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Operator: Greetings, and welcome to the Edible Garden Fourth Quarter and Year-End 2022 Business Update Call. . I will now turn the conference over to your host, Mr. Ted Ayvas. You may begin.

Theodore Ayvas: Thanks, Ali. Good morning, and thank you for joining Edible Garden’s Year-end 2022 Conference Call and Business Update. On the call with us today are Jim Kras, Chief Executive Officer of Edible Garden; and Mike James, Chief Financial Officer of Edible Garden. Earlier this morning, the company announced its operating results for the year ended December 31, 2022. The press release is posted on the company’s website, www.ediblegardenag.com. In addition, the company filed its annual report on Form 10-K with the United States Securities and Exchange Commission this morning, 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 and 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 year-end 2022 and provide 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 results of operations and financial position, strategy and plans and our expectations for future operations are forward-looking statements. The words expect, project, plan, believe, may, will, would, should, could, mission, strategy, potential, seek, strive and the negative of such terms and other words and 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 operation, 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 most recent annual filing on Form 10-K filed with the U.S. Securities and Exchange Commission. Because of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this conference call may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. 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 these 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. With that, I will now turn the call over to Jim Kras. Jim?

James Kras: Thank you, Ted. Good morning, and thank you to everyone for joining us today. On behalf of the Edible Garden team, I want to extend our sincere gratitude to our investors for their unwavering support and belief in our vision. With your continued support, we are confident that we will achieve our goals and pave the way for building shareholder value. We are pleased to report that Edible Garden achieved year-over-year top line revenue growth for the third quarter in a row since our IPO last year. This notable success is a result of our strategic capital management and unwavering focus on building a strong Edible Garden brand. Despite a challenging economic climate, we have remained resilient and continue to deliver exceptional customer service while keeping our pricing relatively stable even during a period of unprecedented rapid inflation.

As a result, we believe we have gained a competitive advantage over many of our competitors who have struggled in this environment. In addition, we expect to see an increase in our margins once our Heartland Midwest facility is fully operational. With the continued dedication of the Edible Garden team, we believe that we will achieve positive cash flow later this year, marking a significant milestone in our journey as a public company. Our company’s distribution network is expanding rapidly with the addition of new retail partners in the Northeast, Midwest, Mid-Atlantic and Southeastern regions of the country. In addition, we are introducing new product categories and what we expect to be higher-margin products to the Edible Garden brand to meet our customers’ ever-evolving needs.

Our commitment to sustainability through our Zero-Waste Inspired mission has resonated with environmentally conscious consumers and our distribution partners contributing to the strong demand for our products. Among our achievements in the fourth quarter, we introduced complete salad kits to our product line. These greenhouse grown kits feature our popular sustainable, locally grown cut lettuce that come with all the ingredients necessary to make a complete salad. The first 3 kits in our lineup include a Caesar Salad Kit with baby romaine lettuce, a Crisp Ranch Kit with crispy green leaf lettuce and a Balsamic Vinaigrette kit with spring mix lettuce, with even more in development. The salad kits, which were created to align with current consumption trends and provide maximum convenience to consumers, were first made available at Meijer retail locations in the Midwest.

We also acquired the Pulp line of all-natural non-GMO preservative-free and sustainable gourmet sauces and chili-based products. This marks the company’s initial entree into the global sauces and condiments market, which is projected to grow from $172.8 billion in 2021 to $240.7 billion by 2028. According to research and markets, these fermented sauces, which elevate food flavors from bland to bold, were introduced at Natural Products Expo West 2023 earlier this month. The Pulp product line will initially launch a Whole Foods Markets Mid-Atlantic and Southeastern retail locations starting this summer 2023. The refrigerated section of the supermarket where the sauces will be located is typically adjacent to the produce section, which will enable Edible Garden to leverage its growing brand recognition and to capitalize on the demand for healthier and sustainable options.

Expanding into a new product category is a significant step forward for the Edible Garden brand as it positions us into what we believe will be higher-margin products with extended shelf life. The launch of Pulp products line at Whole Foods Markets Mid-Atlantic and Southeastern retail locations also provides us with a further expansion of our already robust distribution network. Additionally, we added Morton Williams Supermarkets to our Northeast distribution network, which began carrying the Edible Garden product line in all of its locations in the New York metropolitan area. We also expanded our distribution with Gristedes and D’Agostino markets to sell an optimized assortment of Edible Garden products in 29 of their combined locations in Manhattan, Brooklyn and Westchester, New York.

These retail locations are ideally located in densely populated urban areas that receive high volumes of foot traffic in the New York City metropolitan area. Moreover, this expansion enabled us to deepen our penetration and improve our product placement within these retail locations. This past holiday season proved to be one of the most successful in the company’s history as we surpassed industry averages with an order fulfillment rate or a fill rate across all of our retail and distribution partners. Notably, we exceeded a fill rate of 100% in one of the country’s largest supercenter operators, strengthening our existing relationship with this key partner. Despite significant supply chain challenges, Edible Garden was able to deliver outstanding service and execution to our customers, further demonstrating our commitment to excellence.

By consistently exceeding our partner’s expectations, we have established ourselves as a reliable and trusted supplier to sustainably grown produce. The company continues to be committed to leveraging the latest technology to advance our strategy of increasing yields and maximizing the nutritional value of locally grown produce. Edible Garden recently forged at a research partnership with the New Jersey Institute of Technology, the USDA and the EPA to investigate the effects of nanobubble technology in controlled environment agriculture settings. The primary goal of this EPA funded research is to validate the potential benefits of nanobubbles for indoor agriculture and explore their impact on plant health, water usage, nutrient utilization and energy efficiency.

This research is particularly exciting to us as it has the potential to revolutionize plant nutrition and provide more nutritious plants with longer shelf lives. In addition, the partnership is well aligned with Edible Garden’s Zero-Waste Inspired missions which seeks to promote sustainable agricultural practices that reduce waste and conserve resources. If successful, the research project could have significant implications for Edible Garden’s product line benefiting not just the company but also consumers who prioritize health and sustainable food options. Our commitment to sustainability and innovation makes this partnership a significant step forward in the quest for more efficient and sustainable agriculture practices. Earlier this month, Edible Garden was recognized as one of the top agro food tech companies globally in this year’s FoodTech 500 final rankings.

Our Zero-Waste Inspired mission has been the driving force behind our success. Our team’s hard work and dedication, along with the implementation of innovative technologies such as our patented GreenThumb software and patent pending self-watering displays have enabled us to improve yield, reduce waste and optimize costs. We take pride in being acknowledged as 1 of the most promising agro food tech companies worldwide, and strive to maintain this position by building on our achievements and continuing to lead the way in the industry. I would like to now turn the call over to Mike James, Chief Financial Officer of Edible Garden, who will review the financial results for the 3-month and full year periods ending December 31, 2022. Mike?

Michael James: Thanks, Jim, and good morning. Looking at the fourth quarter financial results first, the company reported revenues of $3.1 million in the quarter, an increase of 10%, compared to $2.8 million for the fourth quarter of 2021. As Jim said earlier, this represents the third consecutive quarter of revenue growth since our IPO last year and represents growth from the existing customer base. Cost of goods sold was $3 million for the 3 months ended December 31, 2022 compared to $2.8 million for the 2021 fourth quarter. The increase was due to higher packaging costs due to inflation, higher labor costs due to a tight labor market and increases in rates charged by contract farmers. Selling, general and administrative expenses were $3.1 million for the 3 months ended December 31, 2022 compared to $1.7 million for the 3 months ended December 31, 2021.

The increase was primarily driven by higher payroll and compensation expense, as well as other public company expenses that were not incurred in 2021. Net loss was $3 million or $9.31 per share for the 3 months ended December 31, 2022 compared to a net loss of $2.1 million or $12.76 per share for the 3 months ended December 31, 2021. Turning to the results. For the year ended December 31, 2022, revenues totaled $11.6 million, an increase of 10% compared to $10.5 million for the year ended December 31, 2021. The increase represents the growth from the existing customer base. Cost of goods sold was $11.2 million for the year ended December 31, 2022 compared to $9.9 million for the year ended December 31, 2021. The increase was due to higher packaging costs due to inflation, higher labor costs due to a tight labor market and higher costs charged by contract farmers.

Selling, general and administrative expenses were $9.4 million for the year ended December 31, 2022 compared to $5.6 million for the year ended December 31, 2021. The increase was primarily driven by higher payroll and compensation expense which included onetime expenses related to the completion of our IPO, as well as other public company expenses that were not incurred in 2021. Net loss was $12.5 million or $48.68 per share for the year ended December 31, 2022 compared to a net loss of $5.5 million or $39.28 per share for the year ended December 31, 2021. Per share amounts have been adjusted to reflect all stock splits. Before turning the call back over to the operator for questions, I would like to take a moment to discuss the successful offering we completed in February of 2023, which generated roughly $10.2 million in gross proceeds.

The offering was important as it allowed us to secure the necessary funding to accelerate the expansion of our business. With this funding, we are confident in our ability to execute our business plan and achieve sustainable long-term growth. I would now like to open up the call for questions. Operator, can you please assist us with that?

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Operator: . Our first question is coming from Anthony Vendetti with Maxim Group.

Jeremy Pearlman: This is actually Jeremy on the line. So just a couple of questions from our end. I mean, first, could we talk maybe a little bit more about your distribution network? How many stores are you currently in, where in the U.S. is that, are those stores primarily located? And then what are your plans for 2023 to increase the distribution increase to your store count?

James Kras: Thank you, Jeremy. This is Jim Kras. Currently, we’re north of 4,000 stores. We are looking — we are primarily concentrated, call it, East of the Mississippi, Midwest, Northeast, and we’re making inroads into the Southeast vis-a-vis Whole Foods. The plan is to continue to strengthen our distribution might in the Northeast, in the Midwest with adding store counts with major retailers, as well as more additional local smaller regional chains. We’ll be looking to expand with some of the larger big boxes kind of outside of that region as we move forward, and you’ll see some of that happen over the next few months.

Jeremy Pearlman: Okay. Great. And then just piggybacking off that, I know you mentioned that you have your Grand Rapids, Michigan greenhouse. You completed the first phase of that, and I think you had commenced the second phase. Where are you in the process of that?

James Kras: We are in very, very good shape. We are in the final stages of bringing that online. And I would think that you would see that online in the next 30 days, if not .

Jeremy Pearlman: And does that include — I know you mentioned that you put in a request to get a USDA organic certification. Is that something that you expect…

James Kras: It’s all completed, and we just — our kind of our final go-ahead. We’re in pretty good shape, we’re in very good shape actually, and so that should all sort of dovetail nicely with a launch within the next 30 days.

Jeremy Pearlman: Okay. Great. And then just remind us, I think you said that you have about the capacity for that greenhouse is about $20 million in annualized revenue. And I know you mentioned a couple of times on the call in the financial section about how some of the contract growers were increasing the costs were — is this going to allow you to sort of maybe offset or just replace some of those contract growers once this greenhouse is up and running at full capacity?

James Kras: It will let us offset. So some of our grower — our contract growers will stay in place. They do a very nice job for us, we have agreements in place, and then some of this will allow us to bring on additional business at a much higher margin since margin for us will be much higher since we’ll be fully vertically integrated.

Jeremy Pearlman: Okay. Great. And then in that capacity, is that something that you’re going to have to know — is that something that you could — once it’s online, you think you’ll be able to have that ready to go right away with buyers or is that something you’re going to have to add to your distribution increases? Hopefully throughout 2023, you’ll be able to supply those new stores or new customers with output from this greenhouse.

Michael James: It will — there’ll be somewhat of a ramp-up, but the thing will be in a very good position to take on some existing business as well as definitely integrating the new business, I think, very fluidly.

Jeremy Pearlman: Okay. All right, great, that’s really helpful. And then I think just moving over to the — more of the products. You introduced in the fourth quarter the new salad kits. It’s been about 3 months now. Is there any more information you can give about how that’s been received, what type of velocity have you been seeing on this product and then what you plan — where you plan to see that expanding to other stores if you’re in talks with them?

James Kras: We’ll look, they’ve been doing well. They’re a nice add-on, and we will probably look to extend that into some other varieties as well as push that into distribution into other accounts probably starting out in the Midwest where we currently have production and then look to expand it probably from the West to the East as that’s where, once again, our leverage as a supplier with the large accounts ranging from, obviously, Meijer in the Midwest, Wakefern/Shoprite in the Northeast and then Hannaford. So those are just 3 of many, and we’re obviously doing sales calls to continue to leverage the locality of where those are produced and the freshness, the reduction in crude miles and make sure that we have the freshest product out there that continues to sell well.

Jeremy Pearlman: Okay. All right. Great. And then is there anything else in the pipeline, the product pipeline that might be you could share with us or that’s more — something that we’ll see as it comes out?

James Kras: We’re working on constant innovations here. That’s a lot of what continues to separate us from a lot of our competitors. It also adds to our diversity as a company. And our assortment ranges from things that we grow to finished goods. And we continue to focus on being Zero-Waste Inspired, doing it within an ethical, sustainable manner, ways. And to help that drive innovations, not only from what we’re growing and how we increase our yields, but also some of the new finished goods such as Pulp and some of the other alternate proteins that we’re working on. I think you’ll see a real nice host of product coming out over the next 12 to 18 months. And it will be even sooner as new products are the lifeblood of any company, especially CPG/CEA company like we are.

Operator: Our next question is coming from Paul Cooney with Joseph Gunnar & Company.

Paul Cooney: Just wondering with the opening of the Grand Rapids facility, should that be an immediate significant ramp-up in revenue?

James Kras: It will be an immediate impact on margin and profitability as we’re eyeing cash flow positive this year. So that’s going to be a big piece of it. So it will be twofold. It will be an immediate hit to the bottom line, which is great in a positive way, and then obviously it gives us more capabilities to bring in more business that we’ve got teed up.

Paul Cooney: And do you believe the current capital that the company has with the latest raise will get you there to the profit?

James Kras: Yes, yes.

Paul Cooney: All right. And last question. As far as the nonperishable part of your business that you acquired, what are you modeling for that as far as what type of revenue impact do you think that will have in ’23?

James Kras: Well, we’re going to see that come online. I don’t know how much I can speak to that on this call, but that, we’ve already got POs in-house from Whole Foods, which is exceptional. We’re working with major big box retailers that to bring them online. One of the great things about Edible Garden is that we’ve got great authenticity being a grower, a greenhouse grower and a CEA company. We’ve got the wherewithal in our team and some of the recent people that we’ve brought onboard from, actually 1 person from 1 of the major retailers, to really have a mindset that’s geared towards bringing these finished goods to market. Our expectation is the second half of the year as we push this stuff into retail and leveraging our distribution platform which is what I was trying to get at, we have entree into every major chain out there.

We should be able to “light this up pretty quickly,” and that’s our goal. So we had an exceptional show at Natural Product Expo West, which is sort of the Super Bowl of new products for these type of products. And we are getting on the road. I’m leaving tonight and presenting the items to big partners, and we’re excited about it. We’re thrilled. So I think that’s going to be a nice complement, excuse the pun, to our assortment and to our revenue line. We’re excited.

Paul Cooney: When you guys are done with — when we get done and we’re online with the Grand Rapids facility, is the plan then to maybe try it on another location like that, maybe more out West and start building a new facility to expand? Or are you going to be looking more to acquire existing grow houses?

James Kras: Well, I mean, look, I think that’s a great question, and I’ll tell you why. It’s because, look, an M&A is going to be part of the strategy moving forward. But as of right now, one of the key differentiators about us is the position that we’re in. The company doesn’t have a considerable amount of debt on it. We have a plan, and being cash flow positive is right within striking distance. And the focus on — with this management team right now is to get to cash flow positive and prove to everybody in this category that these businesses work because this is the future of how we’re going to feed ourselves, our country, the world. And someone needs to get out and show that it can also be commercially viable. So to me, it’s like let’s get through the next quarter or 2, let’s get to cash flow positive.

And then we’ll, in the back on be looking to identify. And I think more retrofits, Paul, to be frank. The team did a fabulous job out in Grand Rapids in a very short period of time of getting this thing ready for prime time from how well we performed on our inspections for organic and food safety. A lot of that is just leveraging the knowledge bank that we have with people who — look, our team has been together for almost 10 years. And then obviously, that team was part of the IPO this past year. We’ve had a committed, knowledgeable workforce and management team that understand what the goal is. And we’re in this thing to win it. And I think that for us, the first step is to make sure that we understand that we can make money and build shareholder value.

Let’s bring in, let’s reuse, repurpose, reimagine some of these old greenhouses because it really plays into being Zero-Waste Inspired and doing more with less. And I think that, that serves us well. And it really worked out well in Grand Rapids and we’re excited about that. So I think you’re going to see us make some moves but I want to get through the next 90, 120 days and make sure we’re leveraging from a position of strength, especially considering what’s going on out in the economy in the market. So we’re going to play it a little close to the vest. But in the background, we’ll be looking to bring something in and really be very smart about how we grow this thing.

Operator: . Our next question is coming from Elon Friedman with VKC Fund.

Elon Friedman: Congratulations on the revenue growth. You said in your remarks that you believe that the company will achieve positive cash flow later this year. Can you please elaborate on how you expect to get there?

James Kras: We plan on bringing on our Grand Rapids facility, Edible Garden Heartland. That will be coming online in the next 30 days. With that is going to be a — it will be a considerable factor based on how much business will be in there and how that impacts our margins. So that will be a key driver for this, as well as the addition of higher-margin, more shelf-stable products that allow us to go into our existing distribution network at a higher margin. So that should help clean things up for us a little bit as we’re going to have kind of the right assortment with the right growing facility that we’re vertically integrated on that will allow for that margin expansion, which will drive that cash flow piece for us.

Elon Friedman: One more question. Can you please provide us about the partnership with the New Jersey Institute of Technology, the USDA and EPA?

James Kras: Yes, it’s pretty cool. It’s really around how the nanobubbles, which are essentially kind of what they say they are. They’re small oxygenated bubbles that , but will allow to stimulate plant growth. Obviously, plant growth, when you’re growing plants and not only do you sell produce, which is a plant, or you take — and you take those plants and turn them into some sort of ingredient, obviously, you want high yield. And if you can impact plant growth and what you can do it in a way that you better improve the conditions for plant growth and nanobubbles would do that, then obviously that impacts quality yield. And for us, obviously, we’re doing more with less, and it’s much more environmentally friendly than other types of ways to impact plant growth.

So it is funded, I believe, by the EPA which is very cool for us. We are really a partner that’s more of a test lab. And we are exchanging our knowledge as well as our facilities to allow them to do a lot of this testing and then we are able to benefit from it. So we’re excited about being in partnership with the EPA and the FDA and the USDA, and of course, the New Jersey Institute of Technology because we are a New Jersey-based company. So excited about it, it’s very promising and it’s important that the company can offer these type of studies.

Elon Friedman: Congratulations on the revenue once again.

Operator: Thank you. We have reached the end of our question-and-answer session. So I will now turn the call back over to management for closing remarks.

James Kras: Thank you again for joining us today. We are pleased with our progress in Edible Garden over the past year, and are excited about the opportunities that lie ahead. We will continue to execute our strategy, and look forward to updating you on our progress in the coming months. Thank you very much, and have a good day.

Operator: Thank you. This does conclude today’s conference, and you may disconnect your lines at this time. We thank you for your participation.