Q2 2021 Arcadia Biosciences Inc Earnings Call
[music].
Good afternoon, and welcome to Arcadia Biosciences second quarter 2021 earnings Conference call today's presenters will be Matt platinum, President and CEO and Pam Haley.
Financial Officer of Arcadia. This call is being webcast and you can refer to the company's press release at Arcadia Bio Dot 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 or.
You can review the company's Safe Harbor language in their most recently filed 10-Q.
With that I'll now turn the call over to Matt <unk>, President and CEO.
Thank you Josh is low everyone welcome to our second quarter conference call and thank you for joining us our second quarter marks the first time Arcadia has recorded sales from its newly acquired consumer products, namely our broad portfolio of on trend CBD and wellness products under the leap brands umbrella.
Because the deal was closed on May 17th our new leaf brands revenue are only realized during half of the quarter, but their impact over the prior year is still quite apparent revenues for the quarter were five fold of those in the prior year second quarter and were up four fold on year to date revenues. When we spoke in May we focused much of.
Our discussion on how the leaf transaction signal Arcadia as transformation to a dynamic consumer products company by adding an established CPG brand business with meaningful meaningful recurring revenues through our P&L and new growth opportunities today I want to build on that theme discussing our post acquisition results and placing them.
Lease transaction in the broader context of our path forward as a consumer focused enterprise driven by health and wellness brands in particular, the leaf integration is progressing well and just the last 90 days or so we've accomplished a lot and overall we are on track with our plan immediately upon the close of the acquisition we began inch.
The greater the leaf manufacturing team into the Arcadia organization, leveraging overhead synergies and building out processes and management routines that will enable us to scale capacity within our existing manufacturing facility to meet our anticipated new brand volume growth. We are also quick to secure automation equipment to <unk>.
Further optimize our output improve our gross margins and ensure product quality as we scale after support entry delays due to the global shipping congestion. We've recently begun receiving this equipment and have started installation and testing. We have also made solid progress developing our forthcoming good wheat products and planning our market launch.
We're excited to begin this conversation with retailers and highlight the exceptional intrinsic nutritional benefits of our product retail buyers are constantly seeking new breakthrough in on trend innovation to satisfy consumer needs, particularly in the health and wellness category and good week delivers exactly that so we're eager to get our delicious.
Privates in front of the key retailers that we're targeting.
I'll speak more to that in a moment about our launch plans.
As we accelerate our way through these integration activities and look to the future. Our leadership team is highly energized and fully aligned with our new mission and vision and more importantly, how we are going to get where we're going.
During the quarter, we've taken steps to build strategic capacity, if all of our market positioning and hone our go to market strategies to create a solid foundation designed to further support the successful integration of our operations as well as pave the way for what we strongly believe will be meaningful top line growth for the company.
Among our major priorities over the last quarter has been to significantly increase our management capacity in CPG capabilities by recruiting top talent redeploying our internal resources. So we can best support our go forward strategy and identifying external partners with the expertise to improve our communications and we've made significant progress on this front.
Two.
As we announced in mid July we have hired our first chief marketing officer, Laura pit like Lora is a highly accomplished CPG marketer with a proven track record of building numerous popular food and beverage brands. She is well equipped to guide our go to market strategies and establish good week and the leaf brands as international household <unk>.
<unk> and <unk>.
He has already hit the ground running.
With our Chief growth Officer, Chris <unk>, formerly the CEO of Zola heading our sales strategy and Belinda Yao formerly of the Danone company, leading our operations. We now have deeply experienced professionals in these three critical roles. We've also added to our roster of CPG talent beyond the executive roles having attracted.
Key individuals in finance and procurement physicians, who bring tenured experience from leading CPG companies with these new hires where staffing at all levels with the expertise we need for full commercial success of the CPG company.
In addition to increasing our talent base internally, we have retained a new strategic communications firm the La K PR group <unk> will be working closely with lower Christian needs to support our key here with both corporate and brand communications as well as improving our communications with the street.
The firm has developed a particular niche working with businesses and brands at critical inflection points and we're fortunate to have the benefit of their insights as we move forward and like Lauren Chris they've already had a meaningful impact which leads me to the next priority area of focus for us as we further establish Arcadia as a producer and marketer.
Innovative plant based and wellness products.
<unk> will help us to convey our unique value position proposition and competitive advantage more effectively and more broadly.
Our evolution the path that got us to this point is an exciting story to tell because it sets the stage for tangible near term value creation.
We are here because we accomplished precisely what we set out to do as a biosciences company. We produced an intrinsically superior non GMO wheat and because of that success, we have the opportunity to literally literally and figuratively take what we've grown and commercialize it. The fact that our origins are in science that we have and.
Asian oriented mindset is the connective tissue of the past to the present and indeed, the future to that and there are two fundamental ways that we believe we are distinctly different from most other CPG companies. The first is simply our wheat, developing and perfecting and intrinsically superior non GMO wheat. This.
Stablish as the foundation for us to create a major disruption in the wheat industry, wherein we have the opportunity to set a new global standard for nutrition in wheat based foods because of our superior nutrition is intrinsic to the wheat, which means the nutritional value is delivered naturally from the weed itself no matter.
This are special processes are needed our nutrition profile is unmatched by conventional wheat. This affords us the opportunity to fill a fiber and nutrition GAAP and consumer diets globally studies have found a population wide deficiency in fiber with only 5% of people in the U S meeting the institute of Medicine's recommended daily.
<unk> target of 25 grams of fiber for women and 38 grams per man. This is a staggering deficiency and makes for a tremendous market opportunity for our good wheat products to change the health of the planet with very little adjustment if any to the foods. We now consume for other companies to achieve similar fiber density and wheat based foods.
Wires. The addition of other ingredients like <unk>, or chicory, which often degrade the taste experience and increase the cost to manufacturers and consumers. Moreover, these enhanced products typically have formulation challenges and frequently sacrifice taste for nutrition now.
Now the second way, we are distinctly different from most other CPG companies isn't that the innovation has been central to our business since <unk> inception.
That same innovation mindset that drove the discovery of our crop technologies continues to be core to the development of our good wheat products and our other health and wellness brands. This mindset will continue to be the key driver for our business as we discussed on our last call. Our product lineup now includes multiple skus across brands, including <unk>.
Pro vault savvy naturals zelle.
Zola coconut water and soon good wheat, all of which are designed to enhance quality and health benefits and an array of consumer product categories. Our forward focus is to develop and execute robust go to market strategies for e-commerce retail and in some instances foodservice service to them.
And I'd now like to provide you with a high level overview of the advances we've made against our product development and digital launch plans for the balance of the year.
We've indeed made great advances in our proprietary good wheat product development and have multiple pasta skus teed up for launch our pasta products have unmatched levels of fiber and are in fact, an excellent source.
They have more protein and fewer calories than conventional pasta.
And our partners have only one simple ingredient are good weeks. In addition to these products.
In addition, these products our USA foreign ground and non GMO.
These claims truly and uniquely differentiate are good we positive from the competition in this category.
Our planned launch in late Q4 will be a soft e-commerce launch beginning with one SKU of our good wheat pasta at which time, we will ensure our site is fully optimized.
Supply logistics are rigorously stress tested for scale up.
And then in January after the holidays. The time when consumers are seeking healthier options coming out of the always indulgent holiday season of Q4, we will execute a significant marketing campaign to launch multiple skus of our better for you. Good week brand of pastas with intrinsically superior nutrition, the intent of course.
<unk> is to aggressively drive traffic to our site.
<unk> designs for this launch is underway and shortly we will begin testing. These designs to ensure we launch with consumer preferred packaging that clearly and persuasively communicate our key points of difference and break through the clutter online and on the shelf.
In parallel with these e-commerce activities, we have begun marketing our good wheat pastas to key retailers aligned with category shelf reset cycles for 2022.
When considering the global potential of good wheat, and the number of channels category and SKU opportunities before us focus and orderly execution are more critical now than ever. So when we meet next we will share with you more about the next categories will enter and the associated expected timing.
Switching to our leaf brands are optimized e-commerce sites for sole spring protocols and savvy naturals are all planned to launch by the end of 2022 as.
As we launch these new sites, we have significant digital advertising and social media marketing investments planned against each designed to drive greater consumer awareness of the brands and high traffic to the sites.
Now I'd like to touch on our good hemp activities with the 2021 hemp season effectively concluded we are continuing with our breeding projects to further enhance the vigor and vitality of our proprietary varieties keeping a close eye on pending hemp legislation for potential regulatory measures that would add clarity to the outer.
Look for seed sales in 2022.
With respect to our operations in Hawaii, we are excited to be nearing the first sizable harvest of our Hawaiian CBD through our joint venture archipelago ventures, the crop looks great and we are expecting a bountiful harvest in Q3 for more than 20 acres of biomass because Hawaii only very recently is allow for processing of CBD on.
The islands.
We have developed a cost effective means of transporting our hemp to the mainland where we will outsource the extraction of our Hawaiian CBD once that are leased facilities in Chatsworth, our formulations specialists will determine the optimal proprietary formulations to maximize our in market brand value capture.
Until our launch we're keeping further details confidential for maximum competitive advantage before turning the call over to Pam for a review of the financials I'm pleased to share a very positive cash resource highlights as you have likely seen per our required SEC filings. We successfully sold the bio series shares we previously acquired as partial consideration.
<unk> for the sale of our partnership interest in vertical with this sale and the upfront payments received at the time of the transaction, we have successfully monetized over $27 million in cash from the sale of our interest in the HB for drought tolerant soybean technology importantly, we retain further royalty rights up to 10 million.
Upon commercialization of H before this.
This infusion of capital significantly bolsters, our resources and ability to execute the plans I just outlined.
The reason for a full divestiture of our holdings now versus.
Holding the position into the future was due to the requirements under the investment Company Act of 1040 under the act Arcadia as required to dispose of substantially all of the bio series shares by November 2021, the first anniversary of the date that we acquire these shares or we'd have to bear the full burden of compliance with.
The laws and rules under which.
True investment companies must operate.
As such with a lack of liquidity in the stock today.
By a series stock and the fact that the market prices of Biosurgery shares has increased by more than a 100% since we acquired them in November of 2020, we felt it prudent to lock in a significant gain for our shareholders now and eliminate the very real downside risk of having to sell a significant number of shares in a short period of time, thereby placing significant.
Inefficient downward pressure on the stock.
With that I'd like to turn the call over to Pam for an update on the financials Pam.
Matt I'd like to take a few moments to share the financial highlights for the quarter and year to date with you now.
As Matt mentioned, we are very pleased to have made the asset acquisition of leaf brands and Delek coconut water and we're happy to include revenue from product sales in the second class.
Total revenue recognized for the quarter were one 4 million.
Paired with 281 second.
Second quarter 2020, but the majority of the $1.1 million increase driven by the acquisition of the leaf brands and.
Portfolio is health and wellness product. In addition to good hemp seed sales next quarter.
Acquisition was also the main driver in the year to date increase of $1.6 million as it generated $837000 of revenue and it isn't the good hemp seed sales this quarter and could be greenfield earlier this year.
Total operating expenses of $9.1 million in Q2 of 2021 one.
$1.9 million higher than the $7.2 million recognized in Q2.2020.
Cost of product revenue at $1.6 million increased by $97000 in the second quarter of 2020 for the second quarter of 2021 due primarily to the increase in cost of product revenues associated with the product sales of the portfolio at newly acquired brand <unk>.
Partially offset by lower inventory write downs.
Year to date cost of product revenue of $2 four nine compared to $1.6 million in 2020 year to date with the $821000 increase related primarily to the acquisition as well as increase the good hemp and good wheat product sales.
R&D expenses for the quarter were $1.1 million in 2021 as compared to $2 million in second quarter, 2020, and $2.3 million in second quarter year to date compared to $4.2 million second quarter 2020 year to date.
The decrease for both periods, primarily by lower employee related expenses as we right size, our research team with a shift away from true research and discovery work.
Towards the development and commercialization of our consumer products.
In addition, we no longer have the verdict related expenses in 2021 that were present in 2020 with the sale of.
Our share at this point venture in November of last year.
Selling general and administrative expenses totaled $6.4 million.
Quarter of 2021 at $2.7 million increase from the $3.79 recognized in the first quarter of 2020.
The increase is due in part to be acquisitive activity this quarter, including investment bankers' success fees legal diligence and transaction fees and additional salaries and benefits increased head count.
Marketing advertising and consulting activity increased during 2021 as expected and preparation for our product launches.
Net loss attributable to common stockholders was $5.3 million in the second quarter of 2021 compares to $9.7 million in the second quarter of 2020, and $3.2 million in the first half of 2021 compared to $7.2 million in the first half of 2020.
Covered the revenue and operating expense activity talk give a little more detail on the other items.
The second quarter of 2021 included a realized gain in the amount of $2.8 million.
From the one 875 million shares.
In fact, we felt during the second quarter, which resulted in a year to date realized gain of $10.2 million.
We recognized unrealized gains in previous periods as a result of the appreciation of the stock price.
<unk> had non cash expense of 490, <unk> had a change in fair value of warrant liability from the end of Q1 to the end of Q2.2021 or Q2 of 2020 included $3.1 million of non cash expense.
The balance of cash and cash equivalents of $24 million at the end of the second quarter.
Which was up $11.2 million from the end of the first quarter of 2021.
This is to the balance sheet was driven by the proceeds generated from the sale of the bio series sure. That's appreciated nicely from the acquisition price back in November.
With the capital raised a pipe transaction in the first quarter of 2021.
This concludes our financial highlights for the second quarter and second quarter year to date in 2021. Thank you very much for your time and attention today and I will turn the call back over to the operator for questions Josh.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
On your question Crystal ball, Keith please standby, while we compile the Q&A roster.
Our first question comes from Ryan Meyers with Lake Street Capital You May proceed with your question.
Yes, hi, guys. Thanks for taking my questions first one for me so just kind of digging through some of the 8-K filings. It looks like the acquired brands posted $1.5 million in the first quarter 'twenty one.
Which are little bit lower than the quarterly run rate from the $6.6 million it looks like it posted in fiscal year 'twenty.
Not a huge decline, but can you just walk us through how these brands have performed over the last four quarters and maybe if they saw a boost due to the pandemic pantry loading.
Thanks, Ryan this is Matt.
The brands have performed fairly consistently.
Over the year last year, except really in the first quarter of 2020, I think that's where they saw the greatest impact from Covid.
But I think when you when you look at it.
<unk> for example, it's actually continued our coconut water has continued to perform actually quite.
Quite strongly.
Throughout the last five quarters.
And I would say that the other brands have also held their own.
And that is really just in the retail channel so.
Youll see us focusing on now and I'd like to make a quick correction to something I had said in my prepared comments when I talked about the e-commerce launch for protocols savvy and sole spring I mistakenly said that they will be launched by the end of 2022 I want to make a correction thats by the end of 2021.
So that is the the hyper focus right now for US is taking these products that have been very successful in the retail channel and have had virtually no investment online. We think there is.
Significant opportunity in the near term as we as we develop these websites and the SCO formulations to to drive traffic to these sites and really complement the sales that we have in retail so.
<unk>.
If you can if you can bear with US Q3 ought to be the opportunity for us to give you a better look backwards on a full quarter of revenue in both the retail channel and the online channel.
Okay. That's helpful. And then it looks like free farm daughters have been sold out of all of their products for the past few weeks. Just wondering is this due to demand outpacing supply or is there something else going on here internally with them.
Thanks for that question, because there's been a number of folks asking about that.
So as we talked about in our last earnings call the decision amongst.
Ourselves and three farm daughters was that that they preferred to take a license to the Arcadia technology and so we agreed that that was their preference that we would honor that and so we have it's really.
That matters in their hands.
And they are evaluating how they want to take refund dollars forward and so they basically just kind of put a halt on their activities as they are evaluating what they want to do in <unk>.
Of course, we have wasted no time in developing our own good week brand, which is.
We're in the process of evaluating our packaging and testing that with consumers and getting really really good feedback about that gulli brand, which is what we suspected and why we were actually quite supportive.
$300, taking a license and us taking full control over the good rebrand and the entry into the multiple channels that we see as opportunities for good reason.
And then how does the difficult trough conditions across the wheat market affect your guys as raw ingredient supply over the next year and kind of how are you addressing these conditions as you look into next year's planting goals.
So we are in an enviable position of having a sufficient amount of inventory in stock to serve what we would need probably for the next two years.
And therefore, we really feel well positioned to adult don't see any current.
Concerns around production for pasta and in fact are.
<unk>.
Okay. That's helpful. And then last one for me, what's the what's a good number for us to use them as an operating expense run rate for the business going forward now that you've got the new brands in there.
So.
Operating expenses as there is a lot of moving parts right now having pulled together the two operations and evaluating kind of go forward, what do we really need to spend money on to drive revenue versus not so frankly, we're looking at opportunities to further streamline.
And so we've really worked through that process I would I wouldn't want to give you a number right now, but I think it'll be clearer and something we can talk a little bit more discretely about in Q3. Once we've had this acquisition under our belt for a full quarter in and got a pretty good feel on where those opportunities are to to make it.
Streamline further.
And where we want to make our investments in operating expenses.
Say that not to be evasive, but theyre truly are so many moving parts and in particular as we launch these online initiatives for these brands that are very successful now.
We're going to on a weekly basis evaluate.
Against our digital marketing plans and often times as we've seen with other brands in the market that heavy heavy heavy emphasis on e-commerce.
It is it is certainly possible that.
We start to get good traction and accelerating our marketing digital marketing investments to drive a.
Greater or higher trajectory on those revenues is something we want to be poised to do and so that's another reason it's difficult to give you.
A number that you could <unk>.
That line number that you could depend up we'll just have to see as the months roll by here in Q3, how operating expenses play out.
Great that makes sense, thanks for taking my questions.
Thank you Ron.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Matt <unk> for any further remarks.
Yes, Josh again I'd like to thank you all for joining US today, we're very pleased with the progress we've made on a number of critical funds and expect a very busy second half of the year with our augmented CPG bench strength. The addition of key strategic resources and the pace of our integration process, we feel very well positioned to execute on the plans we have.
In place and we look forward to reporting our progress to you.
Have a great day. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.
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Good afternoon, and welcome to Arcadia Biosciences second quarter 2021 earnings Conference call today's presenters will be Matt <unk>, President and CEO and Pam Haley.
Financial Officer of Arcadia call is being webcast and you can refer to the company's press release that Arcadia bio dot 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 or.
You can review the company's Safe Harbor language in their most recently filed 10-Q.
With that I'll now turn the call over to Matt <unk>, President and CEO.
Thank you, Josh and Hello, everyone welcome to our second quarter conference call and thank you for joining us our second quarter marks the first time Arcadia has recorded sales from its newly acquired consumer products, namely our broad portfolio of on trend CBD and wellness products under the leaf brands umbrella.
Because the deal was closed on May 17th our new leaf brands revenue are only realized during half of the quarter, but their impact over the prior year is still quite apparent revenues for the quarter were fivefold of those in the prior year second quarter and were up four fold while year to date revenues. When we spoke in May we focused much of.
Our discussion on how the lease transactions signal Arcadia transformation to a dynamic consumer products company by adding an established CPG brand business with meaningful meaningful recurring revenues to our P&L and new growth opportunities today I want to build on that theme and discussing our post acquisition results and placing them.
Lease transaction in the broader context of our path forward as a consumer focused enterprise driven by health and wellness brands in particular, the leaf integration is progressing well and just the last 90 days or so we've accomplished a lot and overall we are on track with our plan immediately upon the close of the acquisition we began it.
<unk> the lead manufacturing team into the Arcadia organization, leveraging overhead synergies and building out processes and management routines that will enable us to scale capacity within our existing manufacturing facility to meet our anticipated leaf brand volume growth. We are also quick to secure automation equipment to <unk>.
Further optimize our output improve our gross margins and ensure product quality as we scale after support entry delays due to the global shipping congestion. We've recently begun receiving this equipment and have started installation and testing. We have also made solid progress developing our forthcoming good wheat products and planning our market launch.
We're excited to begin this conversation with retailers and highlight the exceptional intrinsic nutritional benefits of our product retail buyers are constantly seeking new breakthrough in on trend innovation to satisfy consumer needs, particularly in the health and wellness category and good we've delivered exactly that so we're eager to get our delicious.
Product in front of the key retailers that we're targeting I'll.
I'll speak more to that in a moment about our launch plans.
As we accelerate our way through these integration activities and look to the future. Our leadership team is highly energized and fully aligned with our new mission and vision and more importantly, how we're going to get where we're going during the quarter. We've taken steps to build strategic capacity, if all of our market positioning and hone our go to market strategies to Cree.
A solid foundation designed to further support the successful integration of our operations as well as pave the way for what we strongly believe will be meaningful top line growth for the company.
Among our major priorities over the last quarter has been to significantly increase our management capacity in CPG capabilities by recruiting top talent redeploying our internal resources. So we can best support our go forward strategy and identifying external partners with the expertise to improve our communications and we've made significant progress on this.
Front too.
As we announced in mid July we have hired our first chief marketing Officer, Laura Pillock Lora is a highly accomplished CPG marketer with a proven track record of building numerous popular food and beverage brands. She is well equipped to guide our go to market strategies and established good week and the leaf brands as international household brand name.
And she has already hit the ground running.
With our Chief growth Officer, Chris <unk>, formerly the CEO of Zola heading our sales strategy and Belinda, formerly the Danone company, leading our operations. We now have deeply experienced professionals in these three critical roles. We've also added to our roster of CPG talent beyond the executive roles having <unk>.
A key individuals in finance and procurement physicians, who bring tenured experience from leading CPG companies with these new hires where staffing at all levels with the expertise we need for full commercial success of the CPG Company. In addition to increasing our talent base internally, we have retained a new strategic communications firm.
The La <unk> PR group.
He will be working closely with Laura Chris and needs to support our key here with both corporate and brand communications as well as improving our communications with the street.
The firm has developed a particular niche working with businesses and brands at critical inflection points and we're fortunate to have the benefit of their insights as we move forward and like Lauren Chris they've already had a meaningful impact which leads me to the next priority area of focus for us as we further establish Arcadia as a producer and marketer of.
Innovative plant based and wellness products.
He will help us to convey our unique value position proposition and competitive advantage more effectively and more broadly.
Our evolution the path that got us to this point is an exciting story to tell because it sets the stage for tangible near term value creation. We are here because we accomplished precisely what we set out to do as a biosciences company. We produced an intrinsically superior non GMO wheat and because of that success, we have the opportune.
These are literally literally and figuratively take what we've grown and commercialize it. The fact that our origins are in science that we have an innovation oriented mindset is the connective tissue of the past to the present and indeed, the future to that and there are two fundamental ways that we believe we are distinctly different from.
Most other CPG companies. The first is simply our wheat, developing and perfecting and intrinsically superior non GMO wheat establishes the foundation for us to create a major disruption in the wheat industry, wherein we have the opportunity to set a new global standard for nutrition in wheat based foods.
Because of our superior nutrition is intrinsic to the wheat, which means the nutritional value is delivered naturally from the weed itself.
No additives or special processes are needed our nutrition profile is unmatched by conventional wheat. This affords us the opportunity to fill a fiber and nutrition GAAP and consumer diets globally studies have found a population wide deficiency in fiber with only 5% of people in the U S meeting the institute of Medicine's recommended.
Daily target of 25 grams of fiber for women and 38 grams for men. This is a staggering deficiency and makes for a tremendous market opportunity for our good wheat products to change the health of the planet with very little adjustment if any to the foods. We now consume for other companies to achieve similar fiber density and wheat based food.
<unk> requires the addition of other ingredients like <unk> are chicory, which often degrade the taste experience and increase the cost to manufacturers and consumers. Moreover, these enhanced products typically have formulation challenges and frequently sacrifice taste for nutrition.
Now the second way, we are distinctly different from most other CPG companies and isn't that innovation has been central to our business since <unk> inception.
That same innovation mindset that drove the discovery of our crop technologies continues to be core to the development of our good weight products and our other health and wellness brands. This mindset will continue to be the key driver for our business as we discussed on our last call. Our product lineup now includes multiple skus across brands, including sold spring.
Pro ball savvy naturals.
Zola coconut water and soon could reach all of which are designed to enhance quality and health benefits and an array of consumer product categories. Our forward focus is to develop and execute robust go to market strategies for e-commerce retail and in some instances foodservice service to them.
And I'd now like to provide you with a high level overview of the advances we've made against our product development and digital launch plans for the balance of the year.
We have indeed made great advances in our proprietary good wheat product development and have multiple parts of the Skus teed up for launch our pasta products have unmatched levels of fiber and are in fact, an excellent source.
They have more protein and fewer calories than conventional pasta.
And our partners have only one simple ingredients are good weeks. In addition to these products.
In addition, these products, our USA farm ground and non GMO.
These claims truly and uniquely differentiate are going to be positive from the competition in this category.
Our planned launch in late Q4 will be a soft e-commerce launch beginning with one SKU of our good wheat pasta at which time, we will ensure our site is fully optimized.
Supply logistics are rigorously stress tested for scale up.
And then in January after the holidays. The time when consumers are seeking healthier options coming out of the always indulgent holiday season of Q4, we will execute a significant marketing campaign to launch multiple skus of our better for you. Good week brand of pastas with intrinsically superior nutrition, the intent of course.
<unk> is to aggressively drive traffic to our site.
<unk> is designed for this launch is underway and shortly we will begin testing. These designs to ensure we launch with consumer preferred packaging, they clearly and persuasively communicate our key points of difference and breakthrough the clutter online and on the shelf in parallel with E. Commerce activities, we have begun marketing our good wheat pasta.
As to key retailers aligned with category shelf reset cycles for 2022.
When considering the global potential of good wheat, and the number of channels category and SKU opportunities before us focus and orderly execution are more critical now than ever. So when we meet next we will share with you more about the next categories will answer and the associated expected timing.
Switching to our leaf brands are optimized e-commerce sites for sole spring protocol and savvy Naturals are all planned to launch by the end of 2022 as.
As we launch these new sites, we have significant digital advertising and social media marketing investments planned against each designed to drive greater consumer awareness of the brands and high traffic to the sites.
Now I'd like to touch on our good hemp activities with the 2021 hemp season effectively concluded we are continuing with our breeding projects to further enhance the vigor and vitality of our proprietary varieties keeping a close eye on pending hemp legislation for potential regulatory measures that would add clarity to the outlook.
Retrocede sales in 2022.
With respect to our operations in Hawaii, we are excited to be nearing the first sizable harvest of our Hawaiian CBD through our joint venture archipelago ventures, the crop looks great and we are expecting available harvest in Q3 for more than 20 acres of biomass because Hawaii only very recently has allowed for processing of CBD on.
The islands.
We have developed a cost effective means of transporting our hemp to the mainland where we will outsource the extraction of our Hawaiian CBD once that are leased facilities in Chatsworth, our formulations specialists will determine the optimal proprietary formulations to maximize our in market brand value capture.
Until our launch we're keeping further details confidential for maximum competitive advantage before turning the call over to Pam for a review of the financials I'm pleased to share a very positive cash resource highlight as you have likely seen Kerr our required SEC filings, we successfully sold the bio series shares we previously acquired as partial consideration.
<unk> for the sale of our partnership interest in vertical with this sale and the upfront payments received at the time of the transaction, we have successfully monetized over $27 million in cash from the sale of our interest in the HV for drought tolerant soybean technology importantly, we retain further royalty rights up to 10 million.
Upon commercialization of H before this.
This infusion of capital significantly bolsters, our resources and ability to execute the plans I just outlined.
The reason for a full divestiture of our holding now versus holding the position into the future was due to the requirements under the investment Company Act of 1040 under the ACA Arcadia as required to dispose of substantially all of the bio series shares by November 2021, the first anniversary of the date that we.
Acquire these shares or we'd have to bear the full burden of compliance with the laws and rules under which true investment companies must operate.
As such with the lack of liquidity in the stock today to buy a series stock and the fact that the market prices of Biosurgery shares has increased by more than a 100% since we acquired them in November of 2020, we felt it prudent to lock in a significant gain for our shareholders now and eliminate the very real downside risk of having to sell a cigna.
<unk> number of shares in a short period of time, thereby placing significant downward pressure on stop.
With that I'd like to turn the call over to Pam for an update on the financials. Pam. Thank you, Matt I'd like to take a few moments to share the financial highlights for the quarter and year to date Ricky Nap.
Matt mentioned, we are very pleased to have made the asset acquisition at leaf brands and Delek has an outlier and we're happy to include revenue from product sales in the second class.
Total revenue recognized for the quarter were $1.4 million.
Compared to 281 SEC.
Clearly 2020, but the majority of the $1.100 million increase driven by the acquisition of the leaf brands.
Elio is health and wellness products. In addition to good hemp seed sales next quarter the.
The acquisition was also the main driver in the year to date increase of $1.6 million as it generated $837000 of revenue and it isn't the good hemp seed sales this quarter and could be greenfield earlier this year.
Total operating expenses of $9.1 million.
In Q2 of 2021.
We're at $1.9 million higher than the $7.2 million recognized in Q2.2020.
The product revenue at $1.6 million increased by $97000 in the second quarter of 2020 to the second quarter of 2021, due primarily to the increase in cost of product revenue associated with product sales of the portfolio at newly acquired brands, partially offset by lower inventory write down here.
Year to date cost of product revenue of $2 four nine compared to $1.6 million in 2020 year to date with the $821000 increase related primarily to the acquisition as well as increase the good hemp and good wheat product sales.
R&D expenses for the quarter were $1.1 million in 2021 as compared to $2 million in second quarter, 2020, and $2.3 million in second quarter year to date compared to $4.2 million second quarter 2020 year to date.
The decrease for both periods, primarily by lower employee related expenses as we right size, our X teams with a shift away from research and discovery work and towards the development and commercialization of our consumer products.
In addition, we no longer have the verdict related expenses in 2021 that were present in 2020.
Of our Sarah at this giant venture in November of last year.
Selling general and administrative expenses totaled $6.4 million in the second quarter of 2021 at $2.7 million increase and a $3.79 recognized in the first quarter of 2020.
The increase is due in part to be acquisitive activity this quarter, including investment banker success fees legal diligence and transaction fees and additional salaries and benefits increased head count.
Marketing advertising and consulting activity increased during 2021 as expected and preparation for product launches.
Net loss attributable to common stockholders was $5.3 million in the second quarter of 2021 compared to $9.7 million in the second quarter of 2020, and $3.2 million first half of 2021 compared to $790 million in the first half of 2020.
I've covered the revenue and operating expense activity, so I'll give a little more detail on the other items.
The second quarter of 2021 included a realized gain in the amount of $2.8 million.
The $1.87, 5 million shares of dietary fat, we saw during second quarter, which resulted in a year to date realized gain of $10.2 million.
We recognized unrealized gains in previous periods as a result of the appreciation of the stock price.
We also had non cash expense of 490 <unk> had a change in fair value of warrant liability from the end of Q1 to the end of Q2.2021 or Q2 of 2020 included $3.1 million of noncash expense.
The balance of cash and cash equivalents of $24 million at the end of the second quarter.
Which was up $11.2 million from the end of the first quarter of 2021.
This is to the balance sheet was driven by the proceeds generated from the biotech area sure. That's appreciated nicely from the acquisition price back in November.
Along with the capital raise type transaction in the first quarter of 2029.
This concludes our financial highlights for the second quarter and second quarter year to date in 2021. Thank you very much for your time and attention today and I'll turn the call back over to the operator for questions Josh.
Thank you.
Reminder, Doc a question you will need to press star one on your telephone.
On your question Crystal ball, Keith please standby, while we compile the Q&A roster.
Our first question comes from Ryan Meyers with Lake Street Capital You May proceed with your question.
Yes, hi, guys. Thanks for taking my questions first one for me so just kind of digging through some of the 8-K filings. It looks like the acquired brands posted $1.5 million in the first quarter 'twenty one.
Little bit lower than the quarterly run rate from $6.6 million posted in fiscal year 'twenty.
A huge decline, but can you just walk us through how these brands have performed over the last four quarters and maybe if they saw a boost due to the pandemic pantry loading.
Thanks, Ryan this is Matt.
The brands have performed fairly consistently.
Over the year last year, except really in the first quarter of 2020, I think that's where they saw the greatest impact from Covid.
But I think when you when you look at this.
Zola for example, it's actually continued our coconut water has continued to perform actually quite strongly.
Throughout the last five quarters.
And I would say that the other brands have also held their own.
And that is really just in the retail channel so what you'll see us focusing on now and I'd like to make a quick correction to something I had said in my prepared comments when I talked about the e-commerce launch for protocols Savi. It sold spring I mistakenly said that they will be launched by the end of <unk>.
22, I want to make a correction thats by the end of 2021. So that is the the hyper focus right now for US is taking these products that have been very successful in the retail channel and have had virtually no investment online. We think there is.
Significant opportunity in the near term as we as we develop these websites and the SCO formulations to to drive traffic to these sites and really complement the sales that we have in retail so I think.
If you can if you can bear with US Q3 ought to be that opportunity for us to give you a better look backwards on a full quarter of revenue in both the retail channel and the online channel.
Okay. That's helpful and then it looks like the free farm daughters has been sold out of all of their products for the past few weeks just wondering is that due to demand.
Pacing supply or is there something else going on here internally with them.
Thanks for that question, because theres been a number of folks asking about that.
So as we talked about in our last earnings call the decision amongst.
Our selves and tree farm daughters was that to that.
They preferred to take a license to the Arcadia technology and so we agreed that that was their preference that we would honor that and so we have it's really.
That matters in their hands.
And they are evaluating how they want to take <unk> forward and so they basically just kind of put a halt on their activities as they are evaluating what they want to do and of course, we have wasted no time in developing our own good week brand, which is.
We're in the process of evaluating our packaging and testing that with consumers and getting really really good feedback about that gulli brand, which is what we suspected and why we were actually quite supportive.
$300, taking a license and us taking full control over the good rebrand and the entry into the multiple channels that we see as opportunities for good reason.
Okay, and then how does the difficult trough conditions across the wheat market affect your guys as raw ingredient supply over the next year and kind of how are you addressing these conditions as you look into next year's planting goals.
So we are in the enviable position of having a sufficient amount of inventory in stock to serve what we would need probably for the next two years.
And therefore, we really feel well positioned to do don't see any current.
Concerns around production for <unk>.
Pasta and in fact, our RG wheats.
Okay. That's helpful. And then last one for me, what's the what's a good number for us to be using it as an operating expense run rate for the business going forward now that you've got the new brands in there.
So.
Operating expenses as there is a lot of moving parts right now having pulled together the two operations and evaluating kind of go forward, what do we really need to spend money on to drive revenue versus not so frankly, we're looking at opportunities to further streamline.
And so we've really worked through that process.
Wouldn't want to give you a number right now, but I think it'll be clearer and something we can talk a little bit more discretely about in Q3. Once we have had this acquisition under our belt for a full quarter and got a pretty good feel on where those opportunities are to to maybe streamline further.
And where we want to make our investments in operating expenses.
Say that not to be evasive, but theyre truly are so many moving parts and in particular.
As we launch these online initiatives for these brands that are very successful now we are going to on a weekly basis evaluate.
<unk>, our digital marketing plans and often times as we've seen with other brands in the market that heavy heavy emphasis on e-commerce.
It is it is certainly possible that we.
We start to get good traction and accelerating our marketing digital marketing investments to drive a.
Greater or higher trajectory on those revenues is something we want to be poised to do and so thats. Another reason its difficult to give you.
A number that you could flatline number that you could depend on we will just have to see as the months roll by here in Q3, how operating expenses play out.
Great that makes sense, thanks for taking my questions.
Ron.
Thank you and I'm not showing any further questions. At this time I would now like to turn the call back over to Matt <unk> for any further remarks. Thanks.
Thanks, Josh again I'd like to thank you all for joining US today, we're very pleased with the progress we've made on a number of critical funds and expect a very busy second half of the year with our augmented CPG bench strength. The addition of key strategic resources and the pace of our integration process, we feel very well positioned to execute on the plans.
We have in place and we look forward to reporting our progress to you.
Have a great day. Thank you.
Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.