As filed with the Securities and Exchange Commission on November 1, 2021

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

283 County Road 519

Belvidere, NJ 07823

(908) 750-3953

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

James E. Kras
Chief Executive Officer

283 County Road 519

Belvidere, NJ 07823

(908) 750-3953

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box. ☒

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

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

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

CALCULATION OF REGISTRATION FEE

__________ 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

[___] Shares of

Common Stock

EDIBLE GARDEN AG INCORPORATED

This is an initial public offering of our shares of common stock. We are offering on a firm commitment basis, shares of common stock, $0.0001 par value per share (“common stock”). The initial public offering price per share of common stock is expected to be between $____ and $______.

Prior to this offering, there has been no public market for our common stock. We have applied to list our common stock on the Nasdaq Capital Market under the symbol “EDBL.” No assurance can be given that our application will be approved. If our application is not approved or we otherwise determine that we will not be able to secure the listing of our common stock on the Nasdaq Capital Market, we will not complete this offering.

We are an “emerging growth company,” as defined under the federal securities laws and, as such, we have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary — Implications of Being an Emerging Growth Company and Smaller Reporting Company.”

Investing in our securities is speculative and involves a high degree of risk. You should carefully consider the risk factors beginning on page 7 of this prospectus before purchasing our securities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

____________

We have granted the representative of underwriters an option to purchase from us, at the public offering price, up to additional shares of common stock, less the underwriting discounts and commissions, within 45 days from the date of this prospectus to cover over-allotments, if any. If the representative of the underwriters exercises the option in full, the total underwriting discounts and commissions payable will be $ , and the total proceeds to us, before expenses, will be $ .

The underwriters expect to deliver the shares of common stock to purchasers on or about ________, 2021.

Sole Book-Running Manager

Maxim Group LLC

The date of this prospectus is _________, 2021

TABLE OF CONTENTS

You should rely only on the information contained in this prospectus and in any free writing prospectus. We and the underwriters have not authorized anyone to provide you with information different from that contained in this prospectus. We and the underwriters are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The information in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities.

Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside of the United States.

We own or have rights to trademarks or trade names that we use in connection with the operation of our business, including our corporate names, logos and website names. In addition, we own or have the rights to copyrights, trade secrets and other proprietary rights that protect the content of our products. This prospectus may also contain trademarks, service marks and trade names of other companies, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks, trade names or products in this prospectus is not intended to, and should not be read to, imply a relationship with or endorsement or sponsorship of us. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this prospectus are listed without their ^©, ^® and ^™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks. All other trademarks are the property of their respective owners.

 RISK FACTORS

Investing in our common stock is highly speculative and involves a significant degree of risk. You should carefully consider the risks described below and elsewhere in this prospectus, which could materially and adversely affect our business, results of operations or financial condition. Our business faces significant risks and the risks described below may not be the only risks we face. Additional risks not presently known to us or that we currently believe are immaterial may materially affect our business, results of operations, or financial condition. If any of these risks occur, the trading price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Business

We have a history of losses, expect to continue to incur losses in the near term and may not achieve or sustain profitability in the future, and as a result, our management has identified and our auditors agreed that there is a substantial doubt about our ability to continue as a going concern.

We have incurred significant losses since our inception. We have experienced net losses of approximately $2.081 million for the period March 28, 2020 (inception) through December 31, 2020 and $2.345 million in the six months ended June 30, 2021. We expect our capital expenses and operational expenses to increase in the future due to expected increased sales and marketing expenses, operational costs, and general and administrative costs and, therefore, our operating losses will continue or even increase at least through the near term. Furthermore, to the extent that we are successful in increasing our customer base, we will also incur increased expenses because costs associated with generating and supporting customer agreements are generally incurred up front, while revenue is generally recognized ratably over the term of the relationship. You should not rely upon our recent revenue growth as indicative of future performance. We may not reach profitability in the near future or at any specific time in the future. If and when our operations do become profitable, we may not sustain profitability.

The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. Although we plan to attempt to raise additional capital through one or more private placements or public offerings, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business.

We currently operate our flagship facility pursuant to an arrangement with our predecessor and the lessor of the land instead of a lease.

We currently do not have a formal lease to the land on which our flagship facility, in Belvidere, New Jersey, is built. We are currently party to an ongoing arrangement with our predecessor company, Edible Garden Corp., whereby we make lease payments of approximately $15,300 per month to the lessor of the land on which our flagship facility is built and for which our predecessor company is the lessee. We do not have a lease in place directly with the lessor of the property that gives us the right to operate the property. Accordingly, we are subject to the risk that we will lose access to the property if the lessor were to evict us from the facility and property. If we were unable to access the property and continue operations in Belvidere, New Jersey, we may lose the ability to continue growing as great a quantity of herbs and lettuce and may be unable to continue our business. If those risks occur, you could lose the entire value of your investment in us.

We may need to raise capital in addition to this offering, which may not be available on favorable terms, if at all, and which may cause dilution to holders of our common stock, restrict our operations or adversely affect our ability to operate and continue our business.

If we need to raise additional funds due to unforeseen circumstances or material expenditures or if our operating results are worse than expected, we cannot be certain that we will be able to obtain additional financing on favorable terms, if at all, and any additional financings could result in additional dilution to holders of our common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions such as incurring additional debt, expending capital, or declaring dividends, or which impose financial covenants on us that limit our ability to achieve our business objectives. If we need additional capital and cannot raise it on acceptable terms, we may not be able to meet our business objectives, our stock price may fall and you may lose some or all of your investment.

We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects.

We have a relatively short operating history, which makes it difficult to evaluate our business and future prospects. While the predecessor business has existed since 2013, our company has been in existence only since March 2020. We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including those related to:

If we do not manage these risks successfully, our business and financial performance will be adversely affected.

We earned approximately 58% of our revenue from two customers during the six months ended June 30, 2021 and approximately 34% of our revenue from one customer in the period from March 28, 2020 (inception) through December 31, 2020, and if we lose any of these customers or if we are unable to replace the revenue through the sale of our products to additional customers, our financial condition and results from operations would be materially and adversely affected.

During the six months ended June 30, 2021, two customers accounted for approximately 58% of our total revenue, and during the period from March 28, 2020 (inception) through December 31, 2020, one of our customers accounted for approximately 34% of our total revenue. This concentration of customers leaves us exposed to the risks associated with the loss of one or more of these significant customers, which would materially and adversely affect our revenues and results of operations. If these customers were to significantly reduce their relationship with us, or in the event that we are unable to replace the revenue through the sale of our products to additional customers, our financial condition and results from operations could be negatively impacted, and such impact would likely be significant.

The loss of one or more of the Company’s customers, or a reduction in the level of purchases made by these customers, could negatively impact the sales and profits of the Company.

The Company sells its products to national and local supermarket chains. If sales to one or more of the Company’s largest customers are reduced, this reduction may have a material adverse effect on the Company’s business and financial condition. These customers make purchase decisions based on a combination of price, product quality, consumer demand, customer service performance, desired inventory levels and other factors that may be important to them at the time the purchase decisions are made. Changes in these customers’ strategies or purchasing patterns may adversely affect the sales of the Company. For example, the customers may face financial or other difficulties, which may impact their operations and cause them to reduce their level of purchases, which could then adversely affect the Company’s results of operations. Any bankruptcy or other business disruption involving one of the Company’s significant customers also could adversely affect the results of operations as well.

Our relationships with customers are based on purchase orders rather than long-term purchase commitments.

We are subject to uncertainty because our relationships with customers are based on purchase orders rather than long-term purchase commitments. To ensure availability of our products, in some cases we start sowing our products in advance of receiving purchase orders for those products. Inaccuracies in our estimates of customer demand and product mix could negatively affect our ability to supply product to our customers and operating results. Our customers can cancel purchase orders or defer the shipments of our products under certain circumstances with little or no advance notice to us. If we grow more products than we are able to sell to our customers, we will incur losses and our results of operations and financial condition will be harmed.

Our secured indebtedness could have important consequences to you.

Our secured indebtedness could have important consequences to you. For example, it could:

Our secured indebtedness, held by Sament and Evergreen, is secured by a security interest in all of our assets. If we were to default on our obligations under the Sament Notes and Evergreen Note, Sament first, and then Evergreen, would have the right to our assets. We could be required to dispose of material assets or operations to meet our debt service and other obligations, and the value realized on such assets or operations will depend on market conditions and the availability of buyers. Accordingly, any such sale may not, among other things, be for a sufficient dollar amount. If we were to otherwise attempt to sell material assets or operations, the foregoing encumbrances may limit our ability to dispose of material assets or operations. In the event that Sament and Evergreen enforced their rights to our assets, we may have to discontinue our business, and our investors could lose all or a part of their investment in us.

We have a material weakness in our internal control over financial reporting, which if left unremediated could materially and adversely affect the market price of our common stock.

As of December 31, 2020 and June 30, 2021, we did not maintain effective controls over the control environment, including our internal control over financial reporting. Because we are a small company with few employees in our finance department, we lacked the ability to have adequate segregation of duties in the financial statement preparation process. Further, our Board of Directors does not currently have any independent members and no director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-K. Since these entity level controls have a pervasive effect across the organization, management has determined that these circumstances constitute a material weakness. If we are unable to remediate this material weakness as a newly public company, our financial reporting may not be reliable and the market price of our common stock may be adversely affected.

The Company’s performance may be impacted by general and regional economic volatility or an economic downturn.

An overall decline in economic activity could adversely impact the Company’s business and financial results. Economic uncertainty may reduce consumer spending as consumers make decisions on what to include in their food budgets. Economic uncertainty could also result in changing consumer preference. Shifts in consumer spending could result in increased pressure from competitors or customers that may require the Company to increase promotional spending or reduce the prices of some products, which could then lower revenue and profitability.

Additionally, the Company is subject to regional economic volatilities since the Company’s growing operations are located in a few areas, including Belvidere, New Jersey; Half Moon Bay, California; Hilliard, Florida; Francesville, Indiana; Grand Rapids, Michigan; Berlin, New York; Cleveland, Ohio; and Hixton, Wisconsin. The Company’s use of hydroponic farming requires that it rely on local disease-free water sources and growing materials. Accordingly, any change in the availability of these local raw materials could adversely affect the Company’s operating results.

Our business would be adversely affected by the departure of members of our management team.

Our success depends, in large part, on the continued contributions of James E. Kras and Michael James. Although we have employment agreements in place for each of these executives, we cannot assure you that each will remain with us for a specified period. Although we have additional personnel that contribute to our business, the loss of either of these executives could harm our ability to implement our business strategy and respond to the rapidly changing market conditions in which we operate.

If we are unable to attract, train and retain qualified personnel, especially our management and sales personnel, we may not be able to effectively execute our business strategy.

Our future success depends on our ability to attract, retain and motivate qualified personnel, including our management, sales and marketing, operational, transportation, finance and administration personnel. For example, we currently have a limited number of personnel for our picking, packing and shipping group and greenhouse floor operations. We do not know whether we will be able to hire sufficient workers for these positions to meet our production goals or, if hired, retain all of these personnel as we continue to pursue our business strategy. The loss of the services of one or more of our key employees, or our inability to attract, retain and motivate qualified personnel could have a material adverse effect on our business, financial condition and operating results.

The costs of our operations may exceed our estimates due to factors outside of our control, such as labor shortages or external price increases, and we may be unable to pass those costs to our customers, which would negatively impact our financial results.

We depend on our employees and contracted grow operations teams to grow and distribute our products to our customers. We rely on access to competitive, local labor supply, including skilled and unskilled positions, to operate our business consistently and reliably. Any labor shortage, caused by the COVID-19 pandemic or other factors, and any disruption in our ability to hire workers would negatively affect our operations and financial condition. If we experience a sustained labor shortage, we may need to increase wages to attract workers, which would increase our costs of growing our products. Furthermore, if the prices of our raw materials, utilities or distributing our products were to increase, including due to inflationary pressures, we may be unable to pass those increased costs on to our customers. If we are unable to do so, our gross margin would decline, and our financial results would be negatively impacted.

We may implement new lines of business or offer new products and services within existing lines of business.

As an early-stage company, we may implement new lines of business at any time. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. Initial timetables for the introduction and development of new lines of business and/or new products or services may not be achieved, and price and profitability targets may not prove feasible. We may not be successful in introducing new products and services in response to industry trends or developments in technology, or those new products may not achieve market acceptance. As a result, we could lose business, be forced to price products and services on less advantageous terms to retain or attract clients, or be subject to cost increases. As a result, our business, financial condition or results of operations may be adversely affected.

Damage to our reputation could negatively impact our business, financial condition and results of operations.

Our reputation and the quality of our brand are critical to our business and success in existing markets, and will be critical to our success as we enter new markets. Any incident that erodes consumer loyalty for our brand could significantly reduce its value and damage our business. We may be adversely affected by any negative publicity, regardless of its accuracy. Also, there has been a marked increase in the use of social media platforms and similar devices, including blogs, social media websites and other forms of internet-based communications that provide individuals with access to a broad audience of consumers and other interested persons. The availability of information on social media platforms is virtually immediate as is its impact. Information posted may be adverse to our interests or may be inaccurate, each of which may harm our performance, prospects or business. The harm may be immediate and may disseminate rapidly and broadly, without affording us an opportunity for redress or correction.

The Company is subject to risk of product contamination and product liability claims.

The sales of our products involve the risk of injury to consumers. Such injuries may result from tampering by unauthorized personnel, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, or residues introduced during the growing, packing, storage, handling or transportation phases. The Company cannot be sure that consumption of its products will not cause a health-related illness in the future or that it will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful, the negative publicity surrounding any assertion that the Company’s products caused illness or injury could adversely affect the Company’s reputation with existing and potential customers and its brand image.

We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings.

We may incur substantial costs enforcing or acquiring intellectual property rights and defending against third-party claims as a result of litigation or other proceedings. In connection with the enforcement of our own intellectual property rights, the acquisition of third-party intellectual property rights or disputes related to the validity or alleged infringement of third-party intellectual property rights, including patent rights, we may be subject to claims, negotiations or complex, protracted litigation. Intellectual property disputes and litigation may be costly and can be disruptive to our business operations by diverting attention and energies of management and key technical personnel, and by increasing our costs of doing business. If we fail to prevail in any future litigation and disputes, it could adversely affect our results of operations and financial condition. Third-party intellectual property claims asserted against us could subject us to significant liabilities, require us to enter into royalty and licensing arrangements on unfavorable terms, prevent us from assembling or licensing certain of our products, subject us to injunctions restricting our sale of products, cause severe disruptions to our operations or the marketplaces in which we compete or require us to satisfy indemnification commitments with our customers, including contractual provisions under various license arrangements. In addition, we may incur significant costs in acquiring the necessary third-party intellectual property rights for use in our products. Any of these could seriously harm our business.

If we are unable to obtain patent protection for our products or otherwise protect our intellectual property rights, our business could suffer.

Our success depends, in part, on our ability to obtain patent protection for or maintain as trade secrets our proprietary products, technologies and inventions and to maintain the confidentiality of our trade secrets and know‑how, operate without infringing upon the proprietary rights of others and prevent others from infringing upon our business proprietary rights. Despite our efforts to protect our proprietary rights, it is possible that competitors or other unauthorized third parties may obtain, copy, use or disclose our technologies, inventions, processes or improvements. We cannot assure you that any of our existing or future patents or other intellectual property rights will be enforceable, will not be challenged, invalidated or circumvented, or will otherwise provide us with meaningful protection or any competitive advantage. In addition, our four pending patent applications may not be granted. If our patents do not adequately protect our technology, our competitors may be able to offer products similar to ours. Our competitors may also be able to develop similar technology independently or design around our patents, and we may not be able to detect the unauthorized use of our proprietary technology or take appropriate steps to prevent such use. We may need to enter into intellectual property license agreements in the future, and if we are unable to obtain these licenses, our business could be harmed. Any of the foregoing events would lead to increased competition and lower revenues or gross margins, which could adversely affect our operating results.

Confidentiality agreements with employees and third parties may not prevent unauthorized disclosure of trade secrets and other proprietary information, and our inability to maintain the confidentiality of that information, due to unauthorized disclosure or use, or other event, could have a material adverse effect on our business.

In addition to the protection afforded by patents, we seek to rely on trade secret protection and confidentiality agreements to protect proprietary know-how that is not patentable or that we elect not to patent, processes for which patents are difficult to enforce, and any other elements of our product discovery and development processes that involve proprietary know-how, information, or technology that is not covered by patents. Trade secrets, however, may be difficult to protect. We seek to protect our proprietary processes, in part, by entering into confidentiality agreements with our employees, consultants, advisors, contractors and collaborators. Although we use reasonable efforts to protect our trade secrets, our employees, consultants, advisors, contractors, and collaborators might intentionally or inadvertently disclose our trade secret information to competitors. In addition, competitors may otherwise gain access to our trade secrets or independently develop substantially equivalent information and techniques. Furthermore, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad. If we are unable to prevent unauthorized material disclosure of our intellectual property to third parties, or misappropriation of our intellectual property by third parties, we will not be able to establish or maintain a competitive advantage in our market, which could materially adversely affect our business, operating results and financial condition.

Our business could be negatively impacted by cyber security threats, attacks and other disruptions.

We face advanced and persistent attacks on our information infrastructure where we manage and store various proprietary information and sensitive/confidential data relating to our operations. These attacks may include sophisticated malware (viruses, worms, and other malicious software programs) and phishing emails that attack our products or otherwise exploit any security vulnerabilities. These intrusions sometimes may be zero-day malware that are difficult to identify because they are not included in the signature set of commercially available antivirus scanning programs. Experienced computer programmers and hackers may be able to penetrate our network security and misappropriate or compromise our confidential information or that of our customers or other third-parties, create system disruptions, or cause shutdowns. Additionally, sophisticated software and applications that we produce or procure from third-parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the information infrastructure. A disruption, infiltration or failure of our information infrastructure systems or any of our data centers as a result of software or hardware malfunctions, computer viruses, cyber-attacks, employee theft or misuse, power disruptions, natural disasters or accidents could cause breaches of data security, loss of critical data and performance delays, which in turn could adversely affect our business.

Security breaches of confidential customer information or confidential employee information may adversely affect our business.

Our business requires the collection, transmission and retention of large volumes of customer and employee data, and other personally identifiable information, in various information technology systems that we maintain and in those maintained by third parties with whom we contract to provide services. The integrity and protection of that customer and employee data is critical to us. The information, security and privacy requirements imposed by governmental regulation are increasingly demanding. Our systems may not be able to satisfy these changing requirements and customer and employee expectations, or may require significant additional investments or time in order to do so. A breach in the security of our information technology systems or those of our service providers could lead to an interruption in the operation of our systems, resulting in operational inefficiencies and a loss of profits. Additionally, a significant theft, loss or misappropriation of, or access to, customers’ or other proprietary data or other breach of our information technology systems could result in fines, legal claims or proceedings.

Risks Related to Our Industry

Failure to obtain necessary permits or otherwise comply with USDA regulations and requirements could result in a ban or temporary suspension of our ability to grow, manufacture or market our products as organic, and thus could materially adversely affect our business.

As a producer and distributor of food products, we are subject to the laws and regulations in the jurisdictions where our facilities are located and where our products are distributed. In particular we are subject to the Federal Food, Drug and Cosmetic Act, as amended by the Food Safety Modernization Act in 2011 (the “FSM Act”), which is enforced by the FDA. The FDA has the authority to regulate the growing, harvesting manufacture, including composition and ingredients, processing, labeling, packaging import, distribution and marketing and safety of food in the United States. The FSM Act significantly enhances the FDA’s authority over various aspects of food regulation. For example, the FSM Act granted the FDA mandatory recall authority when the FDA determines there is a reasonable probability that a food is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse health consequences or death to humans or animals. While the FDA has been active in implementing the requirements of the FSM Act through issuance of regulations designed to result in a reduction of the risk of contamination in food manufacturing, the full impact of the FSM Act is not yet known, and we cannot assure you that it will not materially impact our business. Regulatory agencies in other jurisdictions have similar authority to address the risk of contamination or adulteration, and to require that contaminated products be removed from the market. The failure to comply with these laws and regulations in any jurisdiction, or to obtain required approvals, could result in a ban or temporary suspension on the production of our products or limit or bar their distribution, and affect our development of new products, and thus could materially adversely affect our business and operating results. In addition, the United States Department of Agriculture (the “USDA”), regulates the import and export of certain fruits and vegetables into and from the United States, and the USDA also imposes growing, manufacturing and certification requirements for certain products labeled with organic claims. Failure to obtain necessary permits or otherwise comply with USDA regulations and requirements could result in a ban or temporary suspension of our ability to grow, manufacture or market our products as organic, and thus could materially adversely affect our business.

The Company’s improper use of hydroponic farming methods may significantly impact the Company’s ability to maintain its operations and may adversely affect its financial results.

The Company’s improper use of indoor hydroponic farming techniques may adversely impact its operating results. For example, hydroponic farming commingles the use of water and electricity in close proximity which, if combined, may cause an electric shock or a power outage. As the nutrients supply in a hydroponic garden is powered by electricity, an outage could be detrimental to the garden. If an outage occurs, and lasts for a considerable period of time, the plants may die out if a supplementary system of nutrition is not implemented.

Hydroponic farming also necessitates proactive disease management practices to protect against pests and other natural conditions, outside of the control of the Company, from spreading through water sources. If the Company fails to properly manage its hydroponic farms, its operations and financial results may be adversely affected.

The Company is subject to fluctuations in market price and demand for agricultural products.

Fresh produce is highly perishable and generally must be brought to market and sold soon after harvest. The selling price received for the Company’s products may depend on a variety of factors, including timing of the sale, the availability and quality of the produce item in the market, and the availability and quality of competing produce.

In addition, general public perceptions regarding the quality, safety, or health risks associated with particular food products could reduce demand for some of the Company’s products. Food safety warnings, advisories, notices, and recalls, such as those administered by the FDA, the Center for Disease Control and Prevention, other federal/state government agencies, could also reduce demand. To the extent that consumers evolve away from products that the Company produces for health, food safety or other reasons, and the Company is unable to modify the product or to develop products that satisfy new consumer preferences, there will be a decreased demand for the Company’s products.

The Company’s results may vary from quarter to quarter depending on seasonal fluctuations related to the sale of the Company’s products.

Earnings may be affected by seasonal factors, including the availability, quality, and price of raw materials, the timing and effects of ripening and perishability, the ability to process perishable raw materials in a timely manner, the leveraging of certain fixed overhead costs during off-season months, and the slight impacts on consumer demand based on seasonal and holiday timing. Because we grow our products, the expenses incurred to meet consumer demand are often incurred in advance of the revenue earned by selling the herbs and lettuce. For example, we begin sowing our longest-growing crop 13 to 14 weeks in advance of delivery . The impact of seasonal demand and the sales cycle for our products may cause our results to vary from quarter to quarter, which may make an investment in us less attractive to some investors.

Increases in commodity or raw product input costs, such as fuel, packaging materials, could increase costs significantly.

The Company’s costs are determined in part by the prices of fuel and packaging materials. The Company may be adversely affected if sufficient quantities of these materials are not available. Additionally any significant increase in the cost of these items could also materially and adversely affect the Company’s operating results.

Specifically, the Company requires significant quantities of fuel for delivery vehicles and thus is exposed to the risks associated with fluctuations in the price for fuel. The price and supply of fuel can fluctuate significantly based on international, political, and economic circumstances, as well as other factors outside of the Company’s control.

Government policies and regulations specifically affecting the agricultural sector and related industries could adversely affect the Company’s operating results.

As a manufacturer of consumable products, the Company’s operations are subject to extensive regulation by various federal government agencies, including the FDA, the USDA and the Federal Trade Commission (“FTC”), as well as state and local agencies, such as the New Jersey Department of Agriculture, with respect to production processes, product attributes, packaging, labeling, storage, and distribution. Under various statutes and regulations, these agencies prescribe requirements and establish standards for safety, purity, and labeling. In addition, the advertising for the Company’s products is subject to regulation by the FTC, and the Company’s operations are subject to certain health and safety regulations, including those issued under the Occupational Safety and Health Act. Failure to comply with existing or modified regulations promulgated by these agencies may adversely affect the Company’s operating results.

We face intense competition that could prohibit us from developing or increasing our customer base.

The indoor agriculture industry is highly competitive. We may compete with companies that have greater capital resources and facilities. More established companies with much greater financial resources which do not currently compete with us may be able to more easily adapt their existing operations to our line of business. Our competitors may also introduce new and improved products, and manufacturers may sell equipment direct to consumers. We may not be able to successfully compete with larger enterprises devoting significant resources to compete in our target market. Due to this competition, there is no assurance that we will not encounter difficulties in increasing revenues and maintaining and/or increasing market share. In addition, increased competition may lead to reduced prices and/or margins for products we sell.

Risks Related to this Offering and Ownership of our Securities

Investors in this offering will experience immediate and substantial dilution in the book value of their investment.

The public offering price will be substantially higher than the net tangible book value per share of our outstanding shares of common stock. As a result, investors in this offering will incur immediate dilution of $ per share based on the assumed public offering price of $ per share. Investors in this offering will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. See “Dilution” for a more complete description of how the value of your investment will be diluted upon the completion of this offering.

The public offering price of our common stock may have little or no relationship to the historical book value of our common stock or the implied value of our common stock in prior financing transactions.

Prior to the listing of our common stock, our shares have not been listed on any stock exchange or other public trading market, but we have issued options, SAFEs, warrants and convertible notes that are exercisable for or convertible into shares of our common stock. However, our historical book value and the exercise or conversion prices of the options, SAFEs, warrants and convertible notes may have little or no relation to broader market demand for our common stock and thus the public offering price in this offering and the public trading price of our common stock on the Nasdaq once trading begins, provided that our common stock is approved for listing on Nasdaq. As a result, you should not place undue reliance on these historical prices as they may differ materially from the public offering price in this offering.

Our management will have broad discretion over the use of the proceeds we receive in this offering and might not apply the proceeds in ways that increase the value of your investment.

Our management will have broad discretion over the use of our net proceeds from this offering, and you will be relying on the judgment of our management regarding the application of these proceeds. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use the net proceeds from this offering for the construction and/or acquisition of existing greenhouses, working capital, organizational build out, including the hiring of a chief operating officer, chief marketing officer, head of sales, and support and operational staff, debt repayment, transaction bonuses for our executive officers and general corporate purposes. Our management might not be able to yield a significant return, if any, on any investment of these net proceeds. You will not have the opportunity to influence our decisions on how to use our net proceeds from this offering.

Concentration of ownership among related parties, including our existing executive officers and directors, may prevent new investors from influencing significant corporate decisions.

Currently, our executive officers and directors collectively own 71.2% of our outstanding shares of common stock. Sament, an affiliate of our predecessor and one of our creditors, owns 20% of our outstanding common stock.

Upon completion of this offering based on the assumed offering price, our executive officers and directors will beneficially own, in the aggregate, approximately % of our outstanding shares of common stock, with Mr. Kras and Mr. James owning approximately % each, and Sament owning approximately       %. As a result, these stockholders will be able to exercise a significant level of control over all matters requiring stockholder approval, including the election of directors, amendment of our certificate of incorporation and approval of significant corporate transactions. These stockholders acquired their shares of common stock for substantially less than the price of the shares of common stock being sold in this offering, and these stockholders may have interests, with respect to their common stock, that are different from those of investors in this offering. The concentration of voting power among these stockholders may have an adverse effect on the price of our common stock. In addition, this concentration of ownership might adversely affect the market price of our common stock by:

This concentration of ownership among related parties, including our existing executive officers and directors, will make the approval of certain transactions difficult or impossible without the support of these stockholders.

We are an “emerging growth company,” as defined in the JOBS Act, and a “smaller reporting company” within the meaning of the Securities Act, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies or smaller reporting companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in this prospectus and our periodic reports and proxy statements, (3) exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved, and (4) an extended transition period for complying with new or revised accounting standards applicable to public companies. Additionally, we may take advantage of certain reduced disclosure obligations as a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. To the extent we take advantage of such reduced disclosure obligations, it may also make comparison of our financial statements with other public companies difficult or impossible.

After we are no longer an “emerging growth company,” we expect to incur additional management time and cost to comply with the more stringent reporting requirements applicable to companies that are deemed accelerated filers or large accelerated filers, including complying with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. We cannot predict or estimate the amount of additional costs we may incur or the timing of such costs.

We have not and do not expect to declare any dividends to our stockholders in the foreseeable future.

We have not and do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors may need to rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

We may seek to raise additional funds, finance acquisitions or develop strategic relationships by issuing securities that would dilute your ownership. Depending on the terms available to us, if these activities result in significant dilution, it may negatively impact the trading price of our shares of common stock.

Any additional financing that we secure may require the granting of rights, preferences or privileges senior to, or pari passu with, those of our common stock. Any issuances by us of equity securities may be at or below the prevailing market price of our common stock and in any event may have a dilutive impact on your ownership interest, which could cause the market price of our common stock to decline. We may also raise additional funds through the incurrence of debt or the issuance or sale of other securities or instruments senior to our shares of common stock, which may be highly dilutive. The holders of any securities or instruments we may issue may have rights superior to the rights of our common stockholders. If we experience dilution from the issuance of additional securities and we grant superior rights to new securities over holders of our common stock, it may negatively impact the trading price of our shares of common stock and you may lose all or part of your investment.

The price of the shares of our common stock and other terms of this offering have been determined by us along with our underwriter.

If you purchase our shares of common stock in this offering, you will pay a price that was not established in a competitive market. Rather, you will pay a price that was determined by us along with our underwriters. The offering price for our shares of common stock may bear no relationship to our assets, book value, historical results of operations or any other established criterion of value. The trading price, if any, of our common stock that may prevail in any market that may develop in the future, for which there can be no assurance, may be higher or lower than the price you paid for our shares of common stock.

Shares eligible for future sale may adversely affect the market price of our common stock if the shares are successfully listed on Nasdaq or other stock markets, as the future sale of a substantial number of outstanding shares of common stock in the public marketplace could reduce the price of our common stock.

The market price of our shares could decline as a result of sales of substantial amounts of our shares in the public market, or the perception that these sales could occur. In addition, these factors could make it more difficult for us to raise funds through future offerings of our common stock. An aggregate of 25,000,000 shares will be issued and outstanding before the consummation of this offering all of which, except those held by management and holders subject to lock-up agreements, are or will be freely tradable immediately upon effectiveness of this registration statement. All of the shares sold in the offering will be freely transferable without restriction or further registration under the Securities Act. The remaining shares will be “restricted securities” as defined in Rule 144. These shares may be sold without registration under the Securities Act to the extent permitted by Rule 144 or other exemptions under the Securities Act. See “Shares Eligible for Future Sale.” 

A possible “short squeeze” due to a sudden increase in demand of our shares of common stock that largely exceeds supply may lead to price volatility in our shares of common stock.

Following this offering, investors may purchase our shares of common stock to hedge existing exposure in our shares of common stock or to speculate on the price of our shares of common stock. Speculation on the price of our shares of common stock may involve long and short exposures. To the extent aggregate short exposure exceeds the number of shares of our common stock available for purchase in the open market, investors with short exposure may have to pay a premium to repurchase our shares of common stock for delivery to lenders of our shares of common stock. Those repurchases may in turn, dramatically increase the price of our shares of common stock until investors with short exposure are able to purchase additional common shares to cover their short position. This is often referred to as a “short squeeze.” A short squeeze could lead to volatile price movements in our shares of common stock that are not directly correlated to the performance or prospects of our company and once investors purchase the shares of common stock necessary to cover their short position the price of our common stock may decline.

Provisions in our certificate of incorporation and bylaws could discourage a change in control, or an acquisition of us by a third party, even if the acquisition would be favorable to you, thereby adversely affecting existing stockholders.

Our certificate of incorporation and bylaws contain provisions that may have the effect of making more difficult or delaying attempts by others to obtain control of our Company, even when these attempts may be in the best interests of our stockholders. For example, our certificate of incorporation authorizes our Board of Directors, without stockholder approval, to issue one or more series of preferred stock, which could have voting and conversion rights that adversely affect or dilute the voting power of the holders of common stock. These provisions and others that could be adopted in the future could deter unsolicited takeovers or delay or prevent changes in our control or management, including transactions in which stockholders might otherwise receive a premium for their shares over then-current market prices. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.

General Risk Factors

Public health outbreaks, epidemics or pandemics, including the global COVID-19 pandemic, have disrupted and may continue to disrupt, our business and could materially affect our business, financial condition and results of operations.

The recent COVID-19 pandemic and resulting worldwide economic conditions have affected, and may continue to affect, our business, financial condition and results of operations.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. For example, government imposed mandatory closures and restrictions across various key markets of ours resulted in volatile supply and demand conditions, primarily due to reduced demand in the food service distribution channel. As a result, product in the industry was redirected to the retail channel and in some cases this led to an increased supply and lower pricing. While demand in our retail channels for certain products has increased due to the impact of COVID-19, there is no guarantee that this increased demand will continue. While these effects were pronounced to varying degrees throughout fiscal year 2020, the future extent of the impact of the COVID-19 pandemic on our financial performance, including our ability to execute our strategic initiatives, is still uncertain and will depend on future developments, including the duration and spread of the pandemic, related government restrictions and the success of vaccines and other treatments for COVID-19. Additionally, as the global economic impacts of COVID-19 continue, fluctuate and/or change, the pandemic’s impact on our operating results may change or be prolonged.

In addition, our ability to continue to supply our products is highly dependent on our workforce, including our workers involved in the growing, harvesting, transportation, processing and distribution of our products. Our ability to maintain the safety of our workforce may be significantly impacted by individuals contracting or being exposed to COVID-19, and our operations and financial results may be negatively affected as a result. While we are following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of our workforce, we cannot be certain that these measures will be successful in ensuring the health of our workforce. Workforce disruptions related to COVID-19 may significantly impact our ability to maintain our operations and may adversely affect our financial results. Throughout the pandemic governments have restricted travel and transportation generally, and while these restrictions have not significantly impacted our ability to supply our products to date, there is no guarantee that future restrictions will not have a significant impact on our business. We also incurred costs in relation to safety precautions undertaken in our shipping operations and there can be no assurances that we would not be required to incur such costs or similar costs in the future.

The impact of the COVID-19 pandemic on our operating results can also impact our ability to meet our financial obligations. Our operating results have been and may continue to be impacted by the pandemic, and we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. In the event of a continued sustained market deterioration or further delayed recovery, we may need additional liquidity which would require us to evaluate available alternative strategies such as seeking additional debt or equity capital, which may be unsuccessful.

A prolonged economic downturn, particularly in light of the COVID-19 pandemic, could adversely affect our business.

Uncertain global economic conditions, in particular in light of the COVID-19 pandemic, could adversely affect our business. Negative global and national economic trends, such as decreased consumer and business spending, high unemployment levels and declining consumer and business confidence, pose challenges to our business and could result in declining revenues, profitability and cash flow. Although we continue to devote significant resources to support our brands, unfavorable economic conditions may negatively affect demand for our products.

Increases in costs, disruption of supply or shortage of raw materials could harm our business.

We may experience increases in the cost or a sustained interruption in the supply or shortage of raw materials. For example, the tariffs currently imposed for importing goods from China has significantly increased. Any such an increase or supply interruption could materially negatively impact our business, prospects, financial condition and operating results. We use various raw materials in our business including aluminum. The prices for these raw materials fluctuate depending on market conditions and global demand for these materials and could adversely affect our business and operating results. Substantial increases in the prices for our raw materials increase our operating costs, and could reduce our margins if we cannot recoup the increased costs through increased prices for our products and services.

Litigation may adversely affect our business, financial condition and results of operations.

From time to time in the normal course of our business operations, we may become subject to litigation involving intellectual property, data privacy and security, consumer protection, food safety, commercial disputes and other matters that may negatively affect our operating results if changes to our business operation are required. We may also be subject to claims involving health and safety, hazardous materials usage, other environmental impacts, or service disruptions or failures. The cost to defend such litigation may be significant and may require a diversion of our resources. There also may be adverse publicity associated with litigation that could negatively affect customer perception of our business, regardless of whether the allegations are valid or whether we are ultimately found liable. As a result, litigation may adversely affect our business, financial condition and results of operations. In addition, insurance may not cover existing or future claims, be sufficient to fully compensate us for one or more of such claims, or continue to be available on terms acceptable to us. A claim brought against us that is uninsured or underinsured could result in unanticipated costs, thereby adversely affecting our results of operations and resulting in a reduction in the trading price of our stock.

An active, liquid and orderly trading market for our common stock may not develop, the price of our stock may be volatile, and you could lose all or part of your investment.

The trading price of our common stock may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. Our stock price could be subject to wide fluctuations in response to a variety of factors, which include:

In addition, during the duration of the COVID-19 pandemic, the stock market has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may seriously affect the market price of companies’ stock, including ours, regardless of actual operating performance. These fluctuations may be even more pronounced in the trading market for our stock shortly following this offering. In addition, in the past, following periods of volatility in the overall market and the market price of a particular company’s securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

Our failure to meet the continuing listing requirements of Nasdaq could result in a delisting of our securities.

If we fail to satisfy the continuing listing requirements of Nasdaq, such as the corporate governance, stockholders equity or minimum closing bid price requirements, Nasdaq may take steps to delist our common stock. Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so. In the event of a delisting, we would likely take actions to restore our compliance with Nasdaq’s listing requirements, but we can provide no assurance that any such action taken by us would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our securities, prevent our common stock from dropping below the Nasdaq minimum bid price requirement or prevent future non-compliance with Nasdaq’s listing requirements.

We will incur increased costs and demands upon management as a result of complying with the laws and regulations affecting public companies, which could adversely affect our operating results.

As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company, including costs associated with public company reporting and corporate governance requirements. These requirements include compliance with Section 404 and other provisions of the Sarbanes-Oxley Act, as well as rules implemented by the Securities and Exchange Commission (“SEC”) and Nasdaq. In addition, our management team also has to adapt to the requirements of being a public company. We expect complying with these rules and regulations will substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly.

The increased costs associated with operating as a public company will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition and operating results.

As a public company, we also expect that it may be more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as our executive officers.

As a public company, we are obligated to develop and maintain proper and effective internal control over financial reporting. We may not complete our analysis of our internal control over financial reporting in a timely manner, or these internal controls may not be determined to be effective, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We will be required, pursuant to Section 404 of the Sarbanes-Oxley Act, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the first fiscal year beginning after the effective date of the IPO. This assessment will need to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

We are in the early stages of the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not be able to remediate future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, we could lose investor confidence in the accuracy and completeness of our financial reports, which would have a material adverse effect on the price of our common stock.

If our shares of common stock become subject to the penny stock rules, it would become more difficult to trade our shares.

The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or authorized for quotation on certain automated quotation systems, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system. If we do not retain a listing on Nasdaq and if the price of our common stock is less than $5.00, our common stock will be deemed a penny stock. The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from those rules, to deliver a standardized risk disclosure document containing specified information. In addition, the penny stock rules require that before effecting any transaction in a penny stock not otherwise exempt from those rules, a broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive (i) the purchaser’s written acknowledgment of the receipt of a risk disclosure statement; (ii) a written agreement to transactions involving penny stocks; and (iii) a signed and dated copy of a written suitability statement. These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our common stock, and therefore stockholders may have difficulty selling their shares.

If we were to dissolve, the holders of our securities may lose all or substantial amounts of their investments.

If we were to dissolve as a corporation, as part of ceasing to do business or otherwise, we may be required to pay all amounts owed to any creditors before distributing any assets to the investors. There is a risk that in the event of such a dissolution, there will be insufficient funds to repay amounts owed to holders of any of our indebtedness and insufficient assets to distribute to our other investors, in which case investors could lose their entire investment.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our stock adversely, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our stock adversely, or provide more favorable relative recommendations about our competitors, our stock price would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

In making your investment decision, you should understand that we and the underwriters have not authorized any other party to provide you with information concerning us or this offering.

You should carefully evaluate all of the information in this prospectus before investing in our company. We may receive media coverage regarding our company, including coverage that is not directly attributable to statements made by our officers, that incorrectly reports on statements made by our officers or employees, or that is misleading as a result of omitting information provided by us, our officers or employees. We and the underwriters have not authorized any other party to provide you with information concerning us or this offering, and you should not rely on this information in making an investment decision.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Business” contains forward-looking statements. All statements other than statements of historical facts contained in this prospectus, including statements regarding our future results of operations and financial position, business strategy and plans and our objectives for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect,” “outlook” and similar expressions are intended to identify forward-looking statements. These forward-looking statements include statements relating to:

We caution you that the foregoing list may not contain all of the forward-looking statements made in this prospectus. We have based these forward-looking statements largely on our current expectations about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this prospectus may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

You should read this prospectus and the documents that we reference in this prospectus and have filed with the SEC as exhibits to the registration statement of which this prospectus is a part with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect.

USE OF PROCEEDS

We estimate that the net proceeds from this offering will be approximately $               after deducting estimated underwriting discounts and estimated offering expenses payable by us. If the over-allotment option is exercised in full, we estimate that our net proceeds will be approximately $         . We intend to use the net proceeds from this offering for the following purposes:

______________ 

A $1.00 increase (decrease) in the assumed public offering price of $             per share, would increase (decrease) the net proceeds to us from this offering by approximately $                 , assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions.

We intend to use $3.792 million of the net proceeds to repay the Sament Notes and accrued interest, which mature in June 2023 and March 2025. If the Evergreen Note is not converted into shares of common stock prior to the closing of this offering, we intend to repay the amount due under the Evergreen Note and accrued interest, or $1,152,396, with some of the proceeds of this offering. We intend to repay the promissory and demand notes held by our executive officers with part of the net proceeds of this offering, which include including $619,460 payable to our Chief Financial Officer. At their election, holders of our outstanding SAFEs may elect to receive cash instead of converting their SAFE into common stock upon the effectiveness of this offering. If all SAFE holders elected to receive cash, we would be required to pay them $538 thousand.

The actual allocation of proceeds realized from this offering will depend upon our operating revenues and cash position and our working capital requirements may change. Therefore, as of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. Accordingly, we will have discretion in the application of the net proceeds, and investors will be relying on our judgment regarding the application of the proceeds of this offering. Pending our use of the net proceeds from this offering, we intend to invest the net proceeds in a variety of capital preservation investments, including short-term, investment-grade, interest-bearing instruments and U.S. government securities.

DIVIDEND POLICY

We have never paid cash dividends on any of our capital stock, and we do not anticipate paying any cash dividends on our common stock in the foreseeable future. We intend to retain all available funds and any future earnings to fund the development and expansion of our business. Any future determination to pay dividends will be at the discretion of our Board of Directors and will depend upon a number of factors, including our results of operations, financial condition, future prospects, contractual restrictions, restrictions imposed by applicable law and other factors our Board of Directors deems relevant.

CAPITALIZATION

The following table sets forth our capitalization as of June 30, 2021 as follows:

The pro forma information below is illustrative only, and our capitalization following the closing of this offering will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this prospectus.

The number of shares of our common stock outstanding set forth in the table above excludes:

DILUTION

If you invest in our securities in this offering, your investment will be immediately and substantially diluted to the extent of the difference between the public offering price per share of our common stock and the pro forma net tangible book value per share of our common stock after giving effect to the offering.

Our net tangible book (deficit) as of June 30, 2021 was $(3.182) million, or approximately $(0.16) per share. Net tangible book value per share represents our total tangible assets less total liabilities, divided by the number of shares of common stock outstanding.

Net tangible book value dilution per share of common stock to new investors represents the difference between the amount per share paid by purchasers in the offering and the pro forma net tangible book value per share of common stock immediately after completion of the offering. After giving effect to the offering and our sale of the  shares of common stock in the offering at a public offering price of $               per share, and after deduction of underwriting discounts and commissions from gross proceeds raised in the offering and estimated offering expenses payable by us, our pro forma net tangible book value as of June 30, 2021 would have been $              , or $       per share of common stock. This represents an immediate increase in pro forma net tangible book value of $     per share of common stock to existing stockholders and an immediate dilution in net tangible book value of $         per share of common stock to investors of the offering, as illustrated in the following table, based on shares outstanding as of June 30, 2021.

Each $1.00 increase (decrease) in the assumed initial public offering price of $            per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma net tangible book value per share after this offering by $  per share and the dilution to new investors purchasing  common stock in this offering by $         per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their option in full to purchase an additional       shares of  common stock in this offering, the pro forma net tangible book value per share after the offering would be $  per share, the increase in the net tangible book value per share to existing stockholders would be $               per share and the dilution to new investors purchasing our common stock in this offering would be $      per share.

The number of shares of our common stock outstanding set forth in the table above excludes:

MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of our operations together with our consolidated financial statements and the notes thereto appearing elsewhere in this prospectus. This discussion contains forward-looking statements reflecting our current expectations, whose actual outcomes involve risks and uncertainties. Actual results and the timing of events may differ materially from those stated in or implied by these forward-looking statements due to a number of factors, including those discussed in the sections entitled “Risk Factors,” “Cautionary Statement regarding Forward-Looking Statements,” and elsewhere in this prospectus.

Business Overview

Edible Garden is a next generation CEA farming company. We use traditional agricultural growing techniques together with technology to grow fresh, organic food, sustainably and safely while improving traceability. We use the controlled environment of traditional greenhouse structures, such as glass greenhouses, together with hydroponic and vertical greenhouses to sustainably grow organic herbs and lettuces.

Our business is a successor business of a subsidiary of Terra Tech. We purchased substantially all of the assets of Edible Garden Corp., a subsidiary of Terra Tech which we refer to in this section as “Predecessor”, from Terra Tech as of March 30, 2020 for approximately $3.0 million. Our company was incorporated on March 28, 2020 in the State of Wyoming as Edible Garden Inc. We are now a Delaware corporation with the name “Edible Garden AG Incorporated.”

Recent Developments

Private Placement

On October 7, 2021, we closed on a private placement with Evergreen and raised $1.0 million, which we intend to use to support our working capital requirements. In the private placement, we issued a 15% original issue discount secured promissory note to Evergreen (the “Evergreen Note”) and a warrant to purchase 751,623 shares of our common stock (the “Evergreen Warrant”). The Evergreen Note matures on July 7, 2022 and incurs interest at a rate of 5.0% per annum. The Evergreen Note is secured and subordinated to the Sament Notes. Evergreen may elect to convert the Evergreen Note into shares of common stock at a conversion price of $1.53 per share. If the Evergreen Note is not converted into shares of common stock prior to the closing of this offering, we intend to repay the amount due under the Evergreen Note with some of the proceeds of this offering. The Evergreen Warrant may be exercised for the underlying shares of common stock at an exercise price of $1.53 per share until October 7, 2026. As part of the private placement, Maxim received a cash fee equal to 6% of the private placement proceeds. We have the option to issue up to $1.0 million in additional notes and warrants to Evergreen before January 10, 2022. The offering was conducted pursuant to an exemption from registration under the Securities Act in reliance upon Rule 506(b) promulgated under the Securities Act.

Exercise of Options by Sament 

On October 8, 2021, Sament exercised its option to purchase 5,000,000 shares of our common stock for an aggregate exercise price of $2.00.

Impact of COVID-19

The COVID-19 pandemic and resulting worldwide economic conditions have affected, and may continue to affect, our business, financial condition and results of operations. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. For example, government imposed mandatory closures and restrictions across various key markets of ours resulted in volatile supply and demand conditions, primarily due to reduced demand in the food service distribution channel. As a result, product in the industry was redirected to the retail channel and in some cases this led to an increased supply and lower pricing. While demand in our retail channels for certain products has increased due to the impact of COVID-19, there is no guarantee that this increased demand will continue. While these effects were pronounced to varying degrees throughout fiscal year 2020, the future extent of the impact of the COVID-19 pandemic on our financial performance, including our ability to execute our strategic initiatives, is still uncertain and will depend on future developments, including the duration and spread of the pandemic, related government restrictions and the success of vaccines and other treatments for COVID-19. Additionally, as the global economic impacts of COVID-19 continue, fluctuate and/or change, the pandemic’s impact on our operating results may change or be prolonged.

In addition, our ability to continue to supply our products is highly dependent on our workforce, including our workers involved in the growing, harvesting, transportation, processing and distribution of our products. Our ability to maintain the safety of our workforce may be significantly impacted by individuals contracting or being exposed to COVID-19, and our operations and financial results may be negatively affected as a result. We are following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of our workforce, we cannot be certain that these measures will be successful in ensuring the health of our workforce. Workforce disruptions related to COVID-19 may significantly impact our ability to maintain our operations and may adversely affect our financial results. Throughout the pandemic governments have restricted travel and transportation generally, and while these restrictions have not significantly impacted our ability to supply our products to date, there is no guarantee that future restrictions will not have a significant impact on our business. We also incurred costs in relation to safety precautions undertaken in our shipping operations and there can be no assurances that we would not be required to incur such costs or similar costs in the future.

The impact of the COVID-19 pandemic on our operating results can also impact our ability to meet our financial obligations. Our operating results have been and may continue to be impacted by the pandemic, and we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. In the event of a continued sustained market deterioration or further delayed recovery, we may need additional liquidity which would require us to evaluate available alternative strategies such as seeking additional debt or equity capital, which may be unsuccessful.

Results of Operations

The comparability of our operating results in the year ended December 31, 2020 compared to the year ended December 31, 2019 includes the predecessor company, Edible Garden Corp., a subsidiary of Terra Tech (“Predecessor”) as well as the successor company, or Edible Garden AG Incorporated (us or the “Successor”).  The period from January 1, 2020 through March 31, 2020 relates to the Predecessor and the period from April 1, 2020 through December 31, 2020 relates to the Successor. The period from January 1, 2019 through December 31, 2019 relate to the Predecessor.

We present the information in this format to assist readers in understanding and assessing the trends and significant changes in our results of operations on a comparable basis. We believe this presentation is appropriate because it provides a meaningful comparison and relevant analysis of our results of operations for the relevant periods.

Comparison of Results of Operations for the Year ended December 31, 2019 (Predecessor) compared to the Period from January 1, 2020 through March 31, 2020 (Predecessor) and the Period from March 28, 2020 (Inception) through December 31, 2020 (Successor)

Revenues

Revenues were $7.691 million for the period March 28, 2020 through December 31, 2020 (Successor) and $1.750 million for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to $5.634 million for the year ended December 31, 2019 (Predecessor).  On a combined basis, revenues for the Predecessor and Successor were $9.441 million for the year ended December 31, 2020, an increase of $3.807 million, or 67.57%, compared to the year ended December 31, 2019 for the Predecessor.  This represents growth from new accounts, growth from our existing customers taking in additional product lines due to the increased demand from consumers due to the impact of COVID-19 and overall category growth.

Cost of goods sold

Cost of goods sold were $6.488 million for the period March 28, 2020 through December 31, 2020 (Successor) and $1.599 million for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to $4.366 million for the year ended December 31, 2019 (Predecessor).  On a combined basis, cost of goods sold for the Predecessor and Successor were $8.087 million for the year ended December 31, 2020, an increase of $3.721 million, or 85.25%, compared to the year ended December 31, 2019 for the Predecessor.

The increase in cost of goods sold was primarily due to the raw material costs in the amount of $2.123 million, on a combined basis, to fulfill the orders placed by our customers and additional costs incurred due to additional supply chain pressure caused by COVID-19.  The increase in labor for both production to produce the products and in house delivery costs to get the products to market amounted to $654 thousand, on a combined basis.  The increase in the cost of freight to get the products to market amounted to $945 thousand, on a combined basis.

Gross margin

Gross margin was $1.203 million or 15.64% of sales for the period March 28, 2020 through December 31, 2020 (Successor) and $151 thousand or 8.64% of sales for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to $1.268 million or 22.52% of sales for the year ended December 31, 2019 (Predecessor).  On a combined basis, gross margin for the Predecessor and Successor was $1.354 million or 14.34% of sales for the year ended December 31, 2020, an increase of $85 thousand, or 6.73%, compared to the year ended December 31, 2019 for the Predecessor, while gross margin as a percentage of sales declined by 8.16%.  Our margins dropped due to the increased costs incurred to fulfill the demand by our customers as a result of COVID-19 for our products which we were able to produce and deliver while beginning to leverage a small part of our operating efficiencies.

Selling, general and administrative

Selling, general and administrative expenses were $3.675 million for the period March 28, 2020 through December 31, 2020 (Successor) and $1.480 million for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to $5.291 million for the year ended December 31, 2019 (Predecessor).  On a combined basis, selling, general and administrative expenses for the Predecessor and Successor were $5.155 million for the year ended December 31, 2020, a decrease of $136 thousand, or 2.57%, compared to the year ended December 31, 2019 for the Predecessor.  Bad debt expense is attributable to the predecessor company for reserves established of approximately $162 thousand; commission expense, on a combined basis, increased by $78 thousand due to brokers we retained to help  increase revenue; depreciation and amortization, on a combined basis, increased by approximately $171 thousand based on the allocation of the assets acquired in the Asset Acquisition; employee benefits, on a combined basis, increased by approximately $71 thousand due to the higher rates paid for workmen’s compensation insurance due to the changes in our experience rating and other professional fees increased by approximately $165 thousand for outside contractors retained to establish better operating efficiencies.  Advertising, on a combined basis, decreased by approximately $72 thousand due to less advertising done during the COVID-19 pandemic; banking, on a combined basis, decreased by approximately $68 thousand since the successor company does not operate in the cannabis industry; salaries, on a combined basis, decreased by approximately $263 thousand due to the reduced headcount while deploying automation in the production facility; legal expense, on a combined basis, decreased by approximately $245 thousand since the predecessor company settled a lawsuit; trade shows, on a combined basis, decreased by approximately $35 thousand since there were no trade shows during the COVID-19 pandemic; and utilities, on a combined basis, decreased by approximately $91 thousand due to better controls put in place at the greenhouse.

Loss on sale of assets

Loss on the sale of assets in the period from January 1, 2020 to March 31, 2020 was approximately $303 thousand from the predecessor company recorded for the sale of the assets to the successor company.

Loss from operations

Loss from operations were $2.472 million for the period March 28, 2020 through December 31, 2020 (Successor) and $1.632 million for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to $3.988 million for the year ended December 31, 2019 (Predecessor).  On a combined basis, loss from operations for the Predecessor and Successor were $4.104 million for the year ended December 31, 2020, an increase of $116 thousand, or 2.83%, compared to the year ended December 31, 2019 for the Predecessor. 

Interest expense

Interest expense was $112 thousand for the period March 28, 2020 through December 31, 2020 (Successor) and zero for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to zero for the year ended December 31, 2019 (Predecessor).  On a combined basis, interest expense for the Predecessor and Successor was $112 thousand for the year ended December 31, 2020, an increase of $112 thousand compared to the year ended December 31, 2019 for the Predecessor.  The interest was incurred by the successor due to the seller financing notes for the Asset Acquisition.  

Gain on Debt Forgiveness

Gain on Debt Forgiveness in the amount of $503 thousand was from the successor due to the Paycheck Protection Program which was approved by the Small Business Administration.

Net Loss

Net Loss was $2.081 million for the period March 28, 2020 through December 31, 2020 (Successor) and $1.632 million for the period from January 1, 2020 through March 31, 2020 (Predecessor), compared to $3.988 million for the year ended December 31, 2019 (Predecessor).  On a combined basis, the net loss for the Predecessor and Successor was $3.713 million for the year ended December 31, 2020, an increase of $275 thousand, compared to $3.988 million net loss for the Predecessor in the year ended December 31, 2019.

Management will continue its efforts to attempt to lower operating expenses and increase revenue.  We continue to invest in further expanding our operations and promoting our name and products.  Given the fact that most of the operating expenses are fixed or have a quasi-fixed character, management expects that, as revenue increases, those expenses, as a percentage of revenue, will significantly decrease. Nevertheless, there can be no assurance that we will be able to increase our revenues in future periods.

Comparison of Results of Operations for the three months ended March 31, 2020 (Predecessor) and the period March 28, 2020 (inception) through June 30, 2020 (Successor) are compared to the six months ended June 30, 2021 (Successor)

Revenues

Revenues were $1.750 million for the three months ended March 31, 2020 (Predecessor) and $2.649 million for the period March 28, 2020 (inception) through June 30, 2020 (Successor) for a total of $4.399 million, compared to $5.260 million for the six months ended June 30, 2021 (Successor).  Revenues for the Successor increased of $861 thousand, or 19.57%, compared to the combined basis for the Predecessor and Successor for the six months ended June 30, 2020.  This represents growth from new accounts, growth from our existing customers taking in additional product lines due to the increased demand from consumers due to the impact of COVID-19 and overall category growth.

Cost of goods sold

Cost of goods sold were $1.599 million for the three months ended March 31, 2020 (Predecessor) and $2.327 million for the period March 28, 2020 (inception) through June 30, 2020 (Successor) for a total of $3.926 million, compared to $4.823 million for the six months ended June 30, 2020 (Successor).  Cost of goods sold for the Successor increased $897 thousand for the six months ended June 30, 2021, or 22.85%, compared to the combined basis for the Predecessor and Successor for the six months ended June 30, 2020.

The increase in cost of goods sold was primarily due to the raw material costs in the amount of $1.126 million, on a combined basis, to fulfill the orders placed by our customers and additional costs incurred due to additional supply chain pressure caused by COVID-19.  The increase in labor for both production to produce the products and in house delivery costs to get the products to market amounted to $43 thousand, on a combined basis.  This increase was offset by a decrease in the cost of freight to get the products to market, of $165 thousand on a combined basis, because our own employees are delivering our products instead of us incurring this cost from third-party carriers.

Gross margin

Gross margin was $151 thousand or 8.64% of sales for the period three months ended March 31, 2020 (Predecessor) and $322 thousand or 12.16% of sales for the period March 28, 2020 (inception) through June 30, 2020 (Successor), compared to $437 thousand or 8.31% of sales for the six months ended June 30, 2021.  Gross margin for the Successor was $437 thousand or 8.31% of sales for the six months ended June 30, 2021, a decrease of $36 thousand, or 7.61%, compared to the combined basis for the Predecessor and Successor for the six months ended June 30, 2020, while gross margin as a percentage of sales declined by 2.44%.  Our margins decreased due to the increased costs incurred to fulfill the demand by our customers as a result of COVID-19 for our products which we were able to produce and deliver while beginning to leverage a small part of our operating efficiencies.

Selling, general and administrative

Selling, general and administrative expenses were $1.480 million for the three months ended March 31, 2020 (Predecessor) and $1.276 million for the period from March 28, 2020 (inception) through June 31, 2020 (Successor), compared to $2.684 million for the six months ended June 30, 2021 (Successor).  Selling, general and administrative expenses for the Successor were $2.684 million for the six months ended June 30, 2021, a decrease of $72 thousand, or 2.61%, compared to the combined basis for the Predecessor and Successor for the six months ended June 30, 2020.  Bad debt expense is attributable to the predecessor company for reserves established of approximately $176 thousand; commission expense, on a combined basis, increased by approximately $37 thousand due to brokers we retained to help increase revenue; employee benefits, on a combined basis, increased by approximately $111 thousand due to the higher rates paid for workmen’s compensation insurance due to the changes in our experience rating ; and other professional fees, on a combined basis, decreased by approximately $61 thousand for outside contractors retained to establish better operating efficiencies.  Salaries, on a combined basis, decreased by approximately $221 thousand due the reduced headcount while deploying automation in the production facility; legal expense, on a combined basis, increased by approximately $52 thousand.

Loss on sale of assets

Loss on the sale of assets was approximately $303 thousand from the predecessor company recorded for the sale of the assets to the successor company.

Loss from operations

Loss from operations were $1.632 million for the three months ended March 31, 2020 (Predecessor) and $954 thousand for the period March 28, 2020 (inception) through June 30, 2020 (Successor), compared to $2.247 million for the year six months ended June 30, 2021 (Successor).  Loss from operations for the Successor were $2.247 million for the six months ended June 30, 2021, a decrease of $339 thousand, or 13.11%, compared to the combined basis of the Predecessor and Successor of $2.586 million for the six months ended June 30, 2020. 

Interest expense

Interest expense was zero for the three months ended March 31, 2020 (Predecessor) and $34 thousand for the period March 28, 2020 through June 30, 2020 (Successor), compared to $99 thousand for the six months ended June 30, 2021 (Successor). On a combined basis, interest expense for the Predecessor and Successor was $49 thousand for the six months ended June 30, 2020. There was an increase for the Successor of $51 thousand for the six months ended June 30, 2021. The interest was incurred by the successor due to the seller financing notes for the Asset Acquisition as well as other working capital loans.

Net Loss

Net Loss was $1.632 million for the three months ended March 31, 2020 (Predecessor) and $1.002 million for the period March 28, 2020 through June 30, 2020 (Successor), compared to $2.347 million for the six months ended June 30, 2021 (Successor).  On a combined basis, the net loss for the Predecessor and Successor was $2.634 million for the six months ended June 30, 2020, a decrease for the Successor of $287 thousand for the six months ended June 30, 2021.

Management will continue its efforts to attempt to lower operating expenses and increase revenue.  We continue to invest in further expanding our operations and promoting our name and products.  Given the fact that most of the operating expenses are fixed or have a quasi-fixed character, management expects that, as revenue increases, those expenses, as a percentage of revenue, will significantly decrease. Nevertheless, there can be no assurance that we will be able to increase our revenues in future periods.

Non-GAAP Financial Measures

In addition to our results determined in accordance with GAAP, we believe certain measures are useful in evaluating our operating performance. These measures constitute non-GAAP measures. These non-GAAP measures are used by management in making operating decisions, allocating financial resources, and internal planning and forecasting, and for business strategy purposes. Non-GAAP financial measures have inherent limitations and are not uniformly utilized by issuers. Therefore, these non-GAAP financial measures should not be considered in isolation, or as a substitute for comparable measures prepared in accordance with GAAP. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP.

Adjusted EBITDA and Adjusted EBITDA Margin

Management believes that Adjusted EBITDA and Adjusted EBITDA Margin, non-GAAP measures, are strong indicators of our overall operating performance and are useful to management and investors as measures of comparative operating performance from period to period. We define Adjusted EBITDA as net income before interest, taxes, depreciation, and amortization, and as further adjusted for loss on extinguishment of debt, share-based compensation, transaction and acquisition-related charges, integration and restructuring charges, and other non-cash charges. We exclude the impact of share-based compensation because it is a non-cash expense and we believe that excluding this item provides meaningful supplemental information regarding performance and ongoing cash generation potential. We exclude loss on extinguishment of debt, transaction and acquisition related charges, integration and restructuring charges, and other charges because such expenses are episodic in nature and have no direct correlation to the cost of operating our business on an ongoing basis. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by total revenues.

Adjusted EBITDA was $(3.479) million for the year ended December 31, 2019 (Predecessor) and represented an Adjusted EBITDA Margin of (62)%. Adjusted EBITDA was $(1.182) million for the period from January 1, 2020 through March 31, 2020 (Predecessor) and represented an Adjusted EBITDA Margin of (68)%.  Adjusted EBITDA was $(1.402) million for the period from March 28, 2020 through December 31, 2020 (Successor) and represented an Adjusted EBITDA Margin of (18)%. On a combined basis, Adjusted EBITDA for the Predecessor and Successor was $(2.584) million for the year ended December 31, 2020 and represented an Adjusted EBITDA Margin of (27)%.  

Growth in Adjusted EBITDA was driven primarily from revenue growth attributed to new and existing customers offset by the contraction of margin due to supply chain issues during COVID-19 pandemic.

The following table presents the reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to the comparable GAAP measures for the last two fiscal years.

Adjusted EBITDA was $(1.182) million for the three months ended March 31, 2020 (Predecessor) and represented an Adjusted EBITDA Margin of (68)%. Adjusted EBITDA was $(765) thousand for the period from March 28, 2020 (inception) through June 30, 2020 (Successor) and represented an Adjusted EBITDA Margin of (29)%. On a combined basis, Adjusted EBITDA for the Predecessor and Successor was $(1.947) million for the period from January 1, 2020 through June 30, 2020 and represented an Adjusted EBITDA Margin of (44)%. Adjusted EBITDA was $(1.863) million for the six months ended June 30, 2021 represented an Adjusted EBITDA Margin of (35)%.

Growth in Adjusted EBITDA was driven primarily from revenue growth attributed to new and existing customers offset by the contraction of margin due to supply chain issues during COVID-19 pandemic.

The following table presents the reconciliation of Adjusted EBITDA and Adjusted EBITDA margin to the comparable GAAP measures for the six-month periods.

Liquidity and Capital Resources

Going Concern Considerations

We have incurred significant losses since our inception. We have experienced net losses of approximately $2.081 million for the period March 28, 2020 (inception) through December 31, 2020 and $2.345 million in the six months ended June 30, 2021. We expect our capital expenses and operational expenses, to increase in the future due to expected increased sales and marketing expenses, operational costs, and general and administrative costs and, therefore, our operating losses will continue or even increase at least through the near term.

Our financial statements have been prepared on a “going concern” basis, which implies we may not continue to meet our obligations and continue our operations for the next twelve months. The report of our independent registered public accounting firm that accompanies our audited consolidated financial statements contains a going concern qualification in which such firm expressed substantial doubt about our ability to continue as a going concern. Our consolidated financial statements do not include any adjustments that might result if we are unable to continue as a going concern. If we are unable to continue as a going concern, holders of our securities might lose their entire investment. Although we plan to attempt to raise additional capital through one or more private placements or public offerings, the doubts raised relating to our ability to continue as a going concern may make our shares an unattractive investment for potential investors. These factors, among others, may make it difficult to raise any additional capital and may cause us to be unable to continue to operate our business.

There is no assurance that we will ever be profitable or that debt or equity financing will be available to us in the amounts, on terms, and at times deemed acceptable to us, if at all. The issuance of additional equity or equity-linked securities by us would result in significant dilution in the equity interests of our current stockholders. Obtaining commercial loans, assuming those loans would be available, would increase our liabilities and future cash commitments. If we are unable to obtain financing in the amounts and on terms deemed acceptable to us, we may be unable to continue our business as planned and as a result may be required to scale back or cease operations, which could cause our stockholders to lose some or all of their investment in us. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result should we be unable to continue as a going concern.

Liquidity

The Company’s primary liquidity requirements are for working capital, continued investments in capital expenditures, and other strategic investments. Income taxes are currently not a significant use of funds but after the benefits of our net operating loss carryforwards are fully recognized, could become a material use of funds, depending on our future profitability and future tax rates. The Company’s liquidity needs are met primarily through cash flows from operations, as well as funds available under our term loan borrowings and related party loans. Our cash flows from operations include cash received from customers, less cash costs to provide services to our customers, which includes general and administrative costs and interest payments.

As of December 31, 2020, we had $5 thousand in cash and cash equivalents, respectively, available.  As of June 30, 2021, we had $15 thousand in cash and cash equivalents, respectively, available.  As of December 31, 2020, we had $3.884 million of total debt outstanding. As of June 30, 2021, we had $4.821 million of total debt outstanding.  We believe our cash on hand, together with the proceeds of this offering, amounts available under our factoring facility, related party loans and cash provided by (used in) operating activities are and will continue to be adequate to meet our operational and business needs in the next twelve months. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, we anticipate that they will be obtained through the incurrence of additional indebtedness, additional equity financings or a combination of these potential sources of funds.  In the event that we need access to additional cash, we may not be able to access the credit markets on commercially acceptable terms or at all. Our ability to fund future operating expenses and capital expenditures and our ability to meet future debt service obligations or refinance our indebtedness will depend on our future operating performance, which will be affected by general economic, financial and other factors beyond our control, including those described under “Risk Factors.”

Long-Term Debt

Secured Promissory Note

On March 30, 2020, the Company issued a promissory note to Sament Capital Investments, Inc. (“Sament”), an affiliate of Terra Tech for $3,000,000 in connection with the acquisition of the Predecessor’s assets. The Note accrues interest at a rate of 3.5% per annum on a 360-day year basis and matures March 30, 2025. In addition, we granted a second secured promissory note to Sament as of June 3, 2020 for $653,870, which accrues interest at a rate of 3.5% until June 3, 2023 (together with the note due March 30, 2025, the “Sament Notes”). The Sament Notes are secured by all of the assets purchased in connection with the Asset Acquisition. Sament also currently owns 20.0% of our outstanding common stock.

Small Business Administration (“SBA”) Loans

On June 22, 2020, the Company entered into a U.S. Small Business Administration Loan Authorization and Agreement pursuant to which the Company received loan proceeds of $150,000 (the “SBA Loan”). The SBA Loan was made under, and is subject to the terms and conditions of, the Economic Injury Disaster Loan Program, which was a program expanded for COVID-19 relief under the CARES Act and is administered by the U.S. Small Business Administration. The term of the SBA Loan is thirty (30) years with a maturity date of June 22, 2050 and the annual interest rate of the SBA Loan is a fixed rate of 3.75%. Under the terms of the CARES Act, the use of loan proceeds for the SBA Loan is limited to alleviating economic injury caused by the COVID-19 pandemic.

SAFE Agreements

During the year ended December 31, 2020, the Company entered into Simple Agreements for Future Equity (“SAFEs”) with investors in a series of transactions exempt from registration under the Securities Act pursuant to Regulation Crowdfunding (the “Crowdfunding offering”).

Upon a future equity financing of greater than $1,000,000 (not including our initial public offering), the SAFE securities are convertible at the option of the Company into securities identical to those issued in the future equity financing (“Shadow Securities”), except (1) they do not have the right to vote except as required by law, (2) they must vote in accordance with the majority of the investors in such future equity financing with respect to any such required vote and (3) they are not entitled to any inspection or information rights. If the Company elects to convert the securities upon the closing of a future equity financing, the investors will receive the number of Shadow Securities equal to the greater the quotient obtained by dividing the amount the investor paid (the “Purchase Amount”) for the securities by:

(a) the quotient of $18,500,000 divided by the aggregate number of issued and outstanding shares of capital stock, assuming full conversion or exercise of all convertible and exercisable securities then outstanding, including shares of convertible preferred stock and all outstanding vested or unvested options or warrants to purchase capital stock, but excluding (i) the issuance of all shares of capital stock reserved and available for future issuance under any of the Company’s existing equity incentive plans, (ii) convertible promissory notes issued by the Company, (iii) any SAFEs, and (iv) any equity securities that are issuable upon conversion of any outstanding convertible promissory notes or SAFEs, or

(b) the lowest price per share of the securities sold in such future equity financing.

The price (either (a) or (b)) determined above shall be deemed the “First Financing Price” and may be used to establish the conversion price of the securities at a later date, even if the Company does not choose to convert the SAFE securities upon the first future equity financing.

Upon our initial public offering of common stock or a change of control (a “Liquidity Event”) prior to any equity financing, the SAFE holders will receive, at the option of the holder, either (i) a cash payment equal to the purchase amount or (ii) a number of shares of common stock of the Company equal to the purchase amount divided by the quotient of (a) $18,500,000 divided by (b) the number, as of immediately prior to the Liquidity Event, of shares of the Company’s capital stock (on an as-converted basis) outstanding, assuming exercise or conversion of all outstanding, vested and unvested options, warrants and other convertible securities, but excluding (i) shares of common stock reserved and available for future grant under any equity incentive or similar plan; (ii) any SAFEs; and (iii) convertible promissory notes.

In the case of a Liquidity Event following any equity financing, the investors will receive, at the option of the investors, either (i) a cash payment equal to the Purchase Amount, or (ii) a number of shares of the most recently issued preferred stock equal to the Purchase Amount divided by the First Financing Price. Shares of preferred stock granted in connection shall have the same liquidation rights and preferences as the shares of preferred stock issued in connection with the Company’s most recent Equity Financing.

During the year ended December 31, 2020, the Company raised a total of $40 thousand in the Crowdfunding offering, which was made through Open Deal Portal LLC (the “Intermediary”), and a total of approximately $538 thousand. The Intermediary was entitled to receive a 6% commission fee and 2% of the securities issued in connection with the offering, which was closed subsequent to year-end.

Related Party Loans

During 2020, the Company borrowed $32,000 from James E. Kras, the Company’s Chief Executive Officer and Director. The funds borrowed were utilized to fund ongoing operations and do not accrue interest.

During 2020, the Company borrowed $25,000 from Jeanne Ciccone, a close relative of James E. Kras. The funds borrowed were utilized to fund ongoing operations and do not accrue interest.

During 2020, the Company borrowed $25,000 from Michael James, the Company’s Chief Financial Officer and Director, of which $2,500 remained outstanding as of December 31, 2020. The funds borrowed were utilized to fund ongoing operations and do not accrue interest.

See “Certain Relationships and Related Party Transactions” for a summary of the convertible notes the Company has issued to Messrs. Kras and James in order to fund ongoing operations.

Vehicle Loan

On May 26, 2020, the Company entered into a financing agreement for the purchase of a vehicle. The loan, which accrues interest at a rate of 17.51%, matures on April 26, 2024. The loan is secured by the vehicle purchased.

Factoring Facility

On March 30, 2021, the Company entered into an accounts receivable purchasing agreement with Quasar Capital Partners, LLC (the “factoring facility”) pursuant to which the Company agreed to provide Quasar with the right to purchase the Company’s accounts receivable at book value less a discount. The Company’s Chief Financial Officer personally guaranteed the amounts payable under the factoring facility. On October 7, 2021, the Company repaid the amounts due under the factoring facility and the guarantee was released.

Evergreen Note

On October 7, 2021, we issued a 15% original issue discount secured promissory note to Evergreen. The Evergreen Note matures on July 7, 2022 and incurs interest at a rate of 5.0% per annum. The Evergreen Note is secured and subordinated to the Sament Notes. Evergreen may elect to convert the Evergreen Note into shares of common stock at a conversion price of $1.53 per share. If the Evergreen Note is not converted into shares of common stock prior to the closing of this offering, we intend to repay the amount due under the Evergreen Note with some of the proceeds of this offering. We have the option to issue up to $1.0 million in additional notes and warrants to Evergreen before January 10, 2022.

Cash Flow Analysis

Comparison of Cash Flows for the Period from March 28, 2020 through December 31, 2020 (Successor) and for the Period from January 1, 2020 through March 31, 2020 (Predecessor) compared to the Year ended December 31, 2019 (Predecessor).

The following table is a summary of our cash flow activity for the periods presented:

Cash Flows from Operating Activities

For the period from March 28, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through March 31, 2020 (Predecessor), and for the year ended December 31, 2019 (Predecessor), net cash provided by (used in) operating activities was $(1.351) million, $(676) thousand, and $(3.519) million, respectively.  The cash flows used by operating activities were driven primarily by working capital needs offset by revenue growth from existing customers and new customers.

Cash Flows from Investing Activities

For the period from March 30, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through March 31, 2020 (Predecessor), and for the year ended December 31, 2019 (Predecessor), net cash used in investing activities was $(48) thousand, $(79) thousand, and $(207) thousand, respectively. Investing cash flows are driven primarily by capitalized purchases of property and equipment.

Cash Flows from Financing Activities

For the period from March 28, 2020 through December 31, 2020 (Successor), the period from January 1, 2020 through March 31, 2020 (Predecessor), and for the year ended December 31, 2019 (Predecessor), net cash provided by financing activities was $1.404 million, $750 thousand and $3.714 million, respectively. Net cash provided by financing activities for the period from March 28, 2020 through December 31, 2020 (Successor) was driven by proceeds of debt issued.  For the January 1, 2020 through March 31, 2020 (Predecessor), and for the year ended December 31, 2019 (Predecessor), net cash provided was for contributions from the parent company.

Comparison of Cash Flows for the three months ended March 31, 2020 (Predecessor) and the period March 28, 2020 (inception) through June 30, 2020 (Successor) are compared to the six months ended June 30, 2021 (Successor)

The following table is a summary of our cash flow activity for the periods presented:

Cash Flows from Operating Activities

For the three months ended March 31, 2020 (Predecessor), the period from March 28, 2020 (inception) through June 30, 2020 (Successor), and the six months ended June 30, 2021 (Successor), net cash provided by (used in) operating activities was $(676) thousand, $(1.089) million, and $(899) thousand, respectively.  The cash flows used by operating activities were driven primarily by working capital needs offset by revenue growth from existing customers and new customers.

Cash Flows from Investing Activities

For the three months ended March 31, 2020 (Predecessor), the period from March 28, 2020 (inception) through June 30, 2020 (Successor), and the six months ended June 30, 2021 (Successor), net cash used in investing activities was $(79) thousand, $(28) thousand, and $284 thousand, respectively. Investing cash flows are driven primarily by capitalized purchases of property and equipment.

Cash Flows from Financing Activities

For the three months ended March 31, 2020 (Predecessor), the period from March 28, 2020 (inception) through June 30, 2020 (Successor), and the six months ended June 30, 2021 (Successor), net cash provided by financing activities was $750 thousand, $1.316 million and $936 thousand, respectively. For the three months ended March 31, 2020 (Predecessor), net cash provided was for contributions from the parent company.  Net cash provided by financing activities for the period from March 28, 2020 (inception) through June 30, 2020 (Successor) and the six months ended June 30, 2021 (Successor) were driven by proceeds of debt issued. 

Off Balance Sheet Arrangements

There were no material off-balance sheet arrangements as of December 31, 2020 or June 30, 2021.

Critical Accounting Policies and Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. The following accounting policies are based on, among other things, judgments and assumptions made by management that include inherent risks and uncertainties. Management’s estimates are based on historical experience, the relevant information available at the end of each period, and their judgment. Although management believes the judgment applied in preparing estimates is reasonable based on circumstances and information known at the time, actual results could differ materially from these estimates under different assumptions or market conditions.

The most significant accounting estimates involve a high degree of judgment or complexity. Management believes the estimates and judgments most critical to the preparation of our consolidated financial statements and to the understanding of our reported financial results are described below.

Revenue Recognition

Revenues are recognized when control of the promised goods or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services. The Company does not offer returns, discounts, loyalty programs or other sales incentive programs that are material to revenue recognition. Payments from our customers are due upon delivery or within a short period after delivery.

Property, Equipment and Leasehold Improvements

Property, equipment and leasehold improvements are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Our fixed assets, which are comprised of leasehold improvements, equipment and vehicles, have useful lives of five years.  Expenditures for major renewals and improvements are capitalized, while minor replacements, maintenance and repairs, which do not extend the asset lives, are charged to operations as incurred. Upon sale or disposition, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in operations.

The Company continually monitors events and changes in circumstances that could indicate that the carrying balances of its property, equipment and leasehold improvements may not be recoverable in accordance with the provisions of ASC 360, “Property, Plant, and Equipment.” When such events or changes in circumstances are present, the Company assesses the recoverability of long-lived assets by determining whether the carrying value of such assets will be recovered through undiscounted expected future cash flows. If the total of the future cash flows is less than the carrying amount of those assets, the Company recognizes an impairment loss based on the excess of the carrying amount over the fair value of the assets.

Intangible Assets

Intangible assets continue to be subject to amortization, and any impairment is determined in accordance with ASC 360, “Property, Plant, and Equipment,” intangible assets are stated at historical cost and amortized over their estimated useful lives. The Company uses a straight-line method of amortization, unless a method that better reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up can be reliably determined. As of December 31, 2020, Edible Garden held one intangible asset related to a non-compete agreement, which has a useful life of two years.  The Company reviews intangible assets subject to amortization quarterly to determine if any adverse conditions exist or a change in circumstances has occurred that would indicate impairment or a change in the remaining useful life.  Conditions that may indicate impairment include, but are not limited to, a significant adverse change in legal factors or business climate that could affect the value of an asset, a product recall, or an adverse action or assessment by a regulator. If an impairment indicator exists, we test the intangible asset for recoverability. For purposes of the recoverability test, we group our amortizable intangible assets with other assets and liabilities at the lowest level of identifiable cash flows if the intangible asset does not generate cash flows independent of other assets and liabilities.  If the carrying value of the intangible asset (asset group) exceeds the undiscounted cash flows expected to result from the use and eventual disposition of the intangible asset (asset group), the Company will write the carrying value down to the fair value in the period identified.

Income Taxes

The provision for income taxes is determined in accordance with ASC 740, “Income Taxes.” The Company files a consolidated United States federal income tax return.  The Company provides for income taxes based on enacted tax law and statutory tax rates at which items of income and expense are expected to be settled in our income tax return.  Certain items of revenue and expense are reported for Federal income tax purposes in different periods than for financial reporting purposes, thereby resulting in deferred income taxes. Deferred taxes are also recognized for operating losses that are available to offset future taxable income.  Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has incurred net operating losses for financial-reporting and tax-reporting purposes.  At December 31, 2020 and 2019, such net operating losses were offset entirely by a valuation allowance.

The Company recognizes uncertain tax positions based on a benefit recognition model.  Provided that the tax position is deemed more likely than not of being sustained, the Company recognizes the largest amount of tax benefit that is greater than 50.0% likely of being ultimately realized upon settlement. The tax position is derecognized when it is no longer more likely than not of being sustained. The Company classifies income tax related interest and penalties as interest expense and selling, general and administrative expense, respectively, on the consolidated statements of operations.

Recent Accounting Pronouncements

See Note 2 of the consolidated financial statements included in this prospectus for information about recent accounting pronouncements.

Internal Controls and Procedures

We are not currently required to comply with the SEC’s rules implementing Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Section 302 of the Sarbanes Oxley Act, which will require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting. Though we will be required to disclose material changes made to our internal controls and procedures on a quarterly basis, we will not be required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act until the year following our first annual report required to be filed with the SEC. We will not be required to have our independent registered public accounting firm attest to the effectiveness of our internal control over financial reporting until our first annual report subsequent to our ceasing to be an “emerging growth company.”

BUSINESS

Overview

Edible Garden is a next generation controlled environment agriculture (“CEA”) farming company. We use traditional agricultural growing techniques together with technology to grow fresh, organic food, sustainably and safely while improving traceability. We use the controlled environment of traditional greenhouse structures, such as glass greenhouses, together with hydroponic and vertical greenhouses to sustainably grow organic herbs and lettuces. In our hydroponic greenhouse, we grow plants without soil. Instead of planting one row of lettuce in the ground, by using a vertical greenhouse, we can grow many towers of lettuce in the same area by planting up instead of planting across. Growing these products sustainably means that we avoid depleting natural resources in order to maintain an ecological balance, such as by renewing, reusing and recycling materials in order to lower the overall one-time use of materials.

Our controlled greenhouse facilities allow us to grow consistent quality herbs and lettuces year-round, first by eliminating some of the variability of outdoor farming with our CEA techniques, and second by leveraging our proprietary software, GreenThumb. In addition to using hydroponic and vertical greenhouse systems, we use a “closed loop” system in our greenhouses. Generally, in a “closed loop” system, drain water is recollected and reused for irrigation. In our closed loop system, we also cycle water back into the system that has been collected through reverse osmosis. When compared to conventional agriculture, our closed looped systems and hydroponic methods use less land, less energy and less water (than legacy farms), thus conserving some of the planet’s limited natural resources. Our advanced systems are also designed to help mitigate contamination from harmful pathogens, including salmonella, e-coli and others.

We have also developed patented software called GreenThumb that assists in tracking plants through our supply chain. Utilizing our GreenThumb software to track the status of our plants as they grow and move throughout the greenhouse allows us to add a layer of quality control due to the frequent monitoring of the growing process, leading to improved traceability. In this context, traceability means being able to track a plant through all stages of production and distribution. In addition to improving traceability, GreenThumb helps us better manage the day-to-day operations of our business. GreenThumb is a web-based greenhouse management and demand planning system that does the following:

We also use our GreenThumb software to help monitor the quality of our products, and we have dedicated quality assurance and quality control personnel that check and monitor our products. We have customer service personnel that answer any questions the consumers of our products may have, and we regularly ask for feedback from our customers on the quality of our products. The combination of the GreenThumb software, quality assurance and control processes (including compliance with food safety standards), and feedback from consumers and purchasers holds us accountable for maintaining the quality of our herbs and lettuce.

We focus our efforts on producing our herbs and vegetables in a sustainable manner that will reduce consumption of natural resources, by recycling water in our closed loop system and using LED lights instead of conventional lightbulbs to accelerate crop growth and yield, when necessary. In addition, the inventory management component of GreenThumb allows us to manage inventory levels, order quantities and fill rates while maximizing truck loads. This means that we are better able to control shipping our products in full truck loads, thus eliminating multiple deliveries and decreasing the excess emission of greenhouse gases that would result from many partially full trucks delivering our products. Together, these elements of our production and distribution process are intended to reduce our carbon footprint, or the total amount of greenhouse gases that are generated by our actions, as compared to a legacy farm business.

We believe our focus on our brand “Edible Garden” is a significant differentiator. The brand not only lends itself to our current portfolio of products but allows us to develop other products in the “Consumer Brands” category. Our focus on sustainability, traceability, and social contribution, which we define as an ongoing effort to improve employee relations, working conditions, and local communities, presents our value proposition to our customers and supermarket partners and distributors. 

We believe that Edible Garden’s state-of-the-art facilities comply with food safety and handling standards.

 We have food safety certifications from Primus, a GFSI certification program, the USDA for organic products, and some of our products are verified as non-GMO by the non-GMO Project. We are licensed under PACA to operate our business. We voluntarily comply with the HACCP principles established by the FDA.

Primus annually audits our growing process and entire food safety management system to ensure that our process and products meet the standards established by the GFSI. We value this certification because our customers require purchasing products from producers who are GFSI certified. When we undergo the GFSI audit, Primus audits the following:

To maintain our USDA Organic certification, we must submit:

In addition, we must:

Some of our products are verified as non-GMO by the non-GMO Project. To have a product verified by the non-GMO Project, we submit to an annual review process of the relevant products. We must source seeds and cuts from reputable and safe suppliers, not use bio-engineered products or ingredients during the growing process, and not include bio-engineered ingredients or products in the final goods sold to customers.

To maintain our PACA license, we submit to an annual review of our business, including our history and principles, to ensure we are meeting our contractual obligations under the law. This includes abiding by fair trading practices, meeting our contractual agreements and specifications, promptly paying all contracts, and maintaining trust assets.

The HACCP principles require that we submit to USDA audits annually. We must also identify the various chemical, physical, and biological hazards that exist in crop production and manage and control those hazards so that they do not contaminate our products or packaging. We must also implement and document critical control points, and implement and document corrective actions taken when those critical control points do not adequately control a hazard.

We intend to use our approach to expand in key strategic markets across the country while supporting our existing operations. Our priority in the near term is to strengthen our existing business in part with the proceeds from this offering. We have a history of operating losses since inception and expect to incur additional near-term losses. As discussed further in “Management’s Discussion and Analysis — Liquidity and Capital Resources,” our auditors have issued an opinion that there is a substantial doubt about our ability to continue as a going concern if we are unable to complete this offering. However, we are pursuing this offering because we believe that we have the potential to take advantage of strategic growth opportunities. Our model of growing local produce near high population density centers and being able to provide fresh produce to our existing supermarket partners, who have a wider network than us, is intended to create organic growth in our business through those existing relationships. If we complete this offering, we intend to use part of the proceeds to either build or acquire greenhouses near population centers and distribution centers to be able to grow more produce close to where it is in demand and to deepen our relationships with regional and national supermarkets. Our model allows us to reduce transportation food miles, reduce fuel costs, and lower emissions related to food transportation.

It is our strong belief that the power of our brand together with the quality, innovative packaging and traceability of our products allow all of our customers to associate Edible Garden with locally grown and sustainably sourced packaged herbs and vegetables. Our tag line “Simply Local, Simply Fresh” is intended to describe our business plan: growing herbs and lettuce in local farms in the regional communities where our customers sell our products so that the products stay fresher for longer. We believe this strategy allows us to drive local grass roots brand awareness while we grow our business to support our plan to become a national brand.

We currently offer 31 stock keeping units “SKU’s” and expect to further cross sell products across our supermarket partners to meet their demand. These products include:

These products are currently sold at over 4000 supermarket stores and food distributors across the Northeast, Midwest and Mid-Atlantic regions of the country. Some of the supermarkets that sell our products include Walmart, Target, Meijer, and Wakefern Food Corporation/ShopRite.

We also service a large number of food distributors. This market segment allows us greater penetration with smaller local and regional supermarkets and the food services business.

Since inception, a few of our customers constituted a majority of our total revenue. For example, during the six months ended June 30, 2021, we earned approximately 58% of our revenue from two customers, and we earned approximately 34% of our revenue from one customer in the period from our inception through December 31, 2020. While we value our strong relationship with these major customers, we face the risk of losing a significant source of revenue if our major customers do not continue to purchase our products. If that were to occur and we were unable to replace the revenue by selling our products to additional customers, our ability to earn revenue would be significantly negatively impacted. Part of our growth strategy is to reduce this customer concentration by expanding our production capacity, which would allow us to sell our products to more supermarket partners.

We  sell products to our customers on a purchase order basis, with no spend or purchase commitments, in the ordinary course of business. We and our customers enter into purchase orders on a daily basis. To date, no purchase order has exceeded 2.0% of our revenue for the particular quarter in which the products were delivered to the customer.

Our Zero-Waste Inspired™ packaging innovations leverage the latest technology to reduce plastics, extend the shelf life of our products, and reduce retail shrink - all leading to a reduced carbon footprint by reducing waste. Our packaging features bio-based (sugar cane) sleeves. Using this material, we are able to reduce our use of plastic in our business. Generally, retail shrink is a loss of inventory. For our supermarket customers, one source of this shrinkage is spoiled product, such as herbs that have been in packaging for so long that they become poor quality. We use herb bags that have micro-perforations that allow ethylene gas to escape from the product packaging. Ethylene gas accelerates spoilage of herbs and lettuce. By allowing this gas to escape, we are able to extend the shelf life of the product while reducing the likelihood that our customers experience retail shrink because they have to throw our products in the garbage. Using this technology, cilantro, for example, is in good quality after 11 days, while it would be in poor quality after seven days in other packaging. The CO2 laser perforation on our packaging creates well-defined holes which allow for a controllable and consistent environment in the bag, while other typical bagged herbs are perforated with a cold needle, which produce inconsistent holes and, therefore, an uncontrollable atmosphere. Less product spoilage means less waste, and less shrinkage means that we will not have to produce as many lettuce and herbs to achieve the same level of retail sales. Altogether, we should be able to produce less carbon and minimize the size of our carbon footprint by using these packaging innovations.

Impact of COVID-19

The COVID-19 pandemic and resulting worldwide economic conditions have affected, and may continue to affect, our business, financial condition and results of operations. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and created significant volatility and disruption of financial markets. For example, government imposed mandatory closures and restrictions across various key markets of ours resulted in volatile supply and demand conditions, primarily due to reduced demand in the food service distribution channel. As a result, product in the industry was redirected to the retail channel and in some cases this led to an increased supply and lower pricing. While demand in our retail channels for certain products has increased due to the impact of COVID-19, there is no guarantee that this increased demand will continue. While these effects were pronounced to varying degrees throughout fiscal year 2020, the future extent of the impact of the COVID-19 pandemic on our financial performance, including our ability to execute our strategic initiatives, is still uncertain and will depend on future developments, including the duration and spread of the pandemic, related government restrictions and the success of vaccines and other treatments for COVID-19. Additionally, as the global economic impacts of COVID-19 continue, fluctuate and/or change, the pandemic’s impact on our operating results may change or be prolonged.

In addition, our ability to continue to supply our products is highly dependent on our workforce, including our workers involved in the growing, harvesting, transportation, processing and distribution of our products. Our ability to maintain the safety of our workforce may be significantly impacted by individuals contracting or being exposed to COVID-19, and our operations and financial results may be negatively affected as a result. We are following the requirements of governmental authorities and taking additional preventative and protective measures to ensure the safety of our workforce, we cannot be certain that these measures will be successful in ensuring the health of our workforce. Workforce disruptions related to COVID-19 may significantly impact our ability to maintain our operations and may adversely affect our financial results. Throughout the pandemic governments have restricted travel and transportation generally, and while these restrictions have not significantly impacted our ability to supply our products to date, there is no guarantee that future restrictions will not have a significant impact on our business. We also incurred costs in relation to safety precautions undertaken in our shipping operations and there can be no assurances that we would not be required to incur such costs or similar costs in the future.

The impact of the COVID-19 pandemic on our operating results can also impact our ability to meet our financial obligations. Our operating results have been and may continue to be impacted by the pandemic, and we cannot predict whether future developments associated with the COVID-19 pandemic will materially adversely affect our long-term liquidity position. In the event of a continued sustained market deterioration or further delayed recovery, we may need additional liquidity which would require us to evaluate available alternative strategies such as seeking additional debt or equity capital, which may be unsuccessful.

Production and Properties

We utilize prime greenhouse locations in the Northeast, Midwest and Mid-Atlantic regions of the country allowing us to provide local fresh and organic products to these local communities. Our locally grown and delivered products using a network of sustainable greenhouse farms provide local communities, retailers and consumers the quality they demand with the food safety they expect. The communities, retailers and consumers benefit from this as this allows us to get our products to market in the shortest time without compromising the plant’s quality and nutritional value. The growing locations are chosen to be near key trucking lanes within hours of major cities to cut down on “food miles” and fuel costs. We believe our strategy enhances our products’ appeal to major consumer constituencies that desire products grown and delivered locally.

Consistent year round growing that adheres to our stringent sustainability protocols occurs in our owned and contracted greenhouse locations in California, Florida, Indiana, New Jersey, New York, Michigan, Ohio and Wisconsin, that can service approximately 55% of the country’s population. We develop long term contract growing relationships that require our herbs and produce to be grown in strict accordance with our proprietary grow process, but have no formal long-term contracts with these growers.  Our growing relationships require our produce to be grown in accordance with our proprietary growing process and to our specifications. Orders are placed with the contract growers based on purchase orders we receive from our customers and the proximity of the contract grower to the specific customer.  The contract grower determines the quantity sown based on the minimum purchase orders received and the contract grower bears the inventory risk, risk of loss and other cost if it over sows the specific crop. We take title of the produce after inspection has been made in accordance with the specifications agreed to by both parties.  Our 5 acre flagship greenhouse location in Belvidere, NJ, in conjunction with over 1 million square feet of contracted greenhouse growers, enables us to use standardized methods and a suite of proprietary technology innovations to operate these hydroponic greenhouses in order to provide supply chain excellence in delivering our fresh produce.

Our locations and capacity include:

Our 5 acre flagship facility in Belvidere, New Jersey began commercial operations in 2015. Our facility incorporates a hydroponic gutter system developed in Holland for the exclusive production of herbs. The flagship facility also includes a cold storage freezer which allows us to package herbs for our distribution partners and a 20,000 sq. ft packhouse, which is under construction. We are currently party to an ongoing arrangement with our predecessor company, Edible Garden Corp., whereby we make lease payments of approximately $15,300 per month to the lessor of the land on which our flagship facility is built and for which our predecessor company is the lessee. We do not have a lease in place directly with the lessor of the property that gives us the right to operate the property, although we have been operating under this arrangement with the lessor for more than one year and do not expect to lose access to the property.

As of June 30, 2021, we had 39 full-time employees and four part-time employees located in or around Belvidere, New Jersey.

We source the raw materials for production from multiple suppliers, including Ball Horticulture, Brandt Box and Paper, PPC Flexible Packing, Sumit Plastics, Sun Gro Horticulture, Sunshine FPC, and expect that those supplies will continue to be available for our use.

Distribution

Edible Garden utilizes advanced, sustainable, environmentally controlled indoor agriculture to grow and process organic herbs and lettuces. Through our extensive distribution platform and proprietary predictive modeling, we pick, pack and ship to big box retailer’s distribution centers in our network. We distribute our products through more than 50 retail partners including national big box retailers, regional grocery stores, distributors, restaurants and local purveyors.

Our growing and distribution plans are designed to get our locally grown products to our retail partners and consumers immediately after harvest. We want to make sure that our products arrive as fresh, undegraded and nutrient rich as when they were harvested. In order for us to meet this objective we strive to deliver our products to market in no less than 24 hours from when they are picked. We currently rely on our own fleet of nine delivery vehicles, as well as other independent shipping operators. We continue to build a broader footprint and intend to increase our logistics and shipping fleet to include more energy efficient vehicles that will use less fuel and leave less waste in our environment. Our greenhouse farms have to be strategically located in order for us to deliver on this objective.

We hold our transportation-related assets and manage the distribution of our products through our wholly-owned subsidiary, EG Transportation, LLC.  This entity owns and leases the delivery vehicles we use to distribute products and holds the liability insurance needed for the transportation aspects of our business. As of October 22, 2021, we have nine delivery vehicles and approximately eight drivers.

Competition

The U.S. fruits and vegetable markets are highly competitive. Our main competitors are Aero Farms, Gotham Greens, Bright Farms, Bowery Farms, Plenty. Many of these companies may have significantly greater financial, technical, marketing and distribution resources, as well as greater experience in the industry than we have. Our services may not be competitive with their services. In addition, our current and potential competitors may establish cooperative relationships with larger companies, to gain access to greater development or marketing resources. Competition may result in price reductions, reduced gross margins and loss of market share. However, we believe the following elements will give us a competitive advantage in the rapidly growing CEA category:

Customer Relationships and Brand. Our herbs and lettuce product portfolio is sold through our supermarket partners including Walmart, Target, Meijer, Wakefern Food Corporation/ShopRite and food distributors. These key partners make up the majority of our revenue. We believe that we will continue capture more opportunities with these partners as we expand our business and product offering. We also utilize an efficient marketing mix of social media, in-store signage and premium shelf positioning to drive consumer awareness and reinforce purchases.

Value Proposition. We are repositioning the way food is grown, packaged and distributed. We believe this is the next generation of farming that is good for people and our planet. We believe scaling our grow operations in a fully controlled environment will result in a higher optimization on yields together with freshness, taste and texture. In addition, our proposition focuses on intelligent common-sense approach to growing more with less resources. Our Zero Waste Inspired approach is in everything we do – from innovative recyclable packaging across our product portfolio and enterprise, using less water, electricity and land, zero pesticides and less road miles. Simply Local Simply Fresh delivers all of this together with our local farming partners with an accessible, traceable, organic product at a competitive price.

Technology Platform. Technology and data are competitive differentiators for Edible Garden. Rather than relying on “off-the-shelf” systems, we have created a data-driven technology platform to power traceability and integration across plant production, operations, data analytics and demand planning. Our proprietary platform allows us to consistently monitor and control plant production inputs across our flagship facility as well as integrate with all of our contract growers. This allows us to scale throughput with disruption and capture data analytics for better yield and predictability.

Management Team. Our management team has worked together for 6 years. Jim Kras, our CEO and Mike James, our CFO, have a strong working relationship and work collaboratively to advance our growth. We believe that they bring strong senior leadership in their respective roles and responsibilities and have been instrumental in our success to date, including growing our business during a pandemic. The unprecedented COVID-19 pandemic continues to challenge business and the economy.  In these uncertain times having a team that has worked together for many years can provide mature leadership and support to the organization at critical moments. Our management team is committed to developing young talent in our business and are committed to continue this employee development as the organization continues to grow.

Industry Overview

Traditional Outdoor Agriculture. The traditional agriculture industry in the United States consists primarily of field crop farms. According to the USDA, the United States had almost 900 million acres of farmland in 2019. Over the last few decades this acreage has shifted and consolidated to larger and larger farms. Today, large-scale family farms make up just 3 percent of farms in the United States and 42 percent of overall production. Production of produce is also regionalized. The American Farm Bureau Foundation reports that Monterey County in California, home of Salinas Valley, supplies 61% of all leaf lettuce and 56% of head lettuce in the United States.

This regional dependency contributes to long, complex distribution chains, with some produce traveling thousands of miles over several days before reaching store shelves. With the environmental and social macrotrends mentioned herein, we believe traditional field farming is also less prepared to support a growing world population, due to its reliance on large amounts of land and water, both of which are becoming scarcer and less available for food production. We also believe consumer trends continue to want to know where their food comes from together with traceability and food safety (food pathogens – listeria and salmonella) are becoming more important to all business partners and consumers.

Traditional Greenhouse Operators and Controlled Environment Agriculture. CEA has gained market share in recent decades as an alternative source of food production. This consists of both greenhouse operating companies and more high-tech greenhouses selling to retailers and grocery stores throughout the country. Despite growth in select crops, greenhouses have not been able to take meaningful market share from traditional field farms in the United States or in the leafy greens market until now. This is a function of shifting consumer trends together with the realization that the planet has finite natural resources. Overall consumer behavior is shifting away from commoditized produce as they associate consumer branded produce as sustainable, safe, organic, pesticide free all year long that is good for them and the social fabric of our planet. That’s why we believe as a market innovator we can continue to capture market share and brand awareness.

Growth Strategy

We are at an important point as we are operating at commercially viable scale and ready for the next level of growth with additional greenhouses and capabilities. Our business plan is to develop, own and operate commercial greenhouses across North America. Presently and in the near term our greenhouse operations will continue to grow herbs and lettuces. Currently, herb production is grown at our flagship facility in Belvidere with an additional contract grower in Indiana. We expect to scale our business by building a portfolio of new, fully scaled commercial greenhouses across the Northeast, Midwest, Mid-Atlantic, South and Southwest. We plan to locate farms with easy access to distribution centers and major population demographic centers and to sell products into established supermarkets partners and distributors. We expect these full-scale commercial greenhouses to have more production capacity than our current facility and to benefit from economies of scale.

Site selection for future facilities is based on a detailed methodology that weighs factors we believe to be indicative of farm unit economics, operational reliability and market accessibility, among other criteria. Examples include customer access and market depth within a 300-mile radius. The availability, reliability and cost of electricity; construction costs, speed to build, site infrastructure and permitting; local labor are further inputs to our selection process.

Intellectual Property

We rely on a combination of trademark laws, trade secrets, confidentiality provisions, and other contractual provisions to protect our proprietary rights, which are primarily our inventions, brand names, marks, and proprietary pods and seeds. Edible Garden owns trademarks, three pending patent applications, and one issued patent in the United States. The issued patent includes claims related to greenhouse management software and systems (GreenThumb) and is expected to remain in force until November 2040, provided that all required maintenance fees are paid. One of the three pending patent applications is a recently filed continuation patent application related to greenhouse management software and systems. The two remaining patent applications are related to automatically watering display stands for herbs and other vegetation.

Research and Product Development

Edible Garden recognizes the consumer acceptance and growth opportunities associated with plant-based derivatives of the products/plants it currently grows. As a leader in sustainability, research and development is a key focus for us moving forward. We have recently started shipping a new product category with plant based nutraceuticals, a derivative in the plant category. This new product will extend our product suite with major retailers in plant-based proteins under the Vitamin Way brand.  We intend to further develop expertise in plant science and horticulture coupled with brand equity in the “plant based” sector. We believe this will lead us to effectively develop and market proprietary industrial ingredients and consumer packaged goods. By unlocking the Company’s capabilities for multiple product lines, we believe significant revenue opportunities are available across a wide spectrum of ancillary markets.

Our Sustainability Plan — Renew, Reuse, Recycle & Innovate

We adhere to an Environmental, Social, and Governance (“ESG”) criteria and set of standards for our operations that is socially conscious. Our Environmental criteria considers how our company performs as a steward of nature. The Social criteria examines how we manage relationships with employees, suppliers, customers, and the communities where we operate. Our Governance deals with the company’s leadership, executive pay, audits, internal controls and shareholder rights. 

Environment: We operate our CEA greenhouse facilities with the goal of being a good steward of nature. With our closed loop systems, we recapture and recycle water into our growing process. We are harmful pesticide-free in our flagship facility as well as all contracted grow facilities. In vertical greenhouses, we are able to grow more herbs and lettuce per square foot than legacy farms. Our GreenThumb software allows us to be more efficient in our packing and shipping process with the goal of reducing excess emission of greenhouse gases and carbon that would result from more trucks transporting our products. Our Zero-Waste Inspired™ packaging innovations are intended to reduce food spoilage and food waste while utilizing bio-based materials, leading to a reduction of plastics in our packaging. In the future, we intend for our greenhouses to take advantage of areas with renewable energy alternatives such as solar, wind, and hydro together with suppliers that support greenhouse gas-free electricity generation, when available. We plan to continue to deliver innovation in our packaging and potting, further eliminating plastics from our products with recycled, biodegradable packaging. We intend to migrate to alternative fuel vehicles for our shipping needs. We commit to be carbon neutral by 2030, meaning that any carbon dioxide released into the atmosphere from our business activities will be balanced by an equivalent amount being removed.

Social – Employees: Being local and producing year-round not only allows for competitive produce prices and the opportunity for more consumers to access high quality produce, it also allows our facilities to offer full time, indoor jobs to members of the community, offsetting the seasonal work offered by more traditional agriculture businesses. We are also committed to paying at a living wage, hiring locally, and promoting internally by investing in internal and community training programs to train employees with a skill set that will allow them to be part of the 21st-century workforce in the next generation of farming. To accompany the rapidly expanding workforce demands of our industry we are committed to work with all of our employees to help us understand any issues and to develop and enhance our indoor agriculture training and internal development opportunities.

Social – Community: We will prioritize underserved communities whether urban or rural where our facilities are located. As a company we will continue to develop our corporate mission of giving back to these communities. Charitable contributions to food banks, school systems, community anti-hunger and social reintegration programs are all part of giving back to these communities. For example, we partner with Abilities of Northwest Jersey Inc. to offer skills training in hydroponics and greenhouse farming at our Belvidere, New Jersey, greenhouse for individuals with disabilities, and we were named the Employer of the Year for 2020 by Abilities of Northwest Jersey. These initiatives aim to provide better economic and social results for these underserved communities.  Our strategy will be to partner with both local, state and federal programs to help identify investment zones or redevelopment areas that would benefit from one of our greenhouse facilities in their community because of the expected local economic development and employment that would be associated with a new facility. We expect that each of our facilities will employ approximately 35-40 employees in these communities. We plan to consider underserved communities in all our future site selection process.

Governance: Edible Garden looks at diversity as a competitive advantage and strives to be fully supportive of diversity endeavors at all levels of the company. This alignment and focus will aid us in steering our long-term corporate actions in the right direction. Our goal is to build diversity across the whole enterprise with specific focus on the management team and board of directors. We plan on establishing a diversity committee with employees and members of our management team that will have complete oversight of these fundamental areas in conjunction with our nominating and governance committee.  In addition, we intend to meet the governance requirements of Nasdaq after this offering is complete and to establish a robust system of corporate governance.

Regulatory Compliance

As a producer and distributor of food products, we are subject to the laws and regulations in the jurisdictions where our facilities are located and where are products are distributed. In particular we are subject to the FSM Act, which is enforced by the FDA. The FDA has the authority to regulate the growing, harvesting manufacture, including composition and ingredients, processing, labeling, packaging import, distribution and marketing and safety of food in the United States. The FSM Act significantly enhances the FDA's authority over various aspects of food regulation. For example, the FSM Act granted the FDA mandatory recall authority when the FDA determines there is a reasonable probability that a food is adulterated or misbranded and that the use of, or exposure to, the food will cause serious adverse health consequences or death to humans or animals. While the FDA has been active in implementing the requirements of the FSM Act through issuance of regulations designed to result in a reduction of the risk of contamination in food manufacturing, the full impact of the FSM Act is not yet known, and we cannot assure you that it will not materially impact our business. Regulatory agencies in other jurisdictions have similar authority to address the risk of contamination or adulteration, and to require that contaminated products be removed from the market. The failure to comply with these laws and regulations in any jurisdiction, or to obtain required approvals, could result in a ban or temporary suspension on the production of our products or limit or bar their distribution, and affect our development of new products, and thus could materially adversely affect our business and operating results. In addition, the USDA regulates the import and export of certain fruits and vegetables into and from the United States, and the USDA also imposes growing, manufacturing and certification requirements for certain products labeled with organic claims. Failure to obtain necessary permits or otherwise comply with USDA regulations and requirements could result in a ban or temporary suspension of our ability to grow, manufacture or market our products as organic, and thus could materially adversely affect our business.

Legal Proceedings

From time to time, we may be party to or otherwise involved in legal proceedings arising in the ordinary course of business. Management does not believe that there is any pending or threatened proceeding against us, which, if determined adversely, would have a material adverse effect on our business, results of operations or financial condition.

Corporate History and Structure

Our business is a successor business of a subsidiary of Terra Tech Corp. (now known as Unrivaled Brands, Inc.)(“Terra Tech”). Unrivaled Brands (OTCQX:UNRV) is a cannabis multi-state operator and the parent company of multiple cannabis brands spanning consumer products, cultivation, distribution, and retail. We purchased substantially all of the assets of Edible Garden Corp., a subsidiary of Terra Tech, from Terra Tech as of March 30, 2020 for approximately $3.0 million, which did not include the purchase of any cannabis assets. To finance the asset purchase, we issued a secured promissory note of $3.0 million to Sament, an affiliate of Terra Tech, which accrues interest at a rate of 3.5% per annum until March 30, 2025. In addition, we granted a second secured promissory note to Sament as of June 3, 2020 for $653,870, which accrues interest at a rate of 3.5% until June 3, 2023. These Sament Notes are secured by the tangible greenhouse assets at our corporate headquarters and any proceeds thereof. Also in connection with the asset purchase, we issued two options to Sament. These options were exercised as of October 8, 2021 for 5.0 million shares of common stock at an aggregate exercise price of $2.00 and are no longer outstanding, as further described below in “Description of Securities.” As a result of this exercise, Sament currently owns 20.0% of our outstanding common stock.

Our company was incorporated on March 28, 2020 in the State of Wyoming as Edible Garden Inc. We subsequently changed our name to Edible Garden AG Incorporated on July 20, 2020, and we effected a stock split of 20 for 1 as of October 14, 2020. Effective July 7, 2021, our parent company, Edible Garden Holdings Inc., merged with and into us with us as the surviving entity. We converted into a Delaware corporation effective July 12, 2021. On September 8, 2021, we effected an additional forward stock split of 20 for 1. We have one wholly-owned subsidiary, EG Transportation, LLC, through which we manage the distribution of our products. Our current corporate structure is as shown below:

Our principal address is 283 County Road 519, Belvidere, NJ 07823. Our telephone number is (908) 750-3953. We maintain a website at www.ediblegarden.com. The information contained on our website is not, and should not be interpreted to be, incorporated into this prospectus. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

MANAGEMENT

The following table sets forth certain information about our executive officers, key employees, directors, and director nominees as of the date of this prospectus.

Executive Officers and Directors

James E. Kras. Mr. Kras is one of our founders, and has served as Chief Executive Officer and a director since our inception in March 2020. Mr. Kras served as President and Chief Marketing Officer of Edible Garden Corp., a wholly-owned subsidiary of Unrivaled Brands (formerly Terra Tech), from March 2016 to March 2020. Prior to that service, Mr. Kras held senior leadership positions in marketing at global leaders Ajinomoto and The Bountiful Company (formerly The Nature’s Bounty Company). Mr. Kras started his career on Madison Avenue in advertising with companies including Grey Advertising and Dentsu/Carat. As our Chief Executive Officer and one of our founders, Mr. Kras brings to the Board of Directors extensive knowledge of our products, structure, and culture as well as years of expertise in the industry.

Michael James. Mr. James is one of our founders, and has served as Chief Financial Officer and a director since our inception in March 2020. Mr. James also currently serves on the board of directors of Guided Therapeutics, Inc. as chairman, audit committee chair and as a member of the compensation committee. Mr. James previously served as Chief Financial Officer of Unrivaled Brands, Inc. (formerly Terra Tech) from February 2012 to March 2020. In addition to this role, Mr. James served as the Chief Executive Officer and Chief Financial Officer of Inergetics, Inc. from June 2012 until January 2016. Previously, Mr. James served as Chief Executive Officer of Nestor, Inc. (“Nestor”), where he successfully completed a financial restructuring of Nestor prior to its sale in September 2009 from the Receiver’s Estate in Superior Court of the State of Rhode Island. He also served on Nestor’s Board of Directors from 2006 to 2009. Mr. James was the Managing Partner of Kuekenhof Capital Management, LLC, a private investment management company, from 1999 to 2015. During his career, Mr. James has served as a Partner at Moore Capital Management, Inc., a premiere private investment management company; Chief Financial and Administrative Officer at Buffalo Partners, L.P., a private investment management company; and Treasurer and Chief Financial Officer of National Discount Brokers. Mr. James began his career in 1980 as a staff accountant with Eisner, LLP. Mr. James is a retired CPA. As our Chief Financial Officer and one of our founders, Mr. James brings to the Board of Directors extensive knowledge of our products, structure, and culture as well as years of expertise in the industry.

Director Nominees

Mathew McConnell. Mr. McConnell has served as Chief Executive Officer of Marco Polo Securities, Inc.’s MPS Chaperone and Distribution business since March 2020. In this position, he oversees international equities, trading, and capital markets processes for this U.S. broker-dealer offering cross-border regulatory and distribution solutions to a robust network of local securities firms across the world. From 2018 to 2020, Mr. McConnell served as Managing Director, Head of Equity Capital Markets of Tellimer (Exotix Capital), including as a member of its U.S. executive committee. Prior to Tellimer, Mr. McConnell was Head of Capital Markets at Auerbach Grayson from 2014 to 2018. Mr. McConnell was chosen to serve as a director because of his extensive international financial and capital markets experience, which we believe will continue to be important as we implement our growth strategy.

Tracy A. Nazzaro.  Ms. Nazzaro is presently the President, Chief Financial Officer and General Manager for Traders Hill Farm, an innovative aquaponics greenhouse farming operation in Hilliard, Florida, that produces specialty leafy greens and tilapia year-round. She joined Traders Hill Farm as Chief Financial Officer in late 2015. Prior to joining Traders Hill Farm, Ms. Nazzaro was a certified business analyst with the University of North Florida SBDC where she provided strategic advisory and financial consulting services to businesses in Northeast Florida. Ms. Nazzaro is also the Executive Director of the RWB Foundation, Inc., a non-profit organization providing financial assistance and operating guidance to small agriculture businesses in Florida. Ms. Nazzaro was chosen to serve as a director because of her extensive experience in our industry and her experience in growing agricultural businesses.

Ryan Rogers. Mr. Rogers has spent nearly two decades working in the food retail industry in various merchandising, sales and sourcing positions. Since June 2021, he has served as a brand manager for FDM Sales, a brand development organization helping accelerate growth for food and beverage brands. Prior to joining FDM Sales, Mr. Roger spent 18 years at Target Corp, where he held merchandising and sourcing roles of increasing responsibility within its food division, including produce buyer, where he led the growth strategy for packaged salads, vegetarian, and healthy snacking. Mr. Rogers was chosen to serve as a director because of his extensive experience in our industry and his ability to help organizations like ours accelerate growth.

Key Employees

Scott Prendergast. Mr. Prendergast has served as our Chief Data Officer since June 2020. Prior to joining Edible Garden, Mr. Prendergast served as VP of Technology for Springbok Energy Partners and Director of Digital Strategy & Analytics for Moroch Partners. Some of Mr. Prendergast’s accomplishments include designing and developing real time well tracking and management portal utilized by Springbok Energy Partners to track well data and optimize mineral right valuations in real time, as well as developing the GreenThumb system that manages real time greenhouse inventory and activities for us and many of our partner farms. Mr. Prendergast started his career after graduating Worcester Polytechnic Institute with a B.S. Aerospace Engineering with a position with Bechtel Corp in the Nuclear Piping Analysis department, working on refueling and NRC compliance at Comanche Peak Nuclear Power Plant and Browns Ferry Nuclear Power Plant.

Stacey Eng. Ms. Eng has served as the Vice President of Logistics for us since inception and our predecessor company since March 2016. Ms. Eng previously worked as the Director of Operations for Inergetics, where she was responsible for developing the company’s supply chain and vendor relationships. Ms. Eng’s accomplishments include building an integrated supply chain to service a complex network of owned and contracted greenhouses throughout the United States while constantly streamlining our business. She has continually ensured that all deliverables were met on time for any size project, reduced lead-time for delivery in conjunction with implementing cost-cutting measures that drove gross margin improvements. Ms. Eng holds B.S. in Supply Chain Management & MIS from Rutgers University where she graduated Magna Cum Laude.

Nick Simons. Mr. Simons joined our predecessor company in 2019 at the flagship Belvidere facility, where he currently supervises over 40 employees. Mr. Simons immediately impacted our results by overseeing improvements that lead his team to break major milestones in case counts we shipped out. With a passion for sustainability, he strives to have our facilities surpass what was previously thought possible. Prior to joining Edible Garden, Mr. Simons worked for Georgia-Pacific where he oversaw and taught Performance Standard Qualification training to production operators, resulting in a decrease in maintenance personal during the shift by over 35%. He also led the night shift to be the first in Dixie’s 85-year history to produce 4.0 million cases during a 12-hour shift. Mr. Simons is a certified 5S Process Leader, has been trained in FDA, cGMP, ISO, ICH Q7 regulations and standards and is Certified Lean Six Sigma Green Belt. Mr. Simons holds B.A. from DeSales University and earned his MBA from East Stroudsburg University.

CORPORATE GOVERNANCE

Director Independence

Our current Board of Directors consists of James E. Kras and Michael James, neither of whom is considered independent based on the listing standards of Nasdaq. We are not currently listed on a national securities exchange or in an inter-dealer quotation system that requires a majority of the Board be independent. We have nominated Mathew McConnell, Tracy Nazzaro and Ryan Rogers, each of whom is considered independent under the Nasdaq listing standards, for appointment to the Board. We expect that these nominees will commence service on the Board at the time of effectiveness of the registration statement of which this prospectus forms a part. As required under applicable Nasdaq rules, we anticipate that our independent directors will meet in regularly scheduled executive sessions at which only independent directors are present.

Committees

Our Board intends to establish three standing committees: audit committee; compensation committee; and nominating and governance committee. Each of these committees will consist solely of independent directors. We will adopt written charters for each of these committees that will be available on our website. Our Board may establish other committees as it deems necessary or appropriate from time to time.

Audit Committee

The audit committee will be responsible for, among other matters:

The Nasdaq rules require us to have one independent audit committee member upon the listing of our common stock, a majority of independent directors within 90 days of the date of this prospectus and all independent audit committee members within one year of the date of this prospectus. Our Board will appoint nominees to serve on the audit committee that meet the definition of “independent director” for purposes of serving on an audit committee under Rule 10A-3 under the Exchange Act and Nasdaq rules. One of these nominees will qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K.

Compensation Committee

The compensation committee will be responsible for, among other matters:

Our Board will appoint nominees to serve on the compensation committee that meet the definition of “independent director” for purposes of serving on a compensation committee under Nasdaq rules.

Nominating and Governance Committee

The nominating and governance committee will be responsible for assisting the Board in identifying qualified individuals to become directors, in determining the composition of the Board and in monitoring the process to assess Board effectiveness.

Board Leadership Structure

Our Board of Directors and management believe that the choice of whether the Chair of our Board of Directors should be an executive of the Company, or a non-executive or independent director, depends upon a number of factors, taking into account the candidates for the position and the best interests of the Company and its stockholders. We do not currently have a Board Chair. Upon the effectiveness of this registration statement, we intend to appoint Mr. Kras, our Chief Executive Officer, as the Board Chair. Mr. Kras’s operating and leadership experience as an officer and director of our company since its inception and combined six years of experience with us and our predecessor company make him a compelling choice for Board Chair.

We intend to appoint Mr. McConnell as lead independent director when each of our independent directors joins our Board of Directors. The lead independent director will preside over executive sessions of the independent directors and serve as a liaison between the independent directors and our management team.

Risk Oversight

Our Board will oversee a company-wide approach to risk management. Our Board will determine the appropriate risk level for us generally, assess the specific risks faced by us and review the steps taken by management to manage those risks. While our Board will have ultimate oversight responsibility for the risk management process, its committees will oversee risk in certain specified areas.

Specifically, our compensation committee will be responsible for overseeing the management of risks relating to our executive compensation plans and arrangements, and the incentives created by the compensation awards it administers. Our audit committee will oversee management of enterprise risks and financial risks, as well as potential conflicts of interest. Our Board is responsible for overseeing the management of risks associated with the independence of our board of directors.

Compensation Committee Interlocks and Insider Participation

None of our officers currently serves, or has served during the last completed fiscal year, on the compensation committee or board of directors of any other entity that has one or more officers serving as a member of our board of directors.

Code of Business Conduct and Ethics

Our Board intends to adopt a Code of Business Conduct and Ethics that applies to our directors, officers and employees. A copy of this code will be available on our website. We intend to disclose on our website any amendments to the Code of Business Conduct and Ethics and any waivers of the Code of Business Conduct and Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller, or persons performing similar functions.

Director and Officer Indemnification Agreements

We intend to enter into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys’ fees, judgments, penalties, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. The indemnification agreements and our certificate of incorporation and bylaws require us to indemnify our directors and officers to the fullest extent permitted by Delaware law.

EXECUTIVE AND DIRECTOR COMPENSATION

Summary Compensation Table

The following table provides information regarding the compensation paid from our inception on March 28, 2020 through December 31, 2020 to each of the executive officers named below, who are collectively referred to as “named executive officers” elsewhere in this prospectus.