The Company’s manufacturing operations at its North Carolina factory began approaching production capacity during the six months ended June 30, 2018. The Company significantly expanded capacity during the second and third quarters of 2017 in order to fulfill anticipated new manufacturing contracts. In mid-May of 2017, the Company began the first phase of a manufacturing contract for an existing brand of filtered cigars under a new contract manufacturing agreement (the “New Agreement”) with a third-party and continued manufacturing a third-party MSA cigarette brand and other filtered cigars on a contract basis. The production volume under the New Agreement continued to increase during the first and second quarters of 2018, has resulted in an increase in the utilization of production capacity, required the hiring of additional personnel, and investment in additional manufacturing equipment for the factory. Raw material component costs, direct manufacturing costs, and an overhead allocation are included in the Cost of goods sold and Finished goods inventory. General and administrative expenses of the factory amounted to $318,511 and $629,439 for the three and six months ended June 30, 2018, respectively ($215,941 and $334,691 for the three and six months ended June 30, 2017, respectively).