Good afternoon and welcome to Arcadia Biosciences' First Quarter 2021 Earnings Conference Call. Today's presenters will be Matt Plavan, President and CEO; and Pam Haley, CFO of Arcadia. This call is being webcast, and you can refer to the company's press release at arcadiabio.com.

Before we start, if you turn to Slide 2, 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-K and, again, on Slide 2 of this presentation.

With that, I'll now turn the call over to Mr. Matt Plavan, President and CEO..

Thank you, operator. Good afternoon all. Welcome to our first quarter conference call and thank you for joining us. Normally, I begin our calls with highlights of our accomplishments for the quarter. However, today I would like to begin our call with specific coverage of an exciting and strategically pivotal event for the company.

Just after the market closed today, we announced that we acquired Lief Brands, a portfolio of leading CBD and wellness products featuring Soul Spring, the number one selling CBD-infused botanical therapy brand in the U.S. in the natural category.

In summary, this transaction is strategically transformative for Arcadia, as it substantially broadens our product offering and direct access to consumers.

With this acquisition, we gained, one, best-in-class CBD and wellness brands with an immediate and significant impact on our top line revenues with potential for strong, organic and synergistic growth. Two, a customer base of over 5,000 U.S.

retail stores through an established network of national retail distributors and large independent grocers through which we believe our GoodWheat, GoodHemp CBD and GLA consumer products can be sold. Three, compelling cost synergy opportunities and four, experienced FMCG management or fast-moving consumer goods management.

Referring now to Slide 3 of our presentation, this acquisition is in line with our stated strategy to maximize the value capture from our proprietary innovations in good-for-you foods and wellness products by the vertical integration of our supply chain.

We believe with greater control over the manufacturing and placement of our products, we can better participate in the product quality and brand equity we create.

We acquired these assets from the parent company, which made its public market debut on the NEO Exchange in January of this year, with an initial market capitalization in excess of $1 billion. It is the largest cannabis company in California by revenue, footprint and brand portfolio.

If you'll flip to Slide 4, I'd like to tell you more about this important transaction. Lief Brands comprises four brands with approximately 80 SKUs, spanning 17 product categories in the health and wellness marketplace. Three of these brands, Soul Spring, Saavy Naturals and Zola generated $6 million of revenue in 2020.

The fourth and newest brand, Provault was launched in March of this year. And therefore, did not contribute to revenue in 2020. Beginning with Soul Spring, the number one selling CBD bath and body brand in the natural channel according to SPINS data.

Soul Spring was launched in June of 2019 targeting channels, including natural, specialty, conventional, drug and online at mysoulspring.com. Soul Spring is currently sold in over 2,000 retail stores, including Sprouts, Wegmans, Vitamin Shoppe, Fresh Thyme, Thrive Markets and others.

The Soul Spring body care lineup includes body balms, body bars, lotions, deodorants, lip balm, and muscle rubs. Now moving clockwise on the slide is Provault. This is a CBD-infused sports performance formula made with natural ingredients and is designed to provide effective support and recovery for athletes and people with pain.

Product formulations include muscle rubs, bath salts, and other creams. As I just mentioned, Provault was launched in March of this year. It's anchored at Sprouts market and is showing good reorder velocity.

We've also received initial order indications from other target customers because of the demand for sports formula, for pain management and the initial positive reception of this brand. We believe the prospects for this line to become a strong revenue contributor are encouraging.

This product competes favorably with Biofreeze and Icy Hot, which collectively generate about $250 million in revenues per year. Continuing clockwise to Saavy Naturals.

This is a non-CBD-infused line of all natural body care products, including soaps, lotions, creams, using proprietary formulations and natural ingredients sourced from around the world. We especially like having the diversity of a non-CBD product line to broaden our offerings.

This is the most mature line of the products in the Lief portfolio having been acquired in 2018 and has a strong consumer brand loyalty. Saavy Naturals were sold in greater than 1,000 retail doors with target channels of online natural specialty and conventional stores. And lastly, we have Zola coconut water.

Zola is a leading coconut water sourced exclusively with sustainably grown coconuts from Thailand, and was named the best tasting coconut water by Epicurious, a Conde Nast digital brand focused on food and cooking. Zola is packed with natural plant-based electrolytes and is made with non-GMO project verified gluten-free vegan ingredients.

Zola is sold in 4,000 natural foods and grocery outlets, including Safeway, Stop & Shop and Albertsons.

With this purchase, we acquire a 20,000 foot square foot GMP licensed ISO certified manufacturing facility in Chatsworth, California, on-site capabilities include ingredient sourcing, formulation, manufacturing, QA/QC, warehousing, and flexible fulfillment, and shipping.

We believe the scale capacity of this facility is several times the existing production volume, which bodes well for our synergy plans, which I'll expand on in a moment. Gross margins range from 30% to 60%, depending upon the SKU and the channel being sold into.

Today, the aggregate GM of this business, our gross margin is close to 40% through some very basic and inexpensive automation to increase production efficiencies, some strategic product mix shifts and improved ingredient sourcing. We believe we can increase gross margins by 500 to 600 basis points within 12 to 18 months.

With this acquisition, we also gained a seasoned management team with proven FMCG expertise, including go-to-market strategies, marketing, manufacturing, supply chain and food and product expertise in the beverage topical and wellness markets.

As evidenced by a strong sales track record, having built nationally acclaimed brands, such as those in a Lief portfolio. Three key executive adds include Chris Cuvelier, formerly CEO of Zola. Chris will be the Chief Growth Officer for Arcadia. Chris founded Zola, an Açaí beverage company in 2001.

A few years later, Chris successfully extended the Zola brand to include coconut water, a post-exercise favorite hydration drink and grew Zola revenues to over $20 million annually. In 2016, Zola was acquired by growth investors, KarpReilly and Chris stayed on as Chief Executive Officer doubling down on his passion for delicious plant-based drinks.

In May of 2019, Caliva acquired Zola and Chris joined Caliva as Head of Beverage and a Member of the Executive team. In January of 2021, Caliva was acquired by the parent company. As Chief Growth Officer of Arcadia, Chris will lead our growth strategy development and sales and marketing execution for our consumer foods business.

Brett Michel, formerly COO of Lief Brands will be the General Manager of Lief Brands for Arcadia. Brett has been Chief Operating Officer of Lief since its inception in 2019, overseeing the manufacturing, launch and expansion of each of the Lief Brands.

Prior to Lief, Brett was the Vice President in Sales and Operations for food distribution company based in Southern California.

Belinda Yao, who's arrival to Arcadia, we announced just last week is our Vice President of Operations and has a proven track record leading all aspects of the supply chain, including building things from scratch and startup and small companies to leading supply chain innovation within Fortune 500 pharmaceutical, chemical and CBG companies.

Most recently, she was the Vice President of Operations at Zola, working closely with Chris to establish and lead a global supply chain for plant-based beverages. Before Zola, Yao served more than eight years with the Dannon Company, a premier multinational food products company, where she held senior management positions in supply chain management.

For Arcadia, Yao will oversee supply chain strategy for all product manufacturing and production, including demand planning, procurement, and supplier relations, order fulfillment, inventory management, logistics, customer service, and data analytics.

Now I'd be remiss not to mention that much of the success of the Lief Brand stems from the superior formulations of food grade, natural ingredients, tested for safety, efficacy, sustainability, and environmental impact sourced from around the world by Hugo and Debra Saavedra.

Hugo and Debra are the veteran experts in the national foods category responsible for the quality standards now adopted by the natural foods industry. In fact, Hugo Naturals, which many of you may be familiar with, which is a very popular line of body care products was their first successful brand of wellness products.

And lastly, the purchase consideration for these assets was $4 million in cash, plus 827,400 shares of Arcadia common stock. If you'll turn now to Slide 5, I'll take a moment to showcase what we believe to be significant, bi-directional revenue and cost synergy opportunities with this – of this combination.

Let me begin with synergies enabled via the Lief business.

The Lief Brands team has established a national distribution footprint with significant product flow through the largest national distributors, including UNFI, KeHE, DOT and Lotus Light and direct sales to national grocers like Sprouts, Wegmans, Albertsons, and Safeway, as well as into specialty nutrition outlets and pharmacies like Vitamin Shoppe.

Immediate access to this national retail footprint is of significant value to Arcadia as we are in the midst of bringing our existing and new consumer food products to the retail market. The grocery network is ideal for our GoodWheat based consumer foods like pastas, flours in the forthcoming pipeline of products powered by GoodWheat.

Similarly, their installed base of pharmacies and vitamin shops are perfect targets for our plant-based GLA SONOVA 400 omega-6 capsules of which we can begin selling immediately into these channels.

Perhaps the most obvious revenue synergy for Arcadia and gaining with this acquisition will be the introduction of our Archipelago premium Hawaiian CBD through the Lief distribution network versus having to incur the time and cost to stand up a retail network ourselves from scratch.

This will be a new SKU available to all stores or Soul Spring is sold. Moreover, now that we have formulation, manufacturing and brand capabilities to produce our Hawaiian CBD products internally, we will capture better margins, not having to pay outside formulators, packaging developers and pay co-manufacturing profits.

So thus far, I've highlighted the retail sales synergies we gained by leveraging the Lief retail distribution network, manufacturing and formulation capabilities depicted at the top of Slide 4. But switching now to the ways in which Arcadia capabilities and investment can drive synergies to the Lief Brands.

E-commerce is largely an untapped segment for the Lief products.

As there has been no online marketing investment in them, their online sales account for between 7% and 15%, which we believe speaks to the brand strength, given the lack of any marketing, with a typical online marketing budget, we believe 25% to 30% in online sales as a percentage of total sales is a reasonable expectation.

With that said, based upon our learnings from building the digital backbone for the Three Farm Daughters e-commerce business, we've developed a proficiency to effectively capture online consumers.

We believe these learnings will translate favorably to targeting new online consumers for our Lief CBD and wellness brands, a product category that generally does very well in e-commerce. With that in mind, let's have a look at the growth projections for CBD sales.

And I can talk a little bit about what we see on the horizon for our line of CBD products. If you'll turn to Slide 6, as you can see, CBD has already become a large commercial market at over $4 billion. And the expectations for continued growth remain impressive.

In particular, beverages and other ingestibles are predicted to lead the category and growth. As you know, a number of large and well-known companies and brands are getting in the game in a significant way. Charlotte's Web, Molson Coors and Martha Stewart’s company are charging forward with CBD-infused beverages, gummies and capsules.

In fact, several of our distributors are clamoring for us to introduce a CBD-infused beverage formulation too. For that reason, we're evaluating beverage formulations, brand strategies and the regulatory environment for ingestibles as new product opportunities. Okay, I'd like to now turn to highlights for Q1 and events subsequent to quarter end.

Another transaction highlight occurring just after the quarter end is our acquisition of the assets of a grasses. A food ingredient company based in Barcelona, Spain, and includes all the physical and intellectual property assets to Arcadia to further commercialize Tritordeum.

Turning to Slide 7, you will see Tritordeum is a novel cereal resulting from – across between two species; durum wheat and wild barley, given food companies and consumers a cereal with a unique functional and nutritional properties.

It's highly functional in a wide range of cereal-based applications, such as breads, crackers, pastas, baked snacks, and beer. As a crop Tritordeum is a robust and sustainable cereal that is water efficient with good disease and pest resistance and broad environmental adaptability.

Finished products made with Tritordeum have a unique gold color and slightly sweet buttery taste. Tritordeum is commercialized within a network of more than 50 grain producers and 25 millers and distributors for delivery of product to customers.

It's been sold in 10 countries with seven retailers in Europe, most recently launching is Tritordeum bread product with Albert Heijn, the largest grocery retailer in Holland.

To help size the acquisition financially, we acquired these assets for approximately $250,000 in cash, while recurring revenues for the business today are between $750,000 and $1 million per year and we expect to be breakeven within a year post acquisition.

We will spend the next 90 days integrating the Tritordeum operations with our GoodWheat operations, quantifying synergies, such as adding GoodWheat formulations to the Tritordeum channels in Europe and the opportunities to sell through Tritordeum products here in the States, again, leveraging the Lief retail distribution network as we are able.

And now for an update on our GoodWheat business. We made good progress refining and optimizing our e-commerce digital architecture in Q1 by March, we were consistently converting website impressions to actual sales transactions at a rate above industry averages of 2% driving sales up in March over February.

As we discussed in our last earnings call in March, it was our intent to substantially increase our digital marketing spend in April with our Three Farm Daughters partners to increase the scale up of our customer acquisitions and begin building a broad base of GoodWheat consumers.

Concurrently however, in April, diligence with Lief Brands was well underway.

We quickly recognized having access to the Lief sales and distribution networks gives Arcadia the horsepower and in-house flexibility to drive strong sales in a more strategically advantageous arrangement through a partnership then through a partnership where strategic decisions and profits are shared equally.

So when broaching the topic with our partners at Three Farm Daughters, they welcomed the opportunity to also make their own strategic decisions and invest in what they believe is best for their brand and their business goals.

Therefore, we mutually agreed to reconfigure our alliance as a license arrangement versus a joint venture, whereby they licensed the GoodWheat ingredients from Arcadia for their products. The continued commercial success of the Three FD brand, pastas and flours remains of an essential importance to both of us.

And we continue to collaborate well to ensure the success of the brand. Shifting for a moment to Arcadia innovation. As we have discussed over the prior couple investor calls, our portfolio develops traits in wheat and hemp represent the potential for significant commercial value.

And our primary innovation emphasis is now around new food formulation and product line extensions. As such, we've reduced our investment in new trait discovery and increased our investment in revenue generating activities for these new product introductions.

This evolution necessitates a different expertise and capability to lead our innovation efforts. Hence, the reason we recently hired Tracy Baker as our Vice President of Product Innovation, who brings nearly 40 years of experience in product formulation and commercialization with organizations like Tropicana, PepsiCo and Gerber.

As we complete this evolution, we no longer require a Chief Technology Officer at the company, therefore it's with mixed feelings that I announced that Dr. Randy Shultz will be transitioning out of the company by month end.

Randy has been instrumental in advancing our traits, do commercial viability and building intellectual property protection and most recently, leading our GoodHemp variety development. We thank him for his contributions and look forward to following his continued professional successes.

Now with respect to GoodWheat, new product introductions, Tracy's leading efforts to evaluate the greatest bang for our buck in food formulation. From among those you'll see listed on Slide 8. That is to say, where does our nutrient dense GoodWheat had the greatest value to consumers and food formulators.

We believe the most immediate category opportunities and where customer testing is currently focused are in those shown, including pancakes, waffles, baking mixes, snacks and pizza crusts. In fact, outlined in Slide 9, we're targeting an introduction of two to three GoodWheat products in 2021.

We're evaluating consumer preferences, testing formulations and lining up manufacturing over the next few months in order to be in commercialization introduction likely in Q4 of this year, also indicated here in is the staggered launch by brand for our commercial introductions.

As you can see, where our planning for a total of six brands to be launched in addition to the GoodWheat consumer products, these are rough estimates based on a number of variables. Therefore, we do expect some changes to these timelines as much as plus or minus 30 days for each. Switching briefly now to GoodHemp seed update.

Because of the delay in the approval from Health Canada, revenues for GoodHemp seeds did not start in earnest until April, which totals today just over 315,000 for the year and slightly under 1 million seeds sold, but for the quarter sales were in fact de minimis.

We're now well into the growing season and our sales team has been in the fields actively engaging with growers and having attended a number of hemp conferences.

For us the fog around this season's prospects has dissipated and it is clear to us that the lack of action on the part of the FDA to establish a regulatory framework for hemp extracts is causing the seed market to regress.

Specifically in the fall of last year, hemp analysts were projecting an increase in acres planted for 2021 over the 72,000 acres that were planted in 2020. Most everyone expected actually well over a 100,000 acres of hemp to be planted in the 2021 planting season.

Most recently and to the contrary, Hemp Benchmarks published their estimates for the 2021 planting season of approximately 27,000 acres based upon licensing data. This is a significant downturn that very few anticipated based upon the reasonably positive buying signals that I think everyone was receiving up until very recently.

We are seeing as growers continue to struggle to secure off-take contracts for hemp, they are changing their minds and declining to grow in 2021 and in some cases are choosing to grow commodities instead, which are at an all time high.

We’ll continue to compete aggressively for our share of seeds sold through the balance of 2021, but expect now for this malaise to persist until the FDA follows through on regulations. The primary hope for action by the FDA now is the H.R. 841 introduced into the house in February of 2021 by congressional representative, Kurt Schrader of Oregon.

This bill allows the use of CBD as a dietary supplement provided that the supplement meets other applicable requirements. If pass, we believe this bill will reinvigorate demand for hemp genetics in time.

Before turning the call over to Pam for review of the financials, I'd like to close with a macro perspective on our corporate mission, healthy people, healthy planet.

Having executed on the stated goal to verticalize, I believe the fundamental commercial strength of the company and our strategic plan to achieve that mission to create shareholder value is stronger now than ever before.

I believe this because one, we have a broad suite of plant-based and sustainable good-for-you consumer food and wellness products lined up for retail and e-commerce channel revenue generation.

Two, we are enabled to provide quality assurance of our premium consumer products from seed to shelf a critically important criteria for any CPG sourcing products, especially in the emerging CBD market. Three, we can maintain better control and margin protection against market shocks, like those we are seeing in the hemp seed markets today.

Four, we are now fully participating in brand and retail margins. And lastly, we possess proven FMCG leadership expertise. With that said, I'll wrap up with that and turn it over to Pam for an update on the financials.

Pam?.

Thank you, Matt. Okay, I'd like to take a few moments to share the financial highlights for the quarter with you now. As Matt mentioned at the onset of the call, we are very pleased of made the asset acquisition of Lief Brands and Zola coconut water, and we look forward to reporting revenue from product sales starting in second quarter.

Turning to Slide number 10. Total revenues recognized for the first quarter of 2021 were $828,000 compared to $309,000 in the first quarter of 2020, with the majority of the $519,000 increase driven by GoodWheat grain sales this quarter, along with additional GLA product sales.

Total operating expenses of $6.2 million in 2021 were up slightly from the $6.1 million recognized in 2020, although the composition deferred.

Cost of product revenues of $856,000 increased by $724,000 from the first quarter of 2022 to the first quarter of 2021, due primarily to hire GoodWheat grain and GLA product sales along with the destruction of some non-viable seed in Hawaii.

R&D expenses for the quarter were $1.2 million in 2021 as compared to $2.2 million in 2020, the $1.1 million decrease was driven primarily by lower employee-related expenses as we shifted our focus away from true research and development and towards the development of commercial products during the latter portion of 2020.

Selling, general and administrative expenses totaled $4.1 million in the first quarter of 2021, a $346,000 increase from the $3.7 million recognized in the first quarter of 2020.

Increased employee expenses along with higher marketing and advertising activities were partially offset by lower consulting-related stock compensation expense in the first quarter of 2021, as compared to the first quarter of 2020.

Net income to common stockholders was $2.1 million in the first quarter of 2021 compared to $2.5 million in the first quarter of 2020. And I'll give a little more detail on that other income and expense line on the slide that totaled $7.4 million for the first quarter of 2021 and $8.3 million for the first quarter of 2020.

So the first quarter of 2021 included an unrealized gain and the amount of $7.5 million related to the 1.875 million shares of bio series stock that we hold as the stock price increased significantly from December 31, 2020 to March 31, 2021.

And we recognized $769,000 of issuance costs associated with the PIPE transaction in January of this year, that brought in $25.1 million of gross proceeds. In addition to a non-cash gain of $322,000 for the change in the fair value of warrant liabilities from the end of quarter four to the end of quarter one.

And the first quarter of 2020 did not include any issuance or offering costs that we did recognize a non-cash gain and the amount of $8.2 million for the change in the fair value of common stock warrant liabilities. The number of warrants outstanding that are associated with these liabilities increased significantly with the January PIPE transaction.

And the balance of cash and cash equivalents totaled $32.8 million at the end of first quarter of 2021. Short-term investments at the end of the quarter was $19.1 million, comprised of the fair value of the bio series stock held and up from the $11.6 million fair market value balance at the end of December, 2020.

So this concludes our financial highlights for the first quarter of 2021.

Thank you very much for your attention today, and I'll turn the call over now to the operator for questions, Leah?.

[Operator Instructions] Your first question comes from the line of Ben Klieve from Lake Street Capital. Your line is open..

All right, thanks for taking my questions here. Congratulations on a good quarter and it sounds like a lot going on over there.

First question is, in the context of the quarter itself just a clarification around the grain sale classification that you have for GoodWheat grain, is that revenue to Three Farm Daughters? I mean, does that – has that termed or as GoodWheat grain sales in the quarters, is that something else?.

Hi Ben. I can take that question. That is not sales to Three Farm Daughters, that was sales to other customers..

Okay. All right, interesting. Okay, and next question I have, you talked about the $6 million recurring revenue from the acquisition. And Matt, it sounds like that $6 million number was the revenue from those brands in 2020.

Is that correct, that's not a forward-looking estimate, that's an actual 2020 number?.

Yes. Thanks for clarifying or asking for clarification. That is correct. That was the revenue generated by three of the four brands in 2020. Provault was launched in March of this year, so anything that generates will be additive to that recurring number..

Got it. Okay..

As well as those existing brands..

Got it, okay. And then you talked about integrating your Hawaiian operations into the supply chain of this acquisition. It sounded like what you were referring to was that, there was going to be new labels to the brands that are – that have a Hawaiian – like a Hawaiian brand element to it.

Is that correct? That these are going to be new brands in this portfolio and you're not necessarily going to be replacing the existing supply chain with your own internal capabilities, is that right?.

Yes, that's correct. These will be additive to the existing skews that they have. They don't currently sell a Hawaiian CBD, so this will be an ad..

Okay, got it. And then on the two other – I guess two other really quick questions. One you talked about the expectations later this year of launching new GoodWheat brands, consumer product one, two and three is how it was phrased on here.

Is it fair to assume that you are focused now exclusively on building your own brands internally and that the partnership model is not something – maybe you'll entertain that down the road, but the internal brand development is what you're focused on for GoodWheat..

Correct. Right. We think that's the best way to create value for our shareholders. And we've learned a lot about the value of the GoodWheat brand itself and we believe that it will – we have – it will resonate directly with consumers, so that is our strategy going forward. And look, I think Three Farm Daughters will continue to be successful as well.

I think that it is their desire to add other products and do things with their brand that are of interest to them. And we want them to be free to do that while we pursue what makes the most sense for us and our shareholders as well..

Got it. And then last question, and this is something that I asked in the last call, but given your comments about the trade portfolio today, I'm going to re-ask it.

I mean at this point, given how much has changed in your – in the strategy even over the last six weeks? Can you talk about really what is in your trait discovery pipeline today and really what's left of those kind of legacy ag biotech capabilities in terms of headcount today versus a year ago, what remaining strategic objectives there are, anything around that would be helpful?.

Sure. So when we look at wheat in particular there is a fairly broad set of traits that we have, that we've added to by having acquired the Agrasys assets that we believe will – or applicable to just about any wheat formulation – any food formulated with wheat to improve its nutritional content.

So we think that either – whether it's high fiber, reduced gluten, extending the shelf life of the wheat all of those capabilities are within the portfolio of traits that we have. So that right there we think is enabler to become a gold standard in wheat, which is a very large opportunity for us.

And so the way to do that at this point is to develop new formulations and focus on food science in order to ensure that we're bringing those products to market in the right consistency and taste which is a slightly different skillset than the traditional biotech.

So that's the reason for the evolution and that's an example of the breadth of the traits that we have available to us in our portfolio for wheat, for example. For hemp, we've developed strong varieties for our GoodHemp and we have continued to kind of evaluate genetic opportunities.

But I think for the time being, given that what we've learned is that the germplasm market for hemp in the near-term and foreseeable future is not likely to be a very large market. We think for the near-term, our dollars are better spent in iterating on those varieties and germplasm advantages that we've – or attributes that we've created to date.

So discovery of new traits, we've really decreased that investment to zero for the near-term and are investing in exploiting those discovered traits to date. And that would be a significant reduction in our R&D both headcount and spend. That's why you see such a significant improvement or reduction in that expense over the prior year quarter..

Got it. That's all helpful context. Very good. Well, I appreciate you both answering my questions and I'll get back in queue..

Okay. Thanks, Ben..

And your next question comes from the line of Steven Ralston from Zacks. Your line is open..

Hello.

Can you hear me?.

Yes.

Hi, Steven, how are you?.

Hi, congratulations on this Lief acquisition, it's quite transformative. It seems like you may go a leaf from being an ag-tech company to a consumer brand named company..

Thank you, Steven..

You're welcome. I'm curious about a couple of things. One is I'm looking at the, now you have multiple product lines and I'm trying to look through these layers of revenues that you're going to be generating going forward. Lief has about $6 million a year.

It seems like the relationship with Tritordeum is going to be almost $1 million, your GoodWheat and GLA is, well, you did at least 800,000 in the first quarter. So we'll call it about $4 million run rate on a yearly basis, because both are growing. And then you have this additive layer of the Hawaiian CBD product line that will probably come online.

I mean, conservatively, it seems like you’d be generating at least $2 million a quarter, how off is that?.

Well, I mean, I think it's pretty mature for us to give specific guidance. But I think you kind of laid out all of the shots on goal that we're looking at that will contribute to revenue, the timing of which we're doing our best to assess.

And whether, like you said, I think the recurring revenue, if you looked at what these products produced in 2020 is around $7 million, including Tritordeum. And then as we push these products on e-commerce, hard to predict how quickly and how much revenue, but when you look at how well some of these CBD topical brands do online, it's encouraging.

So we're going to refrain from commenting, give giving guidance or commenting on it, but I think you're putting the pieces together and connecting the dots to appropriately to recognize that, we really are well positioned right now to bring these products to market and have a significant revenue generation during the year and into the future..

Thank you.

Last question, but it's a broad general one, could you go into any further details of how you expect to get the synergies through – while multiple distribution channels that you now have access to?.

Yes, so I think if you go back to the comments, I went through, there's a very broad, independent grocery chain that Lief is selling into that where they've done very well with their products and have a good relationship whether it's Safeway, Albertsons, and others, we think those are premiere outlets and great opportunities for all the products we took you through on Slide, I think 8.

And so leveraging those relationships and introducing through those relationships, these new products we think is a tremendous synergy. And similarly, with the Hawaiian CBD going into where Soul Spring is today and over a couple thousand stores.

In addition, we can see significant synergies, the other direction, the experience that we've had with the digital infrastructure for selling our Three Farm Daughters pasta.

There were some significant learnings there and we think we're pretty well positioned to use those learnings, to begin targeting consumer demands for those Lief brands that have yet to really be invested in from an e-commerce standpoint. So that would be synergies going the other direction.

Also, we really see some significant low-hanging fruit with regard to improving efficiencies around manufacturing. Some minimal investment in automation should bring a fair amount of improvement in margin, CBD frankly has come down as an ingredient cost over the last year, very, very significantly.

So people were paying $11,000 for a kilogram of just 16 months ago, today it's maybe $1,000. So when we look at the prior margins where they were and where they're going to be in 2021, taking into account those automation and formulation, sourcing improvements. We think that there are significant opportunities for synergies there on the cost side.

So between revenues and costs, we're pretty excited about growing this business and growing it more profitably than it was in 2020. And when I look at how it did against COVID and all the other challenges last year, we feel like we've got a tiger by the tail.

So we're pretty excited about this deal and how we're going to do here for the rest of the year..

Thank you for answering my questions..

Sure. Thanks, Steven..

I'm showing no further question at this time. I would now like to turn the conference back to Matt Plavan. Please go ahead, sir..

Thank you everyone for joining us and your continued interest and support. We are looking forward to real-time reporting on our key milestones and achievements in the field and commercial markets, and we wish you all safety and good health. Have a good afternoon..

This concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect..