Greetings, and welcome to the Edible Garden Fourth Quarter Business Update Conference Call. At this time all participants are on a listen-only mode and a question-and-answer session will follow the formal presentation. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Ted Ayvas of Investor Relations. Sir, you may begin.

Thanks, Ali. Good morning, and thank you for joining Edible Garden's quarter and year-end December 31, 2023 conference call and business update. On the call with us today are Jim Kras, Chief Executive Officer of Edible Garden; and Kostas Dafoulas, Interim Chief Financial Officer of Edible Garden. Earlier this morning the company announced its operating results for the three months and year ended December 31, 2023. The press release is posted on the company's website, www.ediblegardenag.com. In addition, the company has filed its Annual Report on Form 10-K with the U.S. Securities and Exchange Commission, which can also be accessed on the company's website, as well as the SEC's website at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at 212-671-1020. Before Mr. Kras reviews the company's operating results for the quarter and year ended December 31, 2023, and provides a business update, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of historical facts contained in this conference call, including statements regarding our future result of operations and financial position, strategy and plans, and our expectations for future operations are forward-looking statements. The words aim, anticipate, believe, could, expect, may, plan, project, strategy, will, and the negative of such terms and other words in terms of similar expressions are intended to identify forward-looking statements. These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operations, strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to several risks, uncertainties, and assumptions as described in the company's filings with the SEC, including the company's annual report on Form 10-K for the year ended December 31, 2023. Because of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in the conference call may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statement. You should not rely upon forward-looking statements as predictions of future events. Although the company believes that the expectations reflected in the forward-looking statements are reasonable, it cannot guarantee future results, level of activity, performance or achievements. In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of the forward-looking statements except as required by law. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements, as well as others made in this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. Having said that, I will now turn the call over to Jim Kras, Chief Executive Officer of Edible Garden. Jim?

Thanks, Ted. Good morning, and thank you to everyone for joining us today. We are extremely pleased with the 21.6% increase in our annual revenue that we reported for 2023, along with an even more impressive 32.8% year-over-year increase in revenue for the fourth quarter. This robust growth underscores the effectiveness of our efforts over the past year to leverage our distribution network in order to drive revenue. Our strategy to further develop our distribution network is two-pronged, adding new retail partners and expanding our product offerings with existing partners. In 2023, we achieved significant success in both areas, thanks to our growing industry market position driven by our outstanding service and reliability. As a result, Edible Garden has become a go-to partner for retailers seeking a trusted source for organic and sustainable products. Additionally, the company continually strives to identify additional opportunities to boost profit margins. The prudent management of our operations is reflected in our financials by the increase in our gross profit margin by 270 basis points in 2023 to 5.9% of revenue, nearly double the 3.2% gross profit margin we achieved in 2022 and the 767 basis points improvement in our operating margin. Moreover, our gross profit increased to 6.9% of revenue in the fourth quarter. We believe that by continuing to add higher margin products to the Edible Garden product line, we will be able to further increase our gross profit margin in 2024 and in the future years to come. We have further leveraged our platform to enrich and broaden our wider range of Edible Garden products. We recently partnered with Tops Friendly Markets, introducing our sustainable herbs to 149 stores across New York, Pennsylvania, and Vermont. Additionally, Uncle Giuseppe’s Marketplace, a division of RBest Produce is now carrying Edible Garden herbs in their…

Thanks, Jim, and good morning, everyone. Starting with the fourth quarter of 2023 results, the company reported revenue of $4.1 million, an increase of 32.8% compared to $3.1 million for the fourth quarter of 2022. This increase was driven by higher demand from the existing customer base, expansion of our product lines, and the expansion of our product footprint in key retail partner stores. Cost of goods sold was $3.8 million for the three months ended December 31, 2023, compared to $3 million for the 2022 comparable quarter. The increase was the result of costs related to the buildout and staffing of a Heartland facility, increases in rates charged by our suppliers, higher packaging costs due to inflation, and higher labor costs. Despite the increase in COGS, we expanded margin by 4.5% year-over-year. Selling, general and administrative expenses were $2.6 million for the three months ended December 31, 2023, compared to $3.1 million for the same quarter in 2022. The decrease was primarily driven by reduction of professional services expenses related to our IPO, along with costs associated with the build out of a Heartland facility. Net loss was $3.1 million or $0.54 per share for the three months ended December 31, 2023, compared to a net loss of $3 million or $9.13 a share for the quarter ended December 31, 2022. The net loss for the three months ended December 31 also included a one-time non-cash impairment charge of $700,000 related to the write-down of legacy assets acquired from our predecessor company. Now turning to the full year 2023 results, revenue totaled $14 million, an increase of $2.5 million or 21.6% compared to $11.6 million in 2022. The $2.2 million revenue increase was attributed to sales of our herbs, produce, and floral products driven by a mix of organic…

Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Thank you. Our first question is coming from Nick Sherwood with Maxim Group. Your line is live.

Thank you. Good morning and congrats on the quarter and the year. Can you provide us an update on the build out and the integration of the Heartland facility?

Hi, Nick. It's Jim Crass. How are you?

Good, how are you?

I'm good. The status right now is that the facility, we've made a significant investment, it's currently shipping Meijer, which is one of our largest customers, significant volume. We've deployed not only our GreenThumb technology to help us run the operations, we have a fully operating state of the art packhouse, which we just put in some new machinery in the last 30 to 60 days to help lower our manpower costs while increasing the ability to ship more units. In April, we'll be bringing in a considerable amount of our four-inch potted higher margin product that's currently already being grown in the greenhouse. We have five acres there. That will convert into being vertically integrated in April, and we'll start to see some of the benefits of that in May. So we'll be 100% fully operational come the next few weeks with us handling all of our product that's in the Midwest flowing through our facility. So once again, five acres, fully operational, full processing, 100% deployed as well as our software overlay GreenThumb being deployed.

Awesome. Thank you for that, Kras. And then kind of switching gears, you mentioned the protein powder being sold at the Meijer locations. This is kind of one of the first times it's been mentioned during these earnings releases recently. What is the near-term, the medium-term plan? Is this more of just an opportunistic where you're working with Meijer and you're increasing your SKUs, or is this the beginning of maybe a more substantial kind of accelerated rollout to your other retail partners? Thank you.

Well, now with the completion of the Heartland facility, we are looking to push out and focus on leveraging our distribution platform. Being in 5,000 plus stores, being in business with the likes of Meijer and Walmart and Target and whatnot allows us the opportunity to push more product through those doors. We've had this kind of legacy brand in Vitamin Whey at Meijer, it's been a high performer for quite some time. And we see ourselves excelling that business and then leveraging from there to go into some of these other retail partners that we have. We've already started that national rollout presentation process. We're working on a new line as well that will sort of augment Vitamin Whey, which is really a price value grade tasting performance product. We're looking at something that's potentially cleaner labeled and more contemporary that has a wider audience. We've got -- one of the benefits we have here is, we have a very strong relationship with Nutricon. They are experts in flavoring these products as well as developing state-of-the-art formulas. So partnering with them in order to drive in higher margin, better for you products is something that's going to be a big initiative going into the second half of this year with us leveraging the relationships as well as the more contemporary assortment and better margins.

Understood. And then my final question is, can you provide us any more extensive details on the introduction of EG Direct and the sourcing and supplier?

Yes. EG Direct continues to be developed. The thrust of EG Direct is really to start to leverage, once again, the relationships that we have. We have really good relationships with our retailers based on our performance. We're looking at that for not only national, but international opportunities. So we really use that as sort of the arm of the business that helps source products, ideally -- higher margin potentially to party things that we don't necessarily grow or things that we end up manufacturing and want to bring into the platform. So we continue to work on that. We've already started utilizing the relationships there to start to bring in some product from overseas at a higher margin.

Understood. Well, thank you again for answering all of my questions. Congrats on the quarter and I'll return to the queue.

Thanks, Nick.

Thank you. [Operator Instruction] Our next question is coming from [Nicole Kaufman] (ph), who is an investor. [indiscernible], your line is live.

Good morning, gentlemen, and thanks for taking my questions. Congrats on the fourth quarter results and 2023 results. So in the past you guys have talked about getting the company cash flow positive. Can you guys discuss what you're doing to drive efficiencies there and get the company cash flow positive?

Sure, thanks, I'll take this one closest. We've continued to invest in technology as well as -- and I mentioned it to Nick, higher speed, more efficient production lines with our cut herbs. I think the integration of our contract grower business right now that we don't benefit from the margin contribution of that. That's a considerable part of the business that's out in the Midwest that'll be coming in that will help cash flow dramatically, as well as help us strive towards profitability. I think what you saw last year was us continuing to invest in the business and to continue to iron out a lot of the issues we had with just trying to get things up to scale and run well. And I think just with some of the tweaks that we've made with, like I said, better, more efficient lines, reduction in manpower because of the lines running better and being more automated. I think you'll just see an overall optimization across the whole supply chain, which I think will lead towards us being cashflow positive at some point in the future.

Thanks, Jim. That's helpful. And then regarding your gross profit margin, which almost doubled in 2023, what do you attribute that success to? And moving forward, how would you further increase your gross profit margin?

Kostas, do you want to take that one?

Yes, I can start on that and you can add to it. Nicole, thanks for the question. One of the things we mentioned earlier, Nicole, is less reliance on contract growers, and that's going to continue to manifest itself this year and beyond with the onlining of our Heartland facility. So that's going to reduce our kind of raw costs of the materials and supplies and seeds, et cetera, that we purchase for the business. And less reliance on those contractor growers gives us much more control over our cost structure and profitability, essentially. So as we continue to kind of online and drive more products through our internal facilities rather than rely on those contract growers, we should expect that margin to continue to grow somewhat. Furthermore, to what Jim was saying, we're looking to add to our product mix and drive products that are higher margin through the business more shelf stable, so we're less reliant on the seasonality and sort of potential product issues with plants in general. And I think those two things, as they continue to kind of manifest themselves through our financial results, will continue to drive gross profit. Jim, feel free to add to that.

No, I thought that was -- I mean that sums it up. It's a combination of factors, but it's widening the base and the assortment of products so that we have not only -- what we're great at, which is the produce and floral business, but also bring in these higher margin, more shelf stable products. And you see that with pulp, you see that with the vitamins, and I think you'll see a nice mix which will dramatically impact the margins as we move forward, as we widen the base and deepen our relationships with more items that have better margin.

Thank you both. That makes sense, and thanks for the additional color on that. And so to touch on pulp for a minute. With the new entry into this new product category, are you exploring any other product categories that you would be looking to enter?

Yes, once again, I mean, sticking with the zero waste inspired theme and our brand promise of doing more with less, we are looking at products that fit that kind of brand persona. And with that, we're going to be introducing new products this year that are within this condiment category that we're looking to lead and drive with the relationships that we have. I mean, being known as a purveyor of fresh and being so prominent in so many of these big box retailers in their produce section gives us permission to develop products that sort of link to what we're known for. And you're going to see that type of product introduction and innovation that we're known for as a company. Kind of go from being fresh into more bottled, more self-stable, more good for you, and more sustainable type of product. So yes, would be the answer. And that is underway. And I think you'll see some of the exciting stuff over the next quarter as we get ramped up on that part of the business.

Thanks, Jim. I'm looking forward to that. And my last question is, can you provide any additional color on how the sales of pulp are going?

I obviously can't get into specifics, but what I can tell you is, and this is in our press release as well as the script -- that I mentioned in the script. We continue to drive penetration with retailers coming on board. KeHE is a notable one just in the last 30 to 60 days with access to 31,000 doors. We're continuing to drive that relationship. And we continue to see a very positive response to the product line. And so, I think we're bullish on how we think this product line is going to do and where it's going to go.

Well, great. Thank you for answering all my questions and congratulations again on the results.

Thank you very much.

Thank you. As we have no further questions on the line at this time, I will hand it back to management for any closing remarks.

Thank you again for joining us today. I continue to be optimistic about our business' future, thanks to our growing retail network, diverse product line, and strict expense control. We believe these elements are key to our continued success and are paving the way for sustained revenue growth. Our focus on financial discipline and operational efficiency is crucial to our strategy as we aim to become cash flow positive. We look forward to providing updates on our progress in the coming months. Thank you.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.