Good day, ladies and gentlemen, welcome to the 22nd Century Group fourth quarter and year-end results conference call. At this time, all lines are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Thursday, March 9th, 2023. I would now like to turn the conference over to Matt Kreps, Investor Relations for 22nd Century. Please go ahead. Good morning, welcome to 22nd Century Group's fourth quarter results conference call. Joining me today are Jim Mish, CEO, Hugh Kinsman, CFO, and John Miller, President of our Tobacco Business. Earlier today, we issued a press release announcing our results for the fourth quarter and full year 2022. The release, earnings presentation, and 10-K are available in the investors section of our website at xxiicentury.com under the Events subheading. We'll start today's call with prepared remarks from Jim, John, and Hugh before moving into a Q&A session with our research analysts. Given the limited time for today's call, we will focus on commercial advancements driving revenue in our VLN tobacco and GVB hemp cannabis business units. If you have questions about our business that are not addressed on today's call, you are welcome to email investor relations using my contact information provided in today's release. A few reminders about today's call. 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. Also during today's call, we may also discuss non-GAAP financial measures, including adjusted EBITDA, which we define as earnings before interest, tax, 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. With that, I'll turn the call over to Jim, beginning on slide three. Thanks, Matt. Good morning, everyone. The fourth quarter and really all of 2022 were transformative for 22nd Century as we advanced on an aggressive commercial rollout of VLN reduced nicotine content cigarettes and accelerated revenue and margin growth opportunities with our hemp cannabis business unit. The benefits of those activities are only just beginning to show in the first quarter and will become more and more evident and as 2023 progresses and as we transform from an R&D company into a truly commercial entity. Our exceptional Chicago pilot results laid the groundwork for an aggressive 2023 multi-state VLN launch program. The pilot clearly showed that adult smokers are willing to switch brands to VLN to help them smoke less. John's gonna tell you why we are so confident in this. Those results are bringing major retail chains to our door, wanting to carry VLN. We have established distributor relationships with the top tobacco and C-store distributors serving national and regional-level chains that will achieve our goal of up to 18 states by the end of 2023. GVB volumes have continued to scale as we confirmed our dominant share position in the hemp-derived ingredients market. We recently launched an industry first, CDMO plus distribution category management distribution model, and submitted an application to FDA to provide plant-derived APIs to the growing pharmaceutical trial industry centered around CBD-based molecules. The November fire at our Grass Valley facility has actually strengthened our industry position by fully meeting our revenue target even after the fire, continued to build volumes, and putting in place plans to come back even stronger with our new facilities. I'll talk more about that later on in the discussion. Perhaps most importantly to those of you on this call, we are confirming a clear path to cash positive operations, inclusive of corporate overhead in both our VLN and hemp cannabis business units. This is a first for this company. You' ve been asking for it, in slide four summarizes how we get to cash positive. This update includes both corporate overhead allocation and adjustments for the fire in Grass Valley, among other updates. VLN now has relationships in place with Core-Mark, Eby-Brown, and a growing funnel of top regional and national distributors that will enable us to launch hundreds or thousands of stores across multiple states with the top retail chains. Our initial example of 18 states represents up to 600 million cartons sold per year and provides a clear path to cash positive in early 2024. Again, John is gonna detail this math for you. In hemp cannabis, we still intend to hit cash positive 2024, driven by the continued acceleration of consumer demand for CBD-derived products, improved operating results, such as our Prineville crude extraction facility, and an industry first fully verticalized solution with top customers and consumer CBD brands seeking to centralize with GVB's ingredients, manufacturing, and now distribution. I'll talk more about that as we get back into the hemp cannabis business unit after John. That's a good point to let John dive into the incredible work his teams are doing in our tobacco business unit. John? Thanks, Jim, and good morning, everyone. We are moving rapidly to bring an incredibly disruptive product to market. Starting from slide six and where we were in 2022, the Chicago pilot with Circle K confirmed exceptional interest from adult smokers in our VLN reduced nicotine cigarettes, most of whom have repeatedly tried and failed to quit using traditional methods. VLN offers a new tool to reduce their smoking that is easy to understand and has been proven effective in clinical studies. Moving from the pilot, we expanded sales in Illinois and added Colorado, where the MRTP state excise tax structure provides a favorable financial incentive. We also announced launch plans in Arizona, New Mexico and Utah. We began with non-traditional distributors, Eagle Rock and Creager Mercantile in Colorado, and both organizations have been excellent partners to 22nd Century, Circle K, and Smoker Friendly. As our launch plans took shape, other major retailers wanted access to VLN, but wanted to use their current delivery systems through traditional, local, and national scale distribution networks. It quickly became apparent that we would have to develop these local, regional, club, and national distributor accounts ahead of schedule. Slide seven demonstrates the power of our focused action over the last 100 days. We have created a distribution network that includes the largest c-store distributor, Core-Mark, and we are in the last stage of signing the number two national distributor. Additionally, we have developed a group of regional, local, and club accounts to distribute VLN. We piloted with the number two c-store chain in the country and are in the final stages of signing the number one c-store chain in the nation. We also have a growing list of top 10 regional retailers, plus four military bases in the sales funnel. We were active in two states and announced three more. We just announced today plans to enter the three largest cigarette states, California, Texas, and Florida, launching as soon as the agreements that I just mentioned are finalized in the next few weeks. We are also announcing two more international tests in Switzerland and Japan. In summary, we're as close as we could be, short of naming these new partners and ready to go with a rollout that massively expands our retail footprint with national scale distribution partners and within the largest and most important cigarette markets. This is just the starting point for VLN. Now turning to slide eight, you can see what this enhanced programming enables. We have announced eight states, including the top four markets. We've dramatically expanded distribution with national and retail, excuse me, national and regional leaders in the c-store ecosystem and have begun to announce the first of many new retail partners in our pipeline, including the largest c-store chains and distributors. As 2022 came to an end, VLN was available in almost 500 stores. Less than three months later, we have the ability to launch in hundreds of new stores at a time, enabling us to achieve our goal of up to 18 states by the end of the year. Our top retail partners alone operate thousands of stores in our targeted states, plus regional chains such as Texas-based CEFCO, where we expect to launch approximately 100 stores in the near future. Our pipeline is full of many exciting national and regional opportunities, and we look forward to adding new partners to logos on this slide as we move through the year. Perhaps most importantly, the states announced to this date represent 240 million cartons of annual cigarette sales. Slide nine shows we need only a fraction of that volume to hit our goal of becoming cash flow positive. The exceptional pilot results in Chicago confirmed our pathway to achieving one share point in the category. We focused late in the year on large scale distribution channels based on demand from several national retailers. We can now launch entire chains across multiple states well earlier than we had originally expected. The highlighted 18 states represent more than 600 million cartons of potential volume. We won't be on every corner or on every shelf in these states, which is okay. After the scale-up investment process this year to be cash flow positive, we just need to achieve a sales run rate of approximately 1.2 million cartons per year, and we are well on this trajectory. On slide 10, I know our international efforts are also important for many, particularly after New Zealand enacted its national policy allowing only reduced nicotine content cigarettes to be sold starting in a little over two years. We have committed to grow enough seed to supply the entire New Zealand tobacco market with reduced nicotine tobacco, about 2 billion sticks. Whether it's our product, our seeds, or our tobacco, we are working closely with local leaders to support their efforts. We are also planning to expand our programs in South Korea and launch pilots in Japan and Switzerland with more detail to follow. For me on slide 11, we have talked extensively about the federal regulations, including a proposed ban on menthol products and a reduced nicotine content mandate, both of which are moving closer to reality, having been made a clear priority by both the FDA and the Biden administration. We believe that our VLN Menthol King cigarettes could be the only combustible menthol cigarette on the market exempt from the federal menthol ban. State and local bans only add fuel to fire for federal action, which we believe is the best path forward for true tobacco harm reduction. Even more, the science shows that a national reduced nicotine mandate, such as the approach taken by New Zealand, whether through federal regulations or any of more than the 100 bills introduced this year at the state and local level, would help all smokers more easily quit or migrate to less toxic products. We currently have the only product that meets this standard with the clinical data to back it. I'll now pass you back to Jim for an update on our hemp cannabis franchise. Jim? Thanks, John. Look, it's been an amazing year for tobacco progress. You know, teeing up a transformative opportunity to get the business unit to cash flow positive and well beyond. Let's turn to slide 13 as we discuss how we intend to do the same for hemp cannabis on an even faster timeline. GVB is the market leader in North America for the manufacturing of hemp-derived active ingredients and finished products, servicing the consumer packaged goods, nutraceutical, and pharmaceutical industries with a broad global footprint, now selling 100,000 kg of cannabinoid-rich hemp extracts in 2022 and growing. Volumes have accelerated in fourth quarter and into 2023. We had a setback in our original cash positive plans due to the November Grass Valley fire, which primarily impacted margin even though we maintained all customer deliveries and exceeded our revenue target for the fourth quarter. We responded aggressively and plan to achieve cash positive operations regardless in 2024 with a combination of scale and operating enhancement. I'll go into more detail. What truly sets GVB apart, though, is our complete vertically integrated control from plant receptor science to ingredients to finished goods, and now even retail category management. This is what we have built, this is what we have been building it for, and here's why we have been building it. Slide 14 covers the assets underpinning our fully integrated ingredient manufacturing chain. This starts with a world-class extraction facility in Prineville, Oregon, with an expected output capacity of 15,000 kg per month by the end of 2023. As this facility scales, it will displace a majority of our third-party crude purchases in the market. We're replacing our distillate and isolate production capacity from the November Grass Valley fire, which has temporarily injected a lot of one-time costs into our year-end results. We are fortunate to have a strong balance sheet and insurance coverage to recover fully and even build back a far superior campus long term for both economic efficiency and scalability. It will be an absolute center of excellence in the cannabis hemp world. From there, our 40,000 sq ft Las Vegas manufacturing site can produce an extensive variety of white label products for our consumer product customers. This capability will leverage our VLN market sales and distribution teams for the new CDMO+D agreement, which I'll cover shortly. Again, I'll repeat, this is an accelerant with the VLN team, not a distraction. A tremendous amount of synergies. We've also opened new facilities in Europe and acquired RXP in the U.K. to create a strong footprint for landed ingredient sales in the higher margin European market and access to the emerging food and nutraceuticals market in the U.K. Finally, we have filed a DMF to allow our CBD isolate to be used by companies conducting clinical trials with the FDA, supplying the multi-billion dollar pharmaceutical industry. These clinical trials allow immediate revenue. These are not long-term revenues that would take five to seven years to develop, but they start very quickly due to the clinical trial volumes that have to go out even as we speak. Slide 15 provides a more complete update on Grass Valley. First and foremost, a reminder that thankfully all of our employees were safely extracted from the situation and are doing well. Next, we were still able to source ingredients, certify them to our standards and supply our customers and with delivered products in the fourth quarter. In fact, volumes actually increased sequentially by almost 75% to 47,000 kg, and we hit our revenue goal. That volume growth is continuing into 2023, with 20,000 kg already shipped in January. We are seeing a shortage of raw hemp in the marketplace as the market grows. This provides a premium to our ability to source and supply consistently. We are standing up an interim facility in Prineville for distillate and isolate production, which will enable margin recovery as 2023 progresses, gets us to cash flow positive, and then builds a comprehensive campus that will support greater economic efficiency and scalability than our original Grass Valley site could have enabled. We're also working directly with the governor's office in Oregon, as well as their state economic development agency, for key incentives. Slide 16 details a new CDMO plus retail channel management model we are pioneering with several top consumer brands in the cannabis space. We should announce our cornerstone partnership very soon. This model leverages an exclusive license from the brand to GVB to source ingredients, manufacture, and ultimately distribute to the retail shelf. There's no other way to say this, but this is a transformative opportunity for revenue, scale, and profit expansion in the cannabis hemp business unit. By verticalizing our capabilities, it offers a key solution to established brands looking for turnkey solutions and world-class CPG distribution expertise. It also enables us to further leverage our VLN sales team and channel and place products with retailers seeking innovative, high velocity, high margin, small footprint consumer CBD products. Just one or two of these deals would be transformative to the revenue scale, and we are excited to move forward on several opportunities. Moving to slide 17, our position in the higher margin European market has also greatly improved. Our Netherlands warehouse facility supports faster delivery to European customers and a landed cost inclusive of import tariffs and other duties to more than $3 billion and growing market. Our RXP acquisition brings more than 1,200 novel food applications, securities, and GVB's technical data and ingredients. These applications form the core of food, beverage, and nutraceutical products that are intended for the U.K. market and provide an exciting pathway for GVB to play a massive consumer food and beverage marketplace as a provider of high-quality ingredients through large global footprint accounts. We believe the U.S. market will go the same direction when the FDA establishes its new role, specific to the emerging food nutraceutical market, which is distinct from our current growing consumer hemp business lines. It's incremental to that. Bringing it all together on slide 18, the cash positive hemp cannabis operations. First, we continue to execute on operating performance enhancement, resume in-house production, and bring our bulk crude extraction online for additional margin gain as we scale revenue. Second, our new vertical distribution agreements kick off a new growth channel, placing top consumer brand CBD products at retail sites seeking new high-velocity products to meet rapidly expanding consumer demand for CBD products. Just a return to normal operating parameters, coupled with our organic growth and new CDMO+D contract opportunities, can get us to cash positive by first half 2024 as it stands today, if not earlier. We also have longer-term opportunities with our FDA Drug Master File that opens up large adjacent market with notable pricing premiums, plus a new set of FDA guidelines specific to the food nutraceutical markets in the U.S., opens another adjacent channel for sales of our ingredients and CDMO capabilities with customers who will demand precisely calibrated, repeatable, and reliable ingredient solutions. Finally, a quick note on hops. Our third plant science franchise leveraging our extensive alkaloid capabilities. We are developing new biotechnology tools and molecular techniques to accelerate the breeding of unique traits and new top genetics. In early 2022, we expanded our research agreement with KeyGene to identify specific traits which, if appropriately engineered, could benefit consumers of hop products in both the beer and nutraceutical industries. I want to give an update that's clear that we are making significant progress to lock down what I had termed in the past as the final technological milestone, and we'll then be able to go into detail as soon as the IP is filed on this work. With that, let me turn it over to Hugh to discuss the financials. Hugh? Thank you, Jim, and good morning to everyone. Starting off on slide 20 with fourth-quarter financial results. Net sales increased 141% quarter-over-quarter to $19.2 million, reflecting the addition of GVB revenue and increased unit sales for CMO manufacturing. We continue to experience strong customer demand for both our tobacco and hemp cannabis products, including higher CMO sales volume and increased unit sales of our hemp cannabis bulk ingredients. Gross profit decreased slightly quarter-over-quarter to -$646,000, reflecting lower margin sales mix for CMO manufacturing, combined with the impact of the Grass Valley fire. I'll explain gross profit further on slides 21 and 22. Net sales for fiscal year 2022 increased 101%, $52.1 million, again reflecting the addition of GVB and higher CMO unit sales. Gross profit decreased slightly year over year to $1.2 million as a result of the lower margin CMO sales mix as well as the Grass Valley fire. Moving to slide 21, tobacco revenue for the fourth quarter increased $10 million from $7.9 million, an increase of 27%. Gross profit margin on tobacco sales decreased slightly to -$44,000, reflecting increased unit sales of our lower-margin flavored cigars. We expect gross profit margin to improve going forward with the accelerated launch of VLN. Moving to slide 22. Hemp cannabis revenue for the fourth quarter grew 37%, $9.3 million from $6.8 million, due to continued strong customer demand for the company's bulk ingredient products. Despite the Grass Valley fire, fourth quarter hemp cannabis revenue was 18% higher than prior quarter due to the company's thorough contingency planning and strong customer relationships. Gross margin decreased to -$602,000, again reflecting the impact of the Grass Valley fire. Gross margin will continue to improve as we build back our extraction capabilities this year. The hemp cannabis business is expected to have full restoration of its extraction facilities by Q1 2024. Slide 23 describes our recently completed $21 million senior debt facility. The new credit facility will fund increased working capital needs, reflecting significant growth in both VLN and hemp cannabis compliance. Working capital needs are increasing rapidly due to the multiple national-scale distribution partnerships requesting VLN stock, as well as consumer demand for GVB bulk ingredients and CDMO services. Some of our credit facility terms are three years with no amortization in year 1% and 2% monthly amortization thereafter. The cash interest rate is 6%, and this fully includes the 5% original issue discount. Last for me, slide 24, you'll see a few key highlights from our balance sheet. Of note, the total assets of more than $150 million includes $50 million of goodwill and intangibles from the GVB acquisition. The strength of our balance sheet includes quarter-end cap of $21 million, which does not include the additional proceeds from new credit facility or the insurance proceeds of $5 million received to date from the fire. We expect additional insurance proceeds to be received in 2023 as well. 22nd Century's cash requirements are anticipated decrease, reflecting higher sales volume for VLN products through fiscal year 2023 and continued organic growth of hemp cannabis operations. In fact, 22nd Century is on pace to becoming a cash flow positive company in fiscal year 2024 due to the investments we are now making to meet growing consumer demand for both VLN and hemp cannabis products. I'll now pass you back to Jim. Thank you. What we're really saying here is that we have been working several years to position ourselves to move from an R&D company into a commercial company. This is the year of the transformation, and we continue to build significant momentum. We are leveraging our VLN demand and aggressive multi-state launch with major distribution that supports regional and national c-store customers. You can then launch hundreds of stores at a time. Our GVB volumes are growing rapidly in the U.S. and Europe, and our new fully integrated CDMO+D arrangement provides a new industry model for centralizing top branded products with 22nd Century from ingredient to shelf. Steady execution on these targets moves our VLN and hemp cannabis units into cash positives. Again, that is inclusive of corporate overhead allocations as we mature and become that commercial entity. With that, Michelle, please open the call for questions. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press the star followed by the one on your touch- tone phone. You will hear a three-tone prompt acknowledging your request. Should you wish to decline from the polling process, please press the star followed by the two. If you're using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Aaron Grey, Alliance Global Partners. Please go ahead. Hi, good morning, thank you for the questions. First question for me. Just want to get a little bit more color in terms of the VLN launch and, you know, how that's trending in some of the legacy markets. Maybe if we could just touch on, you know, Chicago. Yeah. Good morning, Aaron. This is John. You know, we continue to see results that are very positive for us. All of the results that we get are now driving our plans moving forward. The results we've gotten through the initial pilot, the consumer feedback we've received, the consumer testing we've done, all is talking about the product performing the way we want, which is again, driving our path forward. In terms of what we see in the legacy markets, that is the key driver of how we developed out the plans moving forward. That's the key driver on how we've established our relationships with the big national distributors and then obviously expansion into retail. These things just take a little bit of time. You know, we. As I said, you know, in my talk previously, we had launched with, you know, Smoker Friendly in Circle K with Eagle Rock and Creager Mercantile as a distribution network. It became quite apparent that we had to go into more traditional distributors as well. All three of those paths are continuing forward. As I said, you know, in the discussion about our pipeline, the second quarter is going to be as we really start seeing the retail distribution happen. Okay, great. Appreciate that color there. Second question for me, towards the hemp CBD. Obviously news earlier this month or this year from the FDA taking it back to Congress in terms of the regulation. Just would love to get some color in terms of how you believe the impact it would have for you guys. Seems like the industry will kinda stay in its current state in the interim, might not have some of the bigger CPG operators come into the space. How do you think that positions you guys? Sounds pretty bullish in terms of where you see yourself in the space. Any color you think that might have in terms of the FDA taking it back to Congress and how that might have an impact for you guys in terms of the industry? Thank you. Yeah, sure. I'll pick that one up, Aaron. I think the way you need to think about 22nd Century is our core business thus far is focused on what we call the gray market. This is the market exists today. It's growing 20%-25%. We're dominant in that and both from an ingredients basis and on a CDMO basis. That really is disconnected from, you know, the FDA activity. We've been saying we fully expect FDA to establish a safety threshold limit for CBD. We had counted on the fact that they're gonna have to go to Congress at some point, and the sooner the better to get that established. What that really does is simply draw a box around, in particular the nutraceutical market in order to bring in the, you know, the multinational accounts. Again, our, you know, our current growth, and a lot of our projected growth is in this, gray market. The additional, you know, market that would be enabled by that final FDA, authorization or safety limit into nutraceutical space is massive already and, you know, kind of icing on that cake. It's a very good sign for us that the FDA has progressed to Congress. We do anticipate that the Congress will act as part of the farm bill, renewal in the fall. Then we'll set the stage for FDA to finalize that safety threshold limit, and that will then open up really the Pan Atlantic nutraceuticals market. A very healthy growth, in order to drive towards cash positive just with this gray market. The FDA will finalize these things. They're moving in that direction. These are steps that needed to be taken, and what that really opens up is this multinational nutraceutical business, which will then mean explosive growth for CBD as an ingredient, and as it finds its, you know, way onto the shelves of, you know, of the major brands. We have counted on this on our very long-term growth, not the shorter mid-term growth, and we continue to see that as trending in the right direction. How we've positioned ourselves to be dominant in that market as it opens up is to secure the DMF, is to make sure that our quality and our compliance and our certifications are pharmaceutical grade, which would absolutely be required. Then we'll be in the dominant position, the lead position as an ingredient supplier, and then ultimately as a CDMO to help with those types of formulations as well. We like the way it's going. You know, it would have been, it would have been a shock if FDA simply had acted on it without going to Congress. It could have happened. We weren't exactly counting on it. They've made this move, and it's really a box around that nutraceutical space. Okay, thanks. I appreciate that color. I'll jump back in the queue. Thank you. The next question comes from Vivien Azer of TD Cowen. Please go ahead. Hi. Good morning. Good morning, Vivien. Thank you very much for all the incremental detail around the VLN aspirations over the next year or two. You noted that the state-level expansion could be up to 18. Can you talk about some of the key KPIs that we should be monitoring over the course of 2023 to understand whether you could hit the upper end of that aspiration? Thank you. Good morning, Vivien. The 18 states, which we actually laid out, you know, previous to this call even, the KPI drivers are going to be, you know, primarily through the chain account business. We know for this brand that the chains are where we'll be starting, which, you know, again, totally makes sense because when you look at, you know, when you look at the national volume, you know, over 65% of the volume goes through the chains. That makes sense. That's a key driver for us right there is, you know, we've got to hit the chains, Which again then ties into the distribution strategy, you know, of having the national distribution network set up as well. You know, for us, it's going to be the chains in terms of the retailers, the distributors, and those partnerships We're just building them on a daily basis. What we're really finding out, which is critical, and it kind of ties back into Aaron's last question about the product, right? The product is meeting all of the consumer preferences and needs. It truly gets back to a previous conversation we've had about awareness, education, trial, advocacy, and repeat purchase. Those are gonna be the drivers. There's no doubt in my mind this product performs. There's no doubt in my mind that when people understand what this product does, what it's meant for, they're educated about it, that it is definitely a solution for that 60%-70% of the 35 million smokers who are looking for a way to either lower their nicotine intake, smoke less or, you know, or whatever their personal situation is, those things are met. Now it becomes scale into the stores, you know, awareness through the marketing campaigns, and all of that is set to go. Those are our key. I hope that answers your question, Vivien, but that's really what we're looking at, you know. The product itself we know works. We've got it priced now correctly, we think, in the category in terms of its position. You know, we understand how to promote it. Now it's getting the word out and making sure people understand about it. Yeah, absolutely. That is helpful. I appreciate the disclosure in the 10-K around your fourth quarter carton volume of 1,354. Obviously, it's a far cry from the 1.2 million cartons. You know, from our modeling standpoint, how should we think about average ASPs? Right. If we're gonna start driving our model based on the carton disclosure that you guys are talking about, you know, can you just remind us about the price mix differential for the VLN cigarettes that are being sold to consumers and have been, like, commercialized for consumer use versus the legacy cartons that were being sold for research purposes? Thank you. A couple questions there, Vivien, just to clarify. Are you looking at the average sales price at retail? No. Like, so you guys disclosed, your cartons sold in your 10-K, so we can calculate an average AMP based on your segment-level revenues. There's a mix component that I think everyone should be cognizant of, right? There should be a difference in terms of the manufacturer revenue that you guys are realizing for cartons that you're commercializing now for consumer views versus the legacy VLN business where those, sticks were going more towards research. Understood. Yeah. I mean, moving forward, you know, our projection obviously is significantly higher this year, with what we have with these 18 states. I think Hugh is probably going to be taking you through the actual number of cartons in the projection, which again, you know, is significantly increased, especially with these 18 states. The way we're looking at this in our projections moving forward, you know, we talked a little bit about the cash flow positive number, right? To get to $1.2 million, how does that look? When you look at these addressable markets within the 18 states that we're going to be, selling and marketing the products in, it's a small fraction. Even just in the channel specific approach to the business, you know, if. Then you kind of back into the numbers. If you're looking at those 18 states represent 56% of the total volume, the chains represent 65% of the volume within those states, just as a simple math. There's a clear pathway there to get to 1.2 million cartons. I hope that answers your question. Understood. Yep, a little bit. A little bit. Thank you. Okay. I can clarify it offline then. Thank you. The next question comes from Alex Fuhrman of Craig-Hallum Capital Group. Please go ahead. Hi, guys. Thanks very much for taking my question. Would love to hear about how some of the Southwest markets have been scaling up with the VLN launch relative to the original pilot stores in Chicago. As you get ready to launch in much bigger markets like California and Texas, what do you think you're gonna be doing differently as you approach those bigger markets? Right. Good morning, Alex. If you look at the difference in the markets, right? In Chicago, we had a 150 store test. We tested a lot of different, predominantly retail communication pieces. As we've moved into Colorado, some of the variables there, we had MRTP pricing, right? How do we, you know, how do we utilize that? We had two great partners with Circle K and Smoker Friendly who have, you know, again, tested some of the retail components, some of the pricing components. We've definitely aligned on where we are pricing. Now that we're going to start getting the scale throughout our markets, now we're going to start really introducing much more of the, you know, what I would call enhanced marketing programs, right? It gets back to that awareness, education, trial piece. How do we get large groups of people with a much larger set of stores to understand where you can buy the product, be aware of the product, educated about the benefits of the product, get the communication out? That's really what this is going to allow us to do now, is really start upping the cadence and the frequency of our marketing actions. Again, I get back to the product is, you know, the product has been successful in terms of what it delivers. Now it's getting to the consumer at a much larger scale. That'll be the differences of what you're gonna see, Alex. Okay, that's really helpful. Thanks. Can you walk us through a little bit more of the math of how you get to be cash flow positive in 2024? I mean, I imagine on both sides of the business, you're gonna be continuing to grow working capital in 2024, given the growth trajectory that you're on and the need for inventory, as well as marketing expenses, presumably on the tobacco side. You know, is it primarily going to be, you know, just significant revenue coming in? Or is there gonna be less of a need to spend on marketing or have working capital? Just any kind of, you know, metrics that can help us to size up that for you. Yeah. I have it. Really the key, I think, is, you know, maybe if we just break it into sort of two business units. If you look at tobacco, it's really about, when we hit cash flow positive post corporate overhead, what are the unit sales required to reach that point? It's around, you know, call 250,000-300,000 units quarterly. So call, you know, anywhere from 1.1-1.2 million annualized, as Jim referred to. At that point, you know, you've really had enough density in the markets, and it's really not that significant of a in-market percentage, and we can discuss that further offline. What it, what it does is basically give you enough critical volume to cover all discretionary sales, marketing, and distribution costs. At that point, after, you know, overhead allocation, you're basically, you know, cash flow breakeven for that division. To John's point, we have significant momentum on the distribution channel right now to have, you know, a clear line of sight, when we can achieve that, and it looks like, you know, it would be clearly in 2024. For the hemp cannabis business unit, it really is a function of executing again on our organic growth strategy, both domestic and overseas in Europe, which we have a lot of, yeah, significant, pent-up demand for our bulk ingredient product base there. I felt very confident about that. If you were to combine that with some of the new incremental revenue streams we're starting to create, particularly on the distribution side, as Jim had mentioned, you know, you have a clear path when you start to get to anywhere from, I would say, $55 million-$60 million in revenue to be, again, free cash flow breakeven, free cash flow positive, as a business unit post corporate overhead as well. Great. That is really helpful. Thank you very much. Absolutely. Thank you. The next question comes from Brian Wright, Roth MKM. Please go ahead. Thanks. Good morning. just wanted to get, you know, follow up on starting with the question as far as the rollout in the big states, Texas, California, and Florida, and just how to think about how that gets prioritized. Is it your call? Is it, you know, your customer's call? Then just, you know, we had a sense of how the marketing kind of worked, the programs worked in the stores, in the pilot, but I haven't gotten that kind of level of kind of visibility or just like. I know it's still early stages, but just kinda how you're thinking about that would be helpful. Sure. Yes. Brian, in terms of the cadence, you know, a lot of the rollout strategies and as we had laid out, you know, those 18 states were our primary targets. We knew that there were customers that were going to go, like we said, go where we go. There's a reason why we wanna be in these states. Customers understood the message we were talking about, the reasons why, and they also have some of their own goals that they're, you know, they're looking at. Between the two organizations is how some of these distribution agreements came about. A s you recall, you know, California wasn't on the list during our last call, because of what's happening there right now, we know there's a huge opportunity for VLN. Some of our customers saw that. It's sort of the best way to put it is it's both of the organizations working together to determine, you know, what are the best markets to move into, what are some of the environmental factors within those markets that would drive volume? What are they seeing in their business? What do we know through our research? That's been some of the, what you're seeing through the cadence through the states. What you're going to be able to see now more as we have more scale and scope of stores, is an enhanced marketing program around most of those levers that we can pull. Obviously, we have some constraints where cigarette companies still looked at, you know, by FTC and FDA. What we know is we know what to do at retail, and now we're starting to do the enhanced marketing programs as well. I'd rather not give you specific examples because of, you know, it's not what I want to put out for some of our competitors to know as well. The enhanced marketing programs and those levers that we can pull are what you're going to see now in these bigger markets with more stores. Okay. Thank you. Then just wanted to follow up. I just wanted to make sure I'm paraphrasing the answer on the cash flow. So basically, you're saying corporate allocation also includes working capital needs as far as you're getting to cash flow positive by each of the segments. There's no, you know, additional kind of adjusted adjustments that are also being considered that we need to be aware of? No, Brian, that's absolutely correct. That includes changes in working capital. I mean, if we were to have, you know, even substantial accelerated growth, we'd be at that point, be generating enough in internally generate cash and probably from a credit facility to have enough availability to meet incremental working capital needs. Yeah, we would be, you know, for all safe and purposes, free cash flow breakeven at those milestones. Great. Thank you so much. Thank you. Our last question comes from Jim McIlree of Dawson James. Please go ahead. Yeah, thank you. Good morning. Hugh, on your slide 23, you talked about working capital for the multiple national scale VLN stocking. Can you walk us through how that works? I mean, I'm assuming there's a, you know, an inventory fill that you need to satisfy. How does that work? Is that a, you know, cartons per, you know, market share target or, you know, how is it useful to look at that working capital commitment? Yeah, it's really, it's for modeling purposes, Jim, probably is more on the inventory and accounts receivable side, you know, so call it the core, you know, short-term working capital needs with the growth. You know, it's safe to sort of take it as a percentage of sales right now, initially. Obviously, it'll decline as a percentage over time just because of, you know, operating leverage. Our expectation is, you know, we're building out the inventory obviously for VLN. We're doing the same, you know, for hemp cannabis as well. We have most of the short-term inventory needs satisfied, albeit, you know, there'll be more incremental pressure on working capital for inventory going into the latter part of this year, just with the scale. A lot of it will become now just basically financing our receivables, I should say both on VLN and hemp cannabis. We don't necessarily need short-term AR availability for our contract manufacturers since most of that is paid upfront or paid upon delivery. It really is, as VLN grows and the hemp cannabis grows, we'll definitely need to fund finance the AR, which can be modeled as a percentage of revenue for now. I think the incremental inventory working capital needs will be, you know, we'll go past sort of our base case, you know, our steady-state inventory levels and need more cash for inventory working capital in the second half of the year. On that point, it seems like as you continue to grow, you'll still need working capital investments, but it'll be at a diminishing rate relative to the markets you enter. Is there. That's exactly. When does that hump happen or when's that peak of that hump, if that question makes sense to you? No, that makes complete sense. I think we get full benefit of the operating leverage, if you will, probably in Q4 2023, certainly in Q1 2024. At that point, we've reached kind of a steady state, particularly because of the contribution margin in both those verticals, both VLN and hemp cannabis. At that point, we would be, you know, have significantly diminished working capital cash needs at that point. Got it. Since you're looking at 1.2 million cartons on an annualized basis, let's call it by the middle of 2024, you would still be short of that at the end of 2023 to that kind of, steady-state working capital needs. Is that? That's. Correct? That's fair. Yeah. Okay. The incremental capital need from end of 2023 to mid 2024 is not as significant as the initial phase of, you know, ramp during the fiscal year 2023, which is why we have to- Right. Right. Right. Got that. Okay. Yeah. Lastly, are there any specific capital equipment needs that you have in order to get the hemp cannabis business up and running to the state that you want it to be at. Is there anything significant we should be looking for? We have modeled approximately $8 million, mostly for the restoration of our facilities, as Jim discussed. Our interim extraction capabilities before we start working towards a sort of a circle of excellence plant, if you will. It probably won't be as much. I think if you're assuming CapEx for hemp cannabis at $8 million, it's more than enough for a full restoration of the extraction capabilities this year and working steadily towards putting a new center of excellence in place. Got it. After that, it's, you know, whatever the business is growing and. Exactly. Okay. Fantastic. Thanks a lot. Talk to you guys later. Thank you. Thank you. There are no further questions at this time. I will turn the call back to Jim Mish for closing remarks. Thank you, Michelle, and thanks to everyone for joining us today. You know, my closing comments are that we are laser-focused on the business fundamentals for the company to achieve sustainable cash positive in both business units for the long term. We've been working hard for this. Our long term is now within 12- 18 months. Stay tuned for our next updates as we continue to expand our VLN launch in the U.S. and move ahead on our opportunities with GVB. I'll be attending the Roth Conference next week. If you'd like to arrange a meeting, please reach out to our investor relations team noted on the press release. Again, thank you for your time, and we really look forward to updating you in the near future. Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your-