Good afternoon, and welcome to the Arcadia Biosciences Second Quarter 2022 Earnings Conference Call. Today's presenters will be Stan Jacot, President and Executive Officer; and Pam Haley, Chief Financial Officer of Arcadia. This call is being webcast, and you can refer to the company's press release at arcadiabio.com. Before we start, we would like to remind you that Arcadia Biosciences will be making forward-looking statements on this call based on current expectations and current available information. However, since these statements are based on factors that involve risks and uncertainties, the company's actual performance and results may differ materially from those described or implied today. You can review the company's safe harbor language in their most recent filed 10-Q. With that, I will now turn the call over to Stan Jacot, CEO.

Good afternoon, everyone, and thank you for joining us today for our 2022 second quarter conference call. I am excited to share with you the progress we are making in our journey to deliver innovative plant-based health and wellness products to the consumer marketplace. Our Q2 2022 revenues were up 175% compared to the same quarter last year, part of the increase was driven by the recognition of $862,000 in license revenue from Bioceres related to the Chinese approval of HB4 soy. As we discussed last quarter, the approval would trigger the immediate recognition of the $2 million milestone with 4 cash payments of $500,000 to follow in the coming quarters. Based on accounting guidance, a portion of the $2 million was recognized as license revenue with the remainder recorded as a gain on sale in relation to the sale of our portion of the Verdeca joint venture to Bioceres in 2020. Pam will provide further detail on the financial part of today's presentation. Excluding the impact of the Bioceres milestone revenue, our ongoing revenues were still more than double our revenues in the same period last year and resulted in a record-breaking level of consumer product sales. As a reminder, our Q1 2022 sales of $3.2 million included more than $1 million of business-to-business grain sales as we saw an opportunity to take advantage of rising wheat prices. In comparison, our Q2 2022 grain sales were approximately 70% less than the previous quarter. While our revenues significantly increased year-over-year, our total operating expenses decreased 16% over the same period. Pam will provide additional insights, but it is important to note that our total operating expenses in Q2 2022 include $1.6 million in write-downs and adjustments, partially offset by a $1.1 million gain on the sale of Verdeca to Bioceres.…

Thanks, Stan. Good afternoon, everyone. As Stan noted, we realized significant growth in our revenues this quarter. Total revenues recognized for second quarter 2022 were $3.9 million compared to $1.4 million in second quarter 2021 for an increase of 175% and $7.1 million second quarter year-to-date, compared to $2.2 million during the same 6 months of 2021 for an increase of 217%. Product revenues generated from Zola Coconut Water sales, 1 of the brands acquired in the second quarter of 2021 accounted for the majority of the increase for the quarter and year-to-date, along with increased body care product sales and the license revenue Stan discussed briefly at the onset of the call. As you may recall, we sold our half of the Verdeca joint venture, which was formed to advance and deregulate soybean varieties in November of 2020 to our partner Bioceres. In conjunction with the sale, we licensed multiple traits to Bioceres and the net funds we received at the time of the transaction were allocated between gain on the sale of the transaction and license revenue. We've applied that same allocation methodology to the milestone payments totaling $2 million will now receive from Bioceres. Also contributing to the year-to-date revenue favorability are the sales of grain transacted, primarily in the first quarter of 2022. Total operating expenses of $7.6 million in the second quarter of 2022 were down $1.5 million from the $9.1 million recognized in the second quarter of 2021 and second quarter year-to-date total operating expenses were up slightly from the same period in 2021. There are a number of nonroutine transactions affecting second quarter total operating expenses. The $1.1 million gain on the sale of Verdeca offset by $460,000 write-down to fair market value of the CBD oil inventory that we produced as well…

[Operator Instructions] First question comes from Ben Klieve from Lake Street Capital Markets.

Congratulations on what looks like a pretty darn good quarter here. First, I'd like to just ask kind of a clarifying question regarding the sequential improvement from Q1 to Q2. So when you consider the grain sales in Q1 and Q2, plus the gain from the HB4 revenues in the second quarter. I want to make sure I've got the numbers right here. So in the first quarter, if you back out grain sales, I came to about a $1.9 million revenue number. And then the second quarter, if you back out both grain sales and the Bioceres revenues, I got about 2.6. Pam, is that about right?

Let me see, yes, that's right for Q1. And then you said for Q2, you were backing out the $862,000, right?

Backout, yes, and then you also had some grain sales in Q2. So if you back out the $862,000 plus the grain sales, I come up with like $2.5 million, $2.6 million in Q2 revenue.

Yes, that sounds about right.

Okay. Great. So some real sequential improvement there. And in your comments, it sounded like really the entirety of that sequential improvement was attributable to your -- to the products, not including GoodWheat. Is that right? So GoodWheat was a negligible contributor in the quarter?

That's right. Correct. Yes.

Okay. Okay. Great. And then regarding GoodWheat. So Stan, I believe you said that you're in 500 retail locations currently. Can you kind of update us on the cadence of that? What did you start with on day 1? Where did you end the quarter? And where do you kind of anticipate that store count will be in, I don't know, 3 to 6 months and then in a year, some kind of metric like that?

Yes. Well, we were at about 200 stores or so by the end of the quarter. And clearly, in Q3, we're already shipping to 500 stores and there's a good -- we have good visibility for that number to double again by the end of Q4.

Okay. Great. Great. Great. And the -- it sounds like you saw some real -- I don't know, given how short this is, I'm not sure what the right way to frame this question is, but it sounds like you saw some really good kind of sequential improvements from 1 week to the next 1 month to the next solid same-store sales improvements in that -- in the GoodWheat brand, is that right so far in this very limited time frame?

Yes, it's been limited. And again, we're very happy with the retailer commitments that we've seen and the speed to shelf, to be quite honest. And so right now, we're just working through the model for promotional support. So those are the things that are also going to impact.

Got it. Got it. Okay. Great. And you talked also about a number of kind of moving pieces around divestitures and exiting businesses, et cetera. Can you talk about kind of the net cash impact that you're looking for here when the dust settles in terms of both brands and facilities that you're going to be exiting?

Yes. So for this year, it's going to be basically a net breakeven. But where we're going to see the value is in 2023, where we're going to see less operating expenses as well as higher margins.

Okay. Yes, I heard that, it's good to clarify that you don't have -- you're not expecting some kind of material lump sum from the divestiture, okay, perfect. And then one last one for me here, and I'll let -- then I'll get back in the queue. I mean, this 3-year plan that you're introducing today. What kind of -- what are the kind of benchmarks here that we can look for, for the next couple of quarters? Three years is a long way away, but I mean, what are the kind of -- the real initiatives here over the next 3 to 6 months Stan that we can really look for to show real improvement in the financials born from this initiative.

Yes. So the project GoodWheat -- sorry, Project Greenfield is really heavily reliant on GoodWheat and the expansion into pasta expanding beyond just the 500 stores that we are currently in as well as expansion in new categories. But we also are going to be -- have to be very choiceful about when we enter these categories and how. And so I'd say more guidance will be coming on that as we move forward into future quarters.

Got it. Okay. Very good. Well, I look forward to further updates on that when the time is right. And again, congratulations to you and the team on a really nice sequential improvement here from the first to the second quarter.

And our next question comes from Brian Wright from ROTH Capital Partners.

I wanted to talk a little bit about the 500 stores? You mentioned nationwide. Is it kind of a broad nationwide strategy at this point? Or are you kind of testing regionals and then targeting, then figuring out kind of the cadence and how to go about it. Just wanted to think about kind of geographically how that looks and the strategy there?

Yes. So our strategy is really to align with the mid- to large regional retailers where we have relationships and can develop the support that we need to launch these progs properly and to understand the right kind of go-to-market model, everything from promotion to shopper marketing to other trial driving initiatives. And so those retailers are located in the East, in the Midwest, some in the West Coast. So they are across the nation. But we are taking -- going to be taking those learnings and then expand in 2023 to more retailers.

And in that promotional support, does that include in-store marketing -- and just any kind of color you could provide on what's going on in the stores themselves.

Yes. We have about -- I'd say about 70% of our efforts on GoodWheat right now are -- would be considered shopper marketing. So it's using the retailer's tools, it's using geotargeting with some of the messaging and digital advertising to support the -- driving those consumers to those retailers. And so we're -- and again, every retailer has their own mix of tools which are successful for them. And obviously, they will always include the major ones like features and display.

Great. And last question for me is, you had mentioned in the R&D keeping some product formulation R&D, and just was curious on kind of what efforts are going on in that arena.

Yes. So that's primarily around, again, our GoodWheat brand, and we are already starting formulations in other categories beyond pasta, working with experienced co-pack partners to help develop the correct formulas that will help us break through and win in those categories.

On that, can I just follow up, would mac and cheese be included in your definition of pasta or would that be different?

That would be a different category.

We have no more questions at this time. I'll turn it back to the speakers for final comments.

Thank you. So in closing, I'd like to thank everyone for joining us today and our financial results continue to improve as we have made tremendous progress rightsizing the organization. Our GoodWheat pasta is officially launched, and we have made strategic decisions that will enable continued improvement during the second half of the year and beyond. And we have developed a long-term road map that will allow us to significantly grow this business and reach profitability. We feel we are well positioned to execute on these plans, and we look forward to updating you all on the progress in the future. Thank you again for joining us today. Have a great afternoon, everyone.

And thank you, ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.