What changed in this filing

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Item 1. Business

2022-03-11 compared with 2021-02-19 · 476 added, 284 removed, 208 unchanged (79% of the section changed)

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Turning Point Brands, Inc.

(the “Company,” “we,” “our,” or “us”) is a leading manufacturer, marketer and distributor of branded consumer products.

(the “Company,” “we,” “our,” or “us”) is a leading manufacturer, marketer and distributor of branded

consumer products.

We sell a wide range of products to adult consumers consisting of staple products with our iconic brands Zig-Zag ® and Stoker’s ® to our next generation products to fulfill evolving consumer preferences.

Among other markets, we compete in the alternative smoking accessories and Other Tobacco Products (“OTP”) industries.

Among other markets, we compete in the alternative smoking

accessories and Other Tobacco Products (“OTP”) industries.

The alternative smoking accessories market is a dynamic market experiencing robust secular growth driven by cannabinoid legalization in the U.S.

and Canada, and positively evolving consumer perception and acceptance in North America.

The OTP industry, which consists of non-cigarette tobacco products, exhibited low double-digit consumer unit growth in 2020 as reported by Management Science Associates, Inc.

and Canada, and positively evolving

consumer perception and acceptance in North America.

The OTP industry, which consists of non-cigarette tobacco products, exhibited mid-single-digit consumer unit annualized growth over the three-year period ending 2021 as reported by Management

Science Associates, Inc.

(“MSAi”), a third-party analytics and information company.

Our three focus segments are led by our core, proprietary brands:

Our three focus segments are led by our proprietary brands:

Zig-Zag ® in the Zig-Zag Products segment;

Stoker’s ® along with Beech-Nut ® and Trophy ® in the Stoker’s Products segment;

and Nu-X TM , Solace ® along with our distribution platforms ( Vapor Beast ® , VaporFi ® and Direct Vapor ® ) in the NewGen Products segment.

Our businesses generate solid cash flow which we use to finance acquisitions, increase brand support, expand our distribution infrastructure, and strengthen our capital position.

We currently ship to approximately 800 distributors with an additional 200 secondary, indirect wholesalers in the U.S.

and our distribution platforms ( Vapor Beast ® ,

VaporFi ® and Direct

Vapor ® ) along with Solace ® in the NewGen Products

Our businesses generate solid cash flow which we use to invest in our business, finance acquisitions, increase brand support, expand our distribution infrastructure, and strengthen our capital position.

We currently ship to

approximately 800 distributors with an additional 200 secondary, indirect wholesalers in the U.S.

that carry and sell our products.

Under the leadership of a senior management team with extensive experience in the consumer products, alternative smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions, and acquisitions while concurrently improving operational efficiency.

We have identified additional growth opportunities in the emerging alternatives market.

In January 2019, we established our subsidiary, Nu-X Ventures LLC (“Nu-X”), a new wholly owned subsidiary dedicated to the development, production and sale of alternative products and acquisitions in related spaces.

The creation of Nu-X allows us to leverage our expertise in traditional OTP management to alternative products.

Our management team has extensive experience navigating federal, state and local regulations that are directly applicable to the growing alternatives market.

In July 2019, we acquired the assets of Solace Technology (“Solace”).

Solace is an innovative product development company which established one of the top e-liquid brands and has since grown into a leader in alternative products.

Solace’s legacy and innovation enhanced Nu-X’s strong and nimble development engine.

We believe there are meaningful opportunities to grow through acquisitions and joint ventures across all product categories.

As of December 31, 2020, our products are available in approximately 190,000 U.S.

Under the leadership of a senior management team with extensive experience in the consumer products, alternative

smoking accessories and tobacco industries, we have grown and diversified our business through new product launches, category expansions, and acquisitions while concurrently improving operational efficiency.

We believe there are meaningful opportunities to grow through investing in organic growth, acquisitions and joint ventures across all product categories.

As of December 31, 2021, our products

are available in approximately 195,000 U.S.

retail locations which, with the addition of retail stores in Canada, brings our total North American retail presence to an estimated 215,000 points of distribution.

Our sales team targets widespread distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.

To better align with Turning Point Brands, Inc.’s positioning as a branded consumer products company and to highlight the strength of its focus brands, the company has renamed its core business segments from Smoking Products to Zig-Zag Products and Smokeless Products to Stoker’s Products.

Historical financial results are not impacted by the segment name change.

Our sales team targets widespread

distribution to all traditional retail channels, including convenience stores, and we have a growing e-commerce business.

Zig-Zag Products

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Management estimates also indicate that Zig-Zag ® is the #1 brand in the promising Canadian market.

Rolling paper operations are aided by our sourcing relationship with Republic Technology International SAS (“RTI”).

See the “Distribution and Supply Agreements” section for our discussion of the Zig-Zag ® distribution agreement.

In MYO cigar wraps, the Zig-Zag ® brand commands a majority of the market and continues to innovate in novel ways through further product introductions including our introduction of Zig-Zag ® ‘Rillo sized wraps, which are similar in size to cigarillos, the most popular and fastest growing type of machine-made cigars.

In June 2020, we purchased certain assets from our long-term commercial partner Durfort Holdings S.R.L (‘‘Durfort’’) which included the co-ownership in the intellectual property rights for all of our MYO HTL cigar wraps products.

Along with the transaction, we entered into an exclusive Master Distribution Agreement to market and sell the original Blunt Wrap ® cigar wraps within the USA which was effective October 9, 2020.

In July 2019, we acquired a 30% stake in ReCreation Marketing (“ReCreation”).

ReCreation is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories.

The investment leverages ReCreation’s significant expertise in marketing and distributing cannabis accessories and tobacco products throughout Canada.

In November 2020, we acquired an additional stake that brought our total ownership to 50%.

1 Brand rankings and market share percentages obtained from MSAi for the 52-week period ended December 26, 2020.

In mid-2019 we repositioned the business with growth initiatives focused on new product introductions and new channel expansions that were better aligned with the growing market trends.

We are still in the early stages of realizing the benefits from these initiatives, but have already begun to change the growth profile of our Zig-Zag Products segment.

The Zig-Zag Products segment accounts for the majority of our operating profit and is now our fastest growing segment.

Rolling paper operations are aided by our

sourcing relationship with Republic Technology International SAS (“RTI”).

See “Distribution and Supply Agreements” for our discussion of the Zig-Zag ® distribution agreement.

are similar in size to cigarillos, the most popular and fastest growing type of machine-made cigars.

Along with the transaction, we entered into an exclusive Master Distribution Agreement

to market and sell the original Blunt Wrap ® cigar wraps within the USA which was effective October 9, 2020.

In late 2021, we extended our

MYO cigar wraps offering with entries into the growing hemp wraps and natural leaf wraps markets.

In July 2019, to extend our reach in Canada, we made a minority investment in Turning Point Brands Canada (formerly ReCreation Marketing) that was built up to a 65% ownership stake by July

Turning Point Brands Canada is a specialty marketing and distribution firm focused on building brands in the Canadian cannabis accessories, tobacco and alternative products categories.

Our majority ownership stake leverages Turning Point

Brands Canada’s significant expertise in marketing and distributing cannabis accessories and tobacco products throughout Canada.

The remainder of Turning Point Brands Canada is owned by its management.

In July 2021, we acquired certain assets of Unitabac, a marketer of mass-market cigars.

In the acquisition, we acquired a robust portfolio of cigarillo products and all related intellectual

property, including Cigarillo Non-Tip (NT) HTL products and Rolled Leaf and Natural Leaf Cigarillo Products that we can leverage to re-introduce the Zig-Zag ® brand into a large and growing cigarillo market.

In February 2022, we announced an agreement with Flamagas, a renowned lighter manufacturer, for exclusive distribution of CLIPPER® lighters in the United States and

CLIPPER is the number one reusable lighter in the world and the number two overall world lighter brand.

We aim to use our existing distribution infrastructure to expand access of CLIPPER lighters to more retailers and consumers.

1 Brand ranking and market share percentages obtained from MSAi for the 52-week period ended December 25, 2021.

Since mid-2019, we have been repositioning the business with growth initiatives focused on new product introductions and new channel expansions that are better aligned with the growing market

As a result of those initiatives, we have been successful in changing the growth profile of our Zig-Zag Products segment.

The Zig-Zag Products segment accounts for the majority of our operating profit and is now our fastest growing

Stoker’s Products

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In MST, Stoker’s ® remains among the fastest growing brands and holds an 8.4% share in the stores with distribution and a 5.6% share of the total U.S.

MST non-pouch market.

Stoker’s ® pioneered the large 12 oz.

tub packaging format and is manufactured using a proprietary process that we believe results in a superior product.

In late 2015, we extended the Stoker’s ® MST franchise to include traditional 1.2 oz.

cans to broaden retail availability.

Starting in 2015, we extended the Stoker’s ® MST franchise to include traditional 1.2 oz.

broaden retail availability.

Our proprietary manufacturing process is conducted at our Dresden, Tennessee, plant and packaged in both our Dresden, Tennessee, and Louisville, Kentucky, facilities.

Stoker’s ® chewing tobacco has grown considerable share over the last several years and is presently the #1 discount brand and the second largest brand in the industry, with approximately a 24% market share.

Our status in the chew market is further strengthened by Beech-Nut ® , the #3 premium brand and #7 overall, as well as Trophy ® , Durango ® , and the five Wind River Brands we acquired in 2016.

Stoker’s ® chewing tobacco has grown its market share considerably over

the last several years and is presently the #1 discount and overall brand in the industry, with approximately a 26% market share.

Our status in the chew market is further strengthened by Beech-Nut ® , the #3 premium brand and #7 overall, as well as Trophy ® , Durango ® , and the five Wind River Brands.

Collectively, the Company is the #2 marketer of chewing tobacco with approximately 33% market share.

Our chewing tobacco operations are facilitated through our long-standing relationship with Swedish Match, the manufacturer of our loose-leaf chewing tobaccos.

Our chewing tobacco operations are facilitated through our long-standing relationship with Swedish Match, the manufacturer of our loose-leaf

chewing tobaccos.

NewGen Products

Our NewGen Products (“NewGen”) segment includes our Nu-X subsidiary dedicated to the development, production and sale of alternative products as well as our various acquisitions in the vape distribution space.

Nu-X, which was formed in January 2019, is dedicated to the development, production and sale of innovative, alternative products.

Nu-X was enhanced by the acquisition of the assets and integration of Solace in July 2019.

Solace is an innovative product development company which established one of the top e-liquid brands and has since grown into a leader in alternative products.

Nu-X markets a wide assortment of offerings including CBD and nutraceutical products under the Nu-X TM brand, and nicotine e-liquid products and a nicotine chew product under the Solace ® brand.

Within our vape distribution business, Vapor Beast ® is a leading distributor of vapor products servicing the non-traditional retail channel.

International Vapor Group (“IVG”) operates a strong B2C eCommerce business with direct sales to consumers nationwide and abroad through the Direct Vapor ® and VaporFi ® brands.

We are leveraging our vape distribution business to increase sales of our proprietary brands.

In October of 2020, we made investments that gave us exposure to large and growing addressable markets.

We acquired a minority stake in Wild Hempettes, a leading manufacturer of hemp cigarettes under the WildHemp ™ and Hempettes ™ brands as our entry into the smokable CBD category.

In addition, the Company invested $15.0 million in dosist™, a global cannabinoid company, with an option to invest an additional $15.0 million at pre-determined terms over the next 12 months.

The Company received a warrant to receive preferred shares of dosist™ that will automatically be exercised upon the changing of federal laws in the United States, rescheduling cannabis and/or permitting the general cultivation, distribution and possession of cannabis.

Our NewGen Products (“NewGen”) segment includes our vape distribution business that was built through acquisitions as well as a new product development arm dedicated to the development,

production and sale of alternative products.

Within our vape distribution business, Vapor Beast ® is a leading

distributor of vapor products servicing the non-traditional retail channel.

International Vapor Group (“IVG”) operates a B2C e-commerce business with direct sales to consumers nationwide and abroad through the Direct

Vapor ® and VaporFi ® brands.

are leveraging our vape distribution business to increase sales of our proprietary brands.

As part of this strategy to leverage our distribution infrastructure, we acquired Solace in July 2019.

Solace is an innovative product development company

which built one of the top e-liquid brands into a leader in alternative products.

We have also made minority investments to gain exposure to the large and growing cannabinoid market including in Wild Hempettes, dosist™, Docklight Brands, Inc.

and Old Pal Holding Company LLC.

Competitive Strengths

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We have built a portfolio of leading brands with significant scale that are well recognized by consumers, retailers, and wholesalers.

Our Zig-Zag ® and Stoker’s ® brands are each well established and date back 120 and 80 years, respectively.

The NewGen Products segment has been built primarily through the acquisitions of Solace, VaporBeast, and IVG, leading sellers of e-liquids, devices, and accessories .

Zig-Zag ® is the #1 premium and overall rolling paper brand in the U.S., with significant distribution in Canada.

Zig-Zag ® is also the #1 MYO cigar wrap brand in the U.S., as measured by MSAi.

Our Zig-Zag ® and Stoker’s ® brands are each well

established and date back 122 and 82 years, respectively.

The NewGen Products segment has been built primarily through the acquisitions of VaporBeast, IVG and Solace, leading sellers of e-liquids, devices, and accessories .

Zig-Zag ® is the #1 premium and overall rolling paper brand in

the U.S., with significant distribution in Canada as well.

Zig-Zag ® is also the #1 MYO cigar wrap brand in the

U.S., as measured by MSAi.

We acquired North American rolling papers distribution rights for Zig-Zag ® in 1997.

More importantly, we own the Zig-Zag ® tobacco trademark in the U.S.

which we leverage for our MYO cigar wraps product.

More than 50% of our total 2020 Zig-Zag ® branded net sales are under our own Zig-Zag ® marks rather than those we license from under the Distribution and Licensing Agreements described below .

which we leverage for our MYO cigar wraps

Approximately 50% of our total 2021 Zig-Zag ® branded net sales are under our own Zig-Zag ® marks rather than those we license from under the Distribution and Licensing Agreements described below .

Stoker’s ® is among the fastest growing MST brands in the

industry and is the #1 loose leaf chewing tobacco brand.

We manufacture Stoker’s ® MST using only 100% American

Leaf, utilizing a proprietary process to produce what we believe is a superior product.

1 Brand rankings and market share percentages obtained from MSAi for the 52-week period ended December 25, 2021.

Stoker’s ® is among the fastest growing MST brands in the industry and is the #2 loose leaf chewing tobacco brand.

We manufacture Stoker’s ® MST using only 100% American Leaf, utilizing a proprietary process to produce what we believe is a superior product.

Zig-Zag ® is an iconic brand and has strong, enduring brand recognition among a wide audience of consumers.

2 Brand ranking and market share percentages obtained from MSAi for the 52-week period ended December 25, 2021.

Zig-Zag ® is an iconic brand and has strong, enduring brand recognition

among a wide audience of consumers.

We believe the Stoker’s ® brand is seen as an innovator in both the moist snuff and loose-leaf chewing tobacco markets.

The Solace acquisition provides us with a proven line of e-liquid and a strong new product development platform from which we intend to launch additional novel products, including a variety of actives.

VaporBeast is a powerful distribution engine that allows us to further penetrate non-traditional retail outlets.

IVG provides us direct access to the highly attractive, high margin B2C segment via the flagship Direct Vapor ® and VaporFi ® brands.

Our Nu-X business has developed a line of innovative products that give us exposure to nascent but growing product categories.

IVG provides us direct access to the highly attractive, high margin B2C segment via the flagship Direct

Vapor ® and VaporFi ®

The Solace acquisition provides us with a proven line of e-liquid and a strong new product development platform to launch additional novel products.

Exposure to Growing Cannabinoid Consumption Trends

We believe that the cannabinoid market will expand over the coming years as it becomes increasingly accepted by the public in the U.S.

Our product offerings, particularly those in our Zig-Zag Products and NewGen Products segments, are ideally positioned to benefit from continued growth in consumer consumption.

In addition, the legal cannabis market in the U.S.

is projected to grow from $16 billion in 2020 to $34 billion by 2025, representing a 16% compounded annual growth rate, according to an August 2020 report of Arcview Market Research and BDS Analytics, Inc.

A recent Gallup poll showed nearly seven in ten Americans now support legalizing cannabis nationwide, approximately double the level of twenty years ago.

As of the end of 2020, 15 U.S.

states and the District of Columbia had legalized cannabis for adults and a majority of states now allow for comprehensive public medical cannabis programs.

Our product offerings, particularly those in our Zig-Zag

Products and NewGen Products segments, are ideally positioned to benefit from continued growth in consumer consumption.

The legal cannabis market in the U.S.

is projected to grow from $25 billion in 2021 to $48 billion by 2026, representing a 13% compounded annual growth rate, according to a September 2021

report of BDS Analytics, Inc., providing us with significant opportunity.

A recent Gallup poll showed nearly seven in ten Americans now support legalizing cannabis nationwide, approximately twice the amount as twenty years ago.

As of the end of

2021, 18 U.S.

states and the District of Columbia had legalized cannabis for adult recreational use and a majority of states now allow for comprehensive public medical cannabis programs.

Successful Track Record of New Product Launches and Category Expansions

We have successfully launched new products and entered new product categories by leveraging the strength of our brands.

We methodically target markets which we believe have significant growth potential.

We have been successful in entering new product categories by extending existing products and brands in addition to introducing new products:

In 2009, we extended the Zig-Zag ® tobacco brand into the MYO cigar wraps market and captured a 50% market share within the first two years.

We are now the market share leader for MYO cigar wraps with approximately a 63% share.

We have successfully launched new products and entered new product categories by leveraging the strength of our brands and methodically targeting markets which we believe have significant

growth potential:

In 2009, we extended the Zig-Zag ® tobacco brand into the MYO

cigar wraps market and captured a 50% market share within the first two years.

We are now the market share leader for MYO cigar wraps with approximately a 56% share of the cigar wraps category and 78% of the share of the HTL cigar wraps

sub-category.

1 We believe our success was driven by the Zig-Zag ® tobacco branding, which we feel is widely understood by consumers to represent a favorable, customizable experience ideally suited to MYO products.

We extended the Zig-Zag ® brand into hemp rolling papers in 2018 and followed that with the launch of paper cones in 2019 with both products quickly establishing leading positions in their respective categories.

We leveraged the proud legacy and value of the Stoker’s ® brand to introduce a 12 oz.

MST tub, a product whose size was not offered by any other market participant at the time of introduction.

In late 2021, we extended our Zig-Zag ® MYO cigar wraps offering with entries into the growing hemp wraps and natural leaf wraps markets.

We extended the Zig-Zag ® brand into hemp rolling papers in

2018 and followed that with the launch of paper cones in 2019 with both products quickly establishing leading positions in their respective categories.

We leveraged the proud legacy and value of the Stoker’s ® brand

to introduce a 12 oz.

MST tub, a size that was not offered by any other market participant at the time of introduction.

Stoker’s ® MST has been among the fastest growing moist snuff brands in the industry in terms of pounds sold.

While competitors have introduced larger format tub packaging, the early entry and differentiation of the Stoker’s ® product have firmly established us as the market leader with over 50% of the Tub market as of 2019.

While competitors have since introduced larger format tub packaging, the early entry and differentiation of the Stoker’s ® product have firmly established us as the market leader with over 50% of the Tub market

In 2015, we introduced Stoker’s ® MST in 1.2 oz.

cans to further expand retail penetration, particularly in convenience stores.

cans to further expand retail

penetration, particularly in convenience stores.

VaporBeast quickly established itself as a leading marketer and distributor of liquid vapor products to the non-traditional retail universe.

With its national footprint, VaporBeast is leveraging its regional consumer preference insights to further accelerate sales advances.

In 2019, the IVG acquisition, and specifically the VaporFi B2C marketing engine, offered us the opportunity to leverage the marketing competencies and processes to sell novel proprietary products across multiple channels and platforms.

In 2019, we launched the Nu-X brand focused on product development in the alternative market including CBD and extended the brand into a line of nutraceutical products in 2020.

With its national footprint, VaporBeast is

leveraging its regional consumer preference insights to further accelerate sales advances.

In 2019, the IVG acquisition, and specifically the VaporFi B2C marketing engine, offered us the opportunity to leverage the marketing competencies and processes to sell novel

proprietary products across multiple channels and platforms.

In 2019, the Solace acquisition provided us with a leading line of liquids and a powerful new product development platform.

We extended the brand with the launch of a nicotine chew.

In 2019, we introduced Zig-Zag ® paper cones into the market

and have grown it into one of the top brands in the category.

In 2021, the acquisition of the Unitabac assets provided a platform to re-introduce the Zig-Zag ® brand into a large and growing cigarillo market.

In 2022, we will be entering the lighter market through an exclusive distribution agreement for CLIPPER® lighters in the United States and Canada.

We strategically target product categories that we believe demonstrate significant growth potential and for which the value of our brands is likely to have a meaningful impact.

We believe that our track record and existing portfolio of brands provide growth advantages as we continue to evaluate opportunities to extend our product lines and expand into new categories.

1 Brand rankings and market share percentages obtained from MSAi for the 52-week period ended December 26, 2020.

We believe that

our track record and existing portfolio of brands provide growth advantages as we continue to evaluate opportunities to extend our product lines and expand into new categories.

E-Commerce Capabilities

With the acquisition of VaporBeast and IVG, we established scaled B2B and B2C e-commerce presence to service the vape market.

Our e-commerce capabilities were enhanced by the acquisition and integration of Solace in 2019.

In 2020, we leveraged those capabilities to build a meaningful B2B and B2C e-commerce business for Zig-Zag ® .

Our e-commerce capabilities were enhanced by the acquisition and

integration of Solace in 2019.

We leveraged those capabilities to build a meaningful B2B and B2C e-commerce business for Zig-Zag ® .

Extensive Distribution Network and Data Driven Sales Organization

We have taken important steps to enhance our selling and distribution network and consumer marketing capabilities that allow us to grow our business while keeping our capital expense requirements relatively low.

We have taken important steps to enhance our selling and distribution network and consumer marketing capabilities that allow us to grow our business while keeping our capital expenditure

requirements relatively low.

We have long-standing relationships in the core convenience store channel and wholesale distribution network with access to more than 215,000 retail outlets in North America.

Our NewGen Products B2B business reaches thousands of vape stores and our B2C business has approximately 1.5 million unique customers.

We are also increasing brand presence through non-traditional channels including headshops, dispensaries, and B2B e-commerce.

In e-commerce, we have added brand dedicated platforms including ZigZag.com, Nu-X.com, and SolaceVapor.com.

We service our traditional tobacco and vapor customer bases with an experienced sales and marketing organization of approximately 180 professionals who possess in-depth knowledge of the OTP market.

Our NewGen Products B2B business reaches

thousands of vape stores and our B2C business has approximately 1.6 million unique customers.

We are also increasing brand presence through non-traditional channels including headshops, dispensaries, and B2B e-commerce and are expanding our sales

team dedicated to these channels.

We have added brand dedicated platforms including ZigZag.com and SolaceVapor.com to facilitate our e-commerce brand presence as well as sell on Amazon.

We service our traditional tobacco and vapor customer bases with an experienced sales and marketing organization of approximately 180 professionals who possess in-depth knowledge of the OTP

We extensively use data supported by leading technology to enable our salesforce to analyze changing trends and effectively identify evolving consumer preferences at the store level.

Our market analytics allow us to efficiently and effectively address evolving consumer and market demands.

We subscribe to a sales tracking system provided by MSAi that measures all OTP product shipments by all market participants, on a weekly basis, from approximately 900 wholesalers to over 250,000 traditional retail stores in the U.S.

This system enables us to understand share and volume trends across multiple categories at the individual store level, allowing us to allocate field salesforce coverage to the highest opportunity stores, thereby enhancing the value of new store placements and sales activity.

Within our Stoker’s segment product categories, we have seen a positive correlation between the frequency of store calls by our salesforce and our retail market share.

Our market analytics allow us to efficiently and

effectively address evolving consumer and market demands.

We subscribe to a sales tracking system provided by MSAi that measures all OTP product shipments by all market participants, on a weekly basis, from approximately 600 wholesalers to over

250,000 traditional retail stores in the U.S.

This system enables us to understand share and volume trends across multiple categories at the individual store level, allowing us to allocate field salesforce coverage to the highest opportunity

stores, thereby enhancing the value of new store placements and sales activity.

Within our Stoker’s segment product categories, we have seen a positive correlation between the frequency of store calls by our salesforce and our retail market

Asset-light Business Model that Generates Resilient Free Cash Flow

We have a lean, asset-light manufacturing and sourcing model which leverages outsourced supplier relationships and requires low capital expenditures.

We believe our asset-light model provides marketplace flexibility, allows us to achieve favorable margins and generates high free cash flow conversion.

As part of our asset-light operating model we built long-standing and extensive relationships with leading, high-quality producers from whom we source products including loose-leaf chewing tobacco and cigarette paper, among others.

We believe our asset-light model provides

marketplace flexibility, allows us to achieve favorable margins and generates high free cash flow conversion.

As part of our asset-light operating model, we built long-standing and extensive relationships with leading, high-quality producers from whom we source products including loose-leaf chewing

tobacco and cigarette paper, among others.

We do not outsource our MST production as a result of our proprietary manufacturing processes which are substantively different than those of our competitors.

By outsourcing the production of products to a select group of suppliers with whom we have strong relationships, we are able to maintain low overhead costs and minimal capital expenditures.

By outsourcing the production of certain products to a select group of suppliers with whom we have strong relationships, we are able to maintain low overhead costs and minimal capital

expenditures.

Our supplier relationships allow us to increase the breadth of our product offerings and quickly enter new markets as management is able to focus on brand building and innovation.

In 2020, over 80% of our net sales were derived from outsourced production operations and our capital expenditures have ranged between $2.0 million and $6.1 million per year over the previous 5 years.

In 2021, over 80% of our net sales were derived from

outsourced production operations and our capital expenditures have ranged between $2.0 million and $6.2 million per year over the previous 5 years.

The stability of our cash flows is enhanced by the resilience of our Zig-Zag Products and Stoker’s Products business segments which we believe have recession-resistant end-markets.

Their products are primarily staple products that are small ticket purchases for repeat consumers.

These products are primarily

staples that are small ticket purchases for repeat consumers.

In addition, we believe the secular shift to the value category in the Stoker’s Products segment will benefit the long-term resilience of our brands.

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We operate in a highly regulated environment involving many different government agencies.

In 2009, the FDA was given a mandate over cigarettes and smokeless tobacco, which expanded in 2016 to include all other tobacco products including vaping and cigars.

We believe we have a competitive advantage in this environment with our experienced management team and our increased investments in teams of professionals comprising regulatory lawyers, scientists, and quality assurance processes.

The FDA is currently implementing a process called the PMTA, or the Pre Market Tobacco Authorization, which required all vape products introduced since 2007 to submit an application to the FDA by September 2020.

This is a very expensive and resource-intensive process and there are currently hundreds of competitors in the market but very few have the capability and or the resources, to get their products successfully through this process.

We spent approximately $17 million to file applications covering 250 products, and we believe our application was one of the most extensive portfolios for open tank vaping products that was submitted.

By developing and submitting a deep suite of products and leveraging our distribution platform we believe that we have the opportunity to grow substantial market share with our proprietary products as our competitors navigate this process.

We believe this is a transformational event for the industry with potential to reap substantial benefits over time as the FDA enforcement accelerates and thereby, creating significant barriers for new entrants.

In 2009, the FDA was given jurisdiction over cigarettes and smokeless tobacco, which expanded in 2016

to include all other tobacco products including vaping and cigars.

We believe we have a competitive advantage due to our management team’s experience navigating the regulatory environment.

We have increased our investments in teams of

professionals including regulatory lawyers, scientists, and quality assurance processes to ensure we maintain a competitive advantage in this area.

The FDA is currently implementing a premarket review process, sometimes referred to as the PMTA, or the Pre-market Tobacco Application, process, which required all vape products introduced

since 2007 to submit an application to the FDA by September 2020.

The PMTA process is a very expensive and resource-intensive process and there are currently hundreds of competitors in the market but very few have the capability and or the

resources to get their products successfully through this process.

We spent approximately $17 million in order to file applications covering 250 products, and we believe our application was one of the most extensive portfolios for

open tank vaping products that was submitted to the FDA.

By developing and submitting for FDA marketing authorization a deep suite of products in the space and leveraging our distribution platform, we believe that we have the opportunity to grow

substantial market share with our proprietary products as our competitors navigate this process.

We believe this is a transformational event for the industry with potential for us to realize substantial benefits over time as the FDA accelerates

enforcement thereby, creating significant barriers for new entrants as well as significant difficulties for existing companies who may not have the ability to comply with these regulatory requirements.

See “Risks Related to Legal, Tax and

Regulatory Matters” under Item 1A “Risk Factors” of this Annual Report on Form 10-K.

In addition, we have been building an alternative logistics infrastructure across the U.S.

to comply with the Prevent All Cigarette Trafficking Act (“PACT Act”) which was recently extended to

prohibit the use of the U.S.

Postal Service to mail e-cigarette and related products and requires adult signature on delivery.

Experienced Management Team

With extensive experience in consumer products, alternative smoking accessories and tobacco markets, our senior management team has enabled us to grow and diversify our business while improving operational efficiency.

Members of management have previous experience at other leading tobacco companies, including Altria Group, Inc.

(formerly Philip Morris);

Swedish Match;

and American Brands, Inc.

Given the professional experience of the senior management team we are able to analyze risks and opportunities from a variety of perspectives.

With extensive experience in consumer products, alternative smoking accessories and tobacco markets, our senior management team has enabled us to grow and diversify our business while improving

operational efficiency.

Members of management have previous experience at other leading tobacco companies.

Given the professional experience of the senior management team we are able to analyze risks and opportunities from a variety of

perspectives.

Our senior leadership has embraced a collaborative culture in which the combined experience, analytical rigor, and creativity are leveraged to assess opportunities and deliver products that satisfy consumers’ demands.

Our management

team also brings a proven track record of patient and selective capital deployment into value enhancing transactions.

Growth Strategies

We are focused on building sustainable margin streams, expanding the availability of our products, developing new products through innovation, and enhancing overall operating efficiencies with the goal of improving margins and cash flow.

We are focused on building sustainable margins, expanding the availability of our products, developing innovative new products, and enhancing overall operating efficiencies with the goal of

improving margins and cash flow.

We adopted the following strategies to drive growth in our business and build stockholder value:

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We intend to remain a consumer centric organization with an innovative view and understanding of the alternative smoking accessories and OTP markets.

We believe we have strong tailwinds for growth within our existing product lines.

Within our Zig-Zag Products segment, we are benefitting from secular growth trends in the industry, driving market share gains in our traditional convenience store channel and expanding our presence into non-traditional channels including headshops, dispensaries and e-commerce to drive growth.

We believe we have strong tailwinds for

growth within our existing product lines.

non-traditional channels including headshops, dispensaries and e-commerce to drive growth.

Within our Stoker’s Products segment, there is ample runway for growth driven by same store sales growth and further distribution gains as Stoker’s ® MST continues to be one of the fastest growing brands in the category.

In 2021, less than 10% of our revenues were generated outside of the U.S.

Having established a strong infrastructure and negotiated relationships across multiple segments and products, we are pursuing an international growth strategy to broaden sales and strengthen margins.

Having established a strong infrastructure and negotiated relationships across multiple segments and products, we are

pursuing an international growth strategy to broaden sales and strengthen margins.

We believe international sales represent a meaningful growth opportunity.

Our goals include expanding our presence in the worldwide OTP industry on a targeted basis.

In 2021, we increased our ownership in Turning Point Brands Canada to 65%.

include expanding our presence in the worldwide OTP industry on a targeted basis.

For example, we are expanding Zig-Zag ® ’s retail penetration and product assortment in Canada, and selling our Stoker’s ® MST products in South America, Europe, Asia and Africa.

Expand into Adjacent Categories through Innovation and New Partnerships

We continually evaluate opportunities to expand into adjacent product categories by leveraging our current portfolio or through new partnerships.

We believe there are meaningful opportunities for growth within the alternative smoking accessories and OTP markets.

We maintain a robust product pipeline and plan to strategically introduce new products in attractive, growing markets, both domestically and internationally.

In particular, the strength of the Zig-Zag ® brand provides a great platform to introduce a suite of complementary products similar to our launch and expansion of hemp papers and paper cones.

We have an exciting pipeline of new products and SKUs we plan on introducing over the coming years in both our papers and MYO wraps businesses.

As we have done successfully in the past, we will leverage our existing sales infrastructure to drive distribution of these new products.

We have identified a number of new adjacencies and we intend to leverage our existing brands and partnerships to continue the process of commercializing winning products that satisfy consumer needs.

Within Nu-X, we launched a lineup of products in the CBD and nutraceutical category.

We maintain a robust product pipeline and plan to strategically introduce new products in attractive and growing segments.

We continually evaluate opportunities to expand into adjacent product categories by leveraging our current portfolio and through new partnerships.

We believe there are meaningful opportunities

for growth within the alternative smoking accessories and OTP markets.

We maintain a robust product pipeline and plan to strategically introduce new products in attractive, growing markets, both domestically and internationally, with specific

focus on our papers and MYO wraps businesses.

In particular, the strength of the Zig-Zag ® brand provides a great platform

to introduce a suite of complementary products similar to our launch and expansion of hemp papers, paper cones, hemp wraps and natural leaf wraps.

We have an exciting pipeline of new products and SKUs we plan on introducing over the coming years

in both our papers and MYO wraps businesses.

In 2022, we will be entering the lighter market through an exclusive distribution agreement for CLIPPER® lighters in the United States and Canada.

As we have done successfully in the past, we will

leverage our existing sales infrastructure to drive distribution of these new products and are investing to expand our e-commerce distribution capabilities.

We have identified a number of new adjacencies and we intend to leverage our existing brands and partnerships to continue the process of commercializing winning products that satisfy consumer

Increase our Mix of Proprietary Products in Vape Distribution

Our vape distribution business comprises a majority of our revenue with the NewGen Products segment.

It generates the highest share of our revenues but the lowest share of profits with a sales mix of mostly lower gross margin third-party products.

We aim to improve the profitability of the segment by generating increased sales from higher gross margin proprietary products within our vape distribution platform and growing our sales of Nu-X products.

The NewGen Products segment generates a significant share of our revenue mix but the lowest

share of profits with a sales mix of mostly lower gross margin third-party products.

We aim to improve the profitability of the segment by generating increased sales from higher gross margin proprietary products within our vape distribution

Accelerate Growth Through National Distribution Network

Our business is built around a powerful sales and distribution infrastructure that currently reaches over 215,000 retail outlets in North America.

We have strong presence in independent convenience stores and now service most of the leading chain accounts.

Through our Nu-X Ventures e-commerce platforms and our B2B and B2C vape distribution platforms we have alternative avenues through which to sell third-party products and an increasing mix of our proprietary products.

This allows new products to be tested with lower risk before we plug them into our wider brick and mortar distribution system.

Combining our different platforms, we have an expansive multi-channel distribution infrastructure that gives us a big competitive advantage when we introduce new products or acquire companies that we can integrate into our network.

We believe our experienced salesforce, expansive distribution network, and leading market analytics put us in a strong position to swiftly execute new product launches in response to evolving consumer and market preferences.

We have strong presence in independent

convenience stores and now service most of the leading chain accounts.

Through our e-commerce platforms and our B2B and B2C vape distribution platforms we have alternative avenues through which to sell third-party products and an increasing mix

of our proprietary products.

This strategy allows new products to be tested with lower risk before we incorporate them into our wider brick and mortar distribution system.

Combining our different platforms, we have an expansive multi-channel distribution infrastructure that gives us a big competitive advantage when we introduce new products or acquire companies

that we can integrate into our network.

market preferences.

Strategically Pursue Acquisitions

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We regularly evaluate acquisition opportunities across our industries.

In evaluating acquisition opportunities, our focus is on identifying acquisitions that leverage our distribution platform and product offerings or enable category expansion in areas with high growth potential.

Substantially all of our 2020 U.S.

In evaluating acquisition

opportunities, our focus is on identifying acquisitions that would leverage our distribution platform and product offerings or enable category expansion in areas with high growth potential.

The vast majority of our 2021 U.S.

gross profit was derived from sales of products currently regulated by FDA Center for Tobacco Products.

We have significant experience in complying with the FDA regulatory regime with a compliance infrastructure composed of legal and scientific professionals.

We believe many smaller OTP manufacturers currently lack this infrastructure, which we believe is necessary to comply with the broad scope of FDA regulations.

We have significant experience in complying with the

FDA regulatory regime with a compliance infrastructure composed of legal and scientific professionals.

We believe many smaller OTP manufacturers currently lack this infrastructure, which we believe is necessary to comply with the broad scope of

FDA regulations.

We believe our regulatory compliance infrastructure, combined with our skilled management and strong distribution platform, position us to act as a consolidator within the OTP industry.

We have a strong track record of enhancing our OTP business with strategic and accretive acquisitions.

The company itself was built through acquisitions that were subsequently grown through distribution gains, market share growth and brand extensions into new product categories.

The Company itself was built through acquisitions that were subsequently grown through

distribution gains, market share growth and brand extensions into new product categories.

This is a playbook that we have drawn on over time with a consistent track record of success.

We acquired the U.S.

and Canadian rolling papers distribution rights for Zig-Zag ® in 1997 and extended our product offerings including our entry into the MYO cigar wraps category in 2009.

Today, Zig-Zag ® is the #1 premium and overall rolling paper and MYO cigar wrap brand in the U.S., as measured by MSAi.

and Canadian rolling papers distribution

rights for Zig-Zag ® in 1997 and extended our product offerings including our entry into the MYO cigar wraps category in

Today, Zig-Zag ® is the #1 premium and overall rolling paper and MYO cigar wrap brand in the U.S., as measured by

In 2003, we acquired the Stoker’s ® brand.

We have since built the brand to a strong #2 position in the chewing tobacco industry while successfully leveraging the brand’s value through our MST expansion where it remains among the fastest growing MST brands in the industry.

Subsequent to our initial public offering (“IPO”) in 2016, we completed a series of acquisitions that built the foundation of our NewGen Products segment through (i) VaporBeast, (ii) IVG, and (iii) Solace.

Our investment in ReCreation Marketing in Canada in 2019 is accelerating Zig-Zag ® ’s growth through alternative channel penetration and introducing our proprietary NewGen products into Canada.

We have since built the brand to a strong #1 position in the chewing

tobacco industry while successfully leveraging the brand’s value through our MST expansion where it remains among the fastest growing MST brands in the industry.

Subsequent to our initial public offering (“IPO”) in 2016, we completed a series of

acquisitions that built the foundation of our NewGen Products segment through (i) VaporBeast, (ii) IVG, and (iii) Solace.

Our investment in Turning Point Brands Canada in 2019 is accelerating Zig-Zag ® ’s growth through alternative channel

penetration and introducing our proprietary NewGen products into Canada.

In 2020, we acquired certain assets from Durfort including co-ownership of the intellectual property rights for our MYO cigar wraps products.

The transaction increased our share of the economics in a MYO cigar wraps business that was benefitting from secular growth tailwinds and gave us access to a complimentary product in Blunt Wrap ® through an exclusive distribution agreement.

Our investment in Wild Hempettes provided us entry into the growing smokable CBD category.

Most recently, our investment in dosist™, a global cannabinoid company, gives us increased exposure to the large and growing cannabinoid market.

The transaction increased our

share of the economics in a MYO cigar wraps business that was benefitting from secular growth tailwinds and gave us access to a complimentary product in Blunt Wrap ® through an exclusive distribution

Our investments in Wild Hempettes, dosist™, Docklight and Old Pal give us increased exposure to the large and growing cannabinoid market.

In 2021, we acquired certain assets from Unitabac, providing a platform to re-enter the large and

growing cigarillo category.

Raw Materials, Product Supply, and Inventory Management

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Finished goods - NewGen Products

Gross Inventory

Net Inventory

Zig-Zag Products

Pursuant to the Zig-Zag ® distribution agreements, we are required to purchase from RTI all cigarette papers, cigarette tubes, and cigarette injecting machines that we sell, subject to RTI fulfilling its obligations under the Zig-Zag ® distribution agreements.

See the “Distribution and Supply Agreements” section for our discussion of the Zig-Zag ® distribution agreements.

If RTI is unable or unwilling to perform its obligations or ceases its cigarette paper manufacturing operations, in each case, as set forth in the Distribution Agreements, we may seek third-party suppliers and continue the use of the Zig-Zag ® trademark to market these products.

To ensure we have a steady supply of premium cigarette paper products, as well as cigarette tubes and injectors, RTI is required to maintain, at its expense, a two-month supply of inventory in a bonded, public warehouse in the U.S.

Pursuant to the Zig-Zag ® distribution agreements,

we are required to purchase from RTI all cigarette papers, cigarette tubes, and cigarette injecting machines that we sell, subject to RTI fulfilling its obligations under the Zig-Zag ® distribution agreements.

See “Distribution and Supply Agreements” for a discussion of the Zig-Zag ® distribution agreements.

If RTI is unable or unwilling to perform its obligations or ceases its cigarette paper manufacturing operations, in each

case, as set forth in the Distribution Agreements, we may seek third-party suppliers and continue the use of the Zig-Zag ® trademark

to market these products.

We obtain our MYO cigar wraps from our supplier in the Dominican Republic.

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Our moist snuff and loose-leaf chewing tobaccos are produced from air-cured and fire-cured leaf tobacco, respectively.

We utilize recognized suppliers that generally maintain 12- to 24-month supplies of our various types of tobacco at their facilities.

We utilize recognized suppliers that generally maintain 12- to 24-month

supplies of our various types of tobacco at their facilities.

We do not believe we are dependent on any single country or supplier source for tobacco.

We generally maintain up to a two-month supply of finished, moist snuff and loose leaf chewing tobacco.

We generally maintain up to a two-month supply of finished, moist snuff and loose leaf chewing

tobacco on hand.

This supply is maintained at our Louisville, Kentucky, facility and in two regional public warehouses to facilitate distribution.

We also utilize a variety of suppliers for the sourcing of additives used in our smokeless products and for the supply of our packaging materials.

Thus, we believe we are not dependent on a single supplier for these products.

Thus, we believe we are not dependent on a

single supplier for these products.

There are no current U.S.

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All of our loose-leaf chewing tobacco production is fulfilled through our agreement with Swedish Match.

See the “Distribution and Supply Agreements” section for our discussion of the Swedish Match Manufacturing Agreement.

See “Distribution and Supply Agreements” for our discussion of the Swedish Match Manufacturing Agreement.

NewGen Products

We have sourcing relationships that are capable of providing liquid vapor products for other companies’ brands and for producing our own branded product lines in the category.

Our acquisitions of VaporBeast, IVG and Solace have (i) accelerated our entry into the non-traditional retail channel, where we believe a significant portion of CBD and liquid vapor products are sold;

Our acquisitions

of VaporBeast, IVG and Solace have (i) accelerated our entry into the non-traditional retail channel, where we believe a significant portion of liquid vapor products are sold;

(ii) provided enhanced distribution of products;

and (iii) established best-in-class distribution and B2C platforms combining eCommerce selling skills with a national retail salesforce.

We believe the VaporBeast B2B competency coupled with the IVG B2C selling strengths and our national retail salesforce is a genuine competitive advantage and one that we intend to leverage on behalf of Nu-X CBD and other actives products.

Furthermore, we have established a sourcing group in Asia to ensure timely and cost-effective access to marketplace winners and new product launches, while also maximizing margin through thoughtful logistics strategies.

and (iii) established

best-in-class distribution and B2C platforms combining e-commerce selling skills with a national retail salesforce.

We believe the VaporBeast B2B competency coupled with the IVG B2C selling strengths and our national retail salesforce is a

genuine competitive advantage and one that we intend to leverage on behalf of our actives products.

Furthermore, we have established a sourcing group in Asia to ensure timely and cost-effective access to marketplace winners and new product

launches, while also maximizing margin through thoughtful logistics strategies.

Distribution and Supply Agreements

The Zig-Zag Distribution and License Agreements

In 1992 we entered into two long-term exclusive distribution agreements with respect to sales of Zig-Zag® cigarette papers, cigarette tubes, and cigarette injector machines in the U.S.

In 1992, we entered into two long-term exclusive distribution agreements with respect to sales of Zig-Zag® cigarette papers, cigarette tubes, and

cigarette injector machines in the U.S.

and Canada (collectively, the “Distribution Agreements”).

The Distribution Agreements had an initial twenty-year term, which automatically renews for successive twenty-year terms unless terminated in accordance with the terms of the Distribution Agreements.

The Distribution Agreements had an initial twenty-year term, which automatically renews for successive twenty-year terms unless terminated in

accordance with the terms of the Distribution Agreements.

The Distribution Agreements renewed for their second twenty-year term in November 2012.

Under the Distribution Agreements, we are required to purchase cigarette papers, cigarette tubes, and cigarette injector machines from the licensor;

however, our licensor must provide us with sufficient quantities consistent with specific order-to-delivery timelines outlined in the Distribution Agreements.

Our product supply is further protected by additional safeguards, including the right to seek third-party suppliers in certain circumstances and a two-month safety stock inventory to be kept in the U.S.

however, our licensor must provide us with

sufficient quantities consistent with specific order-to-delivery timelines outlined in the Distribution Agreements.

Our product supply is further protected by additional safeguards, including the right to seek third-party suppliers in certain

circumstances and a two-month safety stock inventory to be kept in the U.S.

at the licensor’s expense.

The Distribution Agreements also provide shared responsibility for duties, insurance, shipping, and taxes.

The import duties and taxes in the U.S.

The import duties and taxes in the

and Canada are our responsibility, while the licensor is responsible for insurance, export duties, and shipping costs.

Each of the Distribution Agreements contains customary termination provisions, including failure to meet performance obligations, the assignment of the agreement or the consummation of a change of control, in each case, without consent of the licensor, upon certain material breaches, including our agreement not to promote, directly or indirectly, cigarette paper or cigarette paper booklets of a competitor, or upon our bankruptcy, insolvency, liquidation, or other similar event.

The licensor also may terminate the Distribution Agreements if a competitor acquires a significant amount of our common stock or if one of our significant stockholders acquires a significant amount of one of our competitors.

In the event of a termination, we have agreed that for a period of five years after the termination we will not engage, directly or indirectly, in the manufacturing, selling, distributing, marketing, or otherwise promoting, in the U.S.

Each of the Distribution Agreements contains customary termination provisions, including failure to meet performance obligations, the assignment of the agreement or the consummation of a change

of control, in each case, without consent of the licensor, upon certain material breaches, including our agreement not to promote, directly or indirectly, cigarette paper or cigarette paper booklets of a competitor, or upon our bankruptcy,

insolvency, liquidation, or other similar event.

The licensor also may terminate the Distribution Agreements if a competitor acquires a significant amount of our common stock or if one of our significant stockholders acquires a significant amount

of one of our competitors.

promoting, in the U.S.

and Canada, of cigarette paper or cigarette paper booklets of a competitor without consent.

There are certain de minimis exceptions to these provisions.

For further details, see ‘‘Risk Factors – We depend on a small number of key third-party suppliers and producers for our products’’.

In subsequent years, we entered into two licensing agreements, giving us the exclusive use of the Zig-Zag® brand name for e-cigarettes and related accessories in the U.S.

For further details, see ‘‘Risk Factors – We depend on a small number

of key third-party suppliers and producers for our products’’.

In subsequent years, we entered into two licensing agreements, giving us the exclusive use of the Zig-Zag® brand name for e-cigarettes and related

accessories in the U.S.

and for paper cone products in the U.S.

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The Distribution Agreements and the License Agreements were initially entered into with Bolloré.

In November of 2020, Bolloré assigned the Distribution Agreements and the License Agreements to RTI.

For a number of years, RTI has been the outsourced manufacturer of cigarette papers, cigarette tubes, cigarette injector machines and certain other products bearing the Zig-Zag ® name.

We do not expect the assignment of the Distribution Agreements or the License Agreements to have a material effect on our business.

In November 2020, Bolloré assigned the Distribution Agreements and the License Agreements to RTI.

For a number of

years, RTI has been the outsourced manufacturer of cigarette papers, cigarette tubes, cigarette injector machines and certain other products bearing the Zig-Zag ® name.

Swedish Match Manufacturing Agreement

In 2008, we entered into a manufacturing and distribution agreement with Swedish Match whereby Swedish Match became the exclusive manufacturer of our loose-leaf chewing tobacco.

Under the agreement, production of our loose-leaf chewing tobacco products was completely transitioned to Swedish Match’s plant located in Owensboro, Kentucky, in 2009.

We source all of the tobacco Swedish Match uses to manufacture our products along with certain proprietary flavorings and retain all marketing, design, formula, and trademark rights over our loose-leaf products.

We also have the right to approve all product modifications and are solely responsible for decisions related to package design and branding of the loose-leaf tobacco produced for us.

Responsibilities related to process control, manufacturing activities, and inventory management with respect to our loose-leaf products are allocated between us and Swedish Match as specified in the agreement.

agreement, production of our loose-leaf chewing tobacco products was completely transitioned to Swedish Match’s plant located in Owensboro, Kentucky, in 2009.

We source all of the tobacco Swedish Match uses to manufacture our products along with

certain proprietary flavorings and retain all marketing, design, formula, and trademark rights over our loose-leaf products.

We also have the right to approve all product modifications and are solely responsible for decisions related to package

design and branding of the loose-leaf tobacco produced for us.

Responsibilities related to process control, manufacturing activities, and inventory management with respect to our loose-leaf products are allocated between us and Swedish Match as

specified in the agreement.

We also have rights to monitor production and quality control processes on an ongoing basis.

The agreement had an initial ten-year term and will automatically be renewed for five successive ten-year terms unless either party provides at least 180 days’ notice prior to a renewal term of its intent to terminate the agreement, or unless otherwise terminated by mutual agreement of the parties in accordance with the provisions of the agreement.

If a notice of non-renewal is delivered, the contract will expire two years after the date on which the agreement would have otherwise been renewed.

The agreement had an initial ten-year term and will automatically be renewed for five successive ten-year terms unless either party provides at least 180 days’ notice prior to a renewal term of

its intent to terminate the agreement, or unless otherwise terminated by mutual agreement of the parties in accordance with the provisions of the agreement.

If a notice of non-renewal is delivered, the contract will expire two years after the

date on which the agreement would have otherwise been renewed.

The terms allow the agreement to be assumed by a buyer, terminated for uncured material breach, or terminated by us subject to a buyout.

We also hold a right of first refusal to acquire the manufacturing plant as well as Swedish Match’s chewing tobacco unit.

We also hold a right of first refusal to

acquire the manufacturing plant as well as Swedish Match’s chewing tobacco unit.

The agreement was automatically renewed for the first of five 10-year renewal periods in September 2018.

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We primarily outsource our manufacturing and production processes and focus on packaging, marketing, and distribution.

We currently manufacture less than 20% of our products as measured by net sales.

We currently manufacture less than 20% of our products as measured by net

Our in-house manufacturing operations are principally limited to (i) the manufacturing of our moist snuff products, which occurs at our facility in Dresden, Tennessee;

and (ii) the packaging of our moist snuff products at our facilities in Dresden, Tennessee, and Louisville, Kentucky.

and (ii) the packaging of our moist snuff products at our facilities in

Dresden, Tennessee, and Louisville, Kentucky.

Our MST products are processed in-house, rather than outsourced, as a result of our proprietary manufacturing processes which are substantively different than those of our competitors.

We use proprietary production processes and techniques, including strict quality controls.

Our quality control group routinely tests the quality of the tobacco, flavorings, application of flavorings, premium cigarette papers, tubes and injectors, cigars, MYO cigar wraps, liquid vapor products, and packaging materials.

Our quality control group routinely tests the quality of the tobacco, flavorings, application of

flavorings, premium cigarette papers, tubes and injectors, cigars, MYO cigar wraps, liquid vapor products, and packaging materials.

We utilize sophisticated quality controls to test and closely monitor the quality of our products.

The high quality of our tobacco products is largely the result of using high-grade tobacco leaf and food-grade flavorings and, on an ongoing basis, analyzing the tobacco cut, flavorings, and moisture content together with strict specifications for sourced products.

Given the importance of contract manufacturing to our business, our quality control group ensures that established, written procedures and standards are adhered to by each of our contract manufacturers.

quality of our tobacco products is largely the result of using high-grade tobacco leaf and food-grade flavorings and, on an ongoing basis, analyzing the tobacco cut, flavorings, and moisture content together with strict specifications for sourced

Given the importance of contract manufacturing to our business, our quality control group ensures that established, written procedures and standards are adhered to by each of our contract

manufacturers.

Responsibilities related to process control, manufacturing activities, quality control, and inventory management with respect to our loose leaf are allocated between us and Swedish Match under the manufacturing agreement.

Sales and Marketing

We have grown the size and capacity of our salesforce and intend to continue strengthening the organization to advance our ability to deepen and broaden the retail availability of our products and brands.

We have grown the size and capacity of our salesforce and intend to continue strengthening the organization to advance our ability to deepen and broaden the retail availability of our products

As of December 31, 2021, we had a nationwide sales and marketing organization of approximately 180 professionals.

Our sales and marketing group focuses on priority markets and sales channels and seeks to operate with a high level of efficiency.

In 2020, our Zig-Zag and Stoker’s Products sales and marketing efforts enabled our products to reach an estimated 210,000 retail doors in North America and over 800 direct wholesale customers with an additional 200 secondary, indirect wholesalers in the U.S.

Our Zig-Zag and Stoker’s Products sales efforts are focused on wholesale distributors and retail merchants in the independent and chain convenience store, tobacco outlet, food store, mass merchandising, drug store, and non-traditional retail channels.

Our sales and marketing group focuses on priority

markets and sales channels and seeks to operate with a high level of efficiency.

In 2021, our Zig-Zag and Stoker’s Products sales and marketing efforts enabled our products to reach an estimated 215,000 retail outlets in North America and over

800 direct wholesale customers with an additional 200 secondary, indirect wholesalers in the U.S.

Our Zig-Zag and Stoker’s Products sales efforts are focused on wholesale distributors and retail merchants in the independent and chain convenience store, tobacco outlet, food store, mass

merchandising, drug store, and non-traditional retail channels.

For Zig-Zag Products, we have also developed a growing e-commerce business.

Our NewGen sales efforts are focused on alternative channels and winning new stores, increasing store share of requirements and growing the B2C engine to capture a greater share of online sales direct to the consumer.

We have expanded, and intend to continue to expand, the sales of our products into previously underdeveloped geographic markets and retail channels.

Our NewGen sales efforts are focused on alternative channels and winning new stores, increasing store

share of requirements and growing the B2C engine to capture a greater share of online sales direct to the consumer.

We have expanded, and intend to continue to expand, the sales of our products into previously underdeveloped geographic markets

and retail channels.

In 2021, we derived more than 90% of our net sales from sales in the U.S., with the remainder primarily from sales in Canada.

We subscribe to a sales tracking system from MSAi that records all traditional OTP product shipments (ours as well as those of our competitors) from approximately 900 wholesalers to over 250,000 traditional retail stores in the U.S.

This system enables us to understand individual product share and volume trends across multiple categories down to the individual retail store level, allowing us to allocate field salesforce coverage to the highest opportunity stores.

Additionally, the ability to select from a range of parameters and to achieve this level of granularity means we can analyze marketplace trends in a timely manner and swiftly evolve our business planning to meet market opportunities.

We employ marketing activities to grow awareness, trial, and sales including selective trade advertising to expand wholesale availability, point-of-sale advertising and merchandising and permanent and temporary displays to improve consumer visibility, and social media.

We comply with all regulations relating to the marketing of tobacco products, such as directing marketing efforts to adult consumers, and are committed to full legal compliance in the sales and marketing of our products.

We subscribe to a sales tracking system from MSAi that records all traditional OTP product shipments (ours as well as those of our competitors) from approximately 600 wholesalers to over

250,000 traditional retail stores in the U.S.

This system enables us to understand individual product share and volume trends across multiple categories down to the individual retail store level, allowing us to allocate field salesforce coverage

to the highest opportunity stores.

market opportunities.

We employ marketing activities to grow awareness, trial, and sales including selective trade advertising to expand wholesale availability, point-of-sale advertising and merchandising and

permanent and temporary displays to improve consumer visibility, and social media.

We comply with all regulations relating to the marketing of tobacco products, such as directing marketing efforts to adult consumers, and are committed to full

legal compliance in the sales and marketing of our products.

To date, we have neither relied upon, nor conducted, any substantial advertising in the consumer media for our tobacco products.

In the years ended December 31, 2020, 2019, and 2018, we did not have any customer that accounted for 10% or more of our net sales.

Our customers use an open purchase order system to buy our products and are not obligated to do so pursuant to ongoing contractual obligations.

For the years ended December 31, 2021, 2020, and 2019, we did not have any customer that accounted for 10% or more of our net sales.

Our customers use an open purchase order system to buy our

products and are not obligated to do so pursuant to ongoing contractual obligations.

We perform periodic credit evaluations of our customers and generally do not require collateral on trade receivables.

Historically, we have not experienced material credit losses.

Historically, we have not experienced

material credit losses.

Sales to customers within our NewGen segment are generally prepaid.

Many of our competitors are better capitalized than we are and have greater resources, financial and otherwise.

We believe our ability to effectively compete and strong market positions in our principal product lines are due to the high recognition of our brand names, the perceived quality of each of our products, and the efforts of our sales, marketing, and distribution teams.

We compete against “big tobacco,” including Altria Group, Inc.

(formerly Philip Morris);

We believe our ability to effectively compete and strong market positions in our

principal product lines are due to the high recognition of our brand names, the perceived quality of each of our products, and the efforts of our sales, marketing, and distribution teams.

We compete against “big tobacco,” including Altria Group,

(formerly Philip Morris International);

British American Tobacco p.l.c.

(formerly Reynolds);

(formerly R.J.

Reynolds Tobacco Company);

Swedish Match;

Swisher International;

Swisher International, Inc.;

and manufacturers including U.K.

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Competition in the OTP market is based upon not only brand quality and positioning but also on price, packaging, promotion, and retail availability and visibility.

Given the decreasing prevalence of cigarette consumption, the “big tobacco” companies continue to demonstrate an increased interest and participation in a number of OTP markets.

Given the decreasing

prevalence of cigarette consumption, the “big tobacco” companies continue to demonstrate an increased interest and participation in a number of OTP markets.

Zig-Zag Products

Our principle competitors for premium rolling paper sales are Republic Tobacco, L.P.

Our principal competitors for premium rolling paper sales are Republic Tobacco, L.P.

and HBI International.

Our major competitors in MYO cigar wraps are Good Times USA, LLC and New Image Global, Inc.

Our major competitors in MYO cigar wraps are Good Times USA, LLC and New Image

We believe MYO cigar wrap products are used interchangeably with both rolling papers and finished cigar products by many consumers.

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Smokeless Tobacco Company (a division of Altria Group, Inc.).

In the loose-leaf chewing tobacco market, our three principal competitors are Swedish Match, the American Snuff Company, LLC (a unit of British American Tobacco p.l.c.), and Swisher International Group, Inc.

In the loose-leaf chewing tobacco market, our three principal competitors are Swedish Match, the American Snuff Company, LLC (a unit of British American Tobacco p.l.c.), and

Swisher International Group, Inc.

We believe moist snuff products are used interchangeably with loose leaf products by many consumers.

NewGen Products

In the NewGen products segment, aside from the established operations of Juul Labs, our competitors are varied as the market is relatively new and highly fragmented.

Our direct competitors sell products that are substantially similar to our products through the same channels in which we sell our liquid vapor products.

We compete with these direct competitors for sales through wholesalers and retailers including, but not limited to, vapor stores, national chain stores, tobacco shops, and convenience stores and in the online direct to consumer environment.

In the NewGen products segment, our competitors are varied as the market is relatively new and highly fragmented.

Our direct competitors sell products that are substantially similar to our

products through the same channels in which we sell our liquid vapor products.

We compete with these direct competitors for sales through wholesalers and retailers including, but not limited to, vapor stores, national chain stores, tobacco shops,

and convenience stores and in the online direct to consumer environment.

Through our acquisitions we now also compete directly with other non-traditional distributors and retailers.

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Beech-Nut ® , Trophy ® , Havana Blossom ® , Durango ® , Stoker’s ® , Tequila Sunrise ® , Fred’s Choice ® , Old Hillside ® , Our Pride ® , Red Cap ® , Tennessee Chew ® , Big Mountain ® , Springfield Standard ® , Snake River ® , Vapor Beast ® , Vapor Shark ® , DirectVapor ® , VaporFi ® and South Beach Smoke ® .

The registered trademarks, which are significant to our business, expire periodically and are renewable for additional 10-year terms upon expiration.

The registered trademarks, which are significant to our business, expire periodically and are renewable for additional 10-year terms upon

Flavor and blend formula trade secrets relating to our tobacco products, which are key assets of our businesses, are maintained under strict secrecy.

The Zig-Zag ® trade dress trademark for premium cigarette papers and related products are owned by RTI and have been exclusively licensed to us in the U.S.

The Zig-Zag ® trademark for e-cigarettes is also owned by RTI and has been exclusively licensed to us in the U.S.

We own the Zig-Zag ® trademark with respect to its use in connection with products made with tobacco including, without limitation, cigarettes, cigars, and MYO cigar wraps in the U.S.

The Zig-Zag ® trade dress trademark for premium cigarette papers and

related products are owned by RTI and have been exclusively licensed to us in the U.S.

The Zig-Zag ® trademark

for e-cigarettes is also owned by RTI and has been exclusively licensed to us in the U.S.

We own the Zig-Zag ® trademark

with respect to its use in connection with products made with tobacco including, without limitation, cigarettes, cigars, and MYO cigar wraps in the U.S.

Research and Development and Quality Assurance

We have a research and development and quality assurance function that tests raw materials and finished products in order to maintain a high level of product quality and consistency.

Research and development largely bases its new product development efforts on our high-tech data systems.

We spent approximately $1.3 million, $2.5 million, and $2.5 million dollars on research and development and quality control efforts for the years ended December 31, 2020, 2019, and 2018, respectively.

and development largely bases its new product development efforts on our high-tech data systems.

We spent approximately $1.1 million, $1.3 million, and $2.5 million dollars on research and development and quality control efforts for the years

ended December 31, 2021, 2020, and 2019, respectively.

Human Capital

As of February 15, 2021, we employed 408 full-time and part-time employees.

As of March 4, 2022, we employed 426 full-time and part-time employees.

None of our employees are represented by unions.

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We believe that our success is driven by our employees.

Our human capital strategy, which is developed and overseen by our COO, focuses on the health and safety of our employees as well as the attraction, development and retention of employees.

Our COO is also responsible for our diversity and inclusion strategies.

The CEO, CFO and COO regularly update the board of directors and its committees on the human capital management, as well as the implementation of new initiatives.

Our human capital strategy, which is developed and overseen by our COO, focuses on the health and safety of our employees, development and retention of

current employees, and talent attraction.

Our COO is also responsible for our diversity, equity and inclusion (“DE&I”) strategies.

The CEO, CFO and COO regularly update the board of directors and its committees on the human

capital management, as well as the implementation of new initiatives.

Health and Safety:

Our health and safety programs are designed to address applicable regulations as well as the specific hazards and work environments of each of our facilities.

Our health and safety programs are designed to address applicable regulations as well as the specific hazards and work environments of each of our

We regularly conduct safety reviews at each of our locations to ensure compliance with applicable regulations and all policies and procedures.

We maintain safety committees that meet regularly to discuss and address any potential issues in our warehouse and manufacturing facilities.

We maintain safety committees that meet regularly to discuss and address any potential

issues in our warehouse and manufacturing facilities.

In addition, we conduct quarterly Motor Vehicle Safety trainings and annual Motor Vehicle Records checks for those assigned to company vehicles or who are daily drivers.

We utilize a number of metrics to assess the performance of our health and safety policies, procedures and initiatives, including lost workdays and any recordable or reportable incidents.

Since the onset of the COVID-19 pandemic, the health and safety of our employees has been our highest priority.

We immediately implemented several changes to enhance COVID-19 safety and mitigate related health risks in our work environment.

For our warehouse and operations, these included split shifts for our fulfillment employees, temperature scans, additional contactless hand sanitizing stations, protective equipment, social distancing guidelines, and increased cleaning and sanitization.

For other employees this included enhancing remote working capabilities as well as other arrangements.

We utilize a number of

metrics to assess the performance of our health and safety policies, procedures and initiatives, including lost workdays and any recordable or reportable incidents.

Also in 2021, we continued to implement strategies to mitigate the risk of

COVID-19 in the workplace.

TPB Culture Committee:

We implemented a Culture Committee in 2021 as a platform to discuss and implement ideas for Turning Point Brands to be

the employer of choice.

The committee is comprised of diverse individuals from different departments and geographic locations.

The committee’s focus is to recommend and implement best practices in the areas of health and safety, DE&I,

employee engagement, talent development and retention, and community engagement.

Employee Engagement:

To assess and improve employee retention and engagement, we have surveyed employees, with the assistance of third-party consultants, and use the results of and feedback from the survey to address employee concerns.

Our most recent survey was conducted in November 2020 and included participation by over two-thirds of our employees.

Diversity and Inclusion:

We place a high value on diversity and inclusion.

As of December 31, 2020, approximately 35% of our workforce was female and 22% of our employees in managerial roles were female.

To assess and improve employee retention and engagement, we implemented a new software system which can frequently survey our workforce and focus our

efforts on maximizing employee engagement and retention.

The system is configured to use text messaging, in addition to email notifications, to increase participation with our distributed workforce.

Diversity, Equity and Inclusion:

We place a high value on DE&I.

As of December 31, 2021, approximately 33% of our workforce was female and 24% of our employees in

managerial roles were female.

As of the same date, underrepresented minorities made up approximately 27% of our workforce, with 19% of our managerial roles held by underrepresented minorities.

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We provide technical and leadership training to employees at both the officer and non-officer levels.

The Company has also launched a learning management system for tracking training hours for its employees.

We believe that encouraging continual development for our employees is essential for it to maintain the strength and profitability of Company, generally, and brands, specifically.

The Company posts its openings internally to allow current employees to apply.

In 2020, we had 11 promotions within the organization.

In 2020, the Company developed Turning

Point University, an online training and development tool used by management and employees.

We believe that encouraging continual development for our employees is essential for us to maintain the strength and profitability of the Company, generally, and brands, specifically.

The Company posts its openings

internally to allow current employees to apply.

In 2021, we had 20 internal promotions within the organization.

Retaining Talent:

D uring the year ended December 31, 2020, our employee turnover rate was 20.7%.

To retain our employees, we believe it is critical to continually focus on ensuring employees are highly engaged and feel valued.

We address these retention efforts in a number of ways, from formal surveys and quarterly business updates, to regular informal discussions with employees that enable us to listen to, understand and address their concerns.

During the year ended December 31, 2021, our employee turnover rate was 16.5%.

To retain our employees, we believe

it is critical to continually focus on ensuring employees are highly engaged and feel valued.

We address these retention efforts in a number of ways, from formal surveys and quarterly business updates, to regular informal discussions with

employees that enable us to listen to, understand and address their concerns.

Employee Benefits :

We offer comprehensive benefit programs to our employees that provides them with, among other things, medical, dental, and vision healthcare;

We offer comprehensive benefit programs to our employees that provides them with, among other things, medical,

dental, and vision healthcare;

401(k) matching contributions;

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tuition assistance;

paid holidays;

and paid vacation time.

Environmental, Social and Governance (“ESG”)

We believe that focusing on our consumers and customers, while proactively and productively addressing the environment, our employees, our community, and society at large, is the key to driving value for all stakeholders.

stakeholders.

We recognize that incorporating ESG into our business strategy enhances our operating principles of winning with accountability, integrity, and responsibility, and will position our company for greater success in the future.

We believe that our Company will maximize its return to shareholders by implementing strategies and establishing goals to address public health, mitigating environmental risks, seeking and integrating a diverse range of viewpoints, and displaying responsible behaviors to suppliers, customers, members of the organization and most of all to its consumers.

believe that our Company will maximize its return to shareholders by implementing strategies and establishing goals to address public health, mitigating environmental risks, seeking and integrating a diverse range of viewpoints, and displaying

responsible behaviors to suppliers, customers, members of the organization and most of all to its consumers.

The Company’s Board of Directors voted on March 22, 2021, to add Environmental, Social, and Governance oversight to the Nominating and Governance Committee portfolio.

In recognition of the committee’s expanded

role, the Nominating and Governance Committee was renamed the Nominating and ESG Committee.

The Company engaged Nasdaq Corporate Solutions (NCS) to provide a comprehensive review of the Company’s ESG program and to provide recommendations based on best practices.

The results of the review were favorable

and the Company is currently implementing action plans to address gaps that were identified by NCS.

Public Health

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We market and sell products intended for adult use only, many containing nicotine.

As a result, public health plays a central role in all of our product initiatives.

As a result, public health plays a central

role in all of our product initiatives.

We believe in, and work diligently to apply, harm reduction principles to all of our products, from development through distribution and marketing.

Turning Point Brands’ vision is built upon the idea that adult consumers, when presented with responsibly marketed and high-quality options, will in large part prefer products with a lower risk profile than others.

This idea of moving adult consumers down the continuum of risk is a key driver of our Company’s future for sustainable growth.

We intend to accomplish this by developing low-risk alternatives according to good product stewardship and manufacturing principles in order to increase adult consumer availability of and access to high-quality products that deliver satisfaction but at a lower risk to the user.

Turning Point Brands’ vision is built upon the idea that

adult consumers, when presented with responsibly marketed and high-quality options, will, in large part, prefer products with a lower risk profile than others.

This idea of moving adult consumers down the continuum of risk is a key driver of our

Company’s future for sustainable growth.

We intend to accomplish this by developing low-risk alternatives according to good product stewardship and manufacturing principles in order to increase adult consumer availability of and access to

high-quality products that deliver satisfaction but at a lower risk to the user.

We will continue to focus our R&D, scientific, policy, and product resources to increase the number of consumers choosing products that are lower risk.

In September of 2020, Turning Point Brands submitted to the U.S.

In September 2020, we submitted to the U.S.

Food and Drug Administration Premarket Tobacco Applications (“PMTAs”) covering 250 products.

This is an important and necessary step for TPB to offer adult consumers an extensive portfolio of products that serve as alternatives to combustible cigarettes and satisfy a wide variety of consumer preferences.

The filings provide detailed scientific data that we believe demonstrates that the products are “appropriate for the protection of public health,” as required by law.

Studies to support the applications were performed and included pharmacokinetics studies, a likelihood of use study, and a patterns of use study, in addition to a toxicological review.

TPB also provided a detailed marketing plan to illustrate how it will continue to prevent youth exposure to the products.

This is an important and necessary step to allow us to offer adult consumers

an extensive portfolio of products that serve as alternatives to combustible cigarettes and satisfy a wide variety of consumer preferences.

The filings provide detailed scientific data that we believe demonstrates that the products are

“appropriate for the protection of public health,” as required by law.

Studies to support the applications were performed and included pharmacokinetics studies, a likelihood of use study, and a patterns of use study, in addition to a

toxicological review.

We also provided a detailed marketing plan to illustrate how it will continue to prevent youth exposure to the products.

See “Risks Related to Legal, Tax and Regulatory Matters” under Item 1A “Risk Factors” of this Annual

Report on Form 10-K.

Prevention of Youth Access

Our vision is a world where only adult consumers purchase and use products that are not intended for youth.

As a seller of products intended for adult-use only, society demands a higher burden of responsibility from us, and we are committed to proactively preventing the underage appeal and access to those products.

We are dedicated to the responsible marketing of our adult use products and are fully committed to complying with all applicable laws and regulations governing them.

TPB targets its marketing activities to both male and female current nicotine, cannabinoid, and other active consumers that are 21 years of age and older.

The marketing of our adult use products does not include content directed toward minors, and prohibited marketing content includes childish images, cartoons, characters, mascots, juvenile designs, or other themes or imagery known to resonate with minors.

The Company plans to continue to engage in appropriately targeted marketing activity, consistent with all legal requirements, industry standards, and best practices.

As a seller of products intended for adult-use only, society demands a higher burden of responsibility

from us, and we are committed to proactively preventing the underage appeal and access to those products.

We are dedicated to the responsible marketing of our adult use products and are fully committed to complying with all applicable laws and

regulations governing them.

We target marketing activities to both male and female current nicotine, cannabinoid, and other active consumers that are 21 years of age and older.

The marketing of our adult use products does not include content

directed toward minors, including child-oriented images or other themes where such imagery is reasonably understood to resonate with minors.

The Company plans to continue to engage in appropriately targeted marketing activity, consistent with all

legal requirements, industry standards, and best practices.

Preventing youth access and use of our adult-use products is a key to our continued success.

All of our adult-use products are intended to be sold to and used by adults 21 years of age and older, and we are proactive in implementing programs to prevent youth access.

All of our adult-use products are intended to be sold to and used by adults 21 years of age and older, and we are

proactive in implementing programs to prevent youth access.

For TPB’s own online retail (B2C) sales, TPB utilizes a robust third-party age verification process for all online purchases by consumers.

On its business-to-business (B2B) website section, TPB offers suggestions of resources for its downstream customers related to prevention of youth access.

These resources include information related to retailer-focused FDA Guidance, third-party age verification software available to both brick-and-mortar and online sellers, and helpful websites that offer compliance tools, e.g., WeCard.

On its business-to-business (B2B) website

section, TPB offers suggestions of resources for its downstream customers related to prevention of youth access.

These resources include information related to retailer-focused FDA guidance, third-party age verification software available to both

brick-and-mortar and online sellers, and helpful websites that offer compliance tools, e.g., WeCard.

Environmental Stewardship

Being good stewards of the planet will support our business success.

We will achieve this by transitioning our fleet to lower emissions vehicles, implementing energy saving initiatives in all of our locations, using renewable energy, and investing in Renewable Energy Credits (RECs) and Verified Emissions Reductions (VERs).

We will achieve this by transitioning our fleet to lower emissions vehicles, implementing energy saving initiatives in all of our locations,

using renewable energy, and investing in Renewable Energy Credits (RECs) and Verified Emissions Reductions (VERs).

We are also focused on reducing our water consumption and lowering our waste streams with increased recycling efforts.

Within each of these categories we will continue to define and update our metrics to measure our environmental impact based on Sustainability Accounting Standards Board (SASB), Carbon Disclosure Project (CDP), Task Force on Climate-related Financial Disclosures (TCFD), and the United Nations Sustainable Development Goals (SDGs).

of these categories we will continue to define and update our metrics to measure our environmental impact based on Sustainability Accounting Standards Board (SASB), Carbon Disclosure Project (CDP), Task Force on Climate-related Financial

Disclosures (TCFD), and the United Nations Sustainable Development Goals (SDGs).

Social Impact

We mobilized our internal resources during the COVID-19 crises to ensure the continuity of supply of our products to our customers and consumers while devoting company resources to assist the community at large, including:

Implementing processes to keep our team members safe with plantwide safety and cleanliness protocols, split shifts for fulfillment personnel, isolating work units where possible, and providing work from home opportunities.

In 2021, we continued to mobilize our internal resources during the COVID-19 crisis to ensure the continuity of supply of our products to our customers and consumers while devoting company resources to assist the community at large, including:

home opportunities.

Leveraging our IT strength and implementing videoconferencing to minimize contact and travel.

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Our Social program focuses on the safety of our people and the diversity of our workforce.

Our goals are to provide an injury-free and diverse workforce in order to provide a winning culture and be the employer of choice.

Our goals are to provide an injury-free and diverse workforce in order to provide a winning culture and be the employer of

We actively monitor and train against our safety program and have safety committees dedicated to implementing best practices and improving our safe working environment.

We have established meaningful measures for our Social program and our targets and actions will allow us to achieve our goals in this area.

We have established meaningful measures for our Social program and

our targets and actions will allow us to achieve our goals in this area.

Corporate Governance

Good corporate governance is critical to our operating principles of winning with accountability, integrity, and responsibility.

Acting with accountability, integrity and responsibility is at the core of our business conduct policy.

Acting with accountability, integrity and responsibility is at the core of our

business conduct policy.

We train all employees on our business conduct policies.

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We believe that Board diversity is critical to having a winning culture and strategy.

We have established meaningful measures for our Governance program and our targets and actions will allow us to achieve our goals in this area.

have established meaningful measures for our Governance program and our targets and actions will allow us to achieve our goals in this area.

2021 Highlights

Key highlights from our 2020 ESG metrics include:

A year over year reduction in water usage at our manufacturing plants;

Recycling more solid waste than solid waste sent to landfills;

A year over year reduction in carbon emissions from our fleet;

In the area of safety, a year over year reduction in our lost time incident rate, and an incident rate well below industry average;

Greater than 30% female representation in our workforce, and 18% or more representation in all categories of management;

Underrepresented minorities made up 18% of our senior management;

Underrepresented minorities made up 43% of our Board, and women represented 29% of our Board;

Implemented expanded policies related to restricting youth access and exposure.

We are committed to defining meaningful targets and strive to achieve these targets in each of these areas.

Further information on our program can be found on our website.

In 2021, we implemented several ESG committees to integrate ESG principles into our business practices.

The committees are comprised of diverse individuals from different departments and geographic locations.

committees report to the ESG Executive Committee, comprised of the President and CEO, COO, CFO, General Counsel, and Senior Vice-President of Sustainability.

The following committees were formed and are actively working:

The Public Health, Responsible Marketing, and Youth Access Prevention Committee, provides a platform to enhance our business practices in these areas.

The committee is charged with recommending and

implementing best practices in the areas of Public Health, Responsible Marketing, and Youth Access Prevention.

The Environmental Committee provides a platform to enhance our environmental practices within our business units.

The committee is charged with recommending and implementing best practices in the areas of

carbon emissions, waste, water, and biodiversity within our business units.

The Supplier Committee provides a platform to assure our supply chain aligns with our Environmental, Social, and Governance practices.

The committee charged with recommending and implementing best

practices in the areas of supplier environmental, social, and governance processes.

The Culture Committee provides a platform to achieve the objective of being the employer of choice.

The committee is charged with recommending and implementing best practices in the areas of health and

safety, DE&I, Talent Development and Retention, and Community Engagement.

The Governance Committee as a platform to assure our governance practices are best in class.

The committee is charged to recommending and implementing best practices in the areas of business ethics,

political engagement, and cybersecurity.

Further information related to our ESG program can be found on our website.

Internet Address and Company SEC Filings

Our primary Internet address is www.turningpointbrands.com.

The SEC maintains a website at https://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

On the investor relations portion of our website, www.turningpointbrands.com/investor-relations, we provide a link to our electronic filings with the U.S.

The SEC maintains a website at https://www.sec.gov that contains reports, proxy and information statements, and

other information regarding issuers that file electronically with the SEC.

On the investor relations portion of our website, www.turningpointbrands.com/investor-relations, we provide a link to our electronic

filings with the U.S.

Securities and Exchange Commission (the “SEC”), including our annual report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to these reports.

We make all such filings available free of charge as soon as reasonably practicable after filing.

We make all such filings

available free of charge as soon as reasonably practicable after filing.

The information found on our website is not part of this or any other report we file with or furnish to the SEC.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business