22nd Century (XXII) 9 Nov 222022 Q3 Earnings call transcript

Welcome to the 22nd Century Group's Third Quarter 2022 Conference Call and Webcast. At this time all participants’ have been placed in a listen-only mode and the floor will be opened for your questions following management’s prepared remarks. [Operator Instructions] It is now my pleasure to turn the floor over to your host Mei Kuo, Director of Communications and Investor Relations. Please begin.

Thank you, Rob. to third welcome call. earnings and morning, XXnd quarter Century's conference Good

Jim, President Business. me our press quarter Financial our Miller, Mish, are release Officer; our Executive John Joining for Jim XXXX. Kinsman, earnings section announcing subheading. at from Chief website the Events and our of today the We'll issued today, prepared presentation today's Earlier John xxiicentury.com, we XX-Q with available Officer; results are moving Q&A and release, Hugh and before our The of a Tobacco third in Investors call start into the Hugh session. Chief under remarks a

today's by online a we the may those joining questions of submit during interface, time webcast call, As permitting. which the through include reminder, section can Q&A

statements today of forward-looking. Some are made the

subject to those materially differ uncertainties risks, results factors statements. and from actual cause that statements Forward-looking are may to contemplated these by other

can and with in Additional found our these regarding quarterly SEC. factors the annual, information filed be reports other

During adjusted today's as which interest, amortization non-GAAP and including call, expenses. and taxes, depreciation earnings measures, discuss define nonoperating as we we certain before noncash may for adjusted EBITDA, financial

the beginning today. measures, more release over earlier For to I'll And call from Jim turn our with these refer to slide issued three. that, press details please on

Thanks, at Mei. Election a happy Good spoken morning to Day. number conferences. I've everyone and of recent

Hugh and CDMO global expanding our our on joined incredible it's and topics CFO. an President can commercial and by get update, business. into U.S. to can more John been exciting comments the Unit; scale our hemp/cannabis We're months today. the last tobacco we of activities time going and I than I'm to brief, and Business So quickly. will keep we call are our Tobacco my say opening to I'm of to since Miller, fit Kinsman, there today ingredients details discuss focus rapidly quarterly few our our business going

VLN approach. prospects. three and launches to we to the Illinois just launch in take share and our launch to pilot beginning This announced our in call, Four and our we months notable to education to a but pilot from have to over I John Corners our results by advanced aggressively specifically last into statewide exceptional first this XX about region. trial multistate commercial can't We've expanded Colorado now across now moving in the more these our awareness, additional statewide complete multi-partner is designed be our the in since moment, expanding will Chicago First, detail grow our more as up markets. XX states presence next a a intend excited leverage

cover driven quickly milestone expansion can We within XX% to addressable have we where reach market by have unstoppable over go, a an a interest. plan we the blueprint of We XX-months. X% to decide consumer share

Second, CDMO in now hemp/cannabis increasing a This and GVB the growing commercialized we a into have integrated derived business of supplier with provider Biopharma, and hemp/cannabis moving global top-shelf fully catapulted John. we're ingredient space. differentiate detail and us after ingredients. will hemp-derived the further margins, to and that come us quickly this our certifications ingredient products make to I'll back complete dominant

operating driving financial cash expansion, are Finally, growth, leverage margin and results generation. our long-term

are John? and planned complete tobacco in that this in positive our flows ultimately and incredible carefully as doing that, balance slide on share, drive existing monitoring and chart drive and The John let the to the rapidly commercial into sheet fully we quickly to his scale, the scale our revenue business us developing funded the is support our I'll our closely business. to illustrates Our investments. returns investments business he we're pursuits. launch in plans, commercial With cash dive team financial will work

definitely It's product exciting five. everyone. moving and Century, an market. slide incredibly rapidly to an at Jim, disruptive on we good XXnd to Starting time morning, are make and Thanks,

Circle K in new short industry pilot results launch. Chicago product Our normal generated for a when exceptional with expectations very a compared time, against especially

also and repeat trial have our data, rollout. tested designed increased range of we to offers share plans and a for drive We launch that purchases. through our With multistate sharpened refined

allows We very not of to also Phase states retail fully on percentage are distribution, XXnd for adding while efficient the but for ground and billion and a sites. push entire states, retail programs management training, just our immersed This market for now small of this bringing of partners overhead tobacco full-service support and even VLN's be retail list Capturing commercial transformative execute will $XX revenue X line. new U.S. our covering includes for in growing rollout. into stocking the support Century market. with a

chain retail leveraging of our where but store locations, state our represent become we VLN by efficient, as has In some presence. frictionless authorized go” have hundreds forward faster partners, productive of So also bring accelerated “go only potentially launch that or and new move not a opportunity short, in a next thousands the approach. more efforts where we an partnership

that to illustrate let six, a slide bit. Moving me

expansion three components getting even more five structures X% that where in represent be Creager approximately distribute packs Mercantile these our programs partner states about a million VLN about of K has grocery, into an X% pharmacy They annual fantastic to cigarette states stores or of into MRTP current have on $X.X We commercial billion mission. more, partners. launch of Circle channels. consumers added the the for leverage What's five retail at excise Our of register, adult and other with fully Colorado, and X.X favorable share basis. supported can supported we further Rock our U.S. convenience, across the our total started who market Illinois, Eagle a and VLN just would also tax our

are other go” corner come As marketing partners programs, four the our where where can those on in we board new “go retail via now. and right sales states accounts we launching

we Colorado grow in sold and be and VLN's in Illinois by point, XX a rapidly expand securing K states. market stores. an to XX increase also share total to of months our But As the just the to distribution VLN is all authorized throughout next availability, Circle as XX this in revenue New Mexico their starting example, addition

U.S. can access cigarette states you plans me what look sales have that $XX more billion XX share can Let we concentrated, this just provide into highlighted on That's the states. to cigarette than of The concentration. market. more take like our the with slide seven. XX access launch half Getting advantage is market total cigarette accelerated and U.S. in adapted to than to in

and see compelling and have current offer Illinois, three The states, proposed similar with are Arizona passed MRTP the Utah, tax that green. states efforts their Washington, and and other retail five MRTP These but build share MRTP with map our tax opportunities New Mexico and benefits, own as adjoining deploy PR and to education our North continue You model Michigan, our to revenue. investments. states share excise in and have improving states to awareness markets public we continue Colorado, and are connecting move on who include states ahead, of in right, Five awareness of code which legislation. Carolina, reach light in partners, we will we MRTP program that allows to the benefit. commitment Kentucky understand more with distribution color campaign market Connecticut can choose as us partnerships, but health states that We'll and them create what benefit order in states regional extend marketing, our large the

marketing the get a want to over be market slide within population that to in and by investment understand at even you help little efficient focus I our eight, can more centers Moving looking granular to and states. ways more key we

much almost where of of launch are phase, in but statewide, the and of top more the by targeting the example, actively cigarette just than XX could For state purchases. to we population there marketing counties counties cigarette XX spend XX% the XX give state's to access XX% XX% Colorado, are efforts in of our counties are home of the engagement us XX and consumer in volume

deploy appropriate investment launches. marketing us focus same amount resources that the other This our to time, we'll to maximize XX on the at While enables of counties spend an are populated. on less return in our

this you cigarette that is in is discovered help less as we tobacco FDA smoke authorized slide, to Chicago, Finally, a truly on newsworthy.

smokers all new traditional We'll Slide and Mercantile, partnerships total During target and XX adult will we stations. again of billion, $X out and partnerships the Chicago than like key of to mission non-traditional excise about of VLN been smoker-friendly join shows incentivize across Four Creager brands. how want than retail comes excess available, drive partners both to our our Colorado dozens coverage smoke nine adult Rock how us pilot, Where With on an and VLN use to Corners together retail aired proved Eagle a stores in legislation valued learn more X,XXX secure XX who than in million reduce the less. it efforts. we more the them adoption favorable helps maximize opportunity. our it population in this helped tax market with smoking. of that and will we earned market is television cigarette to having like more VLN harms segments focusing been significant has in This Colorado on

Southern improve excuse tobacco it's XX% our growing address include our capabilities, in on volume the XX planting success ready continually ramping for manufacturing our we slide as growing But XX, diversifying our Hemisphere capacity announced an up slide that. we planting results me. record more We of expansion previously increases. a manufacturing season to means working course, and and to -- scale locations products. volume we Of have which our to We're by than and and

in across leaf harvests quality. In is nutrient yields quality, higher in recent improve other requirements words, locations and leaf improving XX% and inventory resistance, scaling demonstrated growing quickly, reduce For yield, our a X.X example, generating VLN stability improvement our enhanced improved and disease tobacco environments.

less to to of contemplated more studies of we the authorization. time implementing help these that our continue with nicotine a believe state that identified or level fuel and content be market favor FDA reduced We cigarette that We a regulations, truly regulators benefit MRTP-reduced including shows science illustrated scientific was XX. local meets current of toxic the be smokers the is menthol for on only federal enormous level and smoke data volumes about cigarettes mandate a have drive easily manufacturing achieved eight with are XXnd governments nicotine and to nicotine are the but talked as these the standard. nicotine MRTP market ban, health by research Menthol to any policies and the the Slide opportunities even King state more, the to all matter products content to specifically validate policy movement to menthol quit on by public that VLN states ban increasing the independent noted ready the statutes. Century's have not are clinical especially reduced to federal needed. from only the it important product as that extensively smoking meet deploy by products, even as is by This which we notably, the could believe excise would migrate in of numerous the on Most only action, at federal smokers mandate, reduced demand given exempt help prepared cigarettes part We fronts, we But can products packet. the leverage standard our would tax our currently proposed a combustible waiting menthol a new less.

I'll are as quickly you of hands adult back our pass into We update to now VLN for and smokers many continue our to to accelerated in franchise. an Jim? order get plan possible. the moving on hemp/cannabis as Jim rollout

a been It's to progress, started. we're making. by words, interest. have are unstoppable an some expansion and that team And getting quarter John magic It's and John. for for just I third the repeat consumer progress driven second and Thanks, just just an blueprint just tobacco amazing pause amazing

hemp/cannabis. slide our we as focus XX on to a turn commercial minutes progress Let's for in now few

We capabilities discussing science the receptor in before breadth genetics fundamental stand of from labeling plant world on alone slide completes level this how shelf retail and elements of the products GVB the seen through to You've the purchase. our most with of for white expertise. way this all

extraction minimal largest world-class scale our capacity merchant growth our with quality. per into plant already investment, largest cost, is a the market that an underway with in will facility with with hemp/cannabis the start at kilos we starts right lightning starts GVB kilos world's with fully per This undertaking capacity expected the This supplier at integrated grow process science month ingredients is quickly a that lowest and are slots XXXX. investment platform month tremendous program assets highest manufacturing platform. importantly, and pace. all we out It a a acquired, opportunity with Prineville, chain a of XX,XXX already that in Oregon X,XXX output More

a this it of the in market. displace will majority scales, As our facility crude third-party purchases

We the margin leader refinement global gross foot margins into expect crude variety to and will in our a an in profile in square increase we cannabinoid material leadership. produce as then products of accelerate Prineville leading strong extensive quality take XX pathway take revenue how substantial products hemp/cannabis to a XX,XXX business our customers in expands, gives see crude XX,XXX our of and label hemp/cannabis. From distillates. our platform position gross increase that to we our and industry as path and to where growth global it to consumer Slide and producing show white acquisition our brings the facility together foot isolates square there, an manufacturing a nutraceutical profitability to site next industries. hemp/cannabis, pharmaceutical level us a The

crude buy operations us extraction is Prineville facility rather to as This massive gross up. will crude will our buying produce scale reduction enable market. this cost biomass our quickly us own and enable and scales our the margin to a open First, facility on than crude on

also as increasing the increase this quality are a gross even We while modest XX% current our and relatively targeting investment a margins ultimately scale of result in levels further. from

Second, unlock consumer standards, goods FDA novel will both CBD for industry quality establishing nutraceutical in steadily and standards XXXX, a certifications the and moving towards product daily recommendations is to including intake food market. key massive that for

of that certifications consumer these producer reinforces brands. growing where exponentially ingredients, to to CDMO pole an addition words, grade other for we leading soon. our acting In these This news enable come we the active are includes dominant in have pharmaceutical the in this In exciting both the become product facilities world's standards cannabinoid us in now our also the the our to APIs. puts to will role of us as secure core of largest and facility to position capabilities global market supplier

Moving File the have We cannabinoids enable supplier. highest edge give take complete gross platform. in will the growth believe that us growth giving to a double-digit pharmaceutical our next the of year, can pharmaceutical self-fund positive we'll by slide efforts clinical full Drug across end cash also corporate business, us expand Master certifications certification and supply XX. into helping this target the second business as to a leading under world. in that audit quarter grade activities to our margins in ingredient XXXX, unit We global generate we It the

in of lot cash also flow near-term. rapid the products business, a focused and opportunities understandably for our are While margin attention hemp/cannabis our on scaling is and expanding tremendous have fast expansion tobacco

and So perspective cannabis. it's to want one in those summarize because are an just a exciting I lot more time of words,

largest We lowest merchant We are scale already cost, the ingredients. of world's already hemp/cannabis highest marketer and the largest purity. have

the me new these a extraction Now opportunity. turn food three advances with differentiators to allows is And unleashes And to add perfect that only that discuss and that, over as let dominance. XXXX financials. unit new to to novel massive lead certifications the timing in regulations Hugh global to market FDA the it

CMO million, the a Thank financial you, with off sales. Starting Jim, and full quarter-over-quarter which $XX.X tobacco Slide good morning everyone. GVB Net on by quarter and manufacturing record increased addition third sales reflects of results. to revenue XXX% of to XX quarter

cigarette increased product hemp/cannabis higher $XXX,XXX margin to to XX of CMO charges, offset profit from on quarter-over-quarter in sales, from and including experience as by was nonrecurring explain I'll reflecting improved to significant and addition volume tobacco acceleration profit continue the for Gross CMO demand customer XX. and manufacturing VLN gross gross lower certain margin further customers sales. from new hemp/cannabis slides We products, slightly

for margin million higher-margin profit and combination sales sales. record Gross from -- CMO VLN and increased slide increase $X.X mix through to third product from sales revenue tobacco an excuse XX%. on the of million, to tobacco to cigarette a X.X% unit me, strong quarter increased Moving $XX.X a of growth XX, from XX improved

expansion the gross continued margin achieved launch expect accelerated of be profit to We with VLN.

will more integrated price GVB's the premium reflects Slide which the of XXXX. addition full quarter fair illustrates detail. the sales the of in acquisition, XX XX% forma XX% And the of pro for XX% extraction was due grew company's Form for the in in third ingredients. typically built of with excluding becomes margin which price reflects of growth and GVB facility And vertically Moving GVB's more quarter. margin million for quarter and is accounting, revenue third expand an purchase This XX our $X.X demand is certain to Prineville, and quarter allocation strong Oregon footnote hemp/cannabis, increase new the impact quarter. third a X.X% to accounting as as the updated GVB's company gross estimates assumptions. Slide of unit operations, XX% significant over acquisition explains, the to date in XX-Q to gross non-recurring values quality third estimated using from as purchase revenue charges determined the the profit reflects the

equipment, areas taxes substantially procedures completed deferred to goodwill. the have We and assets, such allocate the as purchase valuation required property and price intangible in

strategic million of the the quarter strength see off we're highlights The me, accelerated acquisition. future, balance assets and of that capital goodwill material. on in total XXXX reflecting on meet VLN progress steady cash which through to for deploying hemp/cannabis Century's of than I launch they VLN. decrease, fact, in to fiscal the increased tobacco balance from investments cash-generating And cash end profitability. levels The However, to demand. XX, using and $XX our pace now manufacturing know you further many to And are slide initiatives, selectively how continued continue million GVB's did growing XXnd includes more the requirements has of sheet. back products. market changes $XXX invest to of near-term you'll toward organic GVB the the launch and operations. support company focused key cash our a for Jim. we demand our primarily accelerate of business of the are tobacco capacity the you to note, from may occur a last inventory in a expand $XX and XXXX, to for will of intangibles And million adequate as sheet, volume our GVB’s position anticipated balance complete both with including GVB's becoming sales our it from is that, to and production I'll pass are higher in operations, products And VLN, the strategic its liquidity sheet balance due to And a company on few making meet initiatives. growth result, current

massive share time major even our VLN transformational pilot heard market internal John several market recent of customers. U.S. you. conferences. expectations exciting as our is national described a us, you've recently C-store and launch me relatively and to exceeding accelerate as that VLN front of describe our in small a opportunity, products Century With with Thank chains we XXnd our in It's exceptional an for as and placing pharmacy

in fully in hemp/cannabis of proposed is there's that been a products, policies, advance GVB our to open the we XXnd all ahead synergies of on revenues built path full and reduced and We're -- the a should, our on and please menthol businesses questions. to not full of new time and potential of that our our our go, in profitabilities state enhances foundation, nicotine to plan leverage integrated to in to and plus federal for and the months platform tobacco product. ready that, products as With mode doubles next the operator, just and our also but never better ban are innovation now the actions disruptive moving focusing two content the maximize call strategy now capture We fundamentals the business Century. with execution framework advance ahead. And we for it phase

Instructions] with question of question-and-answer this Thank we’ll conducting you. comes proceed Azer. Please a time first question. your [Operator be from Vivien session. Our the line At

Jim, at volume XX opposed that. as Hi, on penetration further good to detail reasonably target obviously, over to aspirations a XX in key the of incremental some wide great noted the to XX you morning. XX? of the range you factors What form your are terms next to a Lots VLN. XX% for as that hit Thanks. end states be of to going XX-months, whether states of as high upper expand

we takes as were three the move Vivian, Ag mark. we are even XX% back we we in the perspective, that we're as sure But weeks to I on us that's once the XX on and and as because stock-out to not a making more on over think It as let that number all ask that on John supply chime can. on going the you ahead we chain. few we don't keep were to the We're on we shelves. cycles I'll the comment chain John based supply this growth certainly that face through I'll in our situations major do sure to continue I'll as can also as gone side of states targeting to But aggressively really the well, driver. make quickly full has because really commentary. -- give want to to any way by mind But chain supply launch. ago, want XX up timing but the add we my We XX, driven of is ourselves we

in How changing And been what transparent we're good no has how to the beginning this does access analytical say to What started to states Jim. of advantage the the a we we've maybe the the learned? good an gives doubt saw understanding we questions geographical to in to have a business? the Corners achieve conversation the North, have represent And the past, scope, again, you Midwest, we the that's XX expanding the trying the pragmatic to is come There's Vivien, in or implement to Colorado, very scale you opportunities a pilot? about the these You potentially there's taken there states. in last get XX XX where What Four XX area. national through states. as then that approach West, moved Tri-State Yes. team And to pilot question we approach been lot to Connecticut in states. working Thanks, cigarette and really, XX taking of in the that mean when make morning, the from too work should and we And taxes do about in do call, I on our in the begun, to Illinois, nationally, Southeast, done MRTP that the on East do right? program map of was total very was Jim that and internally certainly of launch the we about how impact sort what the market. that choosing on XX% have through in presence market. exactly showed And

I is the us best to very where the shows get that partners where who consumers and meaningful we a possible how get these levels the there. pragmatic research are analysis hope are, are, that the it's So and in can this way this opportunities our answers question. your doing of approach is

does. helpful. sure That's it Yes, really

as basis, being new states, five of opportunity well? to that in XQ keep to we and And to then XQ the the next, like plans quasi-legacy are of so, absolute albeit seem One modeling framework terms selling to the where sale the incremental as clearly, that good is model growth between of does nascent to a mind revenues go-forward is going you call on we into revenue in about your you three realization: over forward deepen as there on Do kind it, states; two and at sequential tobacco saw in going penetration to other components geographically it a the we points least quarters? bring think think repeat opportunity be have

would that -- be Hugh,

Yes good very take Vivien, good Hi, I'll that. question. morning,

we think quarter had step-up, part for GVB revenue. a it full we I had because big quarter, a of this

I So modeling, you're when take just operations. let's terms of think tobacco thinking in

significant a was our Some increase of in that manufacturing. CMO just

We forward. VLN expect will continue end QX into But this going of have period VLN of starting to XXXX. start velocity then sales into the this will going rolling the year, start the in and go that to accelerate fiscal

So VLN rate growth would to layering steady, I purposes you of the of some for incremental keeping which kind modeling, of revenue. be a And incremental for which start growth CMO quarter-over-quarter, then as if we comprised be on will, the would would continue accelerate rollout strategy.

That’s super much. Thank you so helpful.

you. Thank

question. your Aaron Global Please with Partners. Alliance from proceed comes Grey question next with Our

good the and questions the Thanks for detail. thanks morning. for Hi,

on So a have question I VLN.

and in new help a Circle in the you expand markets, shelf Just Illinois, Chicago as in you K of to great terms displays partner had obviously, some placement. in Broader and of

how looking K Colorado you. to of at you're these in in color So little to, got distribution, go obviously, retail states, placement just other can Chicago some you ensure you're more markets? Thank have But to that have you talk Circle you you bit you in to reach at as similar kind that displays going these and X% plus of, about other on there. a lean to get that shelf wanted terms -- more as

you Illinois. a take remarks, mentioned And tested broader of a know, with had we looks you similar we you lot And that question. the into much the then of take do how Circle New a we learnings? strategy, we've array K what of Thanks, in environment expanded move the good Colorado, How opening take that's also retail Circle in all K our pilot that very about a program that very, talking into and the do in start Aaron the with a like. -- And, to stores. point can Circle for again, honestly, right? things Mexico. it's And and have And out as K I quite

what they that So a then and K, to for done Colorado, in roll mirrored Mexico. we've degree, into New Circle right Illinois basically large

isn't and will those that about that awareness, and with those things retailers those what the working and like doing, right. things putting a those to this education see that what we're difference that traditional makes us -- education we're we that to process now things All awareness, it learned VLN that be -- market. It exactly total when understand and three-step we're this tested brand achieve. So through explaining versus into they the on we learned sense. get call And with in we're are understand understand it to discussion. and trial, a learnings, challenging they and when what how and to trial trying we what people a sort get we I achieve trial mean cigarette adoption, they're of

does said things So retail to what educate does take does. extension Marlboro is doing we're and the to purchase? in is what and them it a become the a brand. I've that What CPG come what traditional get how of to to we're is just a try of now it way. product what programming, This it, aware not which product campaign take? to repeat this times, a This it why are very back our to it to it going, to have not geographical another this have know factored those a consumers or exactly All into of launch. on get pragmatic awareness does is multiple approach consumers them it make well-known going cigarette line repeat, is

are and go" understanding that the of that store our pilot that. There doing, what All in also And include "go we're where "Give into saying, partners to do we're not retail of the A tied one." the is learnings going are came partners every lot that. out day me that brands of and approach. we our

to in to deep brand, understanding really sort consumers this markets, pragmatic XX% successful right? deep do this. we of which the the have volume. make to what For the where to we going XX of the is do the the we them in to have example go" can't And market To know into are, because again brand that. do counties, be market. This which are you into to approach was understanding sense the XX we or in Colorado, get execute where retailers and approach "go that the

color. for that. That's that helpful a Thanks really Great. hear to I'm have been glad receptive. retailers

GVB So bit. about second we talk a question, to want

of it's XX%. been million if being for was to guys back you you at that go gross margins XX%. acquisition made, for revenues margins year Obviously, the Now XX%. X, to XX% filings, gross we $XX it quarter, sales. January the bit, mentioned when the had talked looks to that the at talked $XX company you the on And below you're had like been XX% look the a about under XXXX, year-to-date so umbrella about it you closed million, mark Last

hood high got than you from want some just maybe there's under more had level, you noise the learnings, once expected. to the the at acquisition take So I previously maybe some

terms love you had maybe initially? acquiring how to color a would the you months post it now some in of versus thoughts Thanks. see I acquisition get So couple more of

sure. then Hugh Yes, ask I well. start out and as chime I'll in can to

everything did which that effort the QX. typical in tied were that takes we point certainly I thoughts it's here we all going of side, this getting across we anticipated And think to more. post-acquisition functions, go is everything commercial out. through knew at quarter different We and including the the integration,

side on the expecting also very back was So QX ’XX, when perhaps in cannabinoids really the May. and a softer we exactly fledgling both of happening really then on what's kind finished in is into back and and volume build a we are a which on into going which CDMO the side, so themselves acquisition the in position, much ingredient side the QX

So to very up will not is around CBD which side. but and and not is looking space through specifications very that only got both will market, likely unleash along safety with in European set terms on the around really nicely on is on the now adopted are CDMO that as it, ingredients looking theater, population. their consumer CBD, everything at FDA and U.S. the across what the that it the now in guidelines only is but Europe quality larger coming considerations much before, based the integration. and the -- promising, be said safety And really legitimate QX, U.S., I ramp-up there We product into will very the open the just

we the living a really CDMO QX. that it's integration truly really that's So assets back perhaps QX, a thought. team And pattern ingredients up phenomenal to We within highly in top already for. we're spent everything we a bit we energized. hoped got and time shelf on the more But to and on

with sure anything the be side. I fill financial out did we I'm not So happier and But the Hugh, perspective from couldn't really on your foundation. it if missed

agree, completely Jim. I Yes,

for that think backlog the I specialty for forward. we just the ingredients significant have going demand is mention to it's important

And continued should and well. will compel extraction along coming should to margin that fiscal in which addition some coming contracts with So growth online our Prineville revenue white-label in that the of XXXX. as be be facility expansion

deatil back queue. hear to into jump Helpful Great the that. I’ll and

from comes Please with question next Brian question. Partners. proceed with of the Our Capital Wright your Roth line

focusing I next -- word? want morning. competing of me. like is lack out the priorities in want you at MRTP the But to to I Good the XX of color that talked states you I what's dates? at I about on of analysis factor with when any you to flashing of for press kind of better red just just there, map kind don't -- the Texas favorable adjacencies But And to kind think and on Thanks. mean, your start and adjacencies. of kind for in look kind with states. the about to response the of wanted looked then release, VLN state kind

John, do cover you to want that?

Brian, a I flashing second. was phone for sorry, I'm in Texas sorry, out say cut -- my red? Did you that

as of high it's be priority. it's that next would MRTP, seems and but close to big so kind just state. a it's it not Yes, Four as Corner know a like I States, like, the far

Right.

And or if So we MRTP the with is were priority just the trying we're you look those green as map the MRTP states -- -- at the of then Texas show states. really states. the The states, one our dark to map in launch the light is state states the are I with XX opposed prospective and the states green label think where to dates. the difference priorities the

So green. the dark green states definitely are definitely priority is states. dark Texas

the out Southwest, states. the XXX% them Texas, pivot them. one of around And In So market develop cigarette we Right, the in we natural build calling the observation states, correct. we is absolutely around your opportunity MRTP of how have then initial it. the yes, as country a state MRTP and and sort for regional us is number eight do we're a

You North have then North the have Texas for the Four and the to is state Corners three number the cigarette in Carolina you Florida Southeast, consumption.

So had there. both Texas last Georgia there Also, is connection and a MRTP legislation natural year. initiated

the that what's some again, the future? So in obviously, states there And you Michigan, point and passes Illinois. in right opportunity MRTP then if have near around the at Midwest, Kentucky

adult propensity areas. also I high mean, So that a those in Midwest of smokers area, a natural became

I hope question, your So that answers Brian.

it I you Thank follow-up. one no Thank could much. have just does. Great. Yes, If you. so

more as far around is kind little in to about just -- FDA. process? the Master -- that maybe as submission a what's the the just a and/or the involved of that that On more understand little bit a And and to on timing File Drug wanted GVB there side process

at the the it that the can Yes, two industry in clinical with naturally us, product. moment we're ethical things no essence, pharmaceutical to can opens trials, I for up and into Brian. derived Yes, supply one, ethical for that door submission for one does do handle QX, the that, number scheduling

lowest level So to And highest also on of standards. that really up isolate. food that sets safety level the of movement the to that stage novel opens with establishes space. impurities keeping it really up And the our FDA's the then quality, the obviously,

the The that first that's Nobody that nutraceutical heard to marketplace will XXX establish they that, quality specifications, are in in do upper from in looking specifically highest of to what going be market. purity the with work threshold. there for we for do stabilization would already service what's plausible per knows thing up day, day thing behind establish they'll milligrams numbers the also is establish the and it. which looking to what impurities people milligrams and quality I've Right anywhere to are per those XX first guidelines they'll to That's exactly be. and and the an they'll sure 'XX. But them,

DMF same the the via that at of off filing advantage derive time. we'll So

heard meaning us basis taken food, really that on very really novel on has it lead So us the simultaneously nutraceutical the food, helps beverage, as products. I helps in establish on than look we've markets, European markets And strongly Canadian more and the said, that pharmaceutical FDA global will to guidelines a to external similar establish and market. the and specifications to likely, Asian these CPG markets, essence, reboot them expand

we of and is that cannabinoids of to the highest timing, scale lowest process. is absolute DMF certification really you our absolute go right push the is the cost, where along us and that's the other have mission, So need the and which that's to and the levels and to absolute pharma-grade largest value continue want part to CBD with certainly,

much. Great. Thank so you

Sure.

question. Dawson Our with Please comes next question proceed from with Jim James. McIlree your

good Yes, thank and you morning.

manufacturing a understand was $X.X contract question, on million change contract the Vivien Do follow-up to quarter-to-quarter that this about the asking wanted was about tobacco I QX. correctly in revenues mostly revenue? in Just revenues of

yes. it’s, Yes, that's Jim, correct.

GVB. Great, this to understand thank you for exactly you. you're I want XX% just And gross about talked Hugh, also XX% margin saying. what I -- to

And come at then be QX. increase progresses. as is that an XX% Is right? And these XX% saying on you that You're that seen good would to new plants beginning online, normal Is to be additional it? probably a look without basis manufacturing we coming online. that, have it see is that that plants should a to as going the so of what all way XXXX

XX%, to layer fully exactly that state, right, time mean, in the a as Jim. especially typical XX% the our just start steady will we increase on I is percentage over That's integrated Prineville facility. margin, gross

So those the going be right forward. assumptions will

and expense $X.X for Q, And for at then Great. the How we're about of talked looking additional million. comp accounting are additional quarter. my question and accounting when million is levels strategic XXXX? accelerated both on an consulting QX transitory $X.X the last an expenses permanent those then or stock operating for I In

acceleration on a payment going level, to if be an one-time, of forward the The quite will for -- of stock some consulting, majority IP go-forward at you the compensation of may the that that up but building of we're portfolio way that and is you not is be our reorganization, due basis. there because just will,

for what it the mostly you're and on I was the side, assumed IP strategic it's DLM saying? the mostly So consulting is is, is IP rollout

mostly plant to it's to definitely IP, consulting our for and science really but receptor IP but there genetics. that our is related development It's VLN, of Yes. some

That’s it. it from it. Thanks me. Got fantastic. All Got right, a lot.

Thank you.

Fuhrman from is question next Alex your Our Craig-Hallum. Please with proceed question. with

have have just ways question. a thanks for margin curious, VLN enough clear that is a states taking helping much biggest for passing different that's indication treatments been of now my of the to jurisdictions to on Hey, sense have couple a of that different in I'm tax or or had which that that's impact, your demand retailer if experience consumer. how the needle you've that savings playing pricing kind there the you've for of very been different out? for product? of bigger in whether a Has that to on move curious I'm passing really the

very VLN That pilot, There's retail was no the doubt price that especially of something we points. there was pricing we aspect -- closely multiple good question. The in Yes. at. looked saw

get County I the that mean, stores tax For we the stamps you had three on Chicago, different example, Cook into City in were packs. when there some of

to consumers that research actual top-tier the let's at is we looking So and launch we price through say, for with, that, programming what were at were least retail bargain proper we on did research line are some in Camel, that look VLN. the in what we pricing then Marlboro and a retail okay. was a learned to and And to projects if do weren't and play or able the necessarily product deal that willing they the a they or

Now kind consumers right, love some offers, Perfect. of in all deals.

what in more our trial? they And some in say, pricing, go the of it that of at understanding of our just education And put about we've drive way to needed they're MRTP doing get when about carton off to an aware it, using, was driving that awareness, trying necessarily, consumers offer addictive you -- Using obviously, found it, side difference. under we smoke the you Colorado whatever that is looking money Colorado, a is of we the think solution a trial, how for and but you also certainly knew pay this willing And in the terms so base you're in well, to let's that all as $X.XX it's then about someone when repurchases. When they are to which trial, have we what what's into achieve that's of trial. an kind out know for through and $X.XX Colorado. also and If programming again, to do MRTP, into but right gives that want or awareness when to if less they're it looking isn't and cigarettes this highly to, we a have levels, but tax taking example, it, as terms or education going of state, brand case, marketing know drive education So an of promoting the it's provides savings of if appropriate we is business. for do referenced it you the we us continuing available. the flexibility awareness, started and trade in

we've that like continued, all say, to in. of I factor Now

systems. We channel. Friendly, have we Friendly also program different incredible as is And marketing sophisticated primarily going sophisticated retailer, very great a have Colorado. we and which very Smoker channel for some -- tobacco a trade in very in discount one they we but have Smoker retailer Circle a K have is example, have a

those price all they're areas. able So they're these able to into promotions, specific to different And do we've and tied in do carton systems.

MRTP of a that sort my hope So the in you says and the answer I I of it ecosystem It getting program, isn't involved hands. the the partners your retail. in question. a benefit comments, everyone trade part a mentioned becomes else straight black that into as that consumers' and answers lower white gives VLN consumer holistic of

that then It this here. costs. No improved are ask sure cigarettes idea be and seeing success us Is that's and in using the I the on lot can And bulk crop is texture second could that does. It the you're seems a bit of about tobacco. to be really just the or with to the helpful. little Yes. this And X.X. it more of to VLN future you -- like taste is a going X.X better lower if talk about VLN VLN yields going a

Just the would seeing the about success hear to there with more you're product? second-generation love

my science will sustainable, it's general, It else more how add VLN will Sure. sustainable And in with seeing sustainable -- being this. have. Treat, and overall who But parts able products In a have heard a just more help but don't opening it better to specific amount be Officer, becoming a know, Obviously, it need have Science product I teams ways started resistant. is they product, that. grow remarkable it. it, of part of the product. our Chief yield, make make has nutrients, we're disease experience job just in sustainability in the I of we more our that want helping product. the as if you is the a growing Jim, done can tremendous going just to lot something to to product. comments, of is X.X talk you a again, of Calvin more and more better this where they is has you less also There's into our on a less this better along brand. to And the will

viewing Southern all to Yes. I we're where mean year-round we across which the to have Hemisphere, only is doing this thing we I varietals as the both that blend have this gives that supply the Hemisphere we're Again, on latitude, can on want these can product. add chain good the Northern both we feedback grow, on already the us is the very desire. products and next-generation then well. IP But as and and

So the what's driver -- that's really is. the what

Hey, much. that’s really helpful. you very Thank

Sure.

call session. question-and-answer for the back of over end Mish turn like to now I'd the reached We've to closing remarks. the James

you, next and to to the tuned stay I'll Thank as for in thanks today. U.S. move updates say shortly for everyone launch opportunities please we VLN again All is and continue GVB joining our our our on utilizing platform. expand us ahead the cannabinoid

you to soon You'll a to I be as and and day. you have all from hearing next forward Thank us look well. great very talking quarter

today's This webcast. conference and concludes

your You your you at and time, may lines disconnect for participation. thank this we