What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-03-30 compared with 2022-03-31 · 433 added, 493 removed, 1066 unchanged (46% of the section changed)

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Recent Sales of Unregistered Securities

We did not engage in any financing transaction involving sales of unregistered shares during the year ended December 31, 2021.

Information concerning our sales of unregistered securities during the year ended December 31, 2022, has previously been reported in Current Reports on Form 8-K that we filed during that year.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

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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.

“Arcadia Biosciences,”

"Arcadia Biosciences,”

“GoodWheat,”

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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.

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, 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-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, EKO, and Zola, adds 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.

It is also estimated by the USDA, that approximately one-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 represen ts.

Considering that most people today are not getting enough fiber or protein in their daily diets, the superior nutrient density of our non-GMO 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.

We are a producer and marketer of innovative, plant-based food and beverage products.

We have used non-genetically modified advanced breeding techniques to develop these proprietary innovations which we are now commercializing through the sales of seed and grain, food ingredients and products, trait licensing and royalty agreements.

The acquisition of the assets of Live Zola, LLC ("Zola") added coconut water to our portfolio of products.

Our commercial strategy is to satisfy consumer nutrition 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 Zola brand allows us to broaden our reach within the beverage sector.

Components of Our Statements of Operations Data

We derive our revenues from product sales, royalties, license fees, contract research agreements and government grant projects.

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.

The Company derives its revenues from product sales, licensing agreements and royalty fees.

Product revenues

Our product revenues consist primarily of sales of Arcadia Wellness products, GoodWheat grain, GLA products, and GoodHemp seeds.

Product revenues consist primarily of sales of Arcadia Wellness products, GoodWheat grain and pasta, and GLA products.

We recognize revenue from product sales when control of the product is transferred to third-party 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.

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 license revenues to date consist of up-front, nonrefundable license fees, annual license fees, and subsequent milestone payments that we receive under our license agreements.

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.

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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 one milestone to the next, achievement of milestones is inherently uneven, and our license revenues are likely to fluctuate significantly from period to period.

Given the seasonality of agriculture and time required to progress from one milestone to the next, achievement of milestones is inherently uneven, and 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.

Contract Research and Government Grant Revenues

Contract research and government grant revenues consist of amounts earned from performing contracted research primarily related to breeding programs or the genetic engineering of plants for third parties.

Contract research revenue is accounted for as a single performance obligation for which revenues are recognized over time using the input method (e.g., costs incurred to date relative to the total estimated costs at completion).

Royalty revenues consist of amounts earned from the sale of commercial products that incorporate the Company's traits by third parties.

Royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products.

The Company recognizes the minimum annual royalty on a straight-line basis over the year, and the Company recognizes 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.

Royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers.

Operating Expenses

Cost of Product Revenues

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

Research and Development Expenses

Research and development expenses consist of costs incurred in the discovery, development and testing of our products and products in development incorporating our traits.

These expenses consist primarily of employee salaries and benefits, fees paid to subcontracted research providers, fees associated with in-licensing technology, land leased for field trials, chemicals and supplies, and other external expenses.

These costs are expensed as incurred.

Additionally, we are required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties.

Our research and development expenses may fluctuate from period to period.

Selling, General and Administrative Expenses

Selling, general and administrative expenses consist primarily of employee costs, professional service fees, broker and sales commission fees, and overhead costs.

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, including additional consulting fees.

Cost of revenues

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

Research and development expenses ("R&D")

Research and development expenses consist of costs incurred in the development and testing of the Company's products and other products in development incorporating the Company's traits.

These expenses currently consist primarily of fees paid to product formulation consultants and are expensed as incurred.

Additionally, the Company is required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties.

The Company's research and development expenses may fluctuate from period to period.

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.

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.

Loss on sale of Arcadia Spain

The loss on sale of Arcadia Spain is the loss recognized for the sale of the assets of our subsidiary Arcadia Spain.

See Note 1 to the consolidated financial statements.

Impairment of intangible assets

Impairments of intangible assets are recorded when the fair value of intangible assets drops below its carrying amount.

See Note 2 and 9.

See Note 2 and 8 to the consolidated financial statements.

Impairment of goodwill

Impairments of goodwill are recorded when the fair value of the reporting unit drops below its carrying amount.

See Note 2 to the 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.

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.

Interest Expense

Selling, general and administrative expenses

Selling, general and administrative expenses consist primarily of employee costs, professional service fees, broker and sales commission fees, and overhead costs.

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, including additional consulting fees.

Interest income (expense)

Interest income consists primarily of interest earned on investments.

Interest expense consists primarily of contractual interest on notes payable relating to the purchase of company vehicles.

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

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

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

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

The PPP loan amount forgiven has been recorded as gain on extinguishment of PPP loan, as the Company has been legally released from being the primary obligor.

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 Value of Common Stock Warrant Liabilities

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

Gain on extinguishment of PPP loan

The PPP loan amount forgiven has been recorded as gain on extinguishment of PPP loan, as the Company has been legally released from being the primary obligor.

Loss on Extinguishment of Warrant Liabilities

Loss on extinguishment of warrant liability is comprised of the difference between the reacquisition price and the carrying amount of the portion of the warrants associated with the warrant exercise transactions.

Offering Costs

Offering costs generally include placement agent, legal, advisory, accounting and filing fees, allocated to the common stock warrant liabilities.

Income tax provision

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(in thousands)

Contract research and government grants

Total revenues

Operating expenses (income):

Cost of product revenues

Cost of revenues

Research and development

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Change in fair value of contingent consideration

(Gain) on sale of property and equipment

Impairment of property and equipment, net

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Loss from operations

Interest expense

Interest income (expense)

Other income, net

Change in fair value of common stock warrant liabilities

Loss on extinguishment of warrant liability

Change in fair value of common stock warrant and option liabilities

Gain on extinguishment of PPP loan

Offering costs

Issuance and offering costs

Net loss before income taxes

Income tax (provision) benefit

Income tax (provision)

Net loss attributable to non-controlling interest

Net loss attributable to common stockholders

Product revenues accounted for 97% and 13% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

The $5.5 million, or 531%, increase in product revenues was primarily driven by $4.3 million of sales related to the newly acquired lines of products of Arcadia Wellness, plus higher sales of GoodWheat grain and GoodHemp seed.

License revenues accounted for 0% and 85% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

The $6.8 million decrease in license revenues is the result of amounts previously allocated to the licenses granted to Bioceres for certain intellectual property rights provided in connection with the November 2020 transaction.

There were no license agreements executed in 2021.

Royalty revenues accounted for 3% and 1% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

The $93,000 increase of royalty revenues represents additional annual royalty fees earned.

Contract research and government grant revenues accounted for 0% and 1% of our total revenues for the years ended December 31, 2021 and 2020, respectively.

The $106,000, or 100%, decrease in contract research and

government grant revenues was driven by the completion of agreements and grants.

Given our acute focus on selling our existing products, we do not intend to continue pursuing contract research agreements and government grant projects.

Product revenues accounted for 90% and 97% of our total revenues in 2022 and 2021, respectively.

The $2.4 million, or 36%, increase in product revenues in 2022 compared to 2021 was primarily driven by higher sales of Zola coconut water and body care products, the brands acquired in May 2021.

License revenues accounted for 9% and 0% of our total revenues in 2022 and 2021, respectively.

The $0.9 million increase in license revenues in 2022 compared to 2021 is related to the Verdeca-Bioceres licensing agreement discussed in Note 10 to the consolidated financial statements.

Royalty revenues accounted for 1% and 3% of our total revenues in 2022 and 2021, respectively.

The $59,000 decrease in royalty revenues in 2022 compared to 2021 represents fewer annual royalty fees earned.

Operating expenses (income)

Cost of Product Revenues

Cost of product revenues increased by $3.5 million, or 67%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase is mainly due to sales from the newly acquired lines of products within Arcadia Wellness, in addition to GoodWheat grain and GoodHemp seed sales.

The increase was partially offset by $1.0 million lower inventory write-downs charged to cost of product revenues during the year ended December 31, 2021.

Cost of revenues

Cost of revenues increased by $1.1 million, or 13%, in 2022 compared to 2021.

The increase in cost of revenues is the result of the increase in revenues as well as inventory write-downs of $2.3 million during 2022.

Gross profit, calculated as total revenues less cost of revenues, was $154,000 in 2022 compared to gross loss of $1.9 million in 2021.

The decrease in gross loss was primarily driven by the increase in product revenues as well as the increase in license revenue related to the Verdeca-Bioceres licensing agreement in 2022.

Research and development

Research and development expenses decreased by $4.1 million, or 51%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The decrease was driven by the Company pivoting its focus to commercialization, which led to lower employee-related expenses as we right-sized our research teams, along with the the absence of the expenses related to Verdeca.

Research and development expenses decreased by $2.4 million, or 61%, in 2022 compared to 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

The gain on sale of Verdeca decreased by $8.8 million as we sold our membership interests in the Verdeca joint venture to our partner Bioceres in 2020.

In 2022, we recognized a gain on sale of Verdeca of $1.1 million related to the regulatory approval of the Haab 4 soybeans.

See Note 10 to the consolidated financial statements.

Loss on sale of Arcadia Spain

The loss on sale of Arcadia Spain increased by $497,000 due to the transaction executed in November 2021 in which we sold our wholly owned subsidiary to a European partner.

In 2021, we recognized a loss of $497,000 on the sale of Arcadia Spain, our wholly owned subsidiary, which we sold to a European partner.

See Note 1 to the consolidated financial statements.

Impairment of intangible assets

We recognized an impairment of intangible assets in the amount of $3.3 million for the year ended December 31, 2021.

The impairment charges were primarily the result of lower margins in our wellness products due to unfavorable product mix and higher freight costs that have a significant impact in the near-term.

Impairment of intangible assets decreased by $2.9 million in 2022 compared to 2021.

We recognized impairments of intangible assets of $404,000 and $3.3 million in 2022 and 2021, respectively, primarily as a result of lower margins in our wellness products due to unfavorable product mix and higher freight costs that have a significant impact in the

A volatile economic climate and higher than normal inflation were also contributing factors, in addition to a decline in the hemp seed market forecasted sales.

No impairment losses were recorded in the same period of 2020.

See Note 2 and 9.

See Note 2 and 8 to the consolidated financial statements.

Impairment of goodwill

We recognized an impairment of goodwill in the amount of $1.6 million for the year ended December 31, 2021.

The impairment charge was primarily the result of weakness in our newly acquired consumer product margins, combined with a volatile economic climate and higher than normal inflation.

No impairment losses were recorded in the same period of 2020.

We did not recognize any impairment of goodwill in 2022.

We recognized an impairment of goodwill in the amount of $1.6 million in 2021 primarily as a result of weakness in the acquired consumer product margins, combined with a volatile economic climate and higher than normal inflation.

Change in fair value of contingent consideration

The change in fair value of contingent consideration during the year ended December 31, 2021 was due to the Industrial Seed Innovations ("ISI") contingent consideration remeasurement that resulted in a decrease of the liability in the amount of $210,000.

See Note 6 and 17.

There was no change in fair value of contingent consideration during the year ended December 31, 2020.

Change in fair value of contingent consideration in 2022 was a decrease of $70,000 compared to a decrease of $210,000 in 2021 both due to the remeasurement of the Anawah and Industrial Seed Innovations contingent consideration liabilities.

See Note 6 and 16 to the consolidated financial statements.

Gain on sale of property and equipment

In 2022, we sold property and equipment related to the Davis laboratory, Archipelago and Body Care for net proceeds exceeding book value by $314,000.

Impairment of property and equipment, net

We recorded write-downs of fixed assets in the amount of $1.5 million for the year ended December 31, 2021.

The majority of this amount was because Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to regulatory challenges and a saturated hemp market.

As a result, the Company assessed Archipelago’s fixed assets for impairment, and recorded write-downs in the amount of $1.4 million for the

year ended December 31, 2021.

An additional fixed assets impairment in the amount of $100,000 was recorded for other fixed assets determined to have no future economic benefit.

No write-downs of fixed assets were recorded in 2020.

In 2022, we recognized $530,000 of impairments of property and equipment, of which $320,000 is related to the Radiance Beauty licensing agreement.

In 2021, we recognized $1.5 million of impairments of Archipelago property and equipment related to CBD processing.

Selling, General, and Administrative

Selling, general, and administrative expenses increased by $6.5 million, or 39%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

The increase was primarily driven by selling expenses and other general and support costs related to the acquired businesses, as well as acquisition-related investment banker success fees, legal diligence and transaction fees.

We have also increased commercial and marketing personnel and consulting activities in preparation for new product and channel launches.

Interest Expense

Interest expense was $20,000 for the year ended December 31, 2021, 60% lower compared to the amount recognized during the year ended December 31, 2020, due to the satisfaction of notes payable agreements during 2021.

There was $47,000 of interest expense for the year ended December 31, 2020.

Selling, general, and administrative expenses decreased by $4.9 million, or 21%, in 2022 compared to 2021.

The decrease was primarily driven by lower salaries, lease expense and consulting fees in 2022.

Interest income (expense)

In 2022, the Company had interest income of $289,000 from investments as compared to interest expense of $20,000 in 2021.

Other income, net

Other income, net, increased by $9.4 million, or 1267%, for the year ended December 31, 2021 compared to the year ended December 31, 2020.

This was primarily due to the $10.2 million realized gain of corporate securities of Bioceres recorded in June 2021.

No realized gains of corporate securities were recorded during the year ended December 31, 2020, as the prior year's other income, net balance mainly consisted of the unrealized gain of the same corporate securities in the amount of $656,000.

Other income, net, decreased by $10.1 million, or 100%, in 2022 compared to 2021 due to $10.2 million of realized gain from the sale of corporate securities of Bioceres in June 2021.

See Note 6 and Note 10 to the consolidated financial statements.

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 $5.7 million in 2022 compared to 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 estimated fair value of the liability classified preferred investment options issued in connection with the August 2022 RDO financing transaction.

Gain on extinguishment of PPP loan

During the year ended December 31, 2021, we were notified by the lender that the SBA had forgiven the original PPP loan amount in full, resulting in a $1.1 million gain on the extinguishment of the PPP loan.

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 $8.9 million for the year ended December 31, 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 as of December 31, 2021 compared to the change for the year ended December 31, 2020.

Loss on Extinguishment of Warrant Liability

In connection with the May and July 2020 Warrant Exercise Transactions, the Company recognized a loss on extinguishment of warrant liabilities of approximately $635,000 for the year ended December 31, 2020.

There were no such transactions during the year ended December 31, 2021.

In 2021, we were notified by our lender that the Small Business Administration had forgiven the original PPP loan amount in full, resulting in a $1.1 million gain on the extinguishment of the PPP loan.

See Note 18 to the consolidated financial statements.

Issuance and offering costs

Offering costs increased by $769,000 for the year ended December 31, 2021, and were comprised of placement agent fees, placement agent warrants, and legal and accounting fees allocated to the stock warrant liabilities recorded with the January 2021 private placement financing transaction.

There were no issuance and offering costs incurred during the year ended December 31, 2020.

Income Tax Provision (Benefit)

The income tax provision resulted in a $2,000 expense for the year ended December 31, 2021, compared to a benefit of $124,000 for the year ended December 31, 2020.

In the prior year, purchase accounting deferred tax liabilities related to the ISI acquisition, enabled the realization of a portion of the existing deferred tax assets, thus allowing for a reduction in the valuation allowance in the amount of $107,000.

In 2022, we recognized $314,000 in issuance and offering costs related to the August 2022 RDO financing transaction.

In 2021, we recognized $769,000 in issuance and offering costs related to the January 2021 PIPE financing transaction.

Income tax (provision)

The income tax provision resulted in expense of $14,000 in 2022 as compared to expense of $2,000 in 2021.

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.

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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 our private and public offerings of our equity securities and debt, as well as proceeds from the sale of our products and payments under license agreements, contract research agreements and government grants.

Liquidity and Capital Resources

Our principal use of cash is to fund our operations, which are primarily focused on commercializing our products.

Our contractual obligations are primarily related to our operating leases for facilities, land and equipment.

Refer to Note 17 to the consolidated financial statements for details of our leasing arrangements.

As of December 31, 2022, we had cash and cash equivalents of $20.6 million.

For the years ended December 31, 2022 and 2021, the Company had net losses of $15.6 million and $16.1 million, respectively, and net cash used in operations of $14.0 million and $25.9 million, respectively.

Going Concern

We believe that our existing cash and cash equivalents will not be sufficient to meet our anticipated cash requirements for at least the next 12-18 months from the issuance date of our 2022 financial statements, and thus raises substantial doubt about the Company’s ability to continue as a going concern.

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Our incurrence of debt would result in debt service obligations, and the instruments governing our debt could provide for additional operating and financing covenants that would restrict our operations.

If we do require additional funds and are not able to secure adequate additional funding, we may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned development programs.

require additional funds and are not able to secure adequate additional funding, we may be forced to reduce our spending, extend payment terms with our suppliers, liquidate assets, or suspend or curtail planned product launches.

Any of these actions could materially harm our business, results of operations and financial condition.

The following table summarizes total current assets, current liabilities and working capital for the dates indicated:

Current assets

Current liabilities

Working capital surplus

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

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Financing activities

Effects of foreign currency translation on cash

and cash equivalents

Net increase in cash and cash equivalents

Effects of foreign currency translation on cash and cash equivalents

Net decrease in cash and cash equivalents

Cash flows from operating activities

Cash used in operating activities for the year ended December 31, 2022 was $14.0 million.

Our net loss of $16.1 million, non-cash charges including $1.5 million of stock-based compensation, $1.3 million of lease amortization, $3.6 million of write-downs of inventory, $1.5 million of impairment of property and equipment, $769,000 of issuance and offering costs, $1.6 million of impairment of goodwill, $3.3 million of impairment of

intangible assets, and $929,000 of depreciation were offset by $1.7 million adjustments in our working capital accounts, $10.2 million of realized gain on corporate securities, $8.9 million for the change in fair value of common stock warrant liabilities, $210,000 of other non-cash income from the change in fair value of contingent consideration, and $1.3 million of operating lease payments.

With respect to our net loss of $15.6 million, non-cash charges including $1.1 million of stock-based compensation, $884,000 of lease amortization, $2.5 million of write-downs of inventory, $530,000 of impairment of property and equipment, $314,000 of issuance and offering costs, $404,000 of impairment of intangible assets, $439,000 of depreciation, and $1.0 million adjustments in our working capital accounts were offset by $3.2 million for the change in fair value of common stock warrant and option liabilities, gain on sale of Verdeca of $1.1 million, $314,000 of net gain on disposal of property and equipment, and operating lease payments of $932,000.

Cash used in operating activities for the year ended December 31, 2021 was $25.9 million.

Our net loss of $6.0 million, adjustments in our working capital accounts of $11.5 million, gain on sale of Verdeca of $8.8 million, corporate securities received in exchange for license agreement of $4.3 million, change in fair value of common stock warrant liabilities of $6.6 million, operating lease payments of $910,000, unrealized gain on corporate securities of $656,000 and net amortization of investment premium of $44,000 were partially offset by non-cash charges of $2.0 million for stock-based compensation, depreciation and amortization of $662,000, lease amortization of $1.0 million, loss on extinguishment of warrant liability of $635,000, as well as $4.3 million of inventory write-downs.

With respect to our net loss of $16.1 million, non-cash charges including $1.5 million of stock-based compensation, $1.3 million of lease amortization, $3.6 million of write-downs of inventory, $1.5 million of impairment of property and equipment, $769,000 of issuance and offering costs, $1.6 million of impairment of goodwill, $3.3 million of impairment of intangible assets, and $929,000 of depreciation were offset by $1.7 million adjustments in our working capital accounts, $10.2 million of realized gain on corporate securities, $8.9 million for the change in fair value of common stock warrant liabilities, $210,000 of other non-cash income from the change in fair value of contingent consideration, and $1.3 million of operating lease payments.

Cash flows from investing activities

Cash provided by investing activities for the year ended December 31, 2022 of $1.4 million primarily consisted of $920,000 of proceeds from sales of property and equipment, $569,000 proceeds from sale of Verdeca, partially offset by $72,000 of purchases of property and equipment.

Cash provided by investing activities for the year ended December 31, 2021 of $16.6 million primarily consisted of $21.8 million of proceeds from sales of investments, partially offset by $4.3 million of acquisitions, and $1.0 million in purchases of property and equipment.

Cash provided by investing activities for the year ended December 31, 2020 of $17.3 million primarily consisted of $18.3 million of proceeds from sales and maturities of investments and $3.2 million of proceeds from the sale of Verdeca, partially offset by $2.3 million in purchases of property and equipment, $1.3 million of purchases of investments and $500,000 of acquisitions, net of cash acquired.

Cash flows from financing activities

Cash provided by financing activities for the year ended December 31, 2022 of $4.5 million consisted of proceeds from the issuance of common stock relating to the August 2022 RDO financing transaction of $5.0 million gross proceeds and proceeds from the purchase of ESPP shares of $7,000, which were offset by payments of transaction costs related to the August 2022 RDO financing transaction of $488,000.

Cash provided by financing activities for the year ended December 31, 2021 of $21.9 million consisted of proceeds from the issuance of common stock relating to the January 2021 private placement financing transaction of $25.1 million of 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 private placement of $1.9 million and principal payments on debt of $2.1 million.

Cash provided by financing activities for the year ended December 31, 2020 of $20.6 million consisted of proceeds from the exercise of warrants of $9.4 million, proceeds from the issuance of stock and warrants relating to the December 2020 Offering of $8.0 million, proceeds from borrowings of $3.1 million, capital contributions from the non-controlling interest in our joint venture of $1.6 million and proceeds from the purchase of ESPP shares of $51,000.

Partially offsetting these proceeds were payments of offering costs totaling $652,000 for the December 2020 Offering, as well payments of transaction costs relating to extinguishment of warrant liability of $863,000.

Off-Balance Sheet Arrangements

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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, impairments of long-lived assets such as intangible assets and goodwill, impairment of property and equipment, and net realizable value of inventory.

We consider our critical accounting policies and estimates to be revenue recognition, determination of the provision for income taxes, stock-based compensation, impairments of property and equipment, and net realizable value of inventory.

Revenue recognition

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We generally recognize product revenues once passage of title has occurred, which is generally upon delivery.

Shipping and handling costs charged to customers are recorded as revenues and included in cost of product revenues at the time the sale is recognized.

Shipping and handling costs charged to customers are recorded as revenues and included in cost of revenues at the time the sale is recognized.

We have determined that, at the inception of each license agreement, there is only one deliverable for the license for access to and assistance with the development of the specified intellectual property.

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We recognize revenue related to milestone payments when it is probable that such amounts would not be reversed.

Contract research revenue consists of amounts earned from performing contracted research activities for third parties.

Activities performed are related to breeding programs or the genetic engineering of plants and are subject to an executed agreement.

We generally recognize fees for research activities over the contractually specified performance period.

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

Determination of the provision for income taxes

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The impact from any forfeiture rate adjustment would be recognized in full in the period of adjustment and if the actual number of future forfeitures differs from our estimates, we might be required to record adjustments to stock-based compensation in future periods.

Impairments of long-lived intangible assets and goodwill

The Company evaluates if events and circumstances have occurred that indicate the remaining estimated useful life of long-lived assets, such as identifiable intangible assets and goodwill, may warrant revision or that the remaining balance of these assets may not be recoverable.

In evaluating for recoverability, the Company estimates the future undiscounted cash flows for intangible assets, and discounted cash flows for goodwill, expected to result from the use of the assets and their eventual disposition.

In the event that the balance of any asset exceeds the future undiscounted or discounted cash flow estimate, impairment is recognized based on the excess of the carrying amounts of the asset above its estimated fair value.

Impairments of property and equipment

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Net realizable value of inventories

Inventory costs are tracked on a lot-identified basis, valued at the lower of cost or net realizable value and are included as cost of product revenues when sold.

Inventory costs are tracked on a lot-identified basis, valued at the lower of cost or net realizable value and are included as cost of revenues when sold.

We compare the cost of inventories with market value and write down inventories to net realizable value, if lower.

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

We tested the demand forecasts by obtaining documentation to support customer orders, contracts, historical and future sales that corroborate the reasonableness of amount estimated for demand.

We evaluated the demand forecasts by obtaining documentation to support customer orders, contracts, historical and future sales that corroborate the reasonableness of amount estimated for demand.

We evaluated management’s ability to accurately forecast product demand by comparing actual results to management’s historical estimates.

We performed corroborative inquiries with the personnel responsible for sales forecasting to evaluate the reasonableness of the product salability and demand forecasts.

We assessed whether write-downs of inventory may be understated by examining write-down activity subsequent to December 31, 2021.

We assessed whether write-downs of inventory may be understated by examining GoodWheat write-down activity subsequent to December 31, 2022.

/s/ Deloitte & Touche LLP

Phoenix, Arizona

Tempe, Arizona

March 30, 2023

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Cash and cash equivalents

Short-term investments

Accounts receivable, net of allowance for doubtful accounts of $ 76 and $ 0

Accounts receivable and other receivables, net of allowance for doubtful accounts of $ 3 and $ 76

as of December 31, 2022 and 2021, respectively

Inventories, net —

Assets held for sale

Prepaid expenses and other current assets

Total current assets

Restricted cash

Property and equipment, net

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Amounts due to related parties

Debt —

Unearned revenue —

Operating lease liability —

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Total current liabilities

Debt —

Operating lease liability —

Common stock warrant liabilities

Common stock warrant and option liabilities

Other noncurrent liabilities

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Year Ended December 31,

Contract research and government grants

Total revenues

Operating expenses (income):

Cost of product revenues

Cost of revenues

Research and development

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Change in fair value of contingent consideration

(Gain) on sale of property and equipment

Impairment of property and equipment, net

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Loss from operations

Interest expense

Interest income (expense)

Other income, net

Change in fair value of common stock warrant liabilities

Loss on extinguishment of warrant liability

Change in fair value of common stock warrant and option liabilities

Gain on extinguishment of PPP loan

Offering costs

Issuance and offering costs

Net loss before income taxes

Income tax (provision) benefit

Income tax (provision)

Net loss attributable to non-controlling interest

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Basic and diluted

Other comprehensive loss, net of tax

Unrealized losses on investment securities

Other comprehensive loss

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Balance at December 31, 2021

The accompanying notes are an integral part of these consolidated financial statements.

Comprehensive

(Loss) Income

Non-controlling

Stockholders’

Balance at December 31, 2019

Issuance of shares related to employee stock purchase plan

Issuance of shares related to exercise of June 2018 Warrants

Issuance of investor warrants related to May 2020 Warrant

Issuance of placement agent warrants related to issuance of May

2020 Warrants

Issuance of shares related to the exercise of March 2018 PIPE

Issuance of investor warrants related to July 2020 Warrant

Issuance of placement agent warrants related to issuance of July

2020 Warrants

Shares of common stock issued at closing of ISI transaction

Issuance of shares and warrants related to December 2020 Offering

Offering costs related to December 2020 Offering

Issuance of placement agent warrants related to December 2020

Reclassification upon adoption of ASU 2020-06

Issuance of shares related to August 2022 Offering

Offering costs related to August 2022 Offering

Issuance of shares related to employee stock

purchase plan

Stock-based compensation

Non-controlling interest contributions

Unrealized losses on investment securities

Balance at December 31, 2022

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

Change in fair value of common stock warrant liabilities

Change in fair value of common stock warrant and option liabilities

Change in fair value of contingent consideration

Offering costs

Issuance and offering costs

Amortization of intangible assets

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Impairment of goodwill

Loss (Gain) on disposal of equipment

(Gain) Loss on disposal of equipment

Loss on disposal of intangible assets

Net amortization of investment premium

Stock-based compensation

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Realized gain on corporate securities

Corporate securities received in exchange for license agreement

Unrealized gain on corporate securities

Write-down of inventory and prepaid production costs

Loss on extinguishment of warrant liability

Write-down of inventories

Gain on extinguishment of PPP loan

Impairment of property and equipment

Deferred income taxes

Changes in operating assets and liabilities:

Accounts receivable

Accounts receivable and other receivables

Prepaid expenses and other current assets

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Proceeds from sale of property and equipment

Proceeds from sale of Verdeca —

earn-out received

Purchases of property and equipment

Proceeds from sale of Verdeca

Acquisitions, net of cash acquired

Purchases of investments

Proceeds from sales and maturities of investments

Net cash provided by (used in) investing activities

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of common stock and warrants from

December 2020 Offering

Payments of offering costs relating to December 2020 Offering

Proceeds from issuance of common stock, pre-funded warrants and

preferred investment options from August 2022 Offering

Payments of offering costs relating to August 2022 Offering

Proceeds from issuance of common stock and warrants from

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securities purchase agreement

Proceeds from borrowings

Payments of transaction costs relating to extinguishment of warrant liability

Principal payments on notes payable

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Effects of foreign currency translation on cash and cash equivalents

Net increase (decrease) in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash —

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents —

beginning of period

Cash, cash equivalents and restricted cash —

Cash and cash equivalents —

end of period

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NONCASH TRANSACTIONS:

Shares of common stock issued at closing of ISI transaction

Common stock warrants issued to placement agent and included in offering costs related to

December 2020 Purchase Agreement

Common stock warrants issued to placement agent and included in offering costs related to

May 2020 Warrant Transaction

Common stock warrants issued to placement agent and included in offering costs related to

July 2020 Warrant Transaction

Fair value of shares of common stock issued at closing of Arcadia Wellness transaction

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

Common stock options issued to placement agent and included in offering

costs related to August 2022 RDO securities purchase agreement

Common stock warrants issued to placement agent and included in offering

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

Right of use assets obtained through modification of existing lease agreement

Fixed assets acquired with notes payable

Purchases of fixed assets included in accounts payable and accrued expenses

Proceeds from sale of property and equipment in accounts receivable and other receivables

Proceeds from sale of Verdeca in accounts receivable and other receivables

The accompanying notes are an integral part of these consolidated financial statements.

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Arcadia Biosciences, Inc.

(the "Company"), was incorporated in Arizona in 2002 and maintains its headquarters in Davis, California, with additional facilities in American Falls, Idaho, and Chatsworth, California.

(the "Company," "Arcadia" or "management"), was incorporated in Arizona in 2002 and maintains its headquarters in Dallas, Texas, with additional office space in Davis, California, and additional facilities in American Falls, 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, as well as nutritionally enhanced food ingredients and health and wellness products, has laid the foundation for its path forward.

The Company is a producer and marketer of innovative, plant-based food and beverage products.

Its history as a leader in science-based approaches to developing high-value crop improvements, as well as nutritionally enhanced food ingredients, 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 businesses of Lief Holdings, LLC (“Lief”), EKO Holdings, LLC (“Eko”) and Live Zola, LLC (“Zola”) added bath and body care products, as well as coconut water, to the Company’s portfolio.

The acquisition of the assets of Live Zola, LLC (“Zola”) added coconut water to the Company's portfolio of products.

In May 2021, the Company’s wholly owned subsidiary Arcadia Wellness, LLC (“Arcadia Wellness”

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The acquisition included consumer CBD brands like Soul Spring, a CBD-infused botanical therapy brand in the natural category, Saavy Naturals, a line of natural body care products and 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.

Also included in the purchase was Zola, a coconut water sourced exclusively with sustainably grown coconuts from Thailand.

On July 8, 2022, the Company entered into an agreement to license Saavy Naturals to Radiance Beauty and Wellness, Inc.

("Radiance Beauty").

See Note 7 for a discussion of the licensing agreement.

In April 2021, the newly formed Company’s wholly owned subsidiary Arcadia SPA, S.L.

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In October 2021, Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to regulatory challenges and a saturated hemp market.

As a result, the Company recorded impairments of property and equipment in the amount of $ 1.4 million and $ 0 for the years ended December 31, 2021, and 2020, respectively.

As a result, the Company recorded impairments of property and equipment in the amount of $ 160,000 and $ 1.4 million for the years ended December 31, 2022, and 2021, respectively.

The Company assessed Archipelago’s fixed assets for impairment through an asset recoverability test, using prices for similar assets.

Reverse Stock Split

In February 2023, the Company’s board of directors approved a reverse split of 40:1 on the Company’s issued and outstanding common stock.

On February 15, 2023, the Company’s stockholders approved the certificate of amendment, which the Company filed on February 27, 2023 with the Secretary of State of Delaware to effect the reverse split on March 1, 2023.

All issued and outstanding common stock, options to purchase common stock and per share amounts contained in the consolidated financial statement have been retroactively adjusted to reflect the reverse stock split for all periods presented .

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Liquidity, Capital Resources, and Going Concern

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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.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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.

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.

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Basis of Presentation and Principles of Consolidation

The consolidated financial statements include the accounts of the Company, Arcadia Wellness, Arcadia Spain and Archipelago.

The consolidated financial statements include the accounts of the Company, Arcadia Wellness and Archipelago.

All intercompany balances and transactions have been eliminated in consolidation.

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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 $ 1,474,000 and $ 1,371,000 is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the years ended December 31, 2021 and 2020, respectively.

Net loss attributable to non-controlling interest of $ 236,000 and $ 1.5 million is recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the years ended December 31, 2022 and 2021, respectively.

The non-controlling partner’s equity interests are presented as non-controlling interests on the consolidated balance sheets as of December 31, 2022 and 2021.

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Accordingly, period-end exchange rates were applied to translate its assets and liabilities and average transaction exchange rates to translate its revenues, expenses, gains, and losses into U.S.

Upon disposal of all of the assets and liabilities related to Arcadia Spain, the Company deconsolidated the accounts of the subsidiary as of November 30, 2021, and recorded a loss on the sale in the amount of $ 497,000 during the quarter ended December 31, 2021.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions in the Company’s consolidated financial statements and notes thereto.

Significant estimates and assumptions made by management included the determination of the provision for income taxes, stock-based compensation, impairments of long-lived assets such as intangible assets and goodwill, impairment of property and equipment, and net realizable value of inventory.

Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances.

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therefore, management believes that there is no significant exposure to any credit risk in the Company’s cash and cash equivalents.

However, as of December 31, 2021 and 2020, a substantial portion of the Company’s cash in depository accounts is in excess of the federal deposit insurance limits.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Restricted cash

Restricted cash consists of funds that are contractually or legally restricted as to usage or withdrawal and have been presented separately from cash and cash equivalents on the consolidated balance sheets.

However, as of December 31, 2022 and 2021, a portion of the Company’s cash in depository accounts is in excess of the federal deposit insurance limits.

Investments in debt and equity securities

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Factors that are considered by the Company in determining whether an other-than-temporary decline in value has occurred include (i) the market value of the investment in relation to its cost basis, (ii) the financial condition of the investment, and (iii) the Company’s intent and ability to retain the investment for a sufficient period of time to allow for recovery of the market value of the investment.

As of December 31, 2021, the Company had no short-term investments, and as of December 31, 2020, there was no impairment of the Company’s investments.

Accounts receivable

As of December 31, 2022 and 2021, there was no impairment of the Company’s investments.

Accounts receivable and other receivables

Accounts receivable represents amounts owed to the Company from product sales, licenses, and royalties.

Other receivables represent amounts owed to the Company for miscellaneous non-trade activities including the sale of property and equipment.

The carrying value of the Company’s receivables represents estimated net realizable values.

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The Company had $ 3,000 and $ 76,000 amounts reserved for doubtful accounts at December 31, 2022 and 2021, respectively, and the allowance activity during the year ended December 31, 2022, was immaterial.

Inventory costs are tracked on a lot-identified basis and are included as cost of product revenues when sold.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Inventory costs are tracked on a lot-identified basis and are included as cost of revenues when sold.

Inventories are stated at the lower of cost or net realizable value.

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Amounts inventoried consist primarily of purchased raw materials, components, labor, and manufacturing facility costs.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Zola Coconut water :

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Amounts in inventory for growing biomass primarily consist of labor, supplies and facility costs.

The inventories—current line item on the balance sheet represents inventory forecasted to be sold or used in production in the next 12 months, as of the balance sheet date, and consists primarily of the cost of GoodWheat seed and grain, body care products, Zola Coconut water, and hemp seed.

The inventories—noncurrent line item on the balance sheet represents inventory expected to be used in production or sold beyond the next 12 months, as of the balance sheet date, and consists primarily of GoodWheat seed and grain, and GoodHemp seed.

Raw materials inventories consist primarily of the costs to produce body care products and GoodWheat seeds.

Goods in process inventories consist of costs to produce GoodHemp seed, hemp seed production costs incurred by Archipelago, and GoodWheat seed and grain.

Finished goods inventories consist of GoodWheat and body care products, and GoodHemp seeds that are available for sale.

Raw materials inventories consist primarily of GoodWheat seeds and in-transit Zola Coconut Water.

Finished goods inventories consist primarily of GoodWheat grain, Zola Coconut Water, and GoodHemp seeds that are available for sale.

Property and equipment

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*Leasehold improvements are depreciated over the shorter of the estimated life of the asset or the remaining life of the lease.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

The Company evaluates if events and circumstances have occurred that indicate the remaining estimated useful life of fixed assets may warrant revision or that the remaining balance of these assets may not be recoverable.

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Intangible assets, net

As of December 31, 2021 and 2020, there were $ 3.3 million and $ 0 , respectively of impairm ent of intangible assets, recorded on the consolidated statements of operations and comprehensive loss.

During the years ended December 31, 2022 and 2021, there were $ 404,000 and $ 3.3 million, respectively of impairm ent of intangible assets, recorded on the consolidated statements of operations and comprehensive loss.

See Note 8 for more information.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

No goodwill impairment charges were recorded during the year ended December 31, 2022.

During the year ended December 31, 2021, the Company recorded an impairment charge of $ 1.6 million, which was included as impairment of goodwill on our consolidated statements of operations and comprehensive loss.

The goodwill carrying value of $ 1.6 million was fully impaired.

See Note 7 and 8 for the goodwill recorded at the time of the ISI and AW acquisitions, respectively.

The impairment charge was primarily the result of weakness in our newly acquired consumer product margins combined with a volatile economic climate and higher than normal inflation.

The decline in the stock price observed during the fourth quarter of 2021, pushed our market capitalization significantly below the recorded value of our stockholders' equity.

No goodwill impairment charges were recorded during the year ended December 31, 2020.

Fair value of financial instruments

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

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Concentration of risk

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Customers representing greater than 10% of accounts receivable were as follows (in percentages):

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Customers representing greater than 10% of total revenues were as follows (in percentages):

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Year Ended December 31,

(in thousands)

Research and development

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The Company uses the asset and liability method of accounting for income taxes.

Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

are expected to reverse.

A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized.

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Revenue recognition

The Company derives its revenues from product sales, licensing agreements, royalty fees, contract research agreements, and government grants.

The Company derives its revenues from product sales, licensing agreements and royalty fees.

Product revenues

Product revenues to date have consisted primarily of sales of SONOVA GLA products, GoodWheat grain sales, body care products, Zola Coconut water, and GoodHemp seed sales.

The Company recognizes revenue from product sales when ownership of the product is transferred to third-party distributors and consumers, collectively “our customers”, which generally occurs upon delivery.

Shipping and handling costs charged to customers are

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

recorded as revenues and included in cost of product revenues at the time the sale is recognized.

Revenues fluctuate depending on the timing of shipments of product to our customers.

Product revenues consist primarily of sales of Arcadia Wellness products, GoodWheat grain and pasta, and GLA products.

We recognize revenue from product sales when control of the product is transferred to third-party distributors and manufacturers, collectively “our customers,”

which generally occurs upon delivery.

The Company's 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

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Royalty revenues

Royalty revenues from the Company’s agreements with third parties are recognized when the Company can reasonably determine the amounts earned.

In most cases, this will be upon notification from the third-party licensee.

Contract research and government grant revenues

Contract research revenue and government grants revenues are accounted for as a single performance obligation for which revenues are recognized over time using the input method (e.g., costs incurred to date relative to the total estimated costs at completion).

The Company receives payments from government entities in the form of government grants.

The Company’s obligation with respect to these government agreements is to perform the research on a best-efforts basis.

Unearned revenue

The Company defers revenue to the extent that cash received in conjunction with a license agreement, contract or grant exceeds the revenue recognized in accordance with Company policies.

During the year ended December 31, 2021, the Company recognized revenue of $ 8,000 that was included in unearned revenue on the consolidated balance sheet as of December 31, 2020.

Cost of product revenues

Cost of product revenues relates to the sale of GoodWheat, Zola Coconut water, body care, GLA oil and GoodHemp products and consists of manufacturing costs, including production overhead costs such as depreciation, rent and others, in-licensing and royalty fees, any adjustments or write-downs to inventory, as well as the cost of raw materials, including inventory and third-party services costs related to procuring, processing, formulating, packaging, and shipping the Company’s products.

Research and development expenses

Research and development expenses consist of costs incurred in the discovery, development, and testing of the Company’s products and products in development incorporating the Company’s traits.

These costs are expensed as incurred.

Royalty revenues consist of amounts earned from the sale of commercial products that incorporate the Company's traits by third parties.

Royalty revenues consist of a minimum annual royalty, offset by amounts earned from the sale of products.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

product to their customers, which generally occurs upon shipment.

Royalty revenues can fluctuate depending on the timing of shipments of product by the third parties to their customers.

Unearned revenue

The Company defers revenue to the extent that cash received in conjunction with a license agreement is not yet earned in accordance with the Company policies.

Cost of revenues

Research and development expenses

Research and development expenses consist of costs incurred in the development and testing of the Company's products and other products in development incorporating the Company's traits.

These expenses currently consist primarily of fees paid to product formulation consultants and are expensed as incurred.

Additionally, the Company is required from time to time to make certain milestone payments in connection with the development of technologies in-licensed from third parties.

The Company's research and development expenses may fluctuate from period to period.

Change in fair value of contingent consideration

Change in the fair value of contingent consideration is comprised of the gain associated with the reduction of the contingent liability.

Change in the estimated fair value of common stock warrant liabilities

Change in the estimated fair value of common stock warrant liabilities is comprised of the fair value remeasurement of liability classified common stock warrants.

See Note 6 and Note 16.

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

Change in the estimated fair value of common stock warrant and option liabilities is comprised of the fair value remeasurement of liability classified common stock warrants and options.

Recent Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326):

In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2016-13, Financial Instruments –

Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments.

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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 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 December 15, 2020.

The Company adopt ed ASU No.

The Company adopted A SU No.

2016-13 on January 1, 2023 with an immaterial impact on the Company’s disclosures.

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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.

ASU 2020-06 is effective for public business entities that meet the

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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.

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2020-06 on January 1, 2022 , using the modified retrospective method.

The main impact on the consolidated financial statements that will be prepared on Form 10-Q as of March 31, 2022, will be the reclassification of the Company's stock warrant liabilities to equity on the consolidated balance sheets, and the elimination of quarterly changes in the fair value of our stock warrant liabilities on the consolidated statement of operations and comprehensive loss.

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 consolidated balance sheets.

In May 2021, the FASB issued ASU No.

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2021-04 on January 1, 2022 with an immaterial impact on the Company’s disclosures.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Inventory costs are tracked on a lot-identified basis and are included as cost of 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 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 wheat, hemp seed and CBD oil inventories, as well as body care products of $ 2.5 million for the year ended December 31, 2022.

Of inventory write-downs during the year ended December 31, 2022, $ 394,000 was related to the Radiance Beauty licensing agreement discussed in Note 7.

The Company recorded write-downs of wheat inventories, hemp seed inventories, and body care products of $ 3.6 million for the year ended December 31, 2021.

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):

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Finished goods

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.

Therefore, if there are significant changes in demand and market conditions, substantial future write-downs of inventory may be required, which would materially increase our expenses in the period the write down is taken and materially affect our operating results.

The Company recorded write-downs of wheat inventories, hemp seed inventories, and body care products of $ 3.6 million for the year ended December 31, 2021.

The Company recorded $ 4.3 million of inventory write-downs for the year ended December 31, 2020.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Property and Equipment, Net

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Depreciation expense was $ 439,000 and $ 929,000 for the years ended December 31, 2022 and 2021, respectively.

As of December 31, 2021 and 2020, respectively, there was $ 267,000 and $ 239,000 of construction in progress included in property and equipment that had not been placed into service and was not subject to depreciation.

The Company recorded impairments of property and equipment in the amount of $ 1.5 million and $ 0 for the years ended December 31, 2021, and 2020, respectively.

The majority was related to the fact that Arcadia and Legacy mutually agreed to wind down the cultivation activities of Archipelago, due to regulatory challenges and a saturated hemp market.

As a result, the Company assessed Archipelago’s fixed assets for impairment through an asset recoverability test, and recorded write-downs in the amount of $ 1.4 million for the year ended December 31, 2021, calculating the fair value using prices for similar assets.

An additional fixed assets impairment in the amount of $ 100,000 was recorded as of December 31, 2021, for other fixed assets, not related to Archipelago, determined to have no future economic benefit .

As of December 31, 2022 and 2021, there was $ 10,000 and $ 267,000 of construction in progress, respectively, 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 consolidated balance sheet as assets held for sale.

During the year ended December 31, 2022, management initiated the sale of property and equipment related to the Davis laboratory, Archipelago and Body Care.

The Company completed the sale of such property and equipment with a net gain on sale of property and equipment in the amount of $ 314,000 recorded on the consolidated statements of operations and comprehensive loss during the year ended December 31, 2022.

The proceeds related to the sale of property and equipment during the year ended December 31, 2022 were $ 920,000 .

The Company had no sales of assets held for sale as of December 31, 2021.

Property and equipment related to Archipelago, in the amount of $ 87,000 , have been classified as assets held for sale, and are recorded at fair value as of December 31, 2022.

During the year ended December 31, 2022, the Company recorded write-downs of property and equipment of $ 530,000 , of which $ 320,000 was related to the Radiance Beauty licensing agreement.

See Note 7 for further discussion of the licensing agreement.

The Company recorded impairments of property and equipment in the amount o f $ 1.5 million for the year ended December 31, 2021 primarily related to the unwinding of Archipelago.

The Company assessed Archipelago’s fixed assets for impairment through an asset recoverability test, calculating the fair value using prices for similar assets.

Arcadia Biosciences, Inc.

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Unrealized and realized gains and losses are recognized as other income in the consolidated statements of operations and comprehensive loss.

The Company classified its investments in corporate securities of Bioceres Crop Solutions Corp.

(“BIOX”) as short-term investments.

The Company recorded realized gains of $ 10.2 million for the year ended December 31, 2021, associated with the sale of these corporate securities in other income, net, in the consolidated statements of operations and comprehensive loss.

The following tables summarize the amortized cost and fair value of the investment securities portfolio at December 30, 2021 and December 31, 2020.

During the year ended December 31, 2021, the Company recorded realized gains of $ 10.2 million associated with the sale of corporate securities in other income, net, in the consolidated statements of operations and comprehensive loss.

The following tables summarize the amortized cost and fair value of the investment securities portfolio at December 31, 2022 and 2021:

(Dollars in thousands)

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Money market funds

Short-term investments:

Corporate securities

Total Assets at Fair Value

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Money market funds

Short-term investments:

Corporate securities

Total Assets at Fair Value

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2022 or 2021.

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable and other receivables, accounts payable and accrued liabilities.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

The Company uses the market approach technique to value its financial instruments and there were no changes in valuation techniques during 2021 or 2020.

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and notes payable.

For accounts receivable, accounts payable, accrued liabilities, and notes payable the carrying amounts of these financial instruments as of December 31, 2021 and December 31, 2020 were considered representative of their fair values due to their short term to maturity or repayment.

receivable and other receivables, accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of December 31, 2022 and December 31, 2021 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 acquisition, as described in Note 17, a contingent liability resulting from the Industrial Seed Innovations (“ISI”) acquisition, as described in Note 7 and 17, and common stock warrant liabilities related to the March 2018, the June 2019, the September 2019, and the January 2021 Offerings described in Note 15.

The contingent liability related to the Anawah acquisition was measured and recorded on a recurring basis as of December 31, 2021 and December 31, 2020, using unobservable inputs, namely the Company’s ability and intent to pursue certain specific products developed using technology acquired in the purchase.

The Company’s Level 3 liabilities consist of a contingent liability resulting from the Anawah, Inc.

("Anawah") acquisition as described in Note 16, as well as preferred investment options related to the August 2022 Registered Direct Offering described in Note 14.

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 14, which were reclassified to additional paid-in capital upon adoption of ASU 2020-06, as of January 1, 2022.

See Note 3 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 December 31, 2022 and 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 ISI acquisition was measured and recorded on a recurring basis as of December 31, 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 warrant liabilities were measured and recorded on a recurring basis using the Black-Scholes Model with the following assumptions at December 31, 2021 and 2020:

January 2021 Warrants

September 2019 Warrants

June 2019 Warrants

March 2018 Warrants

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

August 2022 Options

August 2022 Placement Agent Options

Expected term (in years)

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(Dollars in thousands)

Balance as of December 31, 2019

Change in fair value and

other adjustments

Exercise of warrants

ISI acquisition contingent

consideration

Placement Agent Options

Balance as of December 31, 2021

Reclassification upon adoption

of ASU 2020-06

Initial recognition

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Notes to Consolidated Financial Statements.

Industrial Seed Innovations Acquisition

In August 2020, the Company acquired by merger Industrial Seed Innovations (“ISI”), an Oregon-based industrial hemp breeding and seed company.

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, Umpqua and Santiam seed varieties are now part of Arcadia’s portfolio, alongside the Company’s GoodHemp line of hemp seeds.

The acquisition was 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 was eligible to be recognized in two 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 consolidated balance sheets as of December 31, 2021.

A change in fair value of contingent consideration of $ 210,000 was recognized for the year ended December 31, 2021 as the annual revenue milestone was not met for this year.

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 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 year ended December 31, 2020.

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

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

Purchase Price

Intangible assets, net

Deferred tax liability

Total consideration allocated

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 consolidated statements of operations and comprehensive loss as a discrete tax benefit in the income tax provision.

The former shareholders of ISI remain responsible for ISI’s pre-acquisition liabilities.

Pursuant to the 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 had a term of 3 years with the option to renew for three additional 3-year terms.

The lease was terminated effective December 31, 2021, as no further hemp seed production is deemed necessary as the inventory balance on hand is deemed sufficient.

The Company recorded aggregate impairment charges of $ 404,000 and $ 3.3 million during the years ended December 31, 2022 and 2021, respectively, related to intangible assets and other long-lived assets.

The Company has classified the fair value measurements as a Level 3 measurement in the fair 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 at fair value as of December 31, 2022.

The Company has classified the fair value measurements as a Level 3 measurement in the fair 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 they can be used.

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 brands of bath and body care products such as Soul Spring, the CBD-infused botanical therapy brand, Saavy Naturals, a line of natural body care products and Provault, a

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

CBD-infused sports performance formula.

Also included in the purchase was Zola, a coconut water sourced from Thailand.

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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 consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

The Company performed a preliminary 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.

The following table presents the allocation of the purchase price of the assets acquired, based on their fair values at December 31, 2021.

The following table presents the allocation of the purchase price of the assets acquired, based on their fair values at the acquisition date (in thousands):

Purchase Price

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The lease was effective on May 17, 2021 and has a term of 3 years .

For the period from May 17 to December 31, 2021, the Company recognized approximately $ 4.3 million of revenue and $ 7.5 million of net loss relating to Arcadia Wellness, which included charges for the amortization and impairment of acquired intangible assets.

For the period from January 1, 2022 to December 31, 2022, the Company recognized approximately $ 6.5 million of revenue and $ 2.1 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.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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-year useful life).

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Goodwill will be tested for impairment at least annually (more frequently if certain indicators are present).

Goodwill arising from the Arcadia Wellness acquisition is not deductible for tax purposes.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Goodwill arising from the Arcadia Wellness acquisition is 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 year ended December 31, 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 year ended December 31, 2022.

Supplemental Pro-Forma Results of Operations (Unaudited)

The following unaudited pro-forma condensed consolidated results of operations for the years ended December 31, 2021 and 2020, have been prepared as if the acquisition of Arcadia Wellness had occurred on January 1, 2020 and includes adjustments for amortization of intangibles, and the addition to basic and diluted weighted average number of shares outstanding.

The following unaudited pro-forma consolidated results of operations for the years ended December 31, 2022 and 2021, have been prepared as if the acquisition of Arcadia Wellness had occurred on January 1, 2021 and includes adjustments for amortization of intangibles, and the addition to basic and diluted weighted average number of shares outstanding.

ended December 31,

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Basic and diluted

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Intangible assets, net

The Company’s intangible assets, net as of December 31, 2021 and 2020, consist of the following:

The Company’s intangible assets, net as of December 31, 2022 and 2021, consist of the following (in thousands):

December 31, 2022

December 31, 2021

Accumulated Amortization and Impairment (1)

Accumulated Amortization

Amortized intangible assets

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Total intangible asset, net

(1) During the year ended December 31, 2021, the Company estimated an overall decrease in the 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.

(1) During the years ended December 31, 2022 and 2021, the Company estimated an overall decrease in the 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, Arcadia performed a quantitative intangible assets impairment test.

The Company used a discounted cash flow approach to develop the fair value of our acquired intellectual property, customer lists, brands and trademarks.

As a result of this assessment, Arcadia recorded an impairment of intangible assets in the amount of $ 3.3 million in the consolidated statements of operations and comprehensive loss for the year ended December 31, 2021.

Intellectual property and customer lists will be amortized based on their useful lives ranging between 4 and 15 years.

As of December 31, 2021, future amortization of intellectual property and customer lists is as follows:

Year Ending December 31,

As a result of this assessment, Arcadia recorded an impairment of intangible assets in the amount of $ 404,000 and $ 3.3 million in the consolidated statements of operations and comprehensive loss for the years ended December 31, 2022 and 2021, respectively.

Of the impairment recognized during the year ended December 31, 2022, $ 72,000 was related to the Radiance Beauty licensing agreement.

Arcadia Biosciences, Inc.

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Pursuant to the Operating Agreement, a joint operating committee consisting of two individuals appointed by the Company and two individuals appointed by Legacy will manage Archipelago.

As of December 31, 2021, the Company and Legacy hold 50.75 % and 49.25 % interests in Archipelago, respectively, and have made capital contributions to Archipelago of $ 3,108,000 and $ 3,016,000 , respectively, as determined by the joint operating committee.

As of December 31, 2022, the Company and Legacy hold 50.75 % and 49.25 % interests in Archipelago, respectively, and have made capital contributions to Archipelago of $ 3.1 million and $ 3.0 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 consolidated financial statements after eliminating intercompany transactions.

Net loss attributable to non-controlling interest of $ 236,000 and $ 1.5 million was recorded as an adjustment to net loss to arrive at net loss attributable to common stockholders for the years ended December 31, 2022 and 2021, respectively.

Legacy’s equity interests are presented as non-controlling interests on the consolidated balance sheets.

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agricultural technologies.

On November 12, 2020, the Company entered into a Master Transaction Agreement with BIOX pursuant to which (i) the Company sold all of its memberships interests it owned in Verdeca to BIOX, and (ii) the Company and BIOX entered into a license agreement for certain intellectual property rights, including rights to the Company’s HB4 soybean trait and its GoodWheat portfolio of specialty wheat products in South and Central America.

On November 12, 2020, the Company entered into a Master Transaction Agreement with BIOX pursuant to which (i) the Company sold all of its memberships interests it owned in Verdeca to BIOX, and (ii) the Company and BIOX entered into a license agreement for certain intellectual property rights, including rights to the Company’s Haab 4 ("HB4") soybean trait and its GoodWheat portfolio of specialty wheat products in South and Central America.

Prior to the transaction, Verdeca was equally owned by the Company and a wholly-owned subsidiary of BIOX.

In consideration for the sale of the membership interests in Verdeca and entering into the license agreement, on November 12, 2020, BIOX paid the Company $ 5,000,000 in cash and issued the Company 1,875,000 shares of BIOX common stock.

BIOX also paid the Company an additional $ 1,000,000 for transaction expenses and fees and is obligated to pay $ 2,000,000 in four equal quarterly payments with the first payment commencing within thirty days of either BIOX reaching commercial plantings of at least 200,000 hectares of Haab 4 soybeans (“HB4”) or China approving the HB4 soybean trait for “food and feed”.

BIOX also paid the Company an additional $ 1,000,000 for transaction expenses and fees and is obligated to pay $ 2,000,000 in four equal quarterly payments with the first payment commencing within thirty days of either BIOX reaching commercial plantings of at least 200,000 hectares of HB4 soybeans or China approving the HB4 soybean trait for “food and feed”.

In addition to the above payments, BIOX is also obligated to pay the Company quarterly royalty payments equal to six percent ( 6 %) of the net revenues BIOX or its affiliates receive from HB4 soybean sales and twenty five percent ( 25 %) of the net revenues BIOX or its affiliates receive from sales of licensed wheat products;

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The fixed consideration was allocated based on estimates of the stand-alone selling prices.

A fixed consideration in the amount of $ 10,288,000 , including $ 6,650,000 of corporate securities received, has been allocated to the sale of the membership interest in Verdeca and resulted in a gain of $ 8,814,000 recorded on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

A fixed consideration in the amount of $ 10,288,000 , including $ 6,650,000 of corporate securities received, was allocated to the sale of the membership interest in Verdeca and resulted in a gain of $ 8,814,000 in 2020.

Inventory with a carrying value of $ 1,474,000 was derecognized in connection with the sale of the membership interest in Verdeca.

A fixed consideration in the amount of $ 6,680,000 , including $ 4,318,000 of corporate securities received, has been allocated to the sale of intellectual property rights and has been recorded as license revenues on the consolidated statements of operations and comprehensive loss for the year ended December 31, 2020.

As of December 31, 2020, the Company had $ 800,000 recorded within accounts receivable on its consolidated balance sheets related to this transaction, which were collected during the year ended December 31, 2021, but no additional proceeds were received.

A fixed consideration in the amount of $ 6,680,000 , including $ 4,318,000 of corporate securities received, has been allocated to the sale of intellectual property rights and was recorded as license revenues in 2020.

Any future proceeds from the agreement will be allocated in the same proportion.

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Notes to Consolidated Financial Statements.

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 consolidated statements of operations and comprehensive loss.

As of December 31, 2022, the Company received payment of $ 1.0 million with the remaining $ 1.0 million in accounts receivable and other receivables, which the Company anticipates to receive over the next three months pursuant to the agreement.

Accounts Payable and Accrued Expenses

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Payroll and benefits

Research and development

Royalty fees due to unrelated parties

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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.

In connection with the January 2021 Private Placement, the Company granted to a placement agent warrants to purchase a total of 9,846 shares of Common Stock (the “January 2021 Placement Agent Warrants”) that have an exercise price per share equal to $ 159.60 and a term of 5.5 years from the date of issuance.

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 Company utilized the Black Scholes Merton model on January 28, 2021 with the following assumptions:

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

of 123.8 %, stock price of $ 115.20 and risk-free rate of 0.5 %.

The estimated fair value of the common stock warrant liability was subsequently remeasured at December 31, 2021 with the changes recorded on the Company’s consolidated statements of operations and comprehensive loss.

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 using the Black-Scholes Model assumptions detailed in Note 6.

The value of the January 2021 Placement Agent Warrants was determined to be $ 942,000 , calculated using the Black-Scholes 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

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

stock warrant liability and expensed and the remaining $ 2.0 million was allocated to the common stock and offset to additional paid in capital.

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) 7,519 shares of its common stock and (ii) warrants to purchase up to 7,519 shares of common stock at an initial exercise price equal to $ 1,830.00 (the “March 2018 Warrants”) and raised total gross proceeds of $ 10.0 million.

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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”).

This shelf registration process 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 $ 50 million.

This registration statement expired on its three-year anniversary, June 8, 2021.

On April 21, 2022, the Company filed a shelf Registration 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 $ 50.0 million.

The Company ceased being able to use the 2018 Shelf Registration Statement to register the issuance of securities after June 8, 2021, the three-year anniversary of its effective date.

The 2022 Shelf Registration Statement may no longer be used to register the issuance of securities after May 12, 2025, the three-year anniversary of its effective date.

In August 2022, the Company entered into a securities purchase agreement (the “August 2022 Purchase Agreement”) pursuant to which it sold (i) 61,250 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 56,813 shares of common stock, at an exercise price of $ 0.004 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 118,063 shares of common stock, at an exercise price of $ 37.35 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

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Options") to purchase a total of 5,904 shares of common stock that have an exercise price per share equal to $ 52.80 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 the Black-Scholes Merton model on August 16, 2022 with the following assumptions:

volatility of 128.46 %, stock price of $ 37.60 , 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 December 31, 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 the 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.

In December 2020, the Company entered into a securities purchase agreement (the “December 2020 Purchase Agreement”) pursuant to which it sold (i) 65,467 registered shares of its common stock pursuant to the 2018 Shelf Registration Statement and (ii) unregistered warrants to purchase 65,467 shares of its common stock (the “December 2020 Warrants”) in a private placement, for total gross proceeds of $ 8.0 million (the “December 2020 Registered Direct Offering”).

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The June 2019 Warrants have an exercise price of $ 200.00 per share, became exercisable upon issuance and expire 5.5 years after the date of 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 $ 6.2938 and a term of five years .

In June 2018, the Company entered into a securities purchase agreement (the “June 2018 Purchase Agreement”) pursuant to which it sold (i) 1,392,345 registered shares of its common stock pursuant to the Shelf Registration Statement and (ii) unregistered warrants to purchase 1,392,345 shares of its common stock (the “June

In connection with the June 2019 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

2018 Warrants”) in a private placement, for total gross proceeds of $ 14.0 million (the “June 2018 Registered Direct Offering”).

total of 1,862 shares of common stock (“June 2019 Placement Agent Warrants”) that have an exercise price per share equal to $ 251.75 and a term of five years .

In June 2018, the Company entered into a securities purchase agreement (the “June 2018 Purchase Agreement”) pursuant to which it sold (i) 34,809 registered shares of its common stock pursuant to the 2018 Shelf Registration Statement and (ii) unregistered warrants to purchase 34,809 shares of its common stock (the “June 2018 Warrants”) in a private placement, for total gross proceeds of $ 14.0 million (the “June 2018 Registered Direct Offering”).

The June 2018 Registered Direct Offering closed on June 14, 2018 .

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In connection with the June 2018 Registered Direct Offering, the Company granted to a placement agent warrants to purchase a total of 1,741 shares of common stock (“June 2018 Placement Agent Warrants”) that have an exercise price per share equal to $ 502.72 and a term of five years .

Common Stock Warrant transactions

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.

In May 2020, several existing accredited investors exercised the June 2018 Warrants (the “May 2020 Warrant Exercise Transaction”) to purchase up to an aggregate of 1,392,345 shares of the Company’s common stock at a reduced exercise price of $ 4.90 per share for gross proceeds of $ 6.8 million.

As consideration for the exercise of 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”) at an exercise price of $ 4.775 per share with an exercise period of five years from 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, the Company granted to a placement agent warrants to purchase a total of 69,617 shares of common stock (the “May 2020 Placement Agent Warrants”) that have an exercise price per share equal to $ 6.125 and a term of five years .

The value of the May 2020 Placement Agent 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.

Equity Classified Common Stock Warrants

In connection with professional services agreements with non-affiliated third parties, during the years ended December 31, 2021 and 2020, the Company issued service and performance warrants (“Service and Performance Warrants”).

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

As of December 31, 2021, the Company issued the following warrants to purchase shares of its common stock.

Warrants and Options

Equity Classified Common Stock Warrants

In connection with professional services agreements with non-affiliated third parties, during the year ended December 31, 2022, the Company issued service and performance warrants (“Service and Performance Warrants”).

The Company issued the following warrants to purchase shares of its common stock, which are outstanding as of December 31, 2022 and 2021, respectively.

These warrants are exercisable any time at the option of the holder until their expiration date.

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Outstanding at

December 2022 Service and Performance Warrants (1)

December 2022

October 2022 Service and Performance Warrants (1)

August 2022 Pre-Funded Warrants

January 2021 Placement Agent Warrants

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September 2019

August 2019 Service and Performance Warrants

July 2019 Service and Performance Warrants

June 2019 Placement Agent Warrants

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March 2018 Placement Agent Warrants

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Liability Classified Common Stock Warrants

Certain warrants contain a contingent cash payment feature and therefore were accounted for as a liability at the date of issuance and are adjusted to fair value at each balance sheet date.

The change in fair value of the warrant liability is recorded as change in fair value of common stock warrant liabilities in the consolidated statements of operations and comprehensive loss.

The key terms and activity of the liability classified common stock warrants are summarized as follows:

Issuance Date

Outstanding at

January 2021 Warrants (2)

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March 2018 Warrants (2)

See Note 6 for the Black-Scholes option-pricing model and weighted-average assumptions used to estimate the fair value of the warrant liabilities.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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

(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 issuance and are adjusted to fair value at each balance sheet date.

The change in fair value of the options liabilities is recorded as change in fair value of common stock warrant and option liabilities in the consolidated statements of operations and comprehensive loss.

The key terms and activity of the liability classified preferred investment options are summarized as follows:

Issuance Date

Outstanding at

August 2022 Options

August 2022 Placement Agent Options

See Note 6 for the Black-Scholes option-pricing model and weighted-average assumptions used to estimate the fair value of the preferred investment options liabilities.

Stock-Based Compensation and Employee Stock Purchase Program

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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, the options granted in the third quarter of 2018 vest over two-year period, vesting monthly on a pro-rated basis.

Options granted

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

generally vest over a four-year period;

however, there might be alternative vesting schedules, as approved by the Board.

Options granted, once vested, are generally exercisable for up to 10 years, after grant to the extent vested.

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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.

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.

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 7,902 shares of the Company’s common stock pursuant to Rule 5635(c)(4) of the Nasdaq Listing Rules.

The Company has 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 are subject to the terms and conditions of the 2015 Plan.

As of December 31, 2022, a total of 62,192 shares of common stock were reserved for issuance under the 2015 Plan, of which 10,771 shares of common stock are available for future grant.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

December 31, 2021, a total of 8,240 and 1,345,955 options are outstanding under the 2006 and 2015 Plans, respectively.

As of December 31, 2022, a total of 103 and 51,421 options are outstanding under the 2006 and 2015 Plans, respectively.

As of December 31, 2021, a total of 206 and 33,648 options were outstanding under the 2006 and 2015 Plans, respectively.

As of December 31, 2022 a total of 8,477 inducement options are outstanding.

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Plavan’s stock options was $ 154,000 and recognized in selling, general and administrative expenses during the year ended December 31, 2021.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below.

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

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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:

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

Year Ended December 31,

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The Company recorded $ 4,000 and $ 14,000 of ESPP related compensation expense for the years ended December 31, 2022 and 2021 , respectively.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Commitments and Contingencies

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.

The Company leases office and facility space having initial lease terms ranging from one to five years , including certain renewal options available to the Company at market rates.

Legal Matters

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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.

In 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 December 31, 2021, the Company continues to pursue a total of two development programs using this technology and believes that the contingent liability is probable.

As of December 31, 2022, the Company continues to pursue or are otherwise liable for a total of two development programs using this technology and believes that the contingent liability is probable.

As a result, $ 2.0 million remains on the consolidated balance sheet as an other noncurrent liability.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Contingent Liability Related to the ISI Acquisition

In August 2020, the Company acquired by merger Industrial Seed Innovations (ISI).

A portion of the purchase price consideration for the acquisition in the amount of $280,000 will be recognized in two 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.

A portion of the purchase price consideration for the acquisition in the amount of $ 280,000 was to be recognized in two annual installments, each of up to 3,316 shares of the Company’s common stock, subject to the achievement of revenue milestones in 2021 and 2022.

The contingent consideration of $ 280,000 was measured and recorded at fair value.

As of December 31, 2021, the full amount of the contingent consideration is included in other noncurrent liabilities as no installments will become due within 12 months from the consolidated balance sheets date.

During the year ended December 31, 2021 as a result of a remeasurement of the contingent consideration, a $ 210,000 decrease in the related liability was recorded as a change in fair value of contingent consideration on the consolidated statements of operations and comprehensive loss.

During the years ended December 31, 2022 and 2021, a decrease in the liability of $ 70,000 and $ 210,000 was recorded, respectively, as a result of a remeasurement of the contingent consideration and reflected in changes in fair value of the contingent consideration on the consolidated statements of operations and comprehensive loss.

The Company has entered into contract research agreements with unrelated parties that require the Company to pay certain funding commitments.

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Accrued royalties are included within accounts payable and accrued expenses on the consolidated balance sheets.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Milestone payments are contingent upon the successful development or implementation of various technologies.

Payments for milestones yet to be achieved totaled $ 2.0 million for both the years ended December 31, 2021 and 2020, respectively.

The timing of the payments is not determinable at this time pending research and development currently in progress;

however, no payments were made during the years ended December 31, 2021 and 2020.

During the year ended December 31, 2022, we recognized a milestone achievement of $ 2.0 million related to the regulatory approval of the HB4 soybean trait licensed to Biocere's.

See Note 10 for more information.

The Company could be adversely affected by certain actions by the government as it relates to government contract revenue received in prior years.

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Operating Leases

As of December 31, 2021, the Company leases office space in Davis, CA, Chatsworth, CA, and Chesterfield, MO, as well as additional buildings, land and equipment.

As of December 31, 2022, the Company leases office space in Dallas, Texas and Davis, California, 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 a third party.

During the year ended December 31, 2021, the Company entered into two leases for office space in Chesterfield, MO, and for office space and

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

production in Chatsworth, CA, both with a 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 December 31, 2021.

Some leases (the Davis office, 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 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 result, the Company paid $ 47,000 in early termination fees to exit the lease.

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 year ended December 31, 2022, the Company entered into an agreement to lease office space in Dallas, Texas.

The new lease commenced in July 2022.

Some leases (the Davis and Dallas offices, a warehouse, 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 year ended December 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.

During 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 year ended December 31, 2021, the Company re-assessed its 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.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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.

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Net lease cost

(1) Short term lease cost consists of field trial lease agreements with a lease term of 12 months or less.

(1) Sh ort 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.

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Weighted-average discount rate

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

The maturities of the operating lease liabilities as of December 31, 2022 are as follows (in thousands):

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Total current and noncurrent operating lease liabilities

No maturities of current and noncurrent debt are due as of December 31, 2021 .

Maturities of current and noncurrent debt as of December 31, 2020 were $ 1.1 million, and $ 2.1 million, respectively.

Vehicle Loans

The Company entered into notes payable agreements to finance the purchase of company vehicles.

During the year ended December 31, 2021, the Company paid all notes payable related to company vehicles in full.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

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 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 2021, the Company applied for full PPP loan forgiveness, and in August 2021, the lender notified Arcadia that the Small Business Administration had forgiven the original loan in full.

During the year ended December 31, 2021, the amount forgiven has been recorded as gain on extinguishment of PPP loan on the 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 –

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As of December 31, 2021, there was no outstanding balance of the Note.

Due to the lender’s control of the deposit account, a balance of $ 2.0 million was included in restricted cash on the consolidated balance sheets as of December 31, 2020.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

The components of loss before income taxes are as follows (in thousands):

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Loss before income taxes

The total income tax (expense) benefit for the years ended December 31, 2021 and 2020 was $( 2,000 ) and $ 124,000 , respectively, and is comprised of current state taxes and foreign taxes withheld by governmental agencies outside of the United States, as follows (in thousands):

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

The total income tax expense for the years ended December 31, 2022 and 2021 was $ 14,000 and $ 2,000 , respectively, and is comprised of current state taxes and foreign taxes withheld by governmental agencies outside of the United States, as follows (in thousands):

Year Ended December 31,

Total current tax (expense) benefit

Total deferred tax (expense) benefit

Total tax (expense) benefit

Total current tax (expense)

Total deferred tax (expense)

Total tax (expense)

The Company operates in only one federal jurisdiction, the United States.

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Year Ended December 31,

Expected income tax provision at the federal

statutory rate

Expected income tax provision at the federal statutory rate

State taxes, net of federal benefits

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Transaction costs

Derivative liabilities

Derivative liability

Contingent Consideration Release

Non-controlling interest

Gain on debt extinguishment

withholding taxes

Income tax provision

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Amortized intangibles

Section 174 Capitalization

Total deferred tax assets

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Accordingly, the net deferred tax assets have been offset by a valuation allowance.

The net valuation allowance decreased by $ 6,000 during the year ended December 31, 2021 and increased by $ 1.9 million during the year ended December 31, 2020.

The net valuation allowance increased by $ 6.3 million during the year ended December 31, 2022 and decreased by $ 6,000 during the year ended December 31, 2021.

At December 31, 2022 , the Company had federal and state NOLs aggregating approximately $ 81.1 million and $ 47.5 million, respectively.

At December 31, 2022, the utilization of a portion of the federal NOLs is subject to an annual limitation under Section 382 of the Internal Revenue Code (IRC).

Of the $ 208.1 million of federal NOLs available, approximately $ 144.0 million are expected to expire utilized due to ownership changes as defined in IRC Section 382.

The Company is currently conducting additional analysis regarding the valuation of the Company at the time of the ownership changes to assess what, if any, portion of the $ 144.0 million limitation may be restored, but the NOL deferred tax asset as recorded currently reflects the full limitation.

Of the $ 222.3 million of federal NOLs available, approximately $ 141.2 million are expected to expire unutilized due to ownership changes as defined in IRC Section 382.

If not utilized, the federal and state NOLs will begin to expire in 2023 and 2024, respectively.

IRC Section 382 may also limit NOLs generated in future years.

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.

The Company’s ownership shift analysis was performed through December 31, 2021.

The Company evaluates deferred tax assets, including the benefit from NOLs, to determine if a valuation allowance is required.

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and tax-planning alternatives.

The significant piece of objective negative evidence evaluated was the cumulative loss

The significant piece of objective negative evidence evaluated was the cumulative loss incurred through the year ended December 31, 2022 .

Given this evidence and the expectation to incur operating losses in the foreseeable future, a full valuation allowance has been recorded against the net deferred tax asset.

The Company will continue to maintain a full valuation allowance against the entire amount of its net deferred tax asset,

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

incurred through the year ended December 31, 2021 .

Given this evidence and the expectation to incur operating losses in the foreseeable future, a full valuation allowance has been recorded against the net deferred tax asset.

The Company will continue to maintain a full valuation allowance against the entire amount of its net deferred tax asset, until such time as the Company has determined that the weight of the objectively verifiable positive evidence exceeds that of the negative evidence and it is likely that the Company will be able to utilize all of its net deferred tax asset relating to its federal and state NOL carryforwards.

until such time as the Company has determined that the weight of the objectively verifiable positive evidence exceeds that of the negative evidence and it is likely that the Company will be able to utilize all of its net deferred tax asset relating to its federal and state NOL carryforwards.

Although the Company has established a full valuation allowance on its net deferred tax asset, for Federal tax losses before 2018 and for all state tax losses, it has not forfeited the right to carryforward tax losses up to 20 years and apply such tax losses against taxable income in such years, thereby reducing its future tax obligations.

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Unrecognized tax benefit ending balance

The Company is currently not under audit for federal or state purposes.

In February 2023, the Company received notification from the Internal Revenue Service that our Archipelago joint venture was selected for audit for the 2021 tax year.

The Opening Conference is scheduled for April 24, 2023, and Management has not yet received the IRS agent’s Initial Document Request.

The Company is currently not under audit for state purposes.

The Company does not anticipate its total unrecognized tax benefits as of December 31, 2022 will significantly change due to settlement of examination or the expiration of statute of limitations during the next 12 months.

The Company is currently unaware of any uncertain tax positions that could result in significant additional payments, accruals or other material deviation in this estimate over the next 12 months.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Retirement Benefits

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The Company did no t make discretionary matching contributions during the years ended December 31, 2022 and 2021 .

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Segment and Geographic Information

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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.

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Warrants to purchase common stock

Preferred investment options

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

Related Party Transactions

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Royalty fees due to JSF were $ 48,000 and $ 64,000 as of December 31, 2022 and December 31, 2021, respectively, and are included in the consolidated balance sheets as amounts due to related parties.

Arcadia Biosciences, Inc.

Notes to Consolidated Financial Statements.

The Company currently leases 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 has grown hemp on this land to support the operations of its joint venture Archipelago Ventures Hawaii.

During the year ended December 31, 2021, the Company leased 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 used to grow hemp on this land to support the operations of its joint venture Archipelago Ventures Hawaii, until the expiration of the lease in February 2022.

The original lease was executed in February 2019, covers 10 acres of land, has a term of two years and provides 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 .

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 two 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 $ 84,000 and $ 84,000 for the years ended December 31, 2021 and 2020, respectively.

The Company made lease payments in the amount of $ 0 and $ 84,000 during the years ended December 31, 2022 and 2021, respectively.

Comcowich served as the Company's interim chief executive officer from January 1, 2022 to February 1, 2022, and received $ 34,000 in total compensation for his services in this role.

During the year ended December 31, 2022, the Company sold Archipelago equipment to Mr.

Comcowich at fair value.

The impact of the transaction on the consolidated financial statements was not material.

Subsequent Events

The Company has reviewed and evaluated subsequent events occurred after December 31, 2021 through the date the consolidated financial statements were available to be issued.

On March 2, 2023, the Company entered into a securities purchase agreement pursuant to which it sold in a private placement (i) 165,500 shares of common stock (“March 2023 PIPE Shares”), (ii) pre-funded common stock purchase warrants (“March 2023 Pre-Funded Warrants”) to purchase up to 500,834 shares of common stock, at an exercise price of $ 0.0001 per share, and (iii) preferred investment options (“March 2023 Options”) to purchase up to 1,332,668 shares of common stock, at an exercise price of $ 9.00 per share, for gross proceeds of $ 6.0 million (the “March 2023 PIPE”).

The March 2023 PIPE closed on March 6, 2023 .

At the closing of the March 2023 PIPE, the Company also reduced the exercise price of outstanding warrants to purchase a total of 178,132 shares of common stock that were previously issued to the investors in the March 2023 PIPE.

The March 2023 Pre-Funded Warrants became exercisable upon issuance and are exercisable until exercised in full.

The March 2023 Options became exercisable upon issuance with 666,334 options expiring 18 months after the date of issuance and the remaining 666,334 options expiring 5 years after the date of issuance.

The Company agreed to register the resale of the March 2023 PIPE Shares and the shares issuable upon exercise of the March 2023 Pre-Funded Warrants and March 2023 Options.

In connection with the March 2023 PIPE, the Company granted to a placement agent preferred investment options ("March 2023 Placement Agent Options") to purchase a total of 33,317 shares of common stock that have an exercise price per share equal to $ 11.25 and a term of five years .

Changes in and Disagreements With Accou ntants on Accounting and Financial Disclosure.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity