Hello, everyone, and thank you for joining us today. My name is Matt Kreps, Investor Relations for the company, and I'd like to welcome you to 22nd Century Group's Fireside Chat event. Joining me today are Larry Firestone, Chairman and CEO, and Jim McIlree, a covering research analyst at Dawson James Securities, who has agreed to be our host today. We know that many of you have closely watched our news since Larry joined in early December and wanted to have an opportunity to update you today on the considerable progress achieved over the past month and a half. We hope this conversation will help you get to know our new leadership a little better, as well as give you important insights into the continuing work to improve our operating results at 22nd Century Group. We have about 30 minutes today, give or take, and Jim will be asking questions for this event, many of which I am sure are the same questions those of you attending may have. If you have additional questions after the event, please feel free to email Investor Relations. My contact information is on all of our press releases. A few reminders for today's call. Some of the statements made today may be 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 on file with the SEC. Additionally, today's live webcast will be available after the event as a replay using the same link located on our IR website, usually within a couple of hours of the live call end. And with that... Thanks, Matt. Great. Thanks, Matt, and Larry, welcome, and thank you for participating in this. Can I just... Can we just start it off, Larry, give us a little bit about your background and what it is that attracted you to accept the CEO position at 22nd Century? Yeah, you bet. So a little bit about me. I've been doing what I do for 43 years now, and that's working companies through challenging times and situations such as 22nd Century has, and moving out of, you know, challenging times and into the growth phase. So this includes turnarounds, startups, spin-offs, and then getting companies positioned for growth. And that's where the fun is. So I've been CEO or CFO of six public companies. I've been on the board of six public companies and in many industries, but really, all of them include manufacturing. So, and on the consumer products side, I've been in three companies so far, so this would be my fourth. You know, my... You know, when I join a company, my role is really centered around, you know, the people and realizing the potential of the people and the company at the same time. So, unlocking, you know, when we get those two in sync, we unlock the shareholder value that we're all looking for at 22nd Century. What brought me here? Former management actually introduced me to the company, and what I saw here was, you know, a lot of locked up value. And really, focus has been an issue for our company. Both, you know, I would say commercially as well as financial discipline, have been a challenge for the company. So that's really where my head's at, is focusing the company on its core tobacco business and also on the financial makeup of the company so that we can get ourselves to live within our skin and get to cash flow positive and be a self-sustaining company. When you talk about the focus of the company, when you came in, did you accept the GVB sale as a fait accompli, or were you part of that decision-making process in selling GVB? Yeah, the GVB sale was pretty well set up. There were some pieces of it that weren't put together. But when I joined, what I could see is with the span of hemp, cannabis, and tobacco and the way the whole company was put together, we didn't have the chassis, the financial chassis and the operational and the leadership chassis to really put together a you know a combination of the two businesses. They were run separately. And so when I got my head around the you know the divestiture, it made total sense to me. And I think we've you know we've executed the divestiture and gotten ourselves now down to a core business, and we're getting leaner every day. Is there... You talked about focus in your initial remarks. There's also various elements of the tobacco business that have different aspects to them. Is there a focus aspect that you're looking to implement in the tobacco business as well, or are you relatively satisfied with where the company is? Yeah, I think... Probably, the drive there is to push the company and help push the company into areas of the tobacco business where there's a business, where there's, you know, positive gross margin, where there's, you know, a structure of the company that, you know, that can afford itself. So we have, right now, we've got, you know, our VLN is our flagship product, and that's, you know, we've spent years putting that together, and we are the first and the only tobacco company that has FDA authorization for Modified Risk Tobacco Product. That's pretty special, and we've spent a lot of time and a lot of money, have a lot invested in that. So that's a part of the business. We've been in that business now for two years, and that's a part of the business that we need to incubate and continue to grow in the marketplace. We've got some pretty good channel representation there, but, but it's small. It's small and growing. And then supporting that, we've got a contract manufacturing business that we do for other tobacco companies. And that's where we find, you know, areas where we can improve our pricing structure, our cost structure, our margin structure, and use that, I would say, that nucleus of a business to support the rollout of VLN. Do you think that, I know, I know that there's been some thoughts about taking VLN into international markets? Is that really—is that a—is that something the company's contemplating, or is it mostly going to be a domestic business, at least in the short- term? Yeah. For right now, VLN, pardon me, right now, VLN, we're looking at domestic, domestic only at this point. There's some governments out there that are, you know, discussing or have, you know, waved the flag over nicotine reduction and things like that in their, you know, in their regulations. But I think our focus of the company right now is let's get VLN, let's get the brand, VLN, well-known in the market. The U.S. is a very large market we haven't tapped very much of it at all. And so we're gonna continue to march ourself forward in the U.S. And when those big events happen, you know, we've got a flagship product. We've got a premier position in the marketplace, being the only one with an MRTP, and we'll be able to pounce on those opportunities. I don't think we need to stretch ourselves too thin at this point. And also, I think you know, Jim, that you know, our financial resources are such that we can't go be the big fish in the pond, so we have to be very, very disciplined in how we approach the market. I'd like to put a hold on the VLN business for now- Okay. -and come back to it later. But I think, if, if you can talk about the benefit of the GVB sale and how you're looking at debt reduction, with the proceeds from that sale. If you can just, you know, if you could just address your debt position and your strategy for debt reduction, I think that would be helpful. Yeah. So, you know, we started the year 2023 with, you know, just under $22 million in debt owed to JGB. And that was principally brought in, that debt was principally brought in to finance the GVB business. And so, as we sold GVB, there's been a couple of tranches that have come out of that, but as we sold GVB, we structured that with JGB to apply those proceeds against the debt. And so right now, we've taken a twenty, you know, in less than a year, we've taken a $22 million debt instrument down to about $9 million after everything transitions. There's some paper pieces of that as well. And then the insurance claim that we have on the Grass Valley fire while we owned GVB is associated with that debt as well. So that's been assigned to JGB. So once we get the proceeds from that insurance claim, that should clean up the rest of the JGB debt. Or, you know, if there's a negotiation there or some kind of a settlement that's a little less than that, then... But that debt will be very, very small when we're at the end of that transaction. I know it's difficult to predict the exact timing of that insurance settlement, but just, you know, best guess or a range of what you think might be a reasonable time period to look for that settlement? Yeah. I'm saying second half of the year, second half of this year, without a crystal ball. I think things are gonna start to get lively in the back and forth between, you know, us and the insurance company and the courts, you know, probably in the June-July timeframe. And then from there, you know, how does it work its way to, you know, to the final end, I think is what, you know, that's what we're all waiting to see. If things go well, we could see a debt-free company by sometime in the second half, and if you're lucky, maybe sooner. Yeah. There is a, there is a small piece of sub-debt behind the JGB. I believe it's, like, $2.5 million, but so debt free, it'll be down to that, that $2.5 million, and, and then we'll, we'll, we'll take that one on as we go, march forward. Okay. And I think the other aspect of the GVB sale was the reduction in expenses that came about because of that. But there's other expense reduction efforts that you've announced or alluded to in some of your press releases. I was hoping you could be a little bit more expansive about your expense reduction initiatives. Yeah. So, you know, when we closed the GVB deal, which was right before the end of the year, you know, we lifted off that whole chassis of people and cost and that part of the business running, which had, you know, multiple entities within the company. And so then we got ourselves down to the core company, and really, we've taken on, you know, we've brought our P&L up. We, you know, we look at it every week now. And so we're looking at on a pure cost reduction side, we've reduced our headcount, and we're continuing to evaluate areas where we can improve the process and reduce the hands-on work. And that's both above and below the line. We've moved out of company facilities for the shareholders. You know, we used to have our headquarters in Buffalo, New York. We've now moved our headquarters address to our NASCO facility down in North Carolina. So we've moved out of that lease. We're closing down our lab space in Maryland, and we're moving that down to NASCO as well. So, and we've moved to a remote workforce for those that were working in those offices. And so NASCO in North Carolina is gonna become, or has become, the hub of the company. And there's, you know, a monthly toll on the business that, you know, we're lifting out of the current cash flow. And then, with the GVB and 22nd Century business, we had found ourselves to have a lot of contract and professional services advising us, guiding us, all those kind of things, including transactionally related. And so we're canceling professional fees, contractors, professional fees, anywhere where cash is going out and it's not core to the current business. So we're turning off a lot of switches, and we look at our cash really daily. And through these measures, as well as looking at some of the gross margin initiatives, we've been able to extend our cash runway, and we keep doing it. Every week, we keep doing it. So it's been very effective. The team's been very, very good at lining up with, I would say, a new focus on the financial structure of the company and making sure that we drive ourselves to live within our skin. And it sounds like it's an ongoing effort. There's not. It's not like you came in, you've taken the actions and you've stopped, but it's continuing to take place. And it'll continue to continue. This is. It's the world of, you know, not to be cliché, but it's the world of continuous improvement every- Right ... every single day. And the team is now comfortable that there's no big bang that's gonna reset the company, and there's no huge financing that's gonna come in, that we've got to make this on our own and get the company to self-sustain, and that's where the company has to be. If we can just come back to the VLN business or the tobacco business and- Mm-hmm ... and kind of put that in the context of the growth strategy for the company, as well as if you can talk about that, and how that's impacted by the expense reduction that we just talked about. Yeah. So, you know, the highlight for the company is VLN. As I mentioned, you know, we've got a lot of money and a lot of time invested in it. We have unique technology. We have unique tobaccos that we grow, and that we put in, pardon me, into the product itself. And, you know, rolling that out to chains is a slow process, and making sure we have sell-through, and we have to be very, very careful that we don't get too wide, too fast, because supporting, you know, supporting a national rollout, if you will, has got to be done very carefully, especially on our budget. So, you know, but when I look at, you know, financially at the brand, you know, the brand is a good margin maker. It's a good, you know, profitable core for us. It just needs to get bigger and become a bigger piece of our revenue picture. So this year, you know, we've got—we have, and I'm not gonna name the chains, but we've got a couple of chains that are adopting VLN as we go, and we should see our traction begin to pick up. And with, you know, with the anticipation that we'll find ourselves with a national brand that people recognize, and again, we're after, you know, we're after reducing the harm that, you know, regular cigarette tobacco causes on society. As people wanna quit, and they know, and they know that this brand is out there, or reduce their nicotine intake, then we want them to know it's out there and look to us. The contract manufacturing business, I think you indicated you're trying to high grade the margins there. How difficult a chore is that? Well, it's a challenge from two fronts, but one, you know, I'll just take the easy one. One is pricing. So we have some, you know, we have some products that we make for other people, where we frankly need to have a hard discussion and talk about pricing and tell them where it needs to be, you know, for us to be a good supplier to them. And so those, you know, those discussions are actually ongoing right now. We've laid things out, and now we know who we need to go talk to. Pardon me. And then, on the other side, as we look at our internal costs, and, you know, as I mentioned, some headcount reductions, some other cost improvements that we're doing in the factory, when we get either additional volume from other contracts that we can absorb our manufacturing overhead, that lowers the cost point for everything that we do in the factory. So there's some knobs that we turn that, you know, deal both in price and cost and overhead. So, that's, that's what we're looking for. I've set a, I've set a target financial model on the team, and, and so now we're lining up our resources to get to that. I'm not ready to disclose what that target is, but, but it's out there for our team internally. So as we go through this year, it sounds like what we should be looking for would be improvement in the margins in the contract business and expansion on VLN, and, you know, since you're dealing with these large retailers, the timing is somewhat uncertain. But hopefully, we'll see something there over the coming quarters. And anything else in the tobacco business that we should be looking for or aware of as the year progresses? Well, we've got, you know, there's some ancillary opportunities for financial improvement around things like duty drawback that we haven't explored yet. So there's some other nuggets out there, but really, you know, I would say from now until, probably now until the end of the second quarter, it's really getting compact, getting everything nice and tight, so we understand the, you know, you know, I always call it the plumbing. So we understand the plumbing and make sure we know there's no leaks, and then we can go drive into those, you know, into some of those other areas. Just to frame this, when you were talking about coming in and debt reduction, expense reduction, and then growth, it seems like you wanna start with the debt, then the expenses, and then the growth. I mean, can you kind of put it in a timetable for us, where we are in that process? The debt reduction is kind of ongoing, and maybe it's the second half. The expense reduction is ongoing. But for the most part, those levers have been pulled, and now we're focusing on the growth, or are we still a few months away from those growth initiatives? Yeah, that's a great question. So the debt reduction is kind of inorganic. That's gonna come... You know, the big debt reduction is gonna come as a function of the, you know, the insurance claim. So, you know, I really don't have planned anywhere in the cash flow that will take operating cash and, you know, apply that against JGB debt. And so, we've done, you know, I think I've been here six or seven weeks, so we've hit some knobs pretty hard on the cost side, and gotten an understanding of, you know, what has to happen. We haven't implemented it all yet. So I would say we're in a... If we're doing baseball, I would say we're in the third inning on the cost reduction side. It's you know, pretty early. You know, a lot of things are still hitting the table. Plus, we've got you know, I would say, a kind of a complicated situation with respect to our internal financials, and that's our team. Our accounting team is separating the GVB and the 22nd Century, so I'm very focused on the 22nd Century, kind of GVB aside. So third inning on the cost side, and I'd say we're in the first inning on the growth. We are just getting started. I think that that... And that's pretty normal in, I'd say, in my operating style, is to get everyone to understand the financials, and then we start to work the strategies to go take it north. And when you're, you know, when you're dealing with a company that's been here doing what we do for as long as we do, some of the things that, you know, like talking to customers about price increases and things like that, are not normal. You know, they're not what we do every week, so we're shaking things up a little bit. There was some insider buying recently, both you and a member of the board. Mm-hmm. Obviously, there's a lot of reasons why insiders transact in the stock, but I was hoping you could just give us some insight as to what was going on with that. Yeah. So, I mean, for me, personally, I always feel like the management team and the board—you know, we represent the shareholders, you know, all the time. So we have to be in full alignment with them, and when, you know, we've got to have skin in the game. And so, I had a small window at the end of the GVB transaction, and before we got into the year-end, before we went into our quarter-end blackout period, where I could pick up some shares, and so, I did. I think that's the beginning of what I would call taking a position in the company so that I can sit next to the shareholders and, you know, if you will, achieve full alignment with them. I think the board, you know, our board member that jumped in has kind of the same vision, so. But I can't really speak for him. Well, you know, we both came in sort of at the same size and took advantage of that little window that we had. Okay. Those were the questions that I had wanted to explore with you, Larry, and I think we're coming close to our time limit. Is there anything that you would like to add, or any comments to wrap up? Yeah, I think I'd like to just say, I mean, you know, business is a team sport. That's kind of the way I look at it. And our team at 22nd Century has gotten their head around transitioning where we wanna go very, very quickly. So, you know, I'd like to thank them for all their participation and their really stick-to-it-iveness as we've gone into, you know, as I said, the first and the third inning of what's becoming 22nd Century's future. And so, I just always wanna thank the team and make sure they know that they're the ones doing all the work. So we may think it out, but they actually do it. All right. Very good. Well, well, thank you so much for participating in this call. It's much appreciated, and, you know, I hope that we can do it again soon. Yeah. Likewise. Thanks, Jim, and thanks for your coverage. All right, thanks. All right. This concludes our webcast. Thank you for your participation.