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| Furthermore, we are delighted to be back online with GVB manufacturing, which brings us significantly higher production capacity and improved economics |
| In the first six months of 2023, kilogram shipments have already exceeded shipments for all of 2022, and we expect improved operating results in the second half of this year as we bring our internal production back online and move ahead with our Cookies and Old Pal license agreements |
| Additionally, for the first half of 2023 kilogram sales have already exceeded 2022 deliveries |
| I believe 22nd Century possesses unique assets in both the tobacco and hemp/cannabis business to create meaningful value for the company |
| Starting from Slide 10, I want to spend a few minutes on our successful and growing hemp cannabis business, where we are now in position to further improve operating results with the return of our in-house - with the return of our in-house manufacturing capabilities |
| Basically, there's fixed overhead and need throughput in order to cover expenses and as volume decreases, there's just been embedded expense that's incurred, and that's why we're shipping our product next to where we're going to have more throughput, and better margins, and increase the overall margin profile of the business going forward |
| I am very pleased to report in our hemp/cannabis business, we had another record volume quarter as we continue to assert our industry leadership |
| I'm pleased to report early returns on engagement and driving adult smokers to stores that sell our product are solid |
| We have also made solid progress on the tobacco side of the business |
| We believe a clinically and scientifically informed policy providing for nonaddictive off-ramp products such as VLN menthol can help the smokers truly cut back and they grow progress |
| Sales have ramped strongly, and we believe we'll continue to do so |
| And again, I will say that to get into - we're going to be in 16 states by the end of September, over 4,000 stores and growing with a clear definition and path forward, we feel it's pretty solid, and we're getting there, and we continue to have more and more interest |
| And quite honestly, when you talk to the retailers, they're pretty impressed with what we've been able to do in a relatively short amount of time |
| But quite honestly, the progress we've made, I think, has been actually pretty good |
| As you can probably surmise, this has put us in a strong position in the North American hemp cannabis extraction business |
| That, combined with demonstrating the potential of VLN, and our focus on cost reductions enables us to continue endeavor to build the value of our proprietary technologies in the near-term |
| That will be a big driver in improving margin enhancement for that business unit |
| Pinnacle is positioned as a well-crafted traditional cigarette attractively priced versus other well-known brands |
| In addition to record volume, and the return of vertical manufacturing, we now have multiple additional growth and improvement factors |
| By demonstrating that value, we will be able to better capitalize on the potential of VLN |
| Both extraction and distillation capabilities are now both online, which will enhance gross margin in the second half of 2023, and we are also contracting biomass cultivation to further increase margins later in the year |
| Hemp/cannabis unit sales for the second quarter grew almost three times year-over-year to $15.4 million in revenue, reflecting continued strong customer demand for the company's bulk ingredient products |
| Putting all these pieces together, we believe our health and cannabis business is now firmly on a strong trajectory in an exciting new global growth market |
| Early consumer data from our new marketing campaign continues to affirm strong product acceptance at more than 70% and a similar metric for VLN replacing the usual brand |
| We've built a solid global footprint, providing opportunities for further market growth as this industry, becomes more mainstream in multiple markets |
| We're seeing high impression, and content viewership rates, and strong click-through rates as well as data demonstrating that the campaign interactions are creating store visits from potential VLN consumers |
| We are now well-positioned to drive improved operating performance generate cash flows to better offset our operating costs, and improve total corporate performance for our stockholders |
| To summarize, our GVB business remains strong |
| Net sales increased by 61.8% year-over-year to $23.4 million, reflecting the addition of GVB revenue, and increased unit sales of our hemp/cannabis bulk ingredients |
| Gross profit is expected to improve going forward with higher margin product mix, for tobacco and completion of hemp/cannabis extraction, and distillation facilities in Q3, 2023 |
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| There were - it's not so much a price of market share issue as it is just an overall decline in demand across the board industry-wide for the filter cigar business |
| And while we understand there is some one-offs from the flyer and gross margins would have been roughly breakeven ex that $2.4 million impact, we're now seeing negative gross margins in the tobacco business |
| Typically, what's happened in the past is in the first half of the year, filtered cigar unit volume demand is sluggish, reflecting probably accelerate purchasing in the fourth quarter |
| Tobacco revenue for the second quarter decreased to $8.1 million from $10 million as we shifted production mix away from low-margin filtered cigars, and towards higher-margin CMO, store brand and VLN products |
| So they've continued to worsen |
| Really, the main issue with tobacco is the lower volume and the filtered cigar revenue |
| Gross profit decreased to a loss of $2.3 million, reflecting lower filter cigar revenue as we shift production mix at our NASCO facility, along with the impact of reselling bulk ingredients for hemp/cannabis products until production facilities are fully restored |
| So it's a challenging environment, and everyone knows that |
| Those could be some other logistical issue that the chain has |
| And again, there's hurdles there you overcome |
| That's fine but maybe I'll try it a different way because if our math is right, we're showing that your tobacco cartons sold declined 46% year-over-year |
| We experienced longer-than-expected lead times bringing on new C-stores as we don't often control the retail distribution timelines |
| We knew one of our biggest issues to pull through, and volume was awareness and education, truly educating consumers about what this product is |
| But it seems to me that perhaps there was an excessive amount of optimism around the rollout of VLN |
| It's mostly attributable to the delay of the ramp in VLN, as John described |
| Those - and those hurdles aren't consumer acceptance |
| She was - you answered her question by saying that you faced distribution issues and your past those now |
| Now those - once you're past those hurdles, especially on the distribution side, and with the major accounts, you don't have to go through those hurdles again |
| And I think it's just the natural sort of delay in the - when you're trying to get penetration with some of the retail clients |
| I know that seems like it was kind of slow to ramp |
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