Industrial Seed Innovations Acquisition |
9 Months Ended | |||||||||||||||||||||||||
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Sep. 30, 2020 | ||||||||||||||||||||||||||
Business Combinations [Abstract] | ||||||||||||||||||||||||||
Industrial Seed Innovations Acquisition |
5. Industrial Seed Innovations Acquisition
On August 21, 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 and Umpqua seed varieties are now part of Arcadia’s portfolio, alongside the Company’s GoodHemp line of genetically superior hemp seeds, transplants, and extracts. The acquisition has significantly broadened and accelerated commercialization of Arcadia’s hemp-related breeding platform, as well as established a breeding research and development facility in the Pacific Northwest, a key production area in the hemp industry.
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 third quarter ended September 30, 2020. The remaining 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. The cash consideration paid for the acquisition was funded by cash on hand.
For the three months period ended September 30, 2020 no revenues from ISI were recorded, and expenses were immaterial. The pro forma impact of the acquisition to the historical financial results was determined to not be significant.
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 Consolidated Statements of Operations and Comprehensive Loss.
The following table presents the preliminary allocation of the purchase price of ISI assets acquired, based on their relative fair values, which have been assessed during the quarter ended September 30, 2020:
The former shareholders of ISI remain responsible for ISI’s pre-acquisition liabilities. Pursuant to the definitive acquisition agreement, the Company entered into a lease agreement with ISI for the use of land, equipment, greenhouses and buildings. The lease was effective upon the execution of the definitive acquisition agreement and has a term of 3 years with the option to renew for three additional 3-year terms. |