22nd Century Group, Inc

Welcome to the 22nd Century Group's first quarter 2022 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 would like to turn the call over to May Kuo, Director of Communications and Investor Relations. Thank you. Please go ahead.

Thank you, Donna. Good morning and welcome to 22nd Century's First Quarter Earnings Conference Call. Joining me today are Jim Misch, our Chief Executive Officer, Mike Zirker, 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 first quarter of 2022. 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 investors 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. 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, Mae. Good morning, everyone, and happy Cinco de Mayo. As you know, 22nd Century is focused on advanced plant biotechnology to improve human health. This morning, we'll provide an update across our three franchises, reduced nicotine tobacco, hemp cannabis, and hops. Based on recent activity, we will focus on tobacco, but we remain highly confident of the significant opportunities in all three of these franchises that will generate substantial growth and value for the company. Of course, let's begin with an update on the pilot launch of BLM, the first and only modified risk tobacco product approved by the FDA. It's still early, but the pilot is going extremely well. We're absolutely thrilled that VLN is on the shelves at our Circle K pilot locations in Chicago, giving smokers for the first time ever an FDA-authorized tobacco cigarette with 95% less nicotine designed specifically to help them smoke less. Our Circle K pilot is designed to refine our marketing to maximize trial, repeat purchase, and advocacy as we're ready for national launch. But bear in mind, we very well may accelerate and expand to additional markets prior to completion of a pilot. This is even more compelling now that the FDA has advanced its proposed rulemaking banning menthol as a characterizing flavor in cigarettes. The rule includes a process that specifically highlights reduced nicotine menthol cigarettes as an example of a product that would be exempted from the rule. We believe that VLN menthol king would be the only menthol cigarette left on the market under this role and a cornerstone of the FDA's policy providing menthol smokers a critical off ramp as the rule takes effects. This is a $24 billion total addressable market and exactly as the FDA indicated in our MRTP authorization in December. All this is favorably impacting our strategic partner discussions. Further, we do not expect to wait for the rule to take full effect to see the benefit. VLN menthol king is already selling very well on our Chicago pilot, as menthol smokers are showing strong interest. The FDA's addition of the helps you smoke less claim to our MRTP authorization has been a significant win, as it helps smokers immediately understand why VLN is important. Having that direct science-based claim on our packaging means that every time a smoker goes to the store to buy a pack of cigarettes, our VLN signage and the VLN packs on the shelf prominently remind them exactly why they should buy our product instead of the highly addictive alternatives. And this is an audience looking for solutions. Seventy percent of adult smokers want to quit but haven't succeeded with current products even after six, ten, or even more quit attempts. That's the norm today, and we will change it. The VLN science shows that it can help smokers to take control of their nicotine consumption and help to break the addiction cycle that so many smokers have found impossible to escape. Smokers now have a choice that will help them to smoke less rather than reinforcing their nicotine addiction as every other tobacco product does. Shifting to slide four, the launch of VLN opens up the doors to growth and strategic partnerships the 22nd century has never seen before. We now have a premium-priced, highly disruptive FDA-authorized products on store shelves. Whether we are talking about the $80 billion U.S. tobacco market, a $24 billion menthol market, or the $800 billion global market, capturing even a very small part of these markets will be transformative to the 22nd century. It's important to remember that this process is not new to our team. Our VLN team has successfully executed this type of branded specialty launch before. most notably with natural American spirit garnering significant market share and creating extraordinary value worldwide. Of course, we will always implement ways to accelerate this growth. Building from our Chicago pilot in 150 Circle K stores, we will then roll out to their 7,000 stores nationwide, as well as other regional and national channel partners, and even additional international markets beyond South Korea, where we made our first shipment in Q1. I'll stop there and let Mike fill in some of the details of our pilot program and launch market. Then I'll briefly discuss our hemp cannabis and hops franchise actions with you. But sincerely, I could not be more excited about 22nd century, 2022, and the future of the company. Mike?