22nd Century Group, Inc

Greetings and welcome to the 22nd Century Group's fourth quarter and full year 2021 earnings conference call. At this time, all participants are on a listen-only mode and the floor will be open for questions following management's prepared remarks. As a reminder, today's conference is being recorded. At this time, I'd like to turn the call over to May Kuo, Director of Communications and Investor Relations. Please begin.

Thank you, Rob. Good morning and welcome to 22nd Century's fourth quarter and full year earnings conference call. Joining me today are Jim Misch, our Chief Executive Officer, Mike Thurker, our President and Chief Operating Officer, and Rich Fitzgerald, our Chief Financial Officer. Earlier today, we issued a press release announcing our results for the fourth quarter and full year 2021. We'll start today's call with prepared remarks from Jim, Mike, and Rich before moving into a Q&A session. During our prepared remarks, we will be referring to slides which are available for viewing in the webcast and posted in the investor section of our website at XXIICentury.com under the events subheading. We hope these slides will serve as a framework for management's prepared remarks, reinforce key takeaways, and provide additional transparency and insight into our business, strategy, and objectives. Also, those of you joining by webcast can submit questions through the online interface, which we may include during the Q&A session of today's call, time permitting. Before we begin, some of the statements made today are forward-looking. Forward-looking statements are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in our annual quarterly, and other reports filed with the SEC. During this call, we may also discuss non-GAAP financial measures, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation, and amortization as adjusted for certain non-cash and non-operating expenses. For more details on these measures, please refer to our press release issued earlier today. And with that, I'll turn the call over to Jim, beginning from slide three.

Thanks, May, and good morning, everyone. Helps you smoke less. This was the shot heard around the tobacco world on December 23rd as the FDA authorized the first and only MRTPs ever given to combustible cigarettes for our VLN products. And then added the clinical evidence-based claim helps you smoke less as a requirement on every single package. These authorizations and claims are all exclusive to NASDAQ traded XXII. Let me just unpack that for a second. After 20 years in development and 10 years in clinical trials, exceeding even pharmaceutical timelines, the FDA chose to specifically highlight in its authorization that the extensive scientific data shows VLN reduced nicotine content cigarettes helps you smoke less. The addition of the helps you smoke less claim means that every time an adult smoker goes to the store to get a pack of cigarettes, sitting on the shelf right next to the other premium cigarette brands will be a pack of our VLN staring them in the face with a statement, helps you smoke less, printed boldly right on the front of the package. We took a collaborative, patient, and thoughtful approach to our interactions with FDA and could not have asked for a better result. We believe that Helps You Smoke Less will be a paradigm shift going forward in the $80 billion U.S. tobacco market and the almost $800 billion global market. I also want to be very clear. This team has had correct assumptions and delivered on all of our commitments to date. We're now moving to deliver on our commitment with a successful pilot and national launch and also deliver on our commitment for a successful international launch. Thriving that effort is an incredible VLN team that has successfully executed this type of branded specialty launch, such as with Natural American Spirit, gaining market share and creating extraordinary value. You're already seeing some of their early results of that effort in our pilot detail, but they're just getting started. By the end of this month, we expect to go live with our first sales of VLN at more than 150 Circle K stores across Metro Chicago. This pilot will enable us to test and optimize our marketing and point of sale programs to reach adult smokers and let them know we have a product to help them smoke less. From there, we have the opportunity to roll out more than 7,000 Circle K stores nationwide. as well as other regional and national trade partners that we will announce as competitive environment allows. This is an efficient, low-cost, and far-reaching national launch strategy in line with our current balance sheet. Because of the Helps You Smoke Less claim and the unique appeal of ELN, we don't need hundreds of millions of dollars for a brand launch. We just need good partners who are joining us in the mission to help you smoke less. With hundreds of issued, pending, and licensed patents and an IP moat around our reduced nicotine tobacco plants and biosynthesis processes, in fact, a moat that Big Tobacco has said would take decades and $20 billion to replicate, we are very well positioned to consider licensing our technology to those who want to join us in the fight to reduce the harm caused by smoking. But it just doesn't stop there. I also want to acknowledge the increased momentum for the proposed menthol ban in combustible nicotine cigarettes, policy that could leave our reduced nicotine cigarette as the only authorized menthol cigarette on the market as a critical off-ramp to current menthol smokers. The FDA is moving swiftly and has already sent a proposed rule to prohibit menthol cigarettes to the OMB. Whether you think about the $80 billion U.S. market or the $800 billion global market, where we are also moving ahead with our first international sales by shipping to South Korea later this month, just capturing even a few points of market share over whatever timeframe you want to use as transformative to 22nd century. I'll stop here and let Mike fill in some of the details on our pilot program. Then I'll briefly discuss our hemp cannabis and hops franchise actions with you. But I cannot be more excited about 2022 and the future for 22nd century.