Good afternoon, and welcome to Arcadia Biosciences Fourth Quarter and Full Year 2024 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 Mark Kawakami, Chief Financial Officer at Arcadia. Please go ahead.

Thank you, and good afternoon. Joining me on the call today is T.J. Schaefer, 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 harbor language in our most recently filed 10-K. With that, I'll now turn the call over to T.J.

Good afternoon, and thank you for joining us today to discuss our 2024 fourth quarter and full year financial results. The year 2024 represented the culmination of a multiyear plan to put Arcadia on a path to profitability, and I am extremely pleased with the progress we have made. Over the last 2 years, we have exited underperforming Body Care brands in an effort to simplify our business and focus our resources on our most promising brands. In mid-2024, we seized on an opportunity to monetize a portion of our wheat intellectual property portfolio through the sale of a trait as well as the GoodWheat brand of wheat products, which provided non-dilutive capital while significantly reducing our operating expenses. Today, we are a leaner company that is solely focused on growing our Zola coconut water products, and we are delivering what we said we would deliver. In May 2024 on the special investor call following the sale of GoodWheat assets, we provided the following guidance for 2024. We said full year revenue would essentially be in line with the $5.3 million we reported for full year 2023 prior to the sale of GoodWheat that our gross profit dollars would be above $2 million with gross margins in the low 40s and that our R&D and SG&A expenses would have a quarterly run rate of around $2 million in the second half of the year. The results we are reporting today illustrate the successful execution of our strategy with full year revenues of just over $5 million, gross profit of $2.1 million and gross margins of 41.3%. Our reported R&D and SG&A expenses in the second half of 2024 were $4.9 million, which resulted in a higher quarterly run rate than our previous guidance as we incurred approximately $1.2 million of…

Thank you, T.J., and welcome to everyone joining us on the call. I would like to remind everyone that my discussion of the financial results will refer to the impact of continuing operations only. Any reference to prior year results will exclude the impact of discontinued GoodWheat and Body Care operations. . With that, I'll begin our discussion of the financial results. In Q4, total revenues were approximately $1.2 million, and this represented an increase of 56% compared to the same period of last year. It's worth noting that this increase in revenues occurred despite a sharp decline in sales of GLA oil as we sold through the last of our remaining inventory. This decline in sales of GLA oil was offset by a 124% increase in Zola revenues. And despite the fact that Q4 tends to be in the slow end of our seasonality curve, Zola sales in Q4 of this year were higher than Zola's best quarter than all of 2023. For the full year, total revenues increased to 13% compared to 2023. This was driven by a 46% increase in Zola sales overcoming a 49% decline in sales of GLA oil. The cost of revenues in 2024 was approximately $3 million, and this represented a 36% increase compared to last year. The increase in the cost of revenues was driven by the increase in Zola sales as product costs made up 84% of the total cost of revenues in 2024 and 93% of the total cost of revenues in 2023. The effect of this shift in the product sales mix can be seen in our gross margin rate, which declined from 51% in 2023 to 41% in 2024. The gross margin rate in Q4 of 2024 was 32%. Research and development costs were $53,000 in 2024. This…

[Operator Instructions] And our first question today will come from the line of Ben Klieve of Lake Street.

All right. Congratulations on a good end of the year here. First question on Zola distribution, can you elaborate a bit on your expectations for continued distribution growth here in 2025?

Sure. So Yes, we do have a healthy pipeline as we enter 2025. I don't want to provide any specific numbers. But the pipeline is as healthy in '25 as it was in '24. We will also benefit as we noted, a lot of the new distribution and gains came in the second half of the year. So we will benefit from the -- just the full 12 months of all of that new distribution in 2025 compared to '24.

Okay. Very helpful. On GLA, can you just help me with some housekeeping here. What was the full year GLA revenue and then also in the fourth quarter? And then can you confirm you guys are 100% sold out of that product as of 12/31/24?

Yes. So full year GLA revenue was $756,000. Q4 was $55,000. And we have complete -- we are completely out of GLA inventory, there will be no GLA sales in 2025.

Okay. Perfect. Very good. And then last one for me and I'll get back in the queue is regarding your efforts to monetize the legacy IP from the prior business model. Can you update us on kind of the status of any of those efforts? How advanced in the conversations are and the expectations or any goals, I guess, for future events?

Sure. So as you are aware, we still do have a portfolio of patents predominantly focused on wheat, it would be our resistant starch reduced gluten and oxidative stability patent portfolio. We are seeking to monetize that entire patent portfolio. I would say it will likely be a series of transactions there will not be 1 buyer for the entire portfolio. And part of that is really due to just some of the legal constraints that we have based on licensing deals or the relationships that we have with existing partners. So I think what you'll probably see is potentially 1 or 2 even more transactions to kind of unwind that portfolio. In terms of time line, I think we are in advanced stages in terms of those discussions. So I'm hopeful that we could have something done in the first half of the year that we would be able to announce, that would be kind of my target.

Got it. Very good. Well, best of luck with all those initiatives invest here and the hopefully final days of the Roosevelt transaction.

Thank you. And I would like to go ahead and turn the call back over to T.J. Schaefer for closing remarks. Please go ahead.

So in closing, we developed a strategy that we believe maximize the potential of our strongest brand, Zola, and we have executed on that strategy in the second half of 2024 and increasing revenues 80%, while delivering on all of the commitments that we communicated back in May. At the same time, our top line is expanding. We have also maintained tight cost controls. Arcadia has now produced gross margins in excess of 30% for 8 straight quarters, and our 2024 use of cash in operations is at the lowest level since Arcadia went public a decade ago. Zola's distribution expansion, particularly in the second half of 2024 provides tremendous momentum as we enter 2025. This concludes my remarks. Thank you for your interest in Arcadia, and have a great day.

Thank you so much for participating in today's conference call. You may now disconnect.