Good afternoon and welcome to Arcadia Biosciences Third Quarter 2023 Financial Results and Business Highlights Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to T.J. Schaefer, Chief Financial Officer at Arcadia. Please go ahead.

Thank you, and good afternoon. Joining me on the call today is Stan Jacot, Arcadia’s President and Chief Executive Officer. 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 hard language in our most recently filed 10-Q. With that, I will now turn the call over to Stan.

Good afternoon, everyone. Thank you for joining us today for our 2023 third quarter conference call. I am pleased to report that Arcadia continues to make excellent progress in executing Project Greenfield, our 3-year strategic plan to unlock the company’s potential and provide a path to profitability. GoodWheat pasta and pancake mixes and Zola Coconut Water adds more than 1,000 stores of distribution in Q3 resulting in revenue growth from continued operations of 20% compared to last quarter. And we are operating with a leaner structure after the exit of our body care business as evidenced by our lowest total SG&A since 2019. I spoke last quarter about our plans to scale more quickly. And today, I want to provide an update on those key initiatives. First, GoodWheat Pasta is executing two programs that are expected to drive growth in Q4 and throughout 2024. The lower average price is now fully in market across more than 2,000 stores, and we expect this more competitive price point to result in higher turns and faster customer reorders. Q4 will also be the rollout of our new marketing messaging that GoodWheat is picky either approved with a clean plate guarantee, you will love it or your money back. We began this new messaging in October during National Pasta Month, resulting in over 14 million impressions and multiple social media influencer partnerships. The second key scaling initiative was the launch of GoodWheat into the breakfast category with new better-for-you Pancake & Waffle Mixes as well as Single-Serve Quikcakes. These new products are made with simple ingredients in Arcadia’s proprietary non-GMO wheat flour, which delivers the same case and texture of regular pancakes, but sneaks in more fiber and protein than traditional wheat flour. In product testing, consumers prefer the taste of GoodWheat Pancake mix…

Thank you, Stan, and good afternoon, everyone. Today, I will walk you through our third quarter financial highlights. In my prepared remarks, we’ll focus on our results from continuing operations, which excludes all body care related results for the period discussed. So let me spend just a few minutes providing some background as to why these brands are now being presented as discontinued operations. As you recall, we exited the Body Care co-packing business in the first half of 2022 and then made the decision to license the Savvy Naturals brand to Radian’s Beauty in July of 2022. At that time, we also ceased body care manufacturing activities and began using third-party manufacturers for ProVault and SoulSpring in an effort to simplify our business, focus our resources and increase our margins while freeing up cash. We considered GoodWheat, Zola and ProVault to be core brands that could offer attractive margins, provide differentiation and give us the ability to scale. However, the CBD category continued to face challenges that included one, a lack of distribution opportunities as the majority of U.S. retailers would not take CBD products, including online retailers, such as Amazon. Two, many retailers that did sell CBD put the product behind locked glass doors that had a negative impact on sales. Three, CBD products could not be marketed on large mainstream platforms such as Google Search, Facebook and Instagram, limiting our ability to advertise. And four, many retailers that once sold CBD made the decision to significantly reduce or completely step out of the category. As a result, we began to explore strategic alternatives for ProVault and SoulSpring at the beginning of 2023, but we’re unable to find a buyer. In June of 2023, we notified retailers that we would no longer be producing the product. And in…

[Operator Instructions] Our first question comes from the line of Dipesh Patel from H.C. Wainwright & Co. Your line is now open.

Hi. Thanks T.J. This is Dipesh, standing in for Ram Selvaraju. Is there anything else that you can highlight as you look at strategic alternatives, maybe including timelines? And then also what progress has been made in capturing additional economics in the value chain for GoodWheat? So, some comments around that would be helpful. Thank you.

Yes. Thank you, Dipesh and thanks for calling in today. So, for your first question, we don’t have a timeline that we are ready to give in terms of closing any transactions, but there are several, that are in our pipeline and we are continuing to work diligently to do the right steps. In terms of capturing value through the rest of our supply chain, we do have several agreements that are in front of some of our partners. And we do expect more news on that front in our next earnings call.

Great. It’s very helpful. Thanks again for the update today.

Thank you. [Operator Instructions] Our next question comes from the line of Ben Klieve from Lake Street Capital Markets. Your line is now open.

Thanks for taking my questions and congratulations guys. Nice little quarter here from top to bottom, it seems. Have a handful of questions for you. First of all, on Zola, it sounds like some of the momentum that you saw in Zola in the second quarter really continued into the third quarter. Excluding the impact of new – the new flavors that are coming online, can you comment on Zola’s contributions to the top line and retail distribution today versus the Thai watermark a few quarters ago before some of the challenges emerged?

Yes, sure and thanks for calling in today, Ben. For Zola, yes, the challenges that we had last quarter or in Q4 of 2022, they are still continuing. And so we are going to expect to lap those by Q4 of 2023. We have seen incremental distribution, and we have seen velocities also start to improve. But we do expect the innovation to be a catalyst for more distribution in 2024.

Okay. Perfect. Thank you. The – I am curious, with GoodWheat retail placements now 15-months-old, maybe a little more, I am wondering if you can talk about kind of the lessons that you took from the initial placements a year ago and how you are driving growth now from new retail stores in maybe a more accelerated manner now. I mean what challenges did you guys run into a year ago that you are not running into today? Any insights there would be helpful.

Yes. So, if we go back 15 months, it was GoodWheat Pasta that we had launched, and we were successful in gaining distribution in a number of different accounts, different size accounts, different regions of the country. We have had lots of great learning as we had spoken on earlier conference calls about on price points and where we need to be in comparison to other better-for-you brands. We have also been learning about shelf placement, number of SKUs on shelf, the promoted pricing programs. So, all of those factors are going into ways that we can optimize our current distribution footprint. So, I think that’s really the focus for the pasta category is making sure that we are nurturing those accounts and those SKUs that we have distribution. And in some accounts, there is opportunities to expand our lineup to include more of the pasta SKUs. So, I think that’s really what our key learnings for pasta. And we are also applying those learnings as we have launched the pancake category and now more recently, the Mac & Cheese category.

Okay. Great. T.J., a clarifying question, on your prepared remarks, did I hear you call out costs in the third quarter associated with Mac & Cheese and Pancakes, I believe, or am I making that up?

Yes. No. So, I called out R&D expenses that they were higher in Q2 related to preparing for the launches of Pancakes and Mac & Cheese.

Okay. So, R&D costs in Q2 were directionally higher for – given both of those products, okay. I thought I missed an explicit number, okay. And then last question for me. I mean the – it looks like a lot of momentum is really built through 2023 so far. I mean as you look into 2024, can you guys give any kind of high-level expectations regarding overall retail doors that you hope to be at ending ‘24, any kind of high-level metrics that you can really provide to help us get a sense of kind of the scale you are looking at 12 months from now?

Yes, sure. I think when we add up the three categories for GoodWheat, we will be over 3,000 doors ending 2023. And in 2024, our plan is really to nurture those 3,000 doors. There may be additional accounts that come online in the first half of the year. But really, we want to make sure that we are growing where we are and that we become almost indispensably attractive to the larger retailers in the larger – in the accounts that we are today. So, we are still planning on double-digit growth for GoodWheat next year and then I would say the same for Zola.

Got it. Okay. Very good. Plenty more to talk about. That’s a good place to leave it. Thanks for taking my questions and congratulations again on a really nice quarter here.

Thank you.

I am showing no further questions at this time. I would now like to turn it back to Stan Jacot for closing remarks.

In summary, as we enter 2024, Arcadia is in the best position in its history. Our proprietary wheat technology has been commercialized in three categories with the potential to add more categories through acquisition. We have exited the low opportunity and high resource body care business and are revitalizing the Zola Coconut Water brand with innovation rolling out early next year. This has resulted in stronger top line growth and higher gross margins. And finally, we have right-sized the organization and streamlined our cost structure in order to extend our runway to execute our plan. We look forward to updating you in the future. Thanks again for joining us and have a great rest of your day.

Thank you for your participation in today’s conference. This does conclude the program. You may now disconnect.