Good afternoon, and welcome to the Arcadia Biosciences Third Quarter 2022 Earnings Conference Call. Today's presenters will be Stan Jacot, President and Chief 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 currently 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 recently filed 10-Q. [Operator Instructions] With that, I will now turn the call over to Stan Jacot, CEO. Sir, you may begin.

Good afternoon, and thank you for joining us today for our 2022 third quarter conference call. Our third quarter results represent continued progress on our path to profitability that we've discussed on previous earnings calls, as part of our long-term strategy called Project Greenfield. As noted in our press release, key highlights include, one, our distribution for GoodWheat doubled from the previous quarter, and two, our gross margins improved to 28%, validation that we are on the right track. Our Q3 revenues reflect the transformation to a leaner, more focused company. We have divested unprofitable lines of business, and Q3 does not include any non-recurring revenues from grain sales or the Bioceres HB4 soybean milestone that we reported in Q1 and Q2. This is all part of our business plan, and it is working. While our Q3 revenues were below Q1 and Q2, our Q3 gross profit dollars were higher than the first two quarters combined. So I'm extremely pleased with the quality of our third quarter revenues, our improvement in gross margins and the distribution gains we have made on GoodWheat in a very short period of time, which is a perfect transition to the first topic I wanted to discuss with you today the success we are having with GoodWheat. On our Q1 earnings call in mid-May, we announced that GoodWheat pasta had officially launched in the retail channel in May 2022. On our Q2 earnings call in mid-August, we communicated that we added the e-commerce channel with our launch on Amazon, and we discussed that we added more and more retailers at a rapid pace as interest grew around our great tasting, better-for-you pasta. At that time, GoodWheat pasta was available in nearly 500 stores, significant progress for a brand that launched just two months earlier. We…

Thanks, Stan. Good afternoon, everyone. As Stan noted, we had anticipated reduced revenue in third quarter as we have turned our focus on our higher-margin brands. Total revenues recognized for third quarter 2022 were $1.9 million compared to $2.4 million in the third quarter of 2021, a decrease of 21%, but resulting in a positive gross margin of 28%. And as mentioned earlier, third quarter year-to-date revenues were $4.3 million higher than third quarter year-to-date 2021 for an increase of 94%. The year-to-date gross margin was 8%, impacted by the first half sales of underperforming businesses, which we have since divested. Lower revenues from co-packing and Savvy Natural product sales accounted for the majority of the decrease for the quarter. Partially offsetting this unfavorability was the GoodWheat pasta [ph] revenue recognized this quarter. And as previously communicated, we launched our Goodland pasta end of second quarter of this year and are very pleased with the progress to date. The $4.3 million favorability in year-to-date revenues for 2022 as compared to 2021 was driven by a full 9 months of coconut water and body care product sales in addition to the GoodWheat pasta and grain sales this year. Total operating expenses of $6.5 million in third quarter of 2022 was $4.6 million less and an $11.1 million recognized in the third quarter of 2021 and third quarter year-to-date total operating expenses was $4.4 million lower than the same period in 2021. As Stan mentioned, we have been focused on cost containment, which is reflected in our results here. Cost of product revenues was lower for the quarter, in line with the lower revenues recognized. SG&A expenses were $1.2 million favorable for the quarter due to the impairment of property and equipment that was recognized in third quarter 2021, with an immaterial…

Thanks for taking my questions. Good afternoon. First question on gross margins, great progress there in the quarter. With this now really streamlined business that you have with three kind of primary product categories and the first quarter of material gross profit. Can you talk about kind of the margin characteristics across each of those three product categories? Because I'm curious if they're kind of relatively in line with each other or individual products that really drive this number right now?

Yeah. Thank you for the question, Ben. We're - at this point for our three product lines, all of the different individual SKUs are a little different. But we would say that our line of sight to growth would keep us in the same gross margin range as we experienced in Q3.

Okay. Thank you. And then a couple of questions on GoodWheat specifically. So first, regarding retail distribution. I mean great progress there, expanding store count as quickly as you did. I'm wondering now what comes next. Can you help us kind of frame realistic expectations for retail count progressing over the next few quarters, say, through the end of 2023 or some kind of time frame in that range?

Yeah. So again, we continue to present GoodWheat to many retailers across the nation. And depending on shelf reset time frames, which will last all the way through this time in 2023, we would expect to get to the 3,000 to 5,000 distribution points by the end of 2023.

Okay. Perfect. Perfect, thank you. Stan, and then I hear you loud and clear on the opportunity to integrate GoodWheat into other categories potentially via acquisition. I'm wondering if you can also elaborate on your kind of expectation on expanding the addressable market beyond CPG that you control via B2B revenues via the ongoing trial underway with Bioceres in South America. Is there any kind of updates you can provide on either of those fronts?

Yeah. We still continue to look for partnerships and continue to leverage the partnerships we currently have with companies like Bioceres, but there's nothing really new to report for this year at this point. Nothing new in the pipeline that will significantly impact our projections.

Okay. All right. Very good. And then one last one for me. With all the kind of moving pieces here recently with exiting businesses and exiting the - your processing facilities. Are there any kind of cash inflows, outflows you're expected here from Q4 and beyond around this broad initiative of streamlining your operations? Or have those all really been realized as of Q3?

Yes, Ben, I'll turn that over to Pam to answer.

Hi, Ben. I don't think that we – we don't expect a lot from a cash perspective. I mean we still will be evaluating as we do each quarter and especially at the end of the year, the inventory balances and the asset balances we have at the end of the year, and we will be looking at those to rightsize them to fair market value. So there could be some additional write-downs, but we really don't expect much in the way of cash going out.

Okay. All right. That makes sense. All right. Well, I think I'm in good shape. Congratulations again on some really good progress on several fronts, and I'll get back on queue.

Thank you.

Thank you. Our next question comes from Dipesh Patel from H.C. Wainwright. Your line is now open.

Hi, guys. Thanks for the update. Just standing in for Ram Selvaraju at H.C. Bain right. When do you plan to reach operating cash flow breakeven?

Yes. So as a part of Project Greenfield, we expect that to happen in early 2025.

Okay. And then with regards to some of your products, do you expect to see - to receive any consideration or whatever remaining hemp-related inventory you are still holding? And if so, what might that look like?

With that, I'll turn that one over to Pam.

Sure. So we - the CBD market has been pretty challenged lately, and we are still looking to monetize the hemp assets that we have on our books. I mean, it's a continuous evaluation. And depending on how that market outlook truly does look for next year, we'll just have to see. But it's pretty challenging right now.

Okay. And then last question, would you characterize the level of - or sorry, how would you characterize the level of commitment among distributors for your GoodWheat product line? And what strategies are they employing in order to drive that uptake?

Yes. So our partners that we've listed, good we [ph] are very satisfied with our performance. I would say for most of them, we are very early on in the trial driving period. As you know, once we secure distribution, we have to get in [indiscernible] promotions and which include feature adds include display. So we are just now starting to see some of those promotion activities that hit the marketplace. And with that, we see the corresponding lift and corresponding trial. So - but yes, we're - the acceptance has been strong. Commitment to our brand has been strong. And as we mentioned in the remarks, we're looking at all the typical promotion tools and marketing tools to continue to improve our losses.

Great. Thank you, Stan, Pam.

Thank you.

And presenters, I show no further questions in queue. At this time, I will turn the call back to Mr. Jacot for closing comments.

Thank you. So in closing, we have made meaningful progress this year in transitioning Arcadia to a more lean and focused organization. Our financial results continue to improve as evidenced by our significant increase in gross profit in Q3, as well as our ongoing management of expenses. And GoodWheat continues to outperform expectations with distribution doubling in the third quarter alone. We believe that our members validate our ability to execute on the long-term plans we have previously shared and look forward to sharing with you our full year results on our next call. Thank you again for joining us today. Have a great afternoon, everyone.

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