 2022. The contingent consideration of $280,000was measured and recorded at fair value. As of September 30, 2021, the full amount of the contingent consideration is included in other noncurrent liabilities as 0 installments will become due within 12 months from the condensed consolidated balance sheets date. During the nine months ended September 30, 2021 as a result of a remeasurement of the contingent consideration, we recorded a decrease to the related liability of $31,000 and $140,000 decrease induring the relatedquarters ended March 31, 2022 and 2021, respectively. During the nine months ended September 30, 2022, the remaining contingent liability of $39,000was recordedwritten-down to $0 as a change in fair valuethe probability of contingent consideration onachievement of the condensed consolidated statements of operations and comprehensive loss.2022 revenue milestone is remote.

Contracts

The Company has entered into contract research agreements with unrelated parties that require the Company to pay certain funding commitments. The initial terms of these agreements range from one to three years in duration and in certain cases are cancelable.

The Company licenses certain technologies via executed agreements (“In-Licensing Agreements”) that are used to develop and advance the Company’s own technologies. The Company has entered into various In-Licensing Agreements with related and unrelated parties that require the Company to pay certain license fees, royalties, and/or milestone fees. In addition, certain royalty payments ranging from 2% to 15% of net revenue amounts as defined in the In-Licensing Agreements are or will be due.

The Company could be adversely affected by certain actions by the government as it relates to government contract revenue received in prior years. Government agencies, such as the Defense Contract Audit Agency routinely audit and investigate government contractors. These agencies review a contractor’s performance under its agreements; cost structure; and compliance with applicable laws, regulations and standards. The agencies also review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. While the Company’s management anticipates no adverse result from an audit, should any costs be found to be improperly allocated to a government agreement, such costs will not be reimbursed, or if already reimbursed, may need to be refunded. If an audit uncovers improper or illegal activities, civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments or fines, and suspension or prohibition from doing business with the government could occur. In addition, serious reputational harm or significant adverse financial effects could occur if allegations of impropriety were made against the Company. There currently are routine audits in process relating to government grant revenues.

18.16. Net Loss per Share

Basic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period and excludes any dilutive effects of stock-based awards and warrants. Diluted net loss per share attributable to common stockholders is computed giving effect to all potentially dilutive common shares, including common stock issuable upon exercise of stock options and warrants. As the Company had net losses for the three and nine months ended September 30, 20212022 and 2020,2021, all potentially dilutive common shares were determined to be anti-dilutive.


Securities that were not included in the diluted per share calculations because they would be anti-dilutive were as follows (in shares):

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Options to purchase common stock

 

 

1,554,909

 

 

 

980,883

 

 

 

1,554,909

 

 

 

980,883

 

Warrants to purchase common stock

 

 

11,510,011

 

 

 

4,450,689

 

 

 

11,510,011

 

 

 

4,450,689

 

Total

 

 

13,064,920

 

 

 

5,431,572

 

 

 

13,064,920

 

 

 

5,431,572

 

21


19.

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Options to purchase common stock

 

 

2,401,734

 

 

 

1,554,909

 

 

 

2,401,734

 

 

 

1,554,909

 

Warrants to purchase common stock

 

 

11,350,011

 

 

 

11,510,011

 

 

 

11,350,011

 

 

 

11,510,011

 

Preferred investment options

 

 

4,958,631

 

 

 

 

 

 

4,958,631

 

 

 

 

Total

 

 

18,710,376

 

 

 

13,064,920

 

 

 

18,710,376

 

 

 

13,064,920

 

17. Related-Party Transactions

The Company’s related parties include Moral Compass Corporation (“MCC”) and the John Sperling Foundation (“JSF”). The rights to the intellectual property owned by Blue Horse Labs, Inc. (“BHL”) were assigned to its sole shareholder, the John Sperling Revocable Trust (“JSRT”) due to BHL’s dissolution and then subsequently to the JSF. The JSF is deemed a related party of the Company because MCC, one of the Company’s largest stockholder, and the JSF share common officers and directors.

JSF receives a single digit royalty from the Company when revenue has been collected on product sales or for license payments from third parties that involve certain intellectual property developed under research funding originally from BHL. Royalty fees due to JSF were $51,00047,000 and $80,00064,000 as of September 30, 20212022 and December 31, 2020,2021, respectively, and are included in the condensed consolidated balance sheets as amounts due to related parties.

TheDuring the nine months ended September 30, 2021, the Company currently leasesleased land on the island of Molokai, Hawaii from an entity owned by Kevin Comcowich, the Chair of the Company’s Board of Directors, and his wife. The Company growsused to grow hemp on this land to

20


support the operations of its joint venture Archipelago Ventures Hawaii.Hawaii, until the expiration of the lease in February 2022. The original lease was executed in February 2019, coverscovered 10 acres of land, hashad a term of two years and providesprovided for rent payments of $1,200 per acre per year. During the quarter ended March 31, 2020, the Company engaged a third-party contractor to construct a fence on the property to adhere to the rules of the hemp pilot program. Out of pocket costs to build this fence were approximately $126,400. Mr. Comcowich supplied materials to the contractor and received payments from the contractor totaling approximately $44,000. In March and April 2020, the Company entered into 2two lease amendments for two additional 10-acre parcels and two additional 15-acre parcels, at the same lease rate of $1,200 per acre per year, and with a term of two years. The Company made lease payments in the amount of $81,0000 and $84,00081,000 forduring the nine months ended September 30, 20212022 and 2020,2021, respectively.

20.18. Subsequent Events

Management has evaluated subsequent events through November 15, 2021,10, 2022, the date that the financial statements were available to be issued.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Special Note Regarding Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and the related notes to those statements included herein. In addition to historical financial information, this report contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included in the most recent Annual Report on Form 10-K filed by the Company. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Solely for convenience, the trademarks, service marks and trade names referred to in this report may appear without the ®, TM, or SM symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks, or trade names.

Overview

We are a producer and marketer of innovative, plant-based health and wellness products. Our history as a leader in science-based approaches to developing high value crop improvements, primarily in wheat, hemp and soy, designed to enhance farm economics by improving the performance of crops in the field, as well as their value as food ingredients, health and wellness products, and their viability for industrial applications, has laid the foundation for our path forward. We have used non-genetically modified (“non-GMO”) advanced breeding techniques to develop these proprietary innovations which we are now commercializing through the sales of seed and grain, food ingredients and products, hemp extracts, trait licensing and royalty agreements. The recent acquisition of the assets of Lief Holdings, LLC (“Lief”), EKO Holdings, LLC (“EKO”) and Live Zola, LLC (“Zola”) addsadded bath and body care products, CBD consumer products, as well as coconut water, to our portfolio of products.

Our commercial strategy is to satisfy 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. The acquisition of the Lief, EKO and Zola brands allows us to broaden our reach within the health and wellness sector.

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-quarterone-fifth of the FDA recommended calories consumed by people in the US are from wheat. Therefore, the market 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-GMnon-GMO GoodWheat™ (“GoodWheat”) technology can improve the dietary intake of average consumers, by increasing their fiber and protein consumption without changing the way they eat. We believe this proprietary advantage gives GoodWheat the potential to become a global standard in wheat.

Our Growth Strategy

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

Accelerate the monetization of our GoodWheat™ wheat trait portfolio. Our proprietary IP with multiple non-GMO wheat traits have clear functional benefits, and we will continue to build partnerships across the wheat value chain. We will continue to invest in acquisition, development and retention of the requisite management and industry experience and production and logistics capacity to fully participate in, and control, the route to market for our high value food ingredients.
Commercialize and Scale our Arcadia Wellness consumer brands through retail and e-commerce expansion. We plan to expand distribution of our consumer brands through mass market retailers, grocery store chains, and other specialty nutrition stores, as well as through e-commerce. These brands can penetrate large and growing categories through high-value, differentiated benefits, with the ability to scale and generate attractive margins. We will continue to build our commercialization and scaling expertise, refine go-to-market strategies and invest in effective brand-building.

22


Evaluate acquisitive growth opportunities. We intend to evaluate potential acquisitions representing vertical integration opportunities with multiple benefits to Arcadia’s growth plans. These could include integrating further into our supply chains to enhance margin capture, as well as speed to market new product innovations and food formulations.

Arcadia Wellness, LLC

In May 2021, our wholly-owned subsidiary Arcadia Wellness, LLC, acquired the assets of Eko, Lief, and Zola. We intend for Arcadia Wellness, LLC, to house all of Arcadia Biosciences consumer goods businesses, including GoodWheat, Zola Coconut Water and ProVault Topical Pain Relief, as well as SoulSpring Body Care.

Our Product Portfolio

GoodWheat™ Consumer Products

The passage of the 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. Arcadia conducts its business in only federal and state markets in which its activities are legal.

23


In addition to bringing new hemp varieties to market, we also see an attractive opportunity to service the growing consumer demand for Cannabidiol (“CBD”) and other hemp-derived cannabinoids. CBDGoodWheat brand is a naturally occurring compound found in the resinous flower of cannabis, a plant with a rich history as a medicine going back thousands of years. Today the therapeutic properties of CBD are being tested and confirmed by scientists and doctors around the world. 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 gain traction in the marketplace as we grow our business channels.

Arcadia GoodWheat™

In 2018, we launched our GoodWheat brand, a non-genetically modified (non-GM) portfolio of wheatnon-GMO wheat-based consumer products that enables food manufacturers to differentiate their consumer-facing brands. Consumer food companies are looking to simplify theirsimplifies food ingredient formulations andfor consumers that are demanding “clean labeling” in their foods, paying more for foods having fewer artificial ingredients and more natural, recognizable and healthy ingredients. A 2017 survey by PR agency Ingredient Communications found that 73% of consumers are happywilling to pay a higher retail price for a food or drink productproducts made with ingredients they recognize. Because GoodWheat increases the nutrient density directly in the primary grains and oils, it provides the mechanism for food formulation simplification naturally and cost effectively to meet evolving consumer demands.

The 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 brand to make an immediate connection with consumers that products made with GoodWheat meet their demands for healthier wheat options that also taste great. The GoodWheat brand encompasses our current and future non-GM wheat portfolio of high fiber Resistant Starch (RS) and Reduced Gluten wheat varieties, as well as future wheat innovations. In October 2019, the U.S. Patent and Trademark Office granted us the latest patents for extended shelf life wheat, the newest trait in our non-genetically modified wheat portfolio. This new trait was designed to promote whole wheat consumption by improving the shelf life and taste of whole grain wheat products.

With additional patents granted in 2020In June 2022, we now hold more than 15 global patents on our high fiber Resistant Starch wheat, protecting both bread wheat and durum (pasta) wheat. Claims granted recently strengthen our intellectual property for our Resistant Starch portfolio of products.

We are preparing for the launch of a line of food products underlaunched our GoodWheat brand, with pasta as the initial category to be introducedavailable in a soft-launch at the beginning of next year.five varieties including penne, spaghetti, fettuccine, elbows and rotini, in select retailers nationwide. Our pasta products will utilizeutilizes our GoodWheat grain as the sole ingredient, providing them with a higher4X the fiber content thanof traditional wheat.pasta and 9g protein per serving without sacrificing taste. In fact, our research shows taste parity to leading pasta brands, which is unique in the growing better-for-you pasta segment. In addition, GoodWheat is the only better-for-you pasta brand made from one simple ingredient, matching consumers’ preference for cleaner labels. Additional categories of products are slated for launch in 2022.2023.

Arcadia Wellness, LLCZola Coconut Water

In May 2021,We believe that natural hydration and the power of plant-based ingredients are the keys to unlock your inspiration from within, and we are proud to make delicious plant-powered beverages that provide the energy and focus you need to crush your day. From the coconut groves of Thailand, we bring you great tasting coconut water and are proud of our wholly-owned subsidiary Arcadia Wellness, LLC, acquiredlong-lasting relationships with partners around the assetsworld who are essential to the quality of Eko, Lief,our products.

ProVault Topical Pain Relief

ProVault’s proprietary THC-Free, CBD-infused blend of natural ingredients and Zola. The acquisition includes leading consumer CBD brands like Soul Spring™, the top selling CBD-infused botanical therapy brandfast-acting cooling agents are designed to safely and effectively relieve muscle and joint pain and soothe your skin. Our products are third-party tested for potency and purity from pesticides, fungicides, microbials and heavy metals. Our topical pain relievers are formulated to address performance concerns from everyday pain to skin protection. So whether you’re a true competitor, a weekend warrior or simply maintaining an active lifestyle, you can count on ProVault to help keep you in the natural category, Saavy Naturals™, a leading linegame. We believe what you put on your body is just as important as what you put in your body.

SoulSpring Body Care

Inspired by nature’s ancient remedies and crafted with care, our SoulSpring products strive to help rejuvenate and renew your mind, body, and soul. Our CBD-infused blends of all-natural body care products and Provault™, a CBD-infused sports performance formula made with natural ingredients providing effective supportprovide a more thoughtful, holistic approach to internal balance and recoveryoverall well-being. SoulSpring premium, broad spectrum CBD is extracted from naturally-grown hemp and blended with nourishing botanicals and minerals. Our CBD is purity-tested, non-pshychoactive and non-intoxicating. Our passion for athletes. Also included in the purchase is Zola, a leading coconut water sourced exclusively with sustainably grown coconuts from Thailand. Key personnel have joined Arcadia Wellness.wellness means thoughtfully choosing honest, natural ingredients - inspired by ancient remedies and carefully selected for their healing properties. We then mindfully blend these ingredients to retain their inner essence and natural properties.

Arcadia GoodHemp™

In December 2019, we announced the launch of a new product line, GoodHemp, as the company's commercial brand for delivering hemp seeds, transplants, flower and extracts. The acquisition of Industrial Seed Innovations (“ISI”) in August 2020 brought ISI’s portfolio of strong performing, federally compliant hemp varieties to Arcadia’s GoodHemp™ catalog. ISI’s popular Umpqua, Rogue and Santiam seed varieties each bring unique and highly desirable characteristics to further differentiate Arcadia’s GoodHemp catalog.

2423


Archipelago Ventures Hawaii, LLC

In August 2019, we formed a new joint venture to serve the Hawaiian, North American and Asian hemp markets, Archipelago Ventures Hawaii, LLC (“Archipelago”). This 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.

In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to the weak hemp market demand and to the sufficient internal ingredient supply for the foreseeable future.

Arcadia SPA

In April 2021, we acquired the assets of Agrasys S.A., a food ingredients company based in Barcelona, Spain. The physical and intellectual property assets enable us to commercialize Tritordeum, a proprietary cereal grain that is a combination of durum wheat and wild barley, resulting in a nutritious grain high in fiber, protein and lutein. Tritordeum was developed at the Instituto de Agricultura Sostenible – Consejo Superior de Investigaciones Científicas, (IAS-CSIC) the largest public institution dedicated to agricultural research in Spain, and subsequently licensed exclusively to Agrasys for commercialization. We completed the transaction through Arcadia SPA, S.L., a newly formed company based in Spain, and key Agrasys personnel have joined Arcadia SPA to operate the Tritordeum business in Europe.

Verdeca HB4® Soybean

In 2012, we partnered with Bioceres, Inc. (“Bioceres”) an Argentina-based technology company, to form Verdeca LLC, (“Verdeca”) a U.S.-based joint venture company to deploy next-generation soybean traits developed to benefit soybean producers through quality improvement, stress mitigation and management practices. The HB4® soybean varieties deliver two layers of value for growers: drought and herbicide tolerance, offering resistance to a broad-spectrum herbicide utilized to prevent growth of a wide range of annual and perennial broadleaf weeds and grasses. 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 $10 million on HB4 soybean sales. An additional $2 million in cash is to be paid upon achievement by Verdeca of specific regulatory or commercial milestones.

Impact of COVID-19

In early 2020, the World Health Organization ("WHO") determined the coronavirus ("COVID-19") was a worldwide pandemic. We are closely monitoring how the spread of the new strains of coronavirus are affecting our employees and business operations. We have developed preparedness plans to help protect the safety of our employees while safely continuing business operations. While management currently expects the impact of COVID-19 to be temporary, there is uncertainty around the duration and its broader impact on the economy and therefore the effects it will have on the Company’s financial condition, liquidity, operations, suppliers, industry, and workforce. The Company experienced delivery delays during the third quarter of 2021 due to a slowed global supply chain. However, management does not expect this will significantly impact revenues, due to the growth the Company is experiencing.

Components of Our Statements of Operations Data

Revenues

We derive our revenues primarily from product revenues, royalties, license revenuessales and contract research agreements. Given our acute focus on selling our GoodWheat and Arcadia Wellness products, we do not intend to continue pursuing contract research agreements and government grant projects.royalties.

Product Revenuesrevenues

Our product revenues to date have consistedconsist primarily of sales of our SONOVAArcadia Wellness products, GoodWheat grain sales, and GoodHemp seeds sales. This quarter also includes revenues from products within the recently acquired brands now part of Arcadia Wellnesspasta, and Arcadia Spain.GLA products. We recognize revenue from product sales when control of the product is transferred to third-party

25


distributors and manufacturers, collectively “our customers,” which generally occurs upon delivery. Our revenues fluctuate depending on the timing of shipments of product to our customers and are reported net of estimated chargebacks, returns and losses.

License Revenues

Our licenseRoyalty revenues to date consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our research and license agreements. Revenue generated from up-front license fees are recognized upon execution of the agreement. We recognize annual license fees when it is probable that a material reversal will not occur.

Milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts would not be reversed. The Company assesses when achievement of milestones are probable in order to determine the timing of revenue recognition for milestone fees. Milestones typically consist of significant stages of development for our traits in a potential commercial product, such as achievement of specific technological targets, completion of field trials, filing with regulatory agencies, completion of the regulatory process, and commercial launch of a product containing our traits. Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and our license revenues are likely to fluctuate significantly from period to period.

Royalty Revenues

Our royalty revenues consist of amounts earned from the sale of commercial products that incorporate our traits by third parties. Our royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products. We recognize the minimum annual royalty on a straight-line basis over the year, and we recognize royalty revenue resulting from the sale of products when the third parties transfer control of the product to their customers, which generally occurs upon shipment. Our royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers.

License revenues

Contract Research and Government Grant Revenues

Contract research and government grantOur license revenues consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our license agreements. Revenue generated from up-front license fees are recognized upon execution of the agreement. We recognize annual license fees when it is probable that a material reversal will not occur.

Milestone fees are variable consideration that is initially constrained and recognized only when it is probable that such amounts earnedwould not be reversed. The Company assesses when achievement of milestones are probable in order to determine the timing of revenue recognition for milestone fees. Milestones typically represent significant stages of development for our traits in a potential commercial product, such as achievement of specific technological targets, completion of field trials, filing with regulatory agencies, completion of the regulatory process, and commercial launch of a product containing our traits. Given the seasonality of agriculture and time required to progress from performing contracted research primarily relatedone milestone to breeding programs or the genetic engineeringnext, achievement of plants for third parties. Contract research revenuemilestones is accounted for as a single performance obligation for whichinherently uneven, and our license revenues are recognized over time using the input method (e.g., costs incurredlikely to date relativefluctuate significantly from period to the total estimated costs at completion).period.

Operating Expenses

Cost of Product Revenuesrevenues

Cost of product revenues relates to the sale of our SONOVA, GoodWheat, GoodHemp, Arcadia Wellness, GoodWheat, and Arcadia SpainGLA products and consists of in-licensing and royalty fees, any adjustments or write-downs to inventory or prepaid production costs, as well as the cost of raw materials, including internal and third-party services costs related to procuring, processing, formulating, packaging and shipping our products.products, as well as in-licensing and royalty fees, any adjustments or write-downs to inventory or prepaid production costs.

Research and Development Expensesdevelopment expenses ("R&D")

Research and development expenses consist of costs incurred in the discovery, development and testing of our products and other products in development incorporating our traits. These expenses currently consist primarily of employee salaries and benefits, fees paid to subcontracted research providers, fees associated with in-licensing technology, land leased for field trials, chemicalsproduct formulation consultants and supplies, and other external expenses. These costs are expensed as incurred. Additionally, we are required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties. Our research and development expenses may fluctuate from period to period.

2624


Gain on sale of Verdeca
 

The gain on sale of Verdeca is the gain recognized for the sale our membership interests in the Verdeca joint venture to our partner Bioceres in November 2020.

Impairment of intangible assets

Impairments of intangible assets are recorded when the fair value of intangible assets drops below its carrying amount. See Note 7 to the Condensed Consolidated Financial Statements.

Change in fair value of contingent consideration

Change in the fair value of contingent consideration is comprised of the fair value remeasurement of the liabilities associated with our contingent consideration. See Note 15 to the Condensed Consolidated Financial Statements.

Gain on sale of property and equipment, net

Gain on sale of fixed assets includes gains from the sale of tangible assets sold above their net book value.

Impairment of property and equipment, net

Impairment of property and equipment, net includes losses from tangible assets due to impairment or recoverability test charges to write down fixed assets to their fair value or recoverability value.

Selling, Generalgeneral and Administrative Expensesadministrative expenses

Selling, general and administrative expenses consist primarily of employee costs, professional service fees, broker and sales commission fees, and overhead costs. Our selling, general, and administrative expenses may fluctuate from period to period. In connection with our commercialization activities for our consumer products, we expect to increase our investments in sales and marketing, and business development, including additional consulting fees.

Impairment of intangible assets

Impairments of intangible assets are recorded when the fair value of intangible assets drops below the previously recorded value from the time of the acquisition.

Change in Fair Value of Contingent Consideration

Change in the fair value of contingent consideration is comprised of the fair value remeasurement of the liabilities associated with our contingent consideration.

Write-down of fixed assets

Write-down of fixed assets includes losses from tangible assets due to impairment or recoverability test charges to adjust fixed assets to their fair value or recoverability value.

Interest Expense

Interest expense consists primarily of contractual interest on notes payable relating to the purchase of company vehicles, and the revolving line of credit.

Other Income, Netincome, net

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

Issuance and offering costs

Issuance and offering costs generally include placement agent, legal, advisory, accounting and filing fees related to financing transactions.

Change in the Estimated Fair Valueestimated fair value of Common Stock Warrant Liabilitiescommon stock warrant and option liabilities

Change in the estimated fair value of common stock warrant and option liabilities is comprised of the fair value remeasurement of the liabilities associated with our financing transactions.

25


Income Tax Provision

Our income tax provision has not been historically significant, as we have incurred losses since our inception. The provision for income taxes consists of state and foreign income taxes. Due to cumulative losses, we maintain a valuation allowance against our U.S. deferred tax assets as of September 30, 20212022 and December 31, 2020.2021. We consider all available evidence, both positive and negative, including but not limited to,to: earnings history, projected future outcomes, industry and market trends, and the nature of each of the deferred tax assets in assessing the extent to which a valuation allowance should be applied against our U.S. deferred tax assets.

27


Results of Operations

Comparison of the Three Months Ended September 30, 20212022 and 20202021

 

Three Months Ended September 30,

 

$ Change

 

% Change

 

 

Three Months Ended September 30,

 

 

$ Change

 

 

% Change

 

 

2021

 

2020

 

 

 

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

(In thousands except percentage)

 

 

(In thousands except percentage)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

2,324

 

 

$

245

 

 

$

2,079

 

 

 

849

%

 

$

1,851

 

 

$

2,324

 

 

$

(473

)

 

 

(20

)%

Royalty

 

 

17

 

 

 

35

 

 

 

(18

)

 

 

(51

)%

License

 

17

 

 

 

10

 

 

 

7

 

 

 

70

%

 

 

10

 

 

 

17

 

 

 

(7

)

 

 

(41

)%

Royalty

 

35

 

 

 

16

 

 

 

19

 

 

 

119

%

Contract research and government grants

 

 

 

 

 

43

 

 

 

(43

)

 

 

(100

)%

Total revenues

 

2,376

 

 

 

314

 

 

 

2,062

 

 

 

657

%

 

 

1,878

 

 

 

2,376

 

 

 

(498

)

 

 

(21

)%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

2,511

 

 

 

1,841

 

 

 

670

 

 

 

36

%

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

1,344

 

 

 

2,511

 

 

 

(1,167

)

 

 

(46

)%

Research and development

 

1,038

 

 

 

1,762

 

 

 

(724

)

 

 

(41

)%

 

 

255

 

 

 

1,038

 

 

 

(783

)

 

 

(75

)%

Impairment of intangible assets

 

120

 

 

 

 

 

 

120

 

 

 

100

%

 

 

 

 

 

120

 

 

 

(120

)

 

 

(100

)%

Write-down of fixed assets

 

1,108

 

 

 

 

 

 

1,108

 

 

 

100

%

Impairment of property and equipment

 

 

24

 

 

 

1,108

 

 

 

(1,084

)

 

 

(98

)%

Selling, general and administrative

 

 

6,312

 

 

 

4,292

 

 

 

2,020

 

 

 

47

%

 

 

4,835

 

 

 

6,312

 

 

 

(1,477

)

 

 

(23

)%

Total operating expenses

 

 

11,089

 

 

 

7,895

 

 

 

3,194

 

 

 

40

%

 

 

6,458

 

 

 

11,089

 

 

 

(4,631

)

 

 

(42

)%

Loss from operations

 

 

(8,713

)

 

 

(7,581

)

 

 

(1,132

)

 

 

15

%

 

 

(4,580

)

 

 

(8,713

)

 

 

4,133

 

 

 

47

%

Interest expense

 

(15

)

 

 

(23

)

 

 

8

 

 

 

(35

)%

Other (expense) income, net

 

(7

)

 

 

 

 

 

(7

)

 

 

(100

)%

Change in fair value of common stock warrant liabilities

 

4,777

 

 

 

1,130

 

 

 

3,647

 

 

 

323

%

Loss on extinguishment of warrant liability

 

 

 

 

(682

)

 

 

682

 

 

 

(100

)%

Interest income (expense)

 

 

95

 

 

 

(15

)

 

 

110

 

 

 

(733

)%

Other income (expense), net

 

 

43

 

 

 

(7

)

 

 

50

 

 

 

(714

)%

Change in fair value of common stock warrant and option liabilities

 

 

1,880

 

 

 

4,777

 

 

 

(2,897

)

 

 

(61

)%

Gain on extinguishment of PPP loan

 

 

1,123

 

 

 

 

 

 

1,123

 

 

 

100

%

 

 

 

 

 

1,123

 

 

 

(1,123

)

 

 

(100

)%

Issuance and offering costs

 

 

(314

)

 

 

 

 

 

(314

)

 

 

100

%

Net loss before income taxes

 

(2,835

)

 

 

(7,156

)

 

 

4,321

 

 

 

(60

)%

 

 

(2,876

)

 

 

(2,835

)

 

 

(41

)

 

 

1

%

Income tax provision

 

 

(1

)

 

 

(9

)

 

 

8

 

 

 

(89

)%

 

 

(1

)

 

 

(1

)

 

 

 

 

 

0

%

Net loss

 

(2,836

)

 

 

(7,165

)

 

 

4,329

 

 

 

(60

)%

 

 

(2,877

)

 

 

(2,836

)

 

 

(41

)

 

 

1

%

Net loss attributable to non-controlling interest

 

 

(661

)

 

 

(774

)

 

 

113

 

 

 

(15

)%

 

 

(10

)

 

 

(661

)

 

 

651

 

 

 

(98

)%

Net loss attributable to common stockholders

 

$

(2,175

)

 

$

(6,391

)

 

$

4,216

 

 

 

(66

)%

 

$

(2,867

)

 

$

(2,175

)

 

$

(692

)

 

 

32

%

Revenues

Product revenues accounted for 99% and 98% and 78% of our total revenues induring the three months ended September 30, 20212022 and 2020,2021, respectively. The $2.1 million,$473,000, or 849%20%, increasedecrease in product revenues for the three months ended September 30, 20212022 compared to the same period in 20202021 was primarily driven by $1.8 milliona decrease in sales of sales related mainlybody care products primarily due to the newly acquired lines offocus on higher-margin products, of Arcadiaand the licensing agreement with Radiance Beauty and Wellness, Inc ("Radiance Beauty") executed in July 2022, in addition to higherthe timing of GLA SONOVA sales.orders. See Note 6 to the Condensed Consolidated Financial Statements for details of the licensing agreement.

Royalty revenues accounted for 1% and 5% of our total revenues induring each of the three months ended September 30, 20212022 and 2020, respectively.2021. The $35,000$17,000 of royalty revenues for the three months ended September 30, 20212022 represents the proportionate share of contracted minimum annual royalty fees.

Contract research and government grantCost of revenues accounted for 0% and 14% of our total revenues for the three months ended September 30, 2021 and 2020, respectively. Our contract research and government grant revenues decreased by $43,000, or 100%, in the three months ended September 30, 2021 compared to the same period in 2020. The decrease was driven by the completion of agreements and grants during 2020. We do not intend to continue pursuing contract research agreements and government grant projects as we focus on selling our commercial products.

Cost of Product Revenues

Cost of product revenues increaseddecreased by $670,000,$1.2 million, or 36%46%, in the three months ended September 30, 2021 compared to the same period in 2020. The increase is mainly due to the increase in cost of product revenues of $1.7 million related to the newly acquired product lines, partially offset by lower inventory write-downs, which amounted to $449,000 during the three months ended September 30, 2022 compared to the same period in 2021 primarily due to lower revenues and $1.5 millionlower inventory write-downs in 2022. Gross profit, calculated as total revenues less cost of revenues, was $534,000 during the third quarterthree months ended September 30, 2022 compared to gross loss of 2020.$135,000 during the three months ended September 30, 2021. The $449,000 ofincrease in the gross profit was primarily due to lower inventory write-downs in third quarter of 2021 was to reduce hemp seed inventory to fair value and recordduring the destruction of hemp crops.three months ended September 30, 2022.

2826


Research and Developmentdevelopment

Research and development expenses decreased by $724,000,$783,000, or 41%75%, induring the three months ended September 30, 20212022 compared to the same period in 2020. The decrease was2021 primarily driven by the Company pivoting itsCompany's recent focus toon commercialization, which has led to lower employee-related expenses, and related activity costs as we right-sized our research teams. Partially offsetting

Impairment of property and equipment

During the favorability forthree months ended September 30, 2022, we recognized $24,000 of impairments of property and equipment related to Arcadia Wellness. During the quarter is $333,000three months ended September 30, 2021, we recognized $1.1 million of expense included in 2021 for the releaseimpairments of product from inventory that was not commercialized by Arcadia.Archipelago property and equipment related to CBD processing.

Selling, General,general, and Administrativeadministrative

Selling, general, and administrative expenses increaseddecreased by $2$1.5 million, or 47%23%, in the three months ended September 30, 2021, compared to the same period in 2020. The increase was driven by increased commercial and marketing personnel and consulting activities in preparation for new product launches.

Impairment of intangible assets

We recognized an impairment of intangible assets in the amount of $120,000 for the third quarter of 2021. The impairment charge was primarily the result of a decline in the hemp seed market forecasted sales. No impairment losses were recorded in the same period of 2020.

Write-down of fixed assets

We assessed Archipelago’s fixed assets related to cultivating hemp and processing CBD for impairment and recorded a write-down in the amount of $1.1 million for the three months ended September 30, 2021. There were no such impairments during the three months ended September 30, 2020. See Note 4.

Change2022, compared to the same period in the Estimated Fair Value of Common Stock Warrant Liabilities2021. The decrease was primarily driven by lower salaries, lease expense and consulting fees.

Change in the estimated fair value of common stock warrant and option liabilities

Change in the estimated fair value of common stock warrant and option liabilities resulted in a gain of $4.8decreased by $2.9 million forduring the three months ended September 30, 2021, due2022 compared to the fair value remeasurementsame period in 2021. The decrease was driven by the adoption of ASU 2020-06 in January 2022, which resulted in the reclassification of common stock warrant liabilities drivenwarrants from liability to equity, partially offset by the change in the stock price, risk-free rates and volatility duringestimated fair value of the third quarter of 2021.liability classified preferred investment options issued in connection with the August 2022 Registered Direct Offering ("RDO") financing transaction.

Gain on extinguishment of PPP loan27


Issuance and offering costs

During the quarter ended September 30, 2021 we were notifiedIssuance and offering costs increased by the lender that the SBA had forgiven the original PPP loan amount in full, and this resulted in a $1.1 million gain for the quarter.

Income Tax Expense

Income tax expense for$314,000 during the three months ended September 30, 2021 of $1,000, slightly decreased when2022 compared to the expense of $9,000 recorded forsame period in 2021 due to the three months ended September 30, 2020.August 2022 RDO financing transaction.

Comparison of the Nine Months Ended September 30, 20212022 and 20202021

 

 

Nine Months Ended September 30,

 

 

$ Change

 

 

% Change

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

(In thousands except percentage)

 

Revenues:

 

 

 

 

 

 

 

 

 

 

 

 

Product

 

$

4,506

 

 

$

630

 

 

$

3,876

 

 

 

615

%

License

 

 

17

 

 

 

110

 

 

 

(93

)

 

 

(85

)%

Royalty

 

 

86

 

 

 

58

 

 

 

28

 

 

 

48

%

Contract research and government grants

 

 

 

 

 

106

 

 

 

(106

)

 

 

(100

)%

Total revenues

 

 

4,609

 

 

 

904

 

 

 

3,705

 

 

 

410

%

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product revenues

 

 

4,954

 

 

 

3,463

 

 

 

1,491

 

 

 

43

%

Research and development

 

 

3,328

 

 

 

5,999

 

 

 

(2,671

)

 

 

(45

)%

Impairment of intangible assets

 

 

120

 

 

 

 

 

 

120

 

 

 

100

%

Change in fair value of contingent consideration

 

 

(140

)

 

 

 

 

 

(140

)

 

 

(100

)%

29


Write-down of fixed assets

 

1,319

 

 

 

 

 

 

1,319

 

 

 

100

%

 

Nine Months Ended September 30,

 

 

$ Change

 

 

% Change

 

 

2022

 

 

2021

 

 

 

 

 

 

 

(In thousands except percentage)

 

Revenues:

 

 

 

 

 

 

 

 

 

Product

 

$

7,967

 

 

$

4,506

 

 

$

3,461

 

 

 

77

%

Royalty

 

 

117

 

 

 

86

 

 

 

31

 

 

 

36

%

License

 

 

872

 

 

 

17

 

 

 

855

 

 

 

5029

%

Total revenues

 

 

8,956

 

 

 

4,609

 

 

 

4,347

 

 

 

94

%

Operating expenses (income):

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenues

 

 

8,250

 

 

 

4,954

 

 

 

3,296

 

 

 

67

%

Research and development

 

 

1,009

 

 

 

3,328

 

 

 

(2,319

)

 

 

(70

)%

Gain on sale of Verdeca

 

 

(1,138

)

 

 

 

 

 

(1,138

)

 

 

(100

)%

Impairment of intangible assets

 

 

72

 

 

 

120

 

 

 

(48

)

 

 

(40

)%

Change in fair value of contingent consideration

 

 

(70

)

 

 

(140

)

 

 

70

 

 

 

(50

)%

Impairment of property and equipment

 

 

370

 

 

 

1,319

 

 

 

(949

)

 

 

(72

)%

(Gain) loss on sale of property and equipment

 

 

(386

)

 

 

17

 

 

 

(403

)

 

 

(2371

)%

Selling, general and administrative

 

 

16,750

 

 

 

11,689

 

 

 

5,061

 

 

 

43

%

 

 

13,834

 

 

 

16,733

 

 

 

(2,899

)

 

 

(17

)%

Total operating expenses

 

 

26,331

 

 

 

21,151

 

 

 

5,180

 

 

 

24

%

 

 

21,941

 

 

 

26,331

 

 

 

(4,390

)

 

 

(17

)%

Loss from operations

 

 

(21,722

)

 

 

(20,247

)

 

 

(1,475

)

 

 

(7

)%

 

 

(12,985

)

 

 

(21,722

)

 

 

8,737

 

 

 

(40

)%

Interest expense

 

(23

)

 

 

(32

)

 

 

9

 

 

 

28

%

Other (expense) income, net

 

10,214

 

 

 

83

 

 

 

10,131

 

 

 

12206

%

Change in fair value of common stock warrant liabilities

 

4,601

 

 

 

6,212

 

 

 

(1,611

)

 

 

26

%

Loss on extinguishment of warrant liability

 

 

 

 

(635

)

 

 

635

 

 

 

(100

)%

Interest income (expense)

 

 

123

 

 

 

(23

)

 

 

146

 

 

 

(635

)%

Other income (expense), net

 

 

13

 

 

 

10,214

 

 

 

(10,201

)

 

 

(100

)%

Change in fair value of common stock warrant and option liabilities

 

 

1,880

 

 

 

4,601

 

 

 

(2,721

)

 

 

(59

)%

Gain on extinguishment of PPP loan

 

1,123

 

 

 

 

 

 

1,123

 

 

 

100

%

 

 

 

 

 

1,123

 

 

 

(1,123

)

 

 

(100

)%

Issuance and offering costs

 

 

(769

)

 

 

 

 

 

(769

)

 

 

(100

)%

 

 

(314

)

 

 

(769

)

 

 

455

 

 

 

(59

)%

Net loss before income taxes

 

(6,576

)

 

 

(14,619

)

 

 

8,043

 

 

 

(55

)%

 

 

(11,283

)

 

 

(6,576

)

 

 

(4,707

)

 

 

72

%

Income tax provision

 

 

(1

)

 

 

(15

)

 

 

14

 

 

 

93

%

 

 

(1

)

 

 

(1

)

 

 

 

 

 

0

%

Net loss

 

(6,577

)

 

 

(14,634

)

 

 

8,057

 

 

 

(55

)%

 

 

(11,284

)

 

 

(6,577

)

 

 

(4,707

)

 

 

72

%

Net loss attributable to non-controlling interest

 

 

(1,199

)

 

 

(1,081

)

 

 

(118

)

 

 

(11

)%

 

 

(152

)

 

 

(1,199

)

 

 

1,047

 

 

 

(87

)%

Net loss attributable to common stockholders

 

$

(5,378

)

 

$

(13,553

)

 

$

8,175

 

 

 

(60

)%

 

$

(11,132

)

 

$

(5,378

)

 

$

(5,754

)

 

 

107

%

Revenues

Product revenues accounted for 89% and 98% and 70% of our total revenues induring the nine months ended September 30, 20212022 and 2020,2021, respectively. The $3.9$3.5 million, or 615%77%, increase in product revenues forduring the nine months ended September 30, 20212022 compared to the same period in 20202021 was primarily driven by $2.6higher sales of the Zola coconut water and body care products, the brands acquired in May 2021, along with $2.1 million of sales related mainly to the newly acquired lines of products of Arcadia Wellness, plus $584,000 of additional sales of GoodWheat grain and $257,000 of GoodHemp seed sales.pasta sales this year that weren't present in 2021.

LicenseRoyalty revenues accounted for 0%1% and 12%2% of our total revenues induring the nine months ended September 30, 2021,2022 and 2020,2021, respectively. The $110,000 in license revenues for the nine months ended September 30, 2020 was due to the achievement of certain milestones.

Royalty revenues accounted for 2% and 6% of our total revenues in the nine months ended September 30, 2021 and 2020, respectively. The $86,000$117,000 of royalty revenues for the nine months ended September 30, 20212022 represents the proportionate share of contracted minimum annual royalty fees.

Contract research and government grant revenuesLicense revenue accounted for 0% and 12%10% of our total revenues for the nine months ended September 30, 2021 and 2020, respectively. Our contract research and government grant revenues decreased by $106,000, or 100%, in the first nine months of 2021, compared to the same period in 2020. The decrease was driven by the completion of agreements and grants during 2020. We do not intend to continue pursuing contract research agreements and government grant projects, as we focus on selling our commercial products.

Cost of Product Revenues

Cost of product revenues increased by $1.5 million, or 43%, in the nine months ended September 30, 2021 compared to the same period in 2020. The increase is in line with sales from the newly acquired lines of products within Arcadia Wellness, in the amount of $2.3 million of additional cost of product revenues, in addition to GoodWheat grain and GoodHemp seeds. The increase is partially offset by lower inventory write-downs, in the amount of $1.3 million,revenue during the nine months ended September 30, 2021, compared2022 and is related to $3.1the Verdeca-Bioceres licensing agreement discussed below.

Cost of revenues

Cost of revenues increased by $3.3 million, or 67%, during the nine months ended September 30, 2020.2022 compared to the same period in 2021. The increase in cost of revenues is the result of the increase in revenues. Gross profit, calculated as total revenues less cost of revenues, was $706,000 during the nine months ended September 30, 2022 compared to gross loss of $345,000 during the nine months

28


ended September 30, 2021. The increase in the gross profit was primarily driven by the increase in license revenue related to the Verdeca-Bioceres licensing agreement during the nine months ended September 30, 2022.

Research and Developmentdevelopment

Research and development expenses decreased by $2.7$2.3 million, or 45%70%, during the nine months ended September 30, 2022 compared to the same period in 2021. The decrease was primarily driven by the Company's recent focus on commercialization, which has led to lower employee-related expenses, and related activity costs as we right-sized our research teams.

Gain on sale of Verdeca

In February 2012, we partnered with Bioceres to form Verdeca, which we equally owned. Verdeca was formed to develop and deregulate soybean varieties using both partners’ agricultural technologies. In November 2020, Arcadia sold its membership interest in Verdeca to Bioceres in a transaction in which Arcadia received cash, shares of Bioceres stock and a royalty stream of up to $10.0 million on sales of Haab 4 ("HB4") soybean. An additional $2.0 million in cash is to be paid upon achievement by Verdeca reaching commercial plantings of at least 200,000 hectares of HB4 or China approving the HB4 soybean trait for “food and feed”. During the nine months ended September 30, 2022, we recognized a gain on sale of Verdeca of $1.1 million related to the regulatory approval of the HB4 soybeans.

Impairment of intangible assets

During the nine months ended September 30, 2022, we recognized $72,000 of impairments of intangible assets related to the Radiance Beauty licensing agreement. During the nine months ended September 30, 2021, compared to the same period in 2020. The decrease was primarily driven by the Company pivoting its focus to commercialization, which led to lower employee-related expenses as we right-sized our research teams. Partially offsetting this favorability was $333,000 of expense included in 2021 for the release of product from inventory that was not commercialized by Arcadia.

Selling, General, and Administrative

Selling, general, and administrative expenses increased by $5.1 million, or 43%, in the nine months ended September 30, 2021 compared to the same period in 2020. The increase was primarily driven by acquisitive activities, including investment banker success

30


fees, legal diligence and transaction fees, and additional salaries and benefits associated with the increased headcount. We have also increased commercial and marketing personnel and consulting activities in preparation for new product launches.

Impairment of intangible assets

We recognized an impairment of intangible assets in the amount of $120,000 for the nine months ended September 30, 2021. The impairment charge was primarily theas a result of a decline in the hemp seed market forecasted sales. No impairment losses were recorded in the same period of 2020.

Change in fair value of contingent consideration

During the nine months ended September 30, 2021, the change in the fair value ofThe Industrial Seed Innovations contingent consideration was due to the ISI contingent consideration remeasurement that resulted in a decrease of the liability in the amount of $140,000. There was no change in fair value of contingent consideration$70,000 and $140,000 during the nine months ended September 30, 2020.2022 and 2021, respectively. See Note 15 to the Condensed Consolidated Financial Statements.

Impairment of property and equipment

Write-down of fixed assets

We assessed Archipelago’s fixed assets related to cultivating hemp and processing CBD for impairment and recorded a write-down in the amount of $1.3 million forDuring the nine months ended September 30, 2021. There were no such2022, we recognized $370,000 of impairments of property and equipment, of which $320,000 is related to the Radiance Beauty licensing agreement. During the nine months ended September 30, 2021, we recognized $1.3 million of impairments of Archipelago property and equipment related to CBD processing.

Gain on sale of property and equipment

During the nine months ended September 30, 2022, we sold some property and equipment related to the Davis laboratory and Archipelago for net proceeds exceeding book value by $386,000. During the nine months ended September 30, 2021, we sold equipment for book value exceeding net proceeds by $17,000.

Selling, general, and administrative

Selling, general, and administrative expenses decreased by $2.9 million, or 17%, during the nine months ended September 30, 2020. See Note 4.

2022 compared to the same period in 2021. The decrease was primarily driven by lower salaries, lease expense and consulting fees.

Other Income, Netincome, net

Other income, net increaseddecreased by $10.1$10.2 million induring the nine months ended September 30, 2021 when2022 compared to the same period in 2020. This is primarily2021 due to the realized gain resulting from the sale of the shares of BIOX.BIOX in 2021.

Change in the estimated fair value of common stock warrant and option liabilities

Change in the estimated fair value of common stock warrant and option liabilities decreased by $2.7 million during the nine months ended September 30, 2022 compared to the same period in 2021. The decrease was driven by the adoption of ASU 2020-06 in January 2022, which resulted in the reclassification of common stock warrants from liability to equity, partially offset by the change in the

29


estimated fair value of the liability classified preferred investment options issued in connection with the August 2022 RDO financing transaction.

Gain on extinguishment of PPPPaycheck Protection Program ("PPP") loan

During the nine months ended September 30, 2021, we were notified by the lender that the SBASmall Business Administration had forgiven the original PPP loan amount in full, and this resulted in a $1.1 million gain for nine months ended September 30, 2021.

Issuance and offering costs

OfferingDuring the nine months ended September 30, 2022, we recognized $314,000 in issuance and offering costs increased by $769,000 forrelated to the August 2022 RDO financing transaction. During the nine months ended September 30, 2021, we recognized $769,000 in issuance and were comprised of the placement agent fees, placement agent warrants, and legal and accounting feesoffering costs related to the January 2021 PIPE financing transaction. There were no issuance and offering costs for the nine months ended September 30, 2020.

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 $4.6 million for the nine months ended September 30, 2021, due to the fair value remeasurement of the common stock warrant liabilities driven by the change in the stock price, risk-free rates and volatility during the nine months ended September 30, 2021.

Income Tax Expense

Income tax expense for the nine months ended September 30, 2021, of $1,000 slightly decreased when compared to the expense of $15,000 recorded for the nine months ended September 30, 2020.

Seasonality

We and our commercial partners operate in different geographies around the world and conduct field trials used for data generation, which must be conducted during the appropriate growing seasons for particular crops and markets. Often, thereDemand for our consumer body care products tends to vary with major holidays and demand for coconut water products is only one crop-growing season per year for certain crops and markets. Similarly, climate conditions and other factors that may influencegenerally higher in 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. Sales of commercial products that incorporate our seed traits will vary based on crop growing seasons and weather patterns within particular regions.summer months.

31


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

Liquidity, Capital Resources, and Going Concern

We have funded our operations primarily with the net proceeds from the saleour private and public offerings of our equity securities and incurring debt, as well as proceeds from the sale of our SONOVA, GoodWheat, and GoodHemp 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 completing development and commercializing our quality seed traits. This includes scaling harvest production of wheat and hemp, as well as coordinating with our partners on their development programs.products. As of September 30, 2021,2022, we had cash and cash equivalents of $35.5$22.7 million. For the nine months ended September 30, 2021,2022, the Company had a net loss of $6.6$11.3 million and net cash used in operations of $19.2$11.6 million. For the twelve months ended December 31, 2020,2021, the Company had net losses of $6.0$16.1 million and net cash used in operations of $30.2$25.9 million.

We believe that our existing cash and cash equivalents will not be sufficient to meet our anticipated cash requirements for at least the next 12 months. See Note 1months from the issuance date of the notes to theour condensed consolidated financial statements, for more information.

As is disclosed in Notes 12 and 13, on January 25, 2021,thus raises substantial doubt about the Company entered intoCompany’s ability to continue as a securities purchase agreement with certain institutional and accredited investors relating togoing concern. The condensed consolidated financial statements do not include any adjustments that might result from the issuance and sale in a private placementoutcome of shares of Company common stock and warrants for an aggregate of $25.1 million, exclusive of any related transaction fees.

We sold all of the 1,875,000 shares of Bioceres stock we acquired in the November 2020 Bioceres transaction. The sale generated gross and net proceeds of $22.2 million, and $21.8 million, respectively.this uncertainty.

We may seek to raise additional funds through debt or equity financings.financings, if necessary. We may also consider entering into additional partner arrangements. TheAny sale of additional equity would result in dilution to the Company’sour stockholders. TheOur incurrence of debt would result in debt service obligations, and the instruments governing suchour debt could provide for additional operating and financing covenants that would restrict our operations. If the Company doeswe do require additional funds and is unableare not able to secure adequate additional funding, at terms agreeable to the Company, 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 theour business, results of operations and financial condition.

Cash Flows

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

 

Nine Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

2021

 

 

2020

 

 

2022

 

 

2021

 

Net cash (used in) provided by:

 

 

 

 

 

 

 

 

 

 

 

 

Operating activities

 

$

(19,208

)

 

$

(23,467

)

 

$

(11,621

)

 

$

(19,208

)

Investing activities

 

16,678

 

14,428

 

 

 

1,136

 

 

 

16,678

 

Financing activities

 

 

22,014

 

 

12,824

 

 

 

4,519

 

 

 

22,014

 

Effects of foreign currency translation on cash and cash equivalents

 

 

(1

)

 

 

 

Net increase in cash

 

$

19,483

 

$

3,785

 

Net (decrease) increase in cash

 

$

(5,966

)

 

$

19,483

 

Cash flows from operating activities

Cash used in operating activities for the nine months ended September 30, 2022, was $11.6 million. With respect to our net loss of $11.3 million, non-cash charges including $897,000 of stock-based compensation, $686,000 of lease amortization, $1.5 million of

30


write-downs of inventories, $370,000 of write-downs of property and equipment, $72,000 of write-downs of intangible assets, $314,000 of issuance and offering costs, and $354,000 of depreciation, were offset by adjustments in our working capital accounts of $439,000, the change in fair value of common stock warrant and option liabilities of $1.9 million, gain on sale of Verdeca of $1.1 million, $386,000 of gain on disposal of property and equipment, other non-cash income from the change in fair value of contingent consideration of $70,000, and operating lease payments of $718,000.

Cash used in operating activities for the nine months ended September 30, 2021, was $19.2 million. With respect to our net loss of $6.6 million, non-cash charges including $1.0 million of stock-based compensation, $914,000 of lease amortization, $1.8 million of write-downs of inventory, $1.3 million of write-down of fixed assets, $769,000 of issuance and offering costs, and $737,000 of depreciation were offset by adjustments in our working capital accounts of $2.4 million, $10.2 million of realized gain on corporate securities, the change in fair value of common stock warrant and option liabilities of $4.6 million, other non-cash income from the change in fair value of contingent consideration of $140,000, and operating lease payments of $984,000.

32


 

Cash used in operatingflows from investing activities

Cash provided by investing activities for the nine months ended September 30, 2020 was $23.5 million. Our net loss2022 consisted of $14.6 million, adjustments in our working capital accounts$897,000 of $8.6 million, non-cash incomeproceeds from the change in fair valuesales of common stock warrant liabilitiesproperty and equipment, $285,000 proceeds from sale of $6.2 million, operating lease payments of $629,000, amortization of investment premium of $44,000 and gain on disposal of equipment of $8,000, wereVerdeca, partially offset by noncash charges including $3.1 million$46,000 of write-downspurchases of inventoryproperty and prepaid production costs, $1.8 million of stock-based compensation, $745,000 of lease amortization, $635,000 of loss on extinguishment of warrant liability and $395,000 of depreciation.

Cash flows from investing activitiesequipment.

Cash provided by investing activities for the nine months ended September 30, 2021 consisted of $21.8 million of proceeds from sales of investments, partially offset by $4.3 million of acquisitions, and $919,000 in purchases of property and equipment.

Cash flows from financing activities

Cash provided by investingfinancing activities for the nine months ended September 30, 20202022 consisted of $18.3 million in proceeds from salesthe issuance of common stock relating to the August 2022 RDO financing transaction of $5.0 million gross proceeds and maturities of investments and $8,000 in proceeds from salesthe purchase of equipment,ESPP shares of $7,000, which were partially offset by $2.0 million in purchasespayments of property and equipment, $1.3 million in purchasestransaction costs related to the August 2022 RDO financing transaction of short-term investments and $500,000 in acquisitions (for ISI acquisition).

Cash flows from financing activities$488,000.

Cash provided by financing activities for the nine months ended September 30, 2021 consisted of proceeds from the issuance of common stock relating to the January 2021 PIPE financing transaction of $25.1 million gross proceeds, capital contributions from the non-controlling interest in our joint venture of $750,000, and proceeds from the purchase of ESPP shares of $39,000, which were offset by payments of transaction costs related to the January 2021 PIPE of $1.9 million and principal payments on debt of $2.0 million.

Cash provided by financing activities for the nine months ended September 30, 2020 consisted of proceeds from the issuance of common stock relating to the exercise of the June 2018 Warrants of $6.8 million and the exercise of half of the March 2018 PIPE Warrants of $2.6 million, proceeds from borrowings of $3.1 million, capital contributions from the non-controlling interest in our joint venture of $1.2 million, and proceeds from the purchase of ESPP shares of $51,000, which were offset by payments of transactions costs related to the extinguishment of warrant liability of $863,000 and principal payments on notes payable of $26,000.

Off-Balance Sheet Arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, including the use of structured finance, special purpose entities, or variable interest entities other than Verdeca, which has beenwas disposed of in November 2020.

Critical Accounting Policies and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these condensed consolidated 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 condensed consolidated financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We consider our critical accounting policies and estimates to be revenue recognition, determination of the provision for income taxes, stock-based compensation, fair value of certain equity instruments, and net realizable value of inventory. See Notes 5, 12 and 13 for the estimates made in connection with the securities purchase agreements executed during 2018, 2019, 2020 and 2021.

3331


ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Required.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

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

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

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation identified above that occurred during the quarter ended September 30, 20212022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3432


PART II. OTHER INFORMATION

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

ITEM 1A. RISK FACTORS

In addition to the other information set forth in this Quarterly Report, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020,2021, which could materially affect our business, financial condition, liquidity or future results. The risks described below and in our Annual Report on Form 10-K are not the only risks facing our company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, liquidity or future results.

Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock, which could negatively impact the market price and liquidity of our common shares and our ability to access the capital markets.

Risk associated with CBD products

 

Our common stock is listed on The manufacture, labeling and distribution by usNasdaq Capital Market. If we fail to satisfy the continued listing requirements of the CBD products inNasdaq Stock Market ("Nasdaq"), such as the corporate governance requirements or the minimum closing bid price requirement, Nasdaq may take steps to delist our portfolio is regulated by various federal, state and local agencies. These governmental authorities may commence regulatory or legal proceedings, which could restrictcommon stock. Such a delisting would have a negative effect on the allowable scopeprice of our product claims orcommon stock, impair the ability to sell or purchase our products incommon stock when persons wish to do so, and any delisting materially adversely affect our ability to raise capital or pursue strategic restructuring, refinancing or other transactions on acceptable terms, or at all. Delisting from The Nasdaq Capital Market could also have other negative results, including the future. The FDA may regulate these products to ensurepotential loss of institutional investor interest and fewer business development opportunities.

On September 27, 3022, we received a notice from the Nasdaq Listing Qualifications Department of Nasdaq informing us that because the products are not misrepresented. We are subject to regulation by the federal government and other state and local agencies as a resultclosing bid price of our CBD products.common stock had been below $1.00 per share for 30 consecutive business days, we no longer complied with the minimum bid price requirement for continued listing on The changing compliance environment increasesNasdaq Capital Market. Nasdaq Listing Rule 5550(a)(2) requires listed securities to maintain a minimum bid price of $1.00 per share, and Nasdaq Listing Rule 5810(c)(3)(A) provides that a failure to meet the possibilityminimum bid price requirement exists if the deficiency continues for a period of 30 consecutive business days. The notice had no immediate effect on the listing or the trading of our common stock on The Nasdaq Capital Market. Pursuant to Nasdaq Listing Rule 5810(c)(3)(A), the notice letter stated that we may violate onehad an initial compliance period of 180 calendar days, or moreuntil March 27, 2023, to regain compliance with the minimum bid price requirement. To regain compliance, the closing bid price of our common stock must meet or exceed $1.00 per share for a minimum of 10 consecutive business days during the requirements.180 calendar day grace period. If at any time before March 27, 2023, the bid price of our operations are found tocommon stock closes at or above $1.00 per share for a minimum of 10 consecutive business days, Nasdaq will provide written notification that we have achieved compliance with the minimum bid price requirement, and the matter would be in violation of any of such laws or any other governmental regulationsresolved. The notice letter also disclosed that apply to us,if we do not regain compliance within the initial compliance period, we may be eligible for an additional 180-day compliance period. To qualify for additional time, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of a plan to cure the deficiency during the second compliance period, including by effecting a reverse stock split if necessary. If the company meets these requirements, Nasdaq would inform us that we have been granted an additional 180 calendar days to regain compliance. However, if it appears to the staff of Nasdaq that we will not be able to cure the deficiency, or if we are otherwise not eligible, the staff would notify us that we will not be granted additional 180 days for compliance and will be subject to penalties, including, without limitation, civildelisting at that time In the event of such notification, we may appeal the staff’s determination to delist its securities, but there can be no assurance that any such appeal would be successful. We intend to monitor the closing bid price for our common stock and criminal penalties, damages, fines,will consider available strategies in an effort to satisfy the curtailment or restructuring of our operations, any of which could adversely affect the ability to operate our business and our financial results. Failure to comply with FDA requirements may result in, among other things, injunctions, product withdrawals, recalls, product seizures, fines and criminal prosecutions. Our advertising is subject to the U.S. Federal Trade Commission, or FTC, under the Federal Trade Commission Act regulation. Additionally, some states also permit advertising and labeling laws to be enforced by attorneys general who may seek relief for consumers, seek class-action certifications, seek class-wide damages and product recalls of products sold by us.minimum bid price requirement.

33


ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

DuringInformation concerning our sales of unregistered securities during the three monthsquarter ended September 30, 2021,2022, has previously been reported in Current Reports on Form 8-K that we issued the securities described below without registration under the Securities Act. Unless otherwise indicated below, the securities were issued pursuant to the private placement exemption provided by Section 4(a)(2) of the Securities Act.

On July 29, 2021, we issued 10,000 shares of our common stock to a warrant holder upon the cash exercise of a warrant with an exercise price per share of $2.19.

On August 4, 2021, we issued 4,000 shares of common stock to two warrant holders. The warrant holders utilized a cashless net exercise (based on a common stock price of $2.37 per share on the date of exercise) of a total of 20,000 warrants, each with an exercise price per share of $1.92.filed during that quarter.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.

3534


ITEM 6. EXHIBITS

The following exhibits are attached hereto or are incorporated herein by reference.

Exhibit

Number

 

 

 

 

Incorporated by Reference

 

 

Exhibit

Number

 

Exhibit Description

 

Form

 

File No.

 

Exhibit

 

Filing Date

 

Filed Herewith

 

 

 

 

 

 

 

 

 

 

 

 

 

4.1

 

Form of Pre-Funded Warrant

 

8-K

 

001-37383

 

4.1

 

8/16/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.2

 

Form of Preferred Investment Option

 

8-K

 

001-37383

 

4.2

 

8/16/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4.3

 

Form of Placement Agent Preferred Investment Option

 

8-K

 

001-37383

 

4.3

 

8/16/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10.1

 

Form of Securities Purchase Agreement

 

8-K

 

001-37383

 

10.1

 

8/16/2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  31.1

 

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

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

  31.2

 

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

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

  32.1(1)

 

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

  32.2(1)

 

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

Inline XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

Inline XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

Inline XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

Inline XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

Inline XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

X

 

 

 

 

 

 

 

 

 

 

 

 

 

104.1

 

Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2022, formatted in inline XBRL (and contained in Exhibit 101)

 

 

 

 

 

 

 

 

 

X

 

Exhibit Description

  10.1(1)

Employment letter for Laura Pitlik, Chief Marketing Officer

  10.2(1)

Severance and Change In Control Agreement for Laura Pitlik

  10.3(1)(2)

CEO Transition Agreement

  31.1

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

  31.2

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

  32.1(3)

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

  32.2(3)

Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

101.INS

Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104.1

Cover page from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2021, formatted in inline XBRL (and contained in Exhibit 101)

(1)
Indicates a management contract or compensatory plan, contract or arrangement in which any Director or any Executive Officer participates.
(2)
Incorporated by reference to Exhibit 10.1 filed with the Report on Form 8-K filed on September 7, 2021.
(3)
This certification is deemed not filed for purpose of Section 18 of the Exchange Act or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.

3635


SIGNATURES

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

 

Arcadia Biosciences, Inc.

November 15, 202110, 2022

By:

 

/s/ MATTHEW T. PLAVANSTANLEY E. JACOT, JR.

 

Matthew T. Plavan

Stanley E. Jacot, Jr.

 

President and Chief Executive Officer

November 15, 202110, 2022

By:

 

/s/ PAMELA HALEY

 

Pamela Haley

 

Chief Financial Officer

3736