Good day, thank you for standing by. Thank you for joining the Nanophase fourth quarter 2022 financial conference call. At this time, all participants are in a listen- only mode. After presentation, we will have a question- and- answer session. If you would like to ask a question, please press star one one on your telephone. Please be reminded that this conference is being recorded. Before we begin, please keep in mind the words believes, expects, anticipates, plans, forecasts, and similar expressions are intended to identify forward-looking statements. Statements contained in this news release that are not historical facts are forward-looking statements that are made pursuant to the safe harbors provision of the Private Securities Litigation Reform Act of 1995. These statements reflect the company's current beliefs. A number of important factors could cause actual results for future periods to differ materially from those expressed in this news release. These important factors include, without limitation, a decision of the customer to cancel a purchase order or supply agreement, demand for and acceptance of the company's personal care ingredients, advanced materials, and formulated products. Changes in development and distribution relationships. The impact of competitive products and technology. Possible disruptions in commercial activity occasioned by public health issues, terrorist activity and armed conflict, and other risks indicated in the company's filings with the Securities and Exchange Commission. Nanophase undertakes no obligation to update or revise these forward-looking statements to reflect new events or uncertainties. I would now like to turn the conference over to Jess Jankowski, CEO. Please go ahead. Thank you, Lisa. Good morning to all of those listening live, welcome to those who choose to listen later online. We're glad you could join us for our fourth quarter and full year 2022 investor call. Today's discussion will cover current results, the current state of the business, and some of our plans for 2023. Kevin Cureton, our Chief Operating Officer, will be joining me on the call today as well. I'm gonna start this call a little differently than I have in the past. After my initial remarks, we'll do a much deeper dive into our financials. The good news is that we continue to see volume growth within our Solésence portfolio. We continue to add new customers, we continue to innovate. You may have seen our recent Fast Company award, where we were recognized as one of the most innovative companies in beauty of 2023. We won the two spot on the list for our innovations in inclusive SPF infused beauty that protects all skin tones from sun damage. This is the most recent award we've received relating to our Solésence products, which came atop two other major awards within the beauty industry in 2022. As a company, we found the sweet spot in a key and growing market with products where our core technologies and knowledge represent a commercial advantage. We've been able to successfully bring this to bear, evidenced by the rapid and broad growth we've seen with Solésence. Today, we wanna bring you up to speed on what our results mean for the future and why we're so optimistic. I've said in the past, maybe ad nauseam to some of you, that the hardest thing about a start-up and getting new technology into the market is in developing products that markets want. We're there. We can sell everything we can make, more than we can make, and we've been able to accomplish this growth on a shoestring. The nature of our financing over the past few years has been a blessing and a curse. We grew faster using fewer resources than most people thought was possible. With Solésence, we went from less than $2 million in sales in 2019 to more than $23 million in sales in 2022. We added $21 million in new revenue through new customers in new markets in three years. We've been entrepreneurial in leveraging knowledge, willpower, working capital, and grit to get where we are. The downside of all of this has been that a $40 million-$50 million company requires a much higher degree of administration and proceduralization than we were built for entering 2022. Clearly, we had results in the second half of the year that were disappointing. Some of the notable expense side issues we're contending with have been one-time events and some relating directly to our planned infrastructure expansion, which weighed us down financially as we work to improve on our operational execution. I wanna be clear, we're not going to grow the company further at the expense of being profitable. We're in a temporary situation that we're confident we can fix. Let's go to some specifics. Unless identified otherwise, all numbers will be stated in approximate terms. Our Q4 2022 revenue was $8.3 million versus $7.4 million for the same period last year, up 12%. Full year 2022 revenue was up 27% at $37.3 million, compared with then record revenue of $29.5 million for the previous year. For the fourth quarter of 2022, we had a net loss of almost $2 million, or $0.04 per share. This was up a $1.5 million, or $0.03 per share compared to Q4 of 2021. This has had a material impact on our annual results. For the full year 2022, we had a net loss of $2.6 million or $0.05 per share. The story of this drastic change merits more discussion before I move on. I'll address it in two parts. First, in terms of gross profit impact, which is where we've struggled the most and where our efforts to improve execution are focused. Second, in operating expenses, where we also invested in infrastructure but saw some one-time events that had an outsized impact. For gross profit, Q4 is typically a weaker quarter in our business and isn't representative of the full year. I'm just gonna highlight the year-over-year numbers. For all of 2022, we've operated three production facilities, all in Illinois, one in Burr Ridge, one in Romeoville, and our newest and largest facility in Bolingbrook. All in, this represents approximately 320,000 sq ft of space, the largest being the 260,000 sq ft facility in Bolingbrook. While to reduce the near-term burden, we are subletting about 1/3 of the Bolingbrook space. Our schedule for upfitting the building was some months behind, we were only able to begin moving production in Q4 of 2022. We were able to run some of our production there late in 2022 and finish the transfer of all of our Solésence filling and assembly late in Q1 of 2023. As a result of all these factors, this space has had several impacts on our costs, mainly our costs of goods. Our facilities costs are up $1.1 million year-over-year, almost all of which is charged to manufacturing. This accounted for about a 3% reduction in 2023 gross margin. Another critical factor was direct labor or DL, the labor it takes to make the product, which was significantly higher than we expected it to be in 2022. Our product revenue was up 25% last year, but our direct labor was up over 40%. This trend was in the opposite direction of what we expected, given more automation and higher production volumes, both of which should have increased our labor efficiency. As a percentage of sales, direct labor expanded 2% year-over-year. A good number of these inefficiencies related to our facility issues as well. As timing stretched out on our move, the gains we expected to achieve through a more linear and less compressed filling and assembly layout obviously didn't come to fruition in 2022. We had additional labor costs relating to this move as we had to maintain multiple lines in two different facilities while we pushed to get Bolingbrook up and running. Now, we accomplished all of this while we continued to produce at record levels. Lastly, the time gonna move and getting the building ready for production has delayed our ability to get a much higher degree of automation in place. Most of this automation has already been paid for with the bulk of the installation beginning in Q1 of 2023. All of these factors caused our expected direct labor numbers per dollar of sales to balloon year-over-year. The combination of the extra time it took us to move, along with the related postponement of the planned gains from a new layout and the resulting delay in adding automation contributed to this large margin hit. Had we operated at 2021 labor efficiencies, which none of us were proud of, we would have seen another 2% pickup in gross profit last year. We expect to see a significant reduction in the labor cost per dollar of sales in 2023, with more of this happening in the second and third quarter than in the first. Total 2023 direct labor should come in closer to 2021 direct labor than that of last year, which could lead to another 5%-6% of improvement in gross margin. We made investments in 2022 that are gonna bear fruit, not just in supporting more growth, but also in pulling costs out of existing production. Our supply chain team has been expanded and reorganized. Our warehouse is operating well, and we're continuing to improve upon that, which leads to greater throughput as well as reductions in costs. This has helped us put our inventory issues behind us, having remediated our material control weakness during 2022. Another benefit we expect to see in 2023 gross profit, beginning in Q1, has been a series of price increases we were able to implement, generally effective in Q1, to offset increases in materials costs and labor costs we saw in 2022. Kevin will cover this more during his comments. We were forced to be much more reactive than proactive in our pricing during 2022, as we have been in many areas. This was due to prioritizing growth, which we believe is critical in these types of quickly growing markets over beefing up our lean overhead model. In terms of the expansion of our operating expenses, we need to separate investment from some of the singular costs we were hit with in 2022. We had two unfortunate events happen in Q3 and Q4 of 2022, the bulk of which hit Q4. We were the victim of cyber theft, which resulted in a loss of $660,000. We recognized $440,000 in legal fees relating to our ongoing litigation with BASF, which they initiated in Q3 of 2022. 2022 also saw a few other things that aren't indicative of ongoing operations. A year-over-year increase in non-cash expense of $460,000 for stock compensation relating to the accounting treatment for stock options, which were granted in December of 2021 at a modern high in stock price. We also recognized $180,000 in accrued G&A consulting expense. This related to our application for an Employee Retention Credit under the CARES Act. If we do not receive this credit from the U.S. Treasury, the expense will be reversed, and no cash will have changed hands. Finally, we recognized about $300,000 in bad debt expense, which between aggressive changes in our credit policies, along with additional resources to follow up on late payments, we expect to drop significantly going forward. Taken together, these items made up over $2 million, almost 80% of our loss for 2022. Most of these expenses are things that we don't expect to be structural ongoing, but we do know there will be more legal fees due to our litigation with BASF. Regarding stock comp expense, it's a non-cash expense that's directly related to the price of our stock. Looking at the areas in operating expenses at the more structural changes we made to the business, let's start with R&D. R&D expenses, which in our company include engineering, were up $800,000 year-over-year. About 40% of this related to adding a few more engineers to support the plant expansion, equipment installation, and throughput optimization. The engineering increases are directly related to improving both production costs and throughput in the near term. They will pay for themselves this year and help us to support future growth more efficiently, avoiding some of the snarls of 2022. The balance of the increase was in more traditional R&D and was split in two roughly equal parts. First, we rounded out staffing in our R&D group to support the growing new product development and commercialization process. This includes the collaborative work required to coordinate this complex process with their counterparts at the brands we work with. This is becoming a strength of our company. When added to our strong formulation team, along with our long history making these regulated products, we are viewed as an excellent partner. This is true both for up-and-coming brands as well as brands that are adding sun care to their offerings and haven't the internal experience to approach a heavily regulated market on their own. This is something that will help us to ship more products to meet our strong demand. On the product development side, we'll also be able to continue to innovate and update our products to keep us competitive in a marketplace that requires innovation for there to be growth. In the second half, the other piece of the increase in R&D expenses represent something Kevin and I are very focused on, our continued investment in intellectual property. This spending is relating to legal fees for new patent applications, shepherding those applications through various patent offices in the U.S. and internationally, and maintaining all of our patents, as well as staff costs and testing costs. Nothing is more important to our brand partners than bringing safe, effective, and innovative technology to the market through Solésence. Let's discuss a key example of the doors our technology can open. In early 2023, we received a Notice of Allowance by the U.S. Patent and Trademark Office for our Kleair technology, which is part of the Active Stress Defense technology platform offered exclusively through Solésence. The Notice of Allowance covers Kleair with a series of claims that are highly sought after in skin health and cosmetic applications. They are for use as a method of protecting skin from light damage. This is in our traditional wheelhouse. Another claim is in using Kleair as a method of suppressing lipid peroxidation, which I know is a mouthful. Think of it as a way to reduce the formation of free radicals and the damage they can do to the human body internally and externally. Another is a method of preventing or reducing lines and wrinkles on skin. As a method of preventing loss of skin elasticity. As a method of preventing thinning of the skin. Lastly, the use of our Kleair technology as a method of protecting antioxidants in formulations. This technology represents a broad group of features that are marketable in a series of skin health and cosmetics applications. It'll also provide the company with substantial added intellectual property protection in the health-infused beauty product space in the United States. This patent further builds upon the company's existing IP in skin health, including our original Active Stress Defense technology patent, which was issued in March 2020. In addition, as we continue to drive innovation in skin health for all on a global scale, we received additional allowances for our plant-based UV absorber technology in Australia, an area with the highest incidence of skin cancer on a per capita basis, along with some in Israel. We expect to be greeted with similar success as we roll this out to other countries as well. Like mineral-based technology, plant-based technology represents our leadership in innovating marketable next-generation technologies that benefit the health of end consumers. The investment in intellectual property is ongoing. It has to be. We're actively protecting our existing products, which also means protecting our brand partners and our position in the marketplace. We're also continuing to develop and protect new technology. Much of this has not yet been introduced to any of our markets, but we expect it to be part of our next generation of product offerings. Moving to SG&A expenses, these were up $3.5 million to $7.5 million for 2022. Of this increase, $1.3 million, or more than 1/3, related to the cyber theft, stock comp expense, and accrued consulting fees. These were some of the expected non-recurring costs mentioned earlier. As mentioned, we saw $440,000 in legal fees relating to our ongoing litigation with BASF in 2022. This will be an ongoing expense in 2023 as we work our way through the process. We feel that our case is a good one. We'll also pursue a negotiated settlement with the goal of resolving this issue as quickly as is practical and beneficial to our company. As I mentioned, we recognized about $300,000 in bad debt expense, which with the additional resources we've added to our sales and customer experience team, we expect to control much better going forward. These items make up more than half of the year-over-year increase in SG&A. The balance of the increase is made up of staffing increases, making up about 20% of the total. Trade shows, exhibitions and marketing, software costs, and a spike in our business insurance related to our growth. It's worth mentioning that the growth in Solésence hasn't only been in dollar volume, but our unit volume from incoming inventory through sales has expanded exponentially. We went from having 10 SKUs or product codes to having and managing hundreds of them in a few years. We also went from having thousands of items in inventory to millions of items. Our transaction volume throughout the company is a multiple of what it was a few years ago. Of course, with this complexity and the managerial challenges related to it, we've had to work on this. Company-wide, as we work to absorb all the additional production volume, the new building, and the learning curves of a series of new people, frequently in newly established roles, there was too much happening managed by too few people, and not enough germane experience in place entering 2022 to keep it all balanced efficiently. We added some critical senior leadership in sales, marketing, and business development, as well as in accounting and finance function. We also strengthened our customer experience team to help with the big increases in unit volume in total customers, new products, and new product launches. All of these things, whether in supply chain, engineering, R&D, or SG&A, amount not only to an investment in our future, but also to allowing us to better control expenses and increase throughput. We also spent about $2.8 million in capital equipment in 2022, following $1.9 million in purchases during 2021. This investment represents much of the spending required to support the automation that we expect to profit from in 2023. I'd like to introduce Kevin Cureton, our Chief Operating Officer, to discuss progress in these strategic areas and their drivers in greater detail. Kevin? Thanks, Jess. As always, I would like to begin by thanking our team for their effort in helping fulfill our mission in enhancing people's lives through the world's best skincare products, as we also work tirelessly toward creating a more valuable company for our shareholders. There is no doubt that we have work to do to improve our performance relative to becoming a customer-centric, world-class manufacturer. Many of the foundational investments, as Jess has already noted, needed to achieve this have been made. Our improvement now comes down to having the right personnel and procedures in place, both of which we have been working to address. We remain certain in our ability to achieve this result. We also have the certainty in what this past year has affirmed, that our company is not just world-class, but a world leader in the creation, formulation, and marketing of skincare and color cosmetics infused with SPF, and clearly a transformative organization in our market. We believe this has solidified our opportunity to create a significant business that will also generate world-class shareholder value and remain very confident in our ability to achieve this. With all of the above in mind today, I would like to share with you some of the fundamentals around our growth business, Solésence, that we hope will also build your certainty in the same outcome. To begin with, as Jess has already noted, our product revenue growth year- over- year is approximately 25%. I should also mention here, however, that delays from receiving packaging from brand partners during the second half of the year reduced revenue by about $2 million. The growth in revenue that we did experience was from a combination of revenue from existing brand partners, which grew around 17% year-over-year, and new brand partners. Growth as a share of revenue from these new brand partners, which we define as companies in their first year of purchases from us, grew by over 50%. The number of new brand partners we added in 2022 nearly doubled as compared to the number of brand partners we added in 2021. I know many of you have asked in the past about the disclosure of the names of these brand partners. We are limited in what we can reveal, excuse me, as most of our brand partners prefer to keep our business relationship confidential. However, a small set of clients have allowed us to mention them publicly. These companies include our longest standing and still one of our largest clients, Colorescience, and other business segment and industry leaders such as Credo, BLOOMEFFECTS, KINLÒ, and Relevant. In addition to these clients, we can also say that our brand partners also include multi-million dollar dermatology companies, a couple of those, and a couple of leading clean makeup brands. Each of these clients are influential in changing how consumers buy and use skincare and color cosmetics, and we are honored to be an instrumental part on how they succeed in serving the market. Coming back to our metrics, while achieving the growth noted earlier, we were also able to increase our average price per unit in 2022 by almost 9% above 2021's level. This is a result of a combination of price increases and product mix. The net increase in price per unit, despite being experienced, despite having experienced significant increases in raw materials and transportation costs, helped us achieve materials margins in 2022 equal to those in 2021. This is very positive as it turned around a trend at mid-year 2022 when our material margin was lower than in 2021. It also helps position us well for a stronger growth profit performance in 2023 than we have achieved in either of the prior years or really any of the prior years in our Solésence business. All of these metrics, these key performance indicators, are an affirmation of the fundamental strength of our business. They also help affirm our ability to grow our top line while we our investments and resources to improving overall profitability. I'll now turn it back over to Jess for some closing comments. Jess? Thanks, Kevin. Since last year, we've executed on a series of strategic goals designed to make Nanophase and Solésence more capable, larger, and ultimately more profitable. We leased a new 260,000 sq ft building that will allow us to consolidate a series of operations to enhance our throughput and our cost efficiency. While the timetable to get this up and running has stretched out, all of our warehousing and all of our filling and assembly is now in that building. We will enhance these operations further this year and consolidate other operations further. We also closed on new financing to support our growing working capital demands, providing $6 million more in available capital. During early 2022, we filled two newly created leadership roles on our commercial team, added our controller and a new supply chain leader in Q3, added key support staff across our manufacturing, supply chain, and customer service teams. We continued to develop new technology with our powerhouse Kleair patent among the latest, but not the last of our impressive technology offerings. These changes have resulted in stronger relationships with our brand partners and wider acceptance in our markets as a top innovator. Now we expect our operational improvements to quickly follow suit and help position us as the profitable and exciting growth company we have always envisioned. We still have more to do, more cost to reduce, and more efficiencies to gain, we're in a much stronger position in this regard than we have been since the massive growth we've seen through Solésence. We're expecting the Solésence business to grow by more than 30% in 2023, and we're expecting that growth to be more profitable and to be accomplished with higher efficiency. 2022 reflected much of the investment we needed to pave the way for this and more. Our goal is to build a company that will grow to a $100 million+ in sales and do it over the next few years. Although we know that most of our investors listen to the webcast or review the transcript after the live call, we'd like to invite those participating in today's call to ask any questions you may have or to share your comments. Lisa, would you please begin the Q&A session? Yes, thank you. At this time, if you would like to ask a question, please press star one one on your telephone. One moment while we compile the Q&A roster. Okay, our first call will be coming from John Henderson of KPG. Your line is open. Morning. Thanks for the call. A lot to digest. Maybe we can just kinda get to the most salient points. Number one, any estimate on when you might be able to kinda return to profitability this year? Sure, John. We're thinking we should be able to do it in Q1. Obviously, timing is everything and we have a Q1 is a back-loaded quarter. We are estimating we'll be profitable for the year and that we should be able to see the beginnings of that in the beginning of the year and then increase as we go through the year. Excellent. You know, I'm sure you can't really comment too much about the BASF suit, but obviously, you know, it's of interest, you know, very important for you guys. Can you kinda maybe just generally sketch out kind of a timeline, you know, of, you know, I saw kind of the commentary in the annual report. It might be helpful just to kind of, you know, sketch out like how it's gonna work. You know, you guys are now in discovery phase. Like, you know, obviously if you can't kinda come to some sort of agreement, like what's the best estimate for, you know, kind of when it would reach to the trial phase? Like, you know, if you were to kind of not be successful, what would be the timeline to kind of, you know, challenge the case, et cetera? Any commentary would be very welcome. Sure. Well, I'm not a, I'm not a lawyer, although I feel more and more like one every day, in this process. I'd say that this summer we will be continuing with discovery and, you know, at some point, depositions going into fall. I would think that, you know, likelihood, if we end up going to trial, be late in the year or earlier the following. It's a, I'm sure we'd have some meetings with the judge this year and then some later. It's one of those things that I think the time we spend on it and the resources waxes and wanes, and it'll keep going. I also think that both parties are interested in bringing it to some resolution in a, in a positive way so that those things are ongoing as well. That's, you know, if we ended up going all the way through the process and having to contest what we viewed as an unfair result, I don't imagine that would be till sometime next year. Again, it's difficult to tell because there are a lot of, a lot of things that go back and forth in it. On the other, you know, the API side of the business, I mean, any outlook there in terms of like, you know, is it kind of still... You know, it looks like they did $1.5 million in Q4 pass. I mean, is it still, you know, different divisions, you know, obviously kind of going over the business? Is have you seen a shift in terms of expectations, you know, from them in 2023? Well, I'll In a minute, I'll pass that over to Kevin. He's got a more direct relationship with the commercial side of the business. I will say that both the people that I'm primarily dealing with and the people that Kevin's team is primarily dealing with, being there on the commercial side, we're on more the contractual side, have made every effort to segregate kind of the two conversations. We haven't seen changes relative to commercial behavior or response to the market, being impacted by the suit. In the suit, the very first thing that was in there was that they were not interested in canceling or terminating the contract. With that, I'd give it over to Kevin for a little more color on how the, what the outlook is to the extent we know for APIs this year. Yeah. Yeah. Thanks, Jess. Yeah, John, the thing we can say at this point is that we don't see anything materially different than last year. We don't necessarily expect it to be a significant up or a significant down. You know, I will say that in general, we usually have more clarity on that as we enter Q2. Just the nature of the ingredients business is sort of a second half of the year business, believe it or not. A lot of their volume is being built for what's called the filling season, that happens in, you know, late Q3, early Q4. We'll get more clarity in terms of what's going on here in another few weeks. Okay, great. Thanks, guys. Thank you. Thank you for the question. One moment while we prepare for the next question. The next question is coming from James Lieberman of Revere. Excuse me. Your line is open. Thank you very much. I'm very impressed by the transformation of the company, understanding that very few companies actually manage this kind of growth in this period of time, so cost effectively, even with all of the challenges you've had to address. That's my beginning statement. Regarding the applications that you're working on for other skincare claims, you were talking about skin elasticity and other features, I couldn't catch them all. Do each of those claims require some kind of FDA study, or are you able to make these sort of statements independent as a matter of just the market that you're in? Jess, would you want me to- Yeah. I'm sorry. Go ahead. Go ahead. Jess and I are in two different locations today, sorry about that. Jim, thanks for your comments. Just to be clear, one of the advantages relative to being in this UV business, the UV protection business, is that we inherently, based upon the FDA, deny a lot of those claims, particularly because of UVA protection, which is inherent to the type of work that we do and the type of products we create. We won't have to do separate studies from an FDA standpoint for those specific claims related to Kleair. We will, as part of the work that we would do, in supporting the claims that our clients would wanna make to consumers, do some additional studies, and we do those on an ongoing basis. Those are less formal studies than what you might think of as an FDA- related study. I mean, is it something as broad-based, and I'm a layperson in this, but is it something as broad-based that if you can protect the skin from UV damage, you ought inherently get... the skin gains health in other areas? Which are the areas you were talking about? Is it almost like an equation of sorts? It's a combination of those, yes. You first protect from UV. You second have to address free radicals, which is a unique combination of what our technology does. Then you want to make sure that UV protection is in the UVA space. Sorry to get kind of technical, but those are sort of the things that pile on top of each other to enable the claims that we're able to make. Okay. Thank you. Congratulations again on the work you're getting. I like the narrative very much. Thank you. Thank you. Jim, I think, I would add to that the consumer testing that Kevin was talking about, those things are frequently, those costs are frequently either shared or absorbed by our partners as well. There are ways that we work to mitigate the impact of those things. Thank you for that comment. Sure. Thank you. Again, if you would like to ask a question, please press star one one on your telephone. One moment for the next question. The next question is coming from Rand Kay of RKA. Your line is open. Good morning, gentlemen. Hi, Rand. This is, I would appreciate your answer to this. I listened to that you guys were adding a lot of staff in a variety of areas, customer service, so on and so forth, a little bit in supply chain. I really didn't hear very much in the way of additions of staff, of significant staff, to operations. My question is this, is that historically, the company has really manifested a tradition of trial and error as a methodology for, you know, getting through this new product phase. My question to you, Kevin, is what has changed in your specific mindset, that you are moving away from trial and error to something else, more of a been there, done that? Why, for example, have you not hired any significant operational expertise to help guide you through that? Thanks, Rand. That's a, certainly a, solid question there. Let me first start by saying a couple things on the hiring. We actually did hire people in manufacturing. We are now in the process of adding to that. Where we are looking now, and very actively, quite honestly, and I wanna be careful that I don't overstate what we're actually doing or give away what we're doing for a lot of different reasons. We expect to have a very strong experienced leader in our manufacturing area as part of our company within the next quarter. That's been something that we've strived to do. We've had some wins and some losses there through the last year. Now it shouldn't be understated quite honestly, that, you know, what we've done in supply chain. Now we're really excited about the possibilities of the leaders that we'll be able to bring in to help us take steps forward that we need to take to realize the profitability that we are seeking to realize. That is something we've been seeking to do. We are in a good place now, I think, to realize that. Okay. Thank you. You're welcome. Thank you. One moment while we prepare for the next question. Our next question is coming from Tony Ruben of Swift. Your line is open. Hi. Good morning, gentlemen. This is a, kind of a series of different questions. You talked about the BASF issue, and I understand obviously there's a confidentiality there, but what I didn't hear is what I sometimes hear on these calls, that, management is highly confident that we will prevail or the claim has no merit. You know, I was wondering if you could address that. Different question is, Kevin, you mentioned that $2 million of sales were basically deferred from Q4 into Q1 because of, nothing to do with the company, supply chain issue from the packaging supplier. Jess mentioned that you expect to be profitable in Q1. Notwithstanding that timing difference then, are you expecting to be not only profitable in the full year, but in Q2, as well? Along similar lines, when would we expect to see normalized gross margins? In other words, when will this operational nightmare end? I mean, we've had now five consecutive quarters of operational disappointment. You know, certainly multiple locations and installing equipment is a part of an excuse. Honestly, the scope of the problem is far greater than that. It's an execution issue. The question is: when will we see normalized gross margins, and what would be those targeted steady-state gross margins? Finally, either in the press release or on the calls, historically, or at least over the last few quarters, you've released backlog. I didn't recall seeing backlog in the press release or in the comments. Is there a comment or a statement that you'd like to add with respect to backlog and/or expected net sales increases in 2023? I know that's a mouthful, and those are in a few different directions, but that's what I wanted to ask. Thank you, gentlemen. Sure. Well, I wrote them all down, so we'll work our way through these. The first one regarding our confidence relative to BASF, we're confident that our claims are good, and that our understanding of the situation is that we should come out on top. That being said, all these things take a long time, and they're costly. What we really wanna do is reach a point where our confidence level in a resolution, whether that's a negotiated resolution or that's something that a judge has to decide, you know, whichever one is better for the company is where we'd be heading. We are confident in that. The issues, if you look in the 10-K, which are voluminous, and we've had, and our lawyers draft those, essentially, we've had a series of procedural things that have gone through, but nothing of substance relative to any of the claims. That's, that's how I would view that. On the backlog question, to jump forward, and Kevin can speak to it more, but I think we'll see Solésence, you know, as I mentioned, should be growing by about 30% this year. We have backlog. We had, I don't have the number off the top of my head. And I say this 'cause I've got a blended set of numbers between what we've built and shipped in Q1 and what's still remaining in backlog. We just received another several billion dollars in orders this week. We are, I think looking in a pretty good position there, particularly when it comes to Solésence business. We don't have orders beyond what we're required to have from BASF at this point, which is always difficult to project. Last year, we had orders for about a year in advance, which made that number bigger earlier in the year. We're in the, you know, in terms of build or build and not shipped, I'm trying to think, we're probably at least $24 million-$25 million, maybe more for this year. The other two items, I think we'll tag-team these. Relative to your question about your profitability in Q1 and how that rolls out due to the deferred revenue, et cetera, you know, Q1 will not be a home run quarter as it goes. It's for a series of reasons, and we'll get into it more when we can get the analysis done for the financials, but we are expecting to be profitable for the year. Normalized gross margins, I think, yes, we've had an execution issue, and we've talked about that. Kevin could weigh in on that, on the series of things that we are doing to remediate that and get to the point where we're at a stronger level. I will say to piggyback on what he said regarding Rand's question about adding senior manufacturing leadership that we've had fits and starts last year in doing that, which, as you know, sometimes take you a step backwards versus moving you a step forward when whatever your decisions you make end up not being, not playing out as well as they should. That's been some of the drag on our system, is that we thought we would have some of this dealt with by end of Q2, early Q3 last year, and it just didn't work out to our satisfaction. With that, I'd hand it over to Kevin for a minute to talk about your gross margin question, particularly and execution issues, et cetera. Yeah. Thanks, Tony, and Jess. Tony, I wasn't as good as Jess in getting all your questions, but I do have the general sense of your question. I do think that you're correct. We have ultimately at a place where execution is really the name of the game. It's the point that we are saying and we all believe all the way through our management team and the board and everyone who... We've got a number of people from our company listening to this call, so everyone who's listening to this call that works for our company as well. That is our focus. You know, resolution of the space management, you know, without having to see and, you know, we'll work on everyone understanding the space management issue a little bit better. The nature of this business is it's a lot of what I refer to as empty wear, and it means that you need space to actually operate efficiently. We didn't have it, so we weren't operating efficiently for a good share of 2022. We now have eliminated that excuse. That isn't any longer an excuse that we can make nor wanna make. We are moving forward appropriately to capitalize on the improvement of efficiencies, and specifically in terms of direct labor expense that's associated with having better space utilization and therefore layouts and production efficiency. I may have missed something there, but I will mention on the backlog, yes, Jess was correct in terms of where we are. We're confident in where we are. We actually have orders that are just starting to trickle in for Q3, but they're, you know, multimillion-dollar orders there. We have the combination of what we've shipped and open orders that put us in a position to exceed 2022's revenue, and to do so very in a profitable manner. We won't overstate how profitable that'll be. Think it's better for us to prove it out at this point than to try and overstate that. Hopefully I captured most of your questions. If not, happy to redirect. Yeah. Just to go for the specific. Again, you know, I like I think everybody else on this call, you know, is very happy with the product and the technology and the awards. If you know, add that $2 million that was deferred because of the supply chain issues, you would have had, you know, strong year-over-year growth, both in the quarter and in the year, and it sounds like 2023 is good there. Everything from the hard stuff, as Jess always says, is good. It's, you know, the blocking and tackling where the frustration is. Specific question was, what is your expectation of steady-state gross margin? Yeah. When do you think if you don't achieve steady-state gross margin, you'll achieve, you know, a not chaos or a not transitional gross margin? Is that Q1? Is that Q2? Is that Q3? Because you know, we understand, but, you know, you also wanna temper what your expectations are... Expectations. Against the performance. Correct. Those were kind of the drill-down questions that were left open. Yeah. Yeah. I'll quickly comment that first half of Q... Or excuse me, first half of 2023 should represent a steady state. It is where we are right now, and what we're expecting in terms of the output that we have and the operational efficiencies that we see happening, that the first half, as you take a look at it, should be representative of that. Sustainable beyond that, if that's what you're asking, Tony. Well, no. Yeah. I was just saying, when would you get to a number? Do you wanna put a percentage target out there or a range in margin target? I think that our goals have us north of 30%. It's hard to go a lot further than that given part of what we're trying to do, which is to continue to grow as rapidly as possible. I would say, you know, to Kevin's point about the first half being representative, one thing that, you know, I mentioned that we remediated our material weakness relative to inventory, but it still took us longer than we would have liked to get the inventory at the end of the year resolved. You know, January was a tough month. February is a much better month. We expect March to be better yet. It may not be perfectly representative, but it should be good. I think that's where we'd have to leave it, just based on the fact that, you know, our knowledge is imperfect and we know that we are trying to get a system in place. I mean, Kevin and I and the team here, we've talked about, you know, what we wanna do is be a growth machine where the growth we keep getting fits into a system that yields profit, you know, profitable growth right away. Because I think we all think at this company that if you know, if you had the resources to put more and more into developing product sales, marketing volume, that we could be growing faster and faster. Yet we've hit a point, as all of our shareholders that have commented and internally, where our growth hasn't, you know, there's no point in growing faster and losing money. That's something where I think we think we're not as far from being the other company, which is growing faster and making more money as we grow. It's an industry that, you know, these things are hard, these calls are hard because we all have a much deeper understanding of what's going on, and we're trying to share as much as we can with clarity without too many words. You're in an industry that there's still a nascent quality to these products, and you have to keep innovating and growing because it's really there is no static here. You know, we're not gonna be at the point where, you know, you're making baby powder or something and, you know, you're trying to catch another 2% of the market from somebody else. It's growing, and when it grows, it hits trend. People like the trend. They want more development of the trend. That's kind of our piece of adding the plant-based products to our minerals-based products. You know, a lot of things, I don't think we're gonna be anywhere near what our optimal gross margin can be in 2023 based on the fact that we do wanna keep growing and the investments will be a lot smaller this year on the infrastructure side. Getting that done is clearly critical. Thank you. Welcome. One moment please. It looks as though we have a follow-up from Rand Kay. Obviously, I think the execution issue has been a substantial millstone around your neck and have been very, very concerned about it. My question, though, from the other side of the standpoint is from the financial control standpoint, is that do you feel that your financial control systems, I mean, with the, you know, the fact that we were hacked and et cetera, et cetera, which, you know, it can happen, but do you feel that the financial controls are robust enough and are in place? Do you find them... Because it sounds a little bit like you guys are, you know, doing the tally at the end of the quarter. Mm-hmm. You know, finding out that the numbers have been missed. I'm wondering if you are specifically trying to drive more financial controls into the system from a targeting standpoint. This is a target we need to hit by. This is a human resource or human capital situation we need to have solved. Mm-hmm. You guys are growing, but yet, you know, you need space, you need space, and then all of a sudden, oh my god, we have too much space, we have to sublease it. What mentally or what philosophically inside the organization from a financial control standpoint has changed in your mind? I think a big piece, Rand, is that our board is asking the same questions and demanding a higher degree of responsiveness, which I hate the term responsiveness because it implies that, you know, people aren't doing their jobs, and that's not true. You know, we added our controller, you know, this year, later in Q3. We may need some more assets relative to some of the accounting. I'd break it into two pieces. The financial controls in terms of the safety of the company's assets, I think are in good shape. I think we also are still, to a degree, manhandling some of those things, but at a higher level, which obviously we wanna get away from. I think all of us do spend a little bit more time than we should collecting the data, which is what you're pointing to, in order to, you know, by the time you analyze it becomes historical data versus fresh daily data. We're being pushed. Kevin is doing a good job on getting KPIs that are closer to happening on a daily basis relative to work orders and those things, which is something that has taken us a little bit to get up and running, and it has to do with a lot of the newness and also the turnover we discussed relative to adding a senior manufacturing person to help coordinate all that. That's gonna help. I think analytically we are getting better information a little bit faster. We need to do that yet again, and one of the things that I think as knowing your background as I do, I think that we have certainly struggled from having on the finance and on the accounting and the analysis side, having people fighting to keep a nose above water to such a great extent that you end up doing more processing than you do analyzing. That's something that is a pretty high area of focus this year. I think we're probably going to make some small changes resource-wise there, to try to help that along. I think we've already, with our new controller coming on, you know, we have a cost accounting function and other things that have been absorbed in doing day-to-day operational stuff because this transaction volume has been so crazy. From the top down, tops being me then Kevin, and more top than that being, our entire board, we are looking at a higher and higher level of. Detail is the wrong term. Analysis requirement and pointing to what are the key. I mean, KPI is a term you throw around. What are the key things that we need to improve on in order to have them flow through the P&L and show us our progress? Maybe Kevin could add a little bit of color on some of the things that he's been working on directly, in his team relative to getting some of those things improved as well. Yeah. Thanks, Jess. One comment to address, Rand. Just so it's clear, we actually leased the building that we're in Bolingbrook, and we leased it with the intent to sublease because we had the opportunity from the beginning, from day one, to have a larger space that we ultimately would be able to grow into, and we knew that we would need that amount of space as we start to consolidate facilities and things along those lines. We've not ever had a day where we didn't have this sublease going on since we executed that lease. Just to clarify that point. The other thing that Jess was mentioning related to day in and day out evaluation. The one thing I think I missed from what you were asking earlier is, you know, that what we have done isn't really what I would call trial and error per se, but more growing from within, that we've applied and used teammates that maybe didn't have the experience in doing the work that we were asking them to do, but we allowed them to be able to try and grow into the positions that we were creating as the business was growing. You know, for a little while, that worked nicely. Obviously, we had a pretty meteoric change in our business between 2019 and 2022, and particularly as we went into 2022, we were outsized relative to the experience that our teammates had relative to the challenge that we have. They're awesome folks. I just wanna make sure it's clear that we believe in that team, but we also understand that there's new and additional experience that we need to apply to help manage that team and really get the best out of them. Within the scope of that, what we've been doing is applying some metrics that are very simple for everyone to understand, particularly around labor utilization, since that's been one of our major issues that we're tracking on a day in and day out basis relative to a target that we have. We've seen some nice improvements in comparison to where we were in 2022 to where we are now. We feel like there's more opportunity that's gonna happen there. We've also added some other KPIs, that are important relative to meeting and having satisfied customers, and we're tracking those as well. One, the on time in full, the OTIF, as it's often referred. We do have those types of measures in place. I think as Jess mentioned, the challenge, of course, is that when we grew the business, we also grew all of the transaction volume, and we never really scaled the financial team to support that until, you know, over the last year or so, where we've been able to add the team and then adding our controller to help. There's been a load of effort that has been overwhelming some parts of our organization, but I think we've realized that and we're correcting or taking the actions to correct it as well. Well, gentlemen, here is the kernel of my concern. Okay? For way too long, you know, the commentary's been punctuated with, you know, we were surprised. Okay? I'm afraid that I am still a bit concerned about the mentality about, well, we were light here and we were light there and, you know, we need to put a throw, you know, a few more bodies at it. My concern is that there has not been, okay, the preeminent, been there, done that force in either manufacturing or finance in the company. You know, at this point, I'm comfortable, and I appreciate the fact that you guys are going to do that in operations and manufacturing. The fact that you guys are chasing data from a historical perspective on finances as opposed to putting in, you know, target goals, and mitigating circumstances or mitigating situations to control costs. You know, to kinda hear about it now, is concerning to me. It's just, you know. It's kinda like we're getting it, we're getting it, we haven't quite gotten there. I'm just wondering if, in fact, there is an understanding by both you guys that, you know, the reason we're out there is because we haven't had the expertise and the knowledge base, you know, to drive that from the top down, as opposed to, you know, the percolation mentality of, "Oops, we got a problem here on the lower ranks. Let's, you know, let it percolate it up. Let's let it percolate up to management." I'm just wondering, is there a sense from both of you that, you know, this is an understanding, or am I not seeing it correctly? I guess I would take exception to the comment in terms of just, you know, seeing surprise over and over again. I mean, in some cases, we were thrilled by the growth, and we went into it knowing that we were resource-limited, as we went along. You know, obviously, cash is tight, and I think a chunk of the, a chunk of what we're dealing with now is trying to and we did a big piece of it in 2022, trying to build out the infrastructure on the people side to be able to do more of these things. Certainly, help is always good to have, and certainly on the execution side, we have seen a lot of pain there, and we, you know, woulda, shoulda had a person there earlier than this year. You know, that's a very good point. I think on the finance side, we are in the process of trying to... One of the things that we're trying to do is streamline a lot of processes internally, and all of these things just are difficult to do, you know, when the fire hose is coming at you, and that's really been a big piece of this. I'm cognizant of it. I think our... I think Kevin and our board is cognizant of the fact that we should be further along in the line in some of these areas, but also cognizant of the fact that we did do this on a shoestring, and part of the cost of that was that you're running forward and we hit that point where all of us, many of whom have plenty of expertise, don't have the bandwidth to do what needs to be done, and we're working on that. Yeah. Just to quickly comment, Rand, I think really piggybacking on what Jess said, we do need, and maybe we added it on the commercial side. We did add it on the commercial side faster than we did on the operating side, but we did add an experienced director of supply chain. That's had a material impact. We are about to have that same type of addition in the manufacturing. We do recognize the needs, and we are addressing them. I appreciate that, gentlemen. Thank you. Thank you. Thank you. This concludes today's Q&A session. I would like to turn the call back over to Jess Jankowski for closing remarks. Thank you, Lisa. We've developed some amazing and marketable technologies and have demonstrated the coveted ability to successfully commercialize them. This has been a long road, but we're in a good spot to really capitalize our investments in people, technology, and facilities. We may have gotten there on a shoestring, but taking the next step, getting to be that $100 million company, has required this initial increase in infrastructure investment. We expect to grow our Solésence business by 30% or more this year, and we can expect this company to be built into a $100 million company over the next few years. We've seen improvements in labor costs in Q1 of this year already. Expect that to continue, have a material impact on 2023 results. We are working on the blocking and tackling on the operations side to get that done this year, early this year. We've made our strides in patents and other intellectual property, which is critical. The Fast Company win was a great thing for us. Won't be the first. Wasn't the first, won't be the last. It's important to say we've got a stronger pipeline than we've ever had, which we intend to commercialize and profit from over the next several years. That said, looking for the opportunity to discuss the business with you again in about a month. Appreciate your attention and your support of our exciting company. I have to throw in that on this opening day in Houston, I'm hoping that the Chicago White Sox and all of you have a splendid day. Thank you, everybody. Thank you for your participation on today's conference call. This concludes the event. Everyone, have a good day, and you may all disconnect.