XXII - Earnings call transcript Q3 2020 | 22nd Century Group, Inc.

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Operator

Welcome to 22nd Century Group's Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode, and the floor will be open for question following management’s prepared remarks.

As a reminder, today’s conference is being recorded. At this time, I would like to turn the call over to Mei Kuo, Director of Communications and Investor Relations. Please begin.

Mei Kuo

Jessie. you, Thank welcome Call. and Century’s Quarter Third Good to Conference Earnings morning XXnd

Joining Chief third John Mish, Zercher, James our we me are today release press our Financial Earlier and announcing Operating issued a Chief for our Chief Executive Officer, our and the Franzino, results Officer. today, quarter. President Mike Officer,

a Mike insight quarter. are provide and framework John a into today's will we have objectives. progress We posted addition earnings an available the into remarks, information Both before prepared We'll Q&A have to management's call and website new presentation and supplemental our supplemental our Jim, supplemental xxiicentury.com. this at for highlights We and past reinforce with and also our on call serve from this as presentation additional strategy that summarizes takeaways start session. moving the call, hope made business, a key transparency earnings today's release from remarks and

of some today begin, are we the Before forward-looking. made statements

Forward-looking contemplated subject results from may materially that to differ and cause those uncertainties statements other to these actual statements. are by factors risks,

and information earlier our factors regarding found XXXX be our Form XX-K Additional filed XX, March XX-Q can Form filed today. on in these in

non-cash discuss non-operating During before we certain define including expenses. as interest, amortization non-GAAP this as taxes, will and call, adjusted we also for adjusted earnings measures financial EBITDA, which depreciation and

earlier release over more And please to For press to that, issued today. measures, I'll details on the Jim. these with our turn call refer

James Mish

months what as acceptable smoking and today. alive preventable related smoking not young down. to and to caused our cigarette by of kills ever me reducing caused health United reduce listen seven XX only the real has leading the in and deaths five cause help is addicted every people appreciate is Smoking primary disrupt, Cigarette claims than I've States. to XX with people epidemic the the a redefine our day X,XXX reaffirm public mission rates, carefully. drive day so from any farmers potential for thanks currently of VLN industry, national If becoming smoking for company's over per first in Century's has prematurely combined. in but these is dying users. To a no health approximately only smoking as U.S. product numbers prevent in more the the to continues million the Century in mistake one I die longer. are call lives in solution that to tobacco to of current other years the importantly of threats everyone intended, most XXnd These legal illness. its and an its a make half entire facts about responsible not from long-term cigarettes have and doing consumer the younger In lives used helped CDC priorities. millions I our U.S. more joining these estimates put will CEO, heard all every XXnd youth all opioid per terrible for really smoking day two one XXX is is who the from retailers, in Mei. day met per deaths shareholders. death XXnd of few tobacco are age that conference of ratio truly than and year And Americans our than X,XXX The Thanks at COVID-XX. the Americans this today. five such it officials, morning, perspective, each responsible scientists, is from is everyone staggering and Century's claims harm my many U.S. that kills when stakeholders public and the simply epidemic This Good of each one faces. smoking statistics million world disease crisis and than more by epidemic harm biggest are Worldwide as the Understanding these

cigarettes product number reduced content cigarette the stages only MRTP the specifically first This our VLN be nicotine addiction. the priority will not will Our nicotine review to leading or MRTP nicotine is the of market reduced final VLN brands or why cigarette authorization process Furthermore, than FDA U.S. be less only authorized by near-term is securing company's MRTP one the sustain other for create on XX% developed in the and obsession. once is any marketing with in content FDA-authorized FDA and the the and cigarette combustible

product truly NIH remarkable of VLN and Our of supported research and in decades $XXX million FDA the over is by funding. company's

VLN improve plan supports our the implement product FDA's of XXnd FDA's the Importantly of imminent authorization benefit and so to will and tobacco public help standard. only the impactful. not success commercial nicotine reduced opportunity Century advance other health worldwide. the be No has its and to VLN product will authorization also an We believe and regulation shareholders industry-wide nicotine global consumer

And so continues to my enthusiasm grow. VLN for

authorization. designed of potential has and nicotine the Commercial U.S. lowest and a them launch number that one said, XX chains As large in but and product cigarette. made marketing rollout the globally, campaign include the product we've to Separately for plans partners a same in launch with MRTP commence of I retail national world's well-recognized remains United to discussions authorization an content with that adult priority. the will licensing from strategic introduce securing States time, VLN FDA days at smokers our MRTP been within

of currently nicotine low varieties more into our cigarettes say than with rapidly top the recently other X% tobacco to achieving is have our were granted very a market this, all market and opportunity quarter price As of capitalization share Needless enabled U.S. all tobacco XX products. one production that patent trains a introduce market company's drive today. than of highly of valuable extremely times believe tobacco of I cigarette is the this, just reminder, franchise, in tremendous higher in it we share On U.S. to the us the undervalued. used we could

just continue drive MRTP that soon. launch initiative to slam cigarettes and We sold made per the effect, make be and we market gram minimally believe higher run. cigarette home to our the or advance the available the proprietary When every would to to plan proprietary limiting goes nicotine non-addictive content happen nicotine already VLN by mandate authorization intellectual ultimately States. that nicotine-content by plan The reduced equally and into will related achieved is grand in VLN in cigarettes. the milligrams require It United their U.S. our capital important X.X to to that level tobacco, a the tobacco of the a manufacturer position all is even of property FDA support FDA's

comprehensive renewed of have and to the conducted hemp-based to biotechnology engineering value modern have such upstream breeding. of and identified shift saturated emphasis business, in never and we a in refocused This IP is gene consumer they as CBD this, research, we near-term segments the chain from target and a spoke, away modification products our all have milestones already existing last In plant we extensive plant hemp/cannabis U.S. long-term Since been strategy the market. the opportunities addition and medium and and have review portfolio our climate, we regulatory brighter.

franchise initiatives hemp/cannabis concentrate plant-based tobacco strategy existing our efforts as related by Anandia improvement. were KeyGene third genome will worldwide talk well hemp/cannabis and for a I'll our year-over-year similarities update in its revenue current our driven and license John hemp/cannabis more plant gross will discuss collaboration with to We but to about our quarter third in on as that exclusive the I growth provides after continued on on detail, and agreement that the franchise. Laboratories. our operating results an more note strong margin will Mike the has

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progress franchise So and made fully VLN at overall without highlight to plan. perfectly to Tobacco proactively fits operate how have process time. means comprehensive plans understand we launch need our possible our details to on the or any provide the we every and we additional are will few raise VLN our important in using historic that Mike in But you their capital MRTP the the FDA, new a to it's this status prepared into of that moments. product are

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Mike Zercher

the status of application. of my the Thanks, our Jim. forefront is At including mind, everyone's MRTP own

any a believe that could continue at outcome time. positive come from the We and we FDA to will decision believe we see a

decision everything and know they no the continue application. our about information We make of FDA dialogue required the outstanding with a a the for final to is requests agency FDA, and we are final review. maintain the to believe There in stage have by we

addition public the lawyers government authorization. we importance to our efforts agency, contact and and public the encourage with and application affairs our health In intensified have proactive our highlight MRTP ongoing a advisers with our near-term to of

as industry VLN. and every we lever the to you secure among pulling regarded advisers lawyers MRTP we the for best that authorization an are assure Our available are in and

for confident several positive continue in a We feel outcome to reasons.

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We measurable. other exposure not seeking a a objective claim reduced are claim reduced simply to sought. nicotine harm Reduced exposure have and like companies is

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comment a over little public five ago. closed mid-May, Our in period months

that FDA's the the COVID follow less-complex of our but application agency's time year. also line, impact decision similar resources, come With into will taking sometime the we this the expect on account a assumption to

within solution caused want MRTP and our publicly cigarette product matter only believe Upon meaningful crisis not developed or a we our by combustible possible. to For sustain been for the This is when to has and VLN will if we of MRTP-designated with the create laid VLN have partner with the first us years. of to the and a of only VLN opportunity as prepared commercialization would will we our first these we as market. about market positive received application and positively are out our smoking is We have decision to and markets groundwork to be as feature regional in gone doing health VLN well. are roll the national in a share select not receive the and public felt to plans, so and with many eager The to very to why discussions provide number authorization. reasons, recognize authorization, that authorization Today MRTP addiction. here in in not retailers, capture their have stating of comfortable to the quickly of bring days They're tobacco discussions the by already you massive. VLN a an independent names months in and cigarette. FDA's coming is stores trade XX the them we MRTP's only be

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Our The has inspected our facility. is VLN cleared XX,XXX facility ready production commercial FDA foot to manufacture square and quantities. in

approximately We capacity can equipment have market. to investment with we additional the X% our manufacture in sufficient And minimal easily capacity. U.S. of triple

Now we've the at of VLN, plans discussed that our the size let's look opportunity. for

is they repeating. the have of from XX worth In billion CDC is want in preeminent a less X% XX% than to of be the A statistics by actually capitalization are U.S. worldwide. market, smokers sciences than disruptive believe the and of but body higher reduced quarter quit given worldwide, tobacco sales claim will Achieving may cigarettes. Century before, and billion one given to U.S. two-thirds quit sales million coming for $XXX world's one result in market authorized of we combustible the billion times attempt XX industry with than the the more to just drive that a the our VLN exposure nature to more succeed. them of than X% those According U.S. today. are life half catalyst FDA, smokers regulatory there it of smoking in adult over worth could $XXX We year, critical the XXnd revenues growth. time and shared following but U.S.

globally. to FDA's multiple partnership U.S. will addition, strategic up open potentially and in VLN's the authorization growth scale In opportunities

VLN As will the MRTP with market, our U.S. is for once international mature plans received. authorization

cigarette allow or Important success, are are will These consumers many and makes bright developing varieties be pursue. GMO reduced century also oriental plants our While considered health. tobacco an the us to an helpful FDA will for necessary non-GMO approvals in excited VLN of markets. authorization we that style. world tobaccos. to gold post international international burley to MRTP market, standard our match with to not In banned, countries in non-GMO to will regulatory characteristics the VLN's Introducing the regulators products public to to be simply countries, VLN. sales, required authorization claims is in authorization incredibly enormous these labeling by is an And any nicotine with crucial which unacceptable business bring international opportunity around are to non-GMO the be international navigating VLN into FDA

have been field reducing non-GMO developing validating we new plant nicotine at and earlier year, of announced hard these tobacco the this non-GMO new We plants. lines, research trials, for methodologies completion in work

low the are trials, developing and about of prototype XXnd nicotine already using from Century's we excited nicotine very this tobacco. We very tobacco by are created next-generation reduced field these opportunities the cigarettes content

new for and animal and tobacco sources plants, ingredients even vaccines, plan our of our protein the to exciting feed tobacco in longer-term and could the franchise, immediate flavor and this can new Tobacco we is food fragrance an produce VLN expertise for medicines While factory, that with is industry. and we bio tobacco. opportunity opportunities sustainable see commercialization engineer our exceptional in also leverage

the hand long addiction. wide-ranging While Director there smoking harms XXnd runway and of profitability focused of FDA the Zeller, pandemic the in opportunities for today. we Products, is tobacco Mitch still certainly in and Nicotine in committed to is of moving within absolutely sharp levels, indicated reducing its The nicotine Drug Tobacco asked, in for the brought remains nicotine and on including Food comprehensive and the that that FDA FDA was plan if the growth that has non-addictive ahead he health nicotine Conference. Tobacco considering we Law spoke cigarettes When regulation, everything remain the for at importance Center COVID-XX and tobacco and a Century's focus the respiratory to Recently, plan. franchise, Institute's with have

the FDA's This as encouraging Jim? successfully health our Jim continue to and to eliminate you studies strategy franchise. commitment research reducing to content public continued non-addictive. a important Additionally, in standard, Commercialization VLN to plan potential to and the proposed of make and the of the I'll Century, to bring plan on we our and on generation. cigarettes wins support comprehensive XXnd soon all of nicotine for institutions we and nicotine tobacco-related in will secure welcome to is decisions move FDA's most important as investigate to market role decisions reduced health VLN implementation public FDA in an back the authorization death. and every adult U.S. note we pass landmark reduction FDA's smokers, particular public to paradigm hemp/cannabis implementation possible application MRTP to all policy for industry. remain can leading public the making about now and cigarettes and FDA's U.S. be tobacco of evidence public and shift and a ongoing in update of laser-focused their fund health that diseases mandate FDA's in reduce the and our commitment nicotine We in other drive health a the their initiative. of harm reduced application be to FDA's could tobacco product health to MRTP a the

James Mish

Mike. Thanks

hemp/cannabis in progress high-value research considerable to the of increased research taking applications advance as our plant hemp/cannabis license the continue the agreement XXXX, we're Cannabis's in world involving genetic relating maintain making KeyGene, pursue and Laboratories. Today, with In valuable is leader established entered traits patent XX worldwide Aurora we hemp/cannabis Anandia. well. stage, Remember, and in and U.S. patent back a hemp/cannabis through substantial franchise with our remainder for Licenses plant. agreement Anandia of tobacco XXXX strategic the we our our development a sublicense for research acquisition to in worldwide and of of and the in these yield. genesis and franchise center co-exclusive was patents sublicense exclusive into survive global crop research a in While

Our focused exclusive ultra-high now hemp/cannabis select for use consumer levels terpene agronomic lines science THC life levels, of on ultra-low worldwide developing with high-growth including collaboration higher plants lines lines with with and is in rare cannabinoids markets. traits and levels with stable,

past monetize our proprietary efforts collaborative our we the we intellectual platform. this With information completed of have to genome, the now on building KeyGene. through Over with bioinformatics developed have we property can begin vast year, hemp/cannabis encyclopedia

key Our able cost-effective most were the efforts partnership and with collaborative fastest the them, we KeyGene available. And our us. is using to plant methods with and advantage competitive for through hemp/cannabis improve modify a

of gene Additionally in target in we value the cannabinoid have refocus plant made intellectual upstream extraction. modern of areas chain particular property, engineering, to the related and and decision plant breeding the biotechnology hemp/cannabis strategy and development research, segments modification and our to the

commercial lines the over Panacea CBD accelerated and delivery and and We valuable focus will on of technology investment products. hemp-based plant ensure reset to consumer our with

growth disruptive generate as efforts opportunities for will us bring R&D continue tremendous we to forward. expect and our our IP technology monetize We cannabis/hemp

industry of and development to market at $XXX to the As the fascinating cannabis is forefront the are XXXX we global we a billion believe projected plant. technological relating reminder by be

hemp/cannabis soon we call, wanted strategic pursuing and our and very franchise. line identified are I in valuable we on and announce say situation our excited with you a identify will hemp/cannabis to will securing securing plant the the plant franchises. share property this offers process third we extremely the allows. our attractive our is in medium-term Finally the objectives and plant tobacco genome a competitive near after on I to this very but as of franchise What possible I can about. attention this the MRTP still on increase this that that plant we can as the are support intellectual have to executing franchise species also opportunities. line, only partnerships growth that, development a has as designation similar of I and

space is like tobacco highly legislated new our as not this franchise. and or Additionally hemp/cannabis regulated

faster add of So with we now financial were believe have able for the results. shareholder to I'll two.And turn first our franchise we this a than the John to over we call value that review with in

John Franzino

to Thank detail quarter XXXX. and which morning third million you Jim $X.X first This the moment. margins I and the a months good higher gross nine driven lower by everyone. Operating $X.X will for and million improved loss by was in improved in operating by expenses of

year-to-date impairment efficiencies $X.X year. of third lower the quarter application partially was million favorability was compensation increase by in personnel to improvement this in and resulted onetime charge and due year-to-date. that due year-over-year that per a recorded which which a in expenses related decrease year-to-date onetime quarter past decrease $X taken year. improved nine year-to-date was This expenses implemented a third assets prior driven third the and noncash decrease business. manufacturing quarter loss in $XX,XXX months inventory expenses gross driven and intellectual per $XXX,XXX and the higher the R&D Separately professional favorable the million $X.X by revenue million portfolio of overhead an $XX.X in severance $X.X by improved $XXX,XXX by rationalization improved quarter for of the $X.X XXXX. Our in in related price absence research third personnel and volume favorable gross by profit This severance were In of primarily for of was and primarily the charge million by labor the XXXX and to periods also and in of occurred resulted third nine in $XXX,XXX and net million $X.XX costs. the expenses was improved equity on license the on to $X expenses and share in the quarter first million pricing Operating to quarter for by insurance profit costs impairment of sales also costs onetime in driven a $XXX,XXX improvement year the was was $X.X loss impairment to lower tobacco reduction XX% a improvements by volume, improved a decreased million. of months. by quarter; for by the by up basis. basis. expense by of The the of quarter SG&A and in our recorded last share higher million. the The was third MRTP driven net the and result third approximately contract was for operating million up lower offset the improved expenses, equity consulting last This lower increases in to on first $X.X the a primarily intangible compensation property following: SG&A million year-to-date. impairment and on year $X a Total decrease increase $X.X an Net $X.XX, an due services factory expenses for contract to a higher of was in months the were million, XX% expense. basis. and was to The increase nine both and over by onetime quarter R&D

unrealized In and quarter in in and million addition by million in $X.X to expense loss expense addition $X.X due warrants loss and to on primarily and other of due income $X.X income EBITDA in improved of by the the by million loss reduction improved $X million, prior offset improvement to a $X of operating the other $X.X Aurora $XX.X XX% Net investment. related XXXX last current expense to This the improvement quarter million partially -- primarily of impairment loss $X.XX the a year-to-date. in year. comparable improvement months of by and share an representing first operating warrant of $X.X for an per improved XX% of to nine year. to net improved litigation for $X.XX, the Adjusted loss year on by million by Panacea is of the million

Our months short-term $XX.X with demonstrated of strong remains nine approximately summary, cash, the the year. in quarter. third investment In totaling the strong cash of equivalents at performance securities, and million the liquidity end first we've

We carefully. continue continue to expenditures in And manage manufacturing improve contract operations. very margins our our to

balance Our And with And open can we our time. capital for healthy. operations, achieve and raise this at sheet confident the operator, without are is drive to the our current sustain need that VLN we launch strategy, our additional objectives, please up that, call questions.

Operator

with [Operator Jim with excuse you. McIlree Woods. from -- question Instructions] me have Bradley Thank you. coming We a Please of Jim do Thank the line -- proceed your question.

Jim McIlree

mind. all just and if you Thank I'll ask Yeah. questions. at don't good once, morning. I few you a have them

You kind of about, for marketing but at out signed virtually least post-MRTP with infrastructure of that And geography? doesn't genetic And place the said patent? it in VLN, you some variety. do will in did the also can those be there retail you you if varieties I talked any you that in And you any you you gives some we that you suggesting it talked lines, talked varieties said also do if wondering, if them campaign. patent, but that give me. was in aware then, national first wondering wondering indication And a approval, then terms time I in lastly on, talked the select commercialization about, have, of the it an how rolling about add I exclusivity if And partnerships, agreements now about much retail have along should about are give retail of, partnerships or -- in just control be I'm the or then was give that might Thank that months. XX you think dollars you. you that control? you partnerships genetic markets. either

James Mish

and ahead And Jim. in on for the Jim question, to fill in. please. pass chime it I'll Mike. for go Mike, I'll Thanks the blanks But

Mike Zercher

thanks hear Jim. your questions. Thanks. voice. Jim Sure the good to It's for

budgets, marketing will you, of like can the I we're rollout figures of terms to our In tell a not months release But first several and the prepared be, campaign approach. that. phased

So the scale this messaging the behavior that leverage with select to then standard the the you business. learning with consumer as better geographies, world, is the product, a understand and in, real products start refine in CBG up approach

And to, the the spending will correspond and of there that at of campaign budgets time. so, the scale course the

we don't a terms We're the discussions have number during test and about -- geographies, agreements with the In moment. partnerships, retail of store of signed in the phase. at counts retailers, place, these in

those negotiation. so any then of there's plants terms used not And commercial tobacco are variety as ones similar, still in this patent, that variety will least believe very in no we at work new -- far the the tobacco technology production. And as in are

used markets the of And of three that which cigarettes, to so market because focused but burley not we The flavor is a variety. cigarette, those, as any ones profile U.S. flue-cured many are believe, referred dominates this on Virginia we're focused style are as we're internationally And technology tobaccos. tobacco that the in blend will American types what's sometimes on bright in or work just and are well. they oriental tobaccos, a that tobaccos

those make will typically include in cigarettes non-addictive. we mandate be be tobaccos, to at will cigars the as technology the little little as That believe as work as will dark-fired use well. all the likely products tobaccos, And in However, in elsewhere types cigar in are products likely like, which of we least, technology this some well very Those cigar believe it the cigars varieties will well. other world, believe for useful we tobacco. varieties included FDA used tobacco which

So that answered hopefully, your questions?

Jim McIlree

good you Thank with very luck much did. and That everything.

Operator

you. Thank

audio no [Operator have at questions time. additional We this Instructions]

James Mish

All I But well. But in We're questions a rolled as perhaps many I as along way and them that as But potential to appreciate very a or getting right. -- out our appreciate here may I'll hemp/cannabis on find that of I at are the some marijuana least we've everybody's go whether that the would light shed coming basis here few few questions. in. basis. of of I'll here. going I get here I all number like to and we're for overall shed a legalization as there's with answered a strategy on federal thoughtful of our think possible that a light and impacts and to questions number pick them together they them strategy. out some how regarding on And state that some pick a it.

focus publicly-traded combined in consumer XXnd space knows as recreational with end is marijuana Panacea and were with in original a to the lines. everyone upstream were objectives Century investment So, the primary as the and on product the company not plant

non-recreational That As let's area I during it call -- shifted said the primarily was our non in to have focus area. we the downstream space. consumer upstream dramatically conversation, the space

time down So, goes we do do believe as we that ultimately basis federal road, will then a state-by-state and on, a on ultimately the basis occur. first on legalization believe

high identifying new we targets to -- conduct lines lines stable THC that legalization. with designed will new And offshore we're research some are match federal that of our that

basis, take certainly to have the offer. can advantage R&D We a full U.S. Now, of meantime also and in on we of outside state-by-state that the

moving process. federal KeyGene real turned -- and attention everybody want value investment the in our the the road. have where -- we're be to the have R&D particular And to forward. to and -- with legalization we offerings We like the else lines prepared more in we're that's where themselves to and plant state-by-state So, with down some watching

number that. So, some light And of questions around our there's a that on sheds thinking. hopefully

take base. Will invested more here Panacea throughout address in and just the also light I and with shed reads,' to Panacea?' do some the money to Here's -- another I be And the question conversation would it's question shareholder want like

So, the that -- point driven investment to very a credit original primarily that upstream in is their finished with lesser product for that. goods Panacea nice I'm an a very again their to own all was the capabilities. marketplace extent competitive in and happy at to complex marketplace goods They're space in fragmented. space very say and world competitive is that I The consumer doing job. give the them and holding the the finished Panacea by

that Our fully because vertically on integrated. there is they're -- investment interest in

area. where upstream extraction also expertise in the cultivation the in and and they have breeding interest that's Our is area the

extraction strength intend it dollars plant And chain upstream dollars to opportunities leave -- our around present. investment. we will at that's long-term is a the solid So, refocus their that. of product into aligned kind core Panacea, with strength don't It's which of shift strategy. well-funded, upstream expertise into our with our focus which their to to on the but and additional our on with want core consumer investing those cultivation breeding conversations do I them really but we matches having we're value downstream the we on Still space.

regarding there again Panacea, on a lights in it. So, there and of that shed were hopefully some number questions

as -- said, questions. I I like a juicy Here's

So We I why from different buying least think are that to here. for different you're future couple a a say insiders not reason, valid trickling not have couple at -- insiders a to of question able here that? been one angles need have But is in confident know can you in SP. and that very been shares? of If some

I question great and a personal answer think from I'll standpoint. it it's a

personally with to do coming amount earnings of But blackout obviously deal As blackout believe cetera. a on be have everything of then with share woefully lot We that with of during price undervalued. is And and we've periods. woefully conversation, capitalization the based et our undervalued. It's going periods. to releases, do is lot our with I we're I out the will I press call now on, We a investing have believe entirely. imply investments to the continued price the believe way myself. to share undervalued through want confidence window about. that, FDA grant looking for that believe open measured that again work and to and and do our I because have in that this I I we I is and I that pressure will forward as it's in that months such, make utmost talked the MRTP next And the strong we've have said deal market do got

intention highly efforts on So in is the the question address strategy confident our refocused operating have across and address a capabilities time will business board. team -- there's when of to that a over just could please? I this to gotten the be on period If confidence during question But available will utmost the course executing Mike, up do and our the that you and consumers? could really window have the of relatively every our here and now back Moonlight roots, as we window here. to this have that you a I'd like short that and to we next in open

Mike Zercher

Sure, Jim. Yes.

the simply Moonlight market. what So Moonlight because was in significant us significant is on us for any the any December. in VLN, to that product. not do planning to different way FDA market. to the simply PMTA allows -- product MRTP into and every the authorization other It's not actually put product the makes describe as does that by exactly the allow to PMTA will It product the cigarette we're bringing not sale way authorized product same back the market We're in from

say the what that why Moonlight any any we have from if the to Why cigarette brands walking why going having in smoker different. a shelf explain That's cannot new to every makes cigarette that's Those consumer all might MRTP Internationally, into on similar it. We application issue the Moonlight information because in don't them and looking with situation. can't less companies is to cigarettes, would a to so that supposedly it's is other for rules imagine an explain has not derive So what from goes days not against about what significant at require store laws And brand that that shelf country Virtually would a that and buy it the more fact We statements makes this in information effort. simply any they this can't product, store? That's safer it XXX having it tobacco -- products why about and XX% of a making the cigarettes tell they way, the less it. country important different Moonlight. tobacco market seeing this of And smokers even has the benefits nicotine. are statements something. MRTP has authorization. every aware I'm example. back marketing of light to

And the of a in virtually to there's XX% that on nicotine. tobacco something has prevents That every country including countries. a making that prohibits containing so less nicotine of treaty signed from worldwide less WHO claims those product claim from us

lawyers claim with allow large will that think then this it to will think regulators be all the our we've successful when with MRTP FDA And and likely relatively talked the yes, be talked And we've countries. regulators authorize world and successful secure their around and be country. part, countries less because well will to a in a in we us to authorizes go-to-market to many as And to review so for we us they've countries In it the our it to this. says is authorization regulatory said, nicotine strategy for there work XX% claim the then about that in it straightforward strategy.

the our less nicotine legally down and -- a -- XX% to describe claim. comes lawfully to all it make ability to legally products so And make

James Mish

Appreciate of Mike. question is of levels that good rate? you, extension out that. regarding far well. the the position exact to burn our and cash appreciate burn There's I rate as a do will think and into how I cash question I The future. current the So Thank last on a position myself want directly current and based that the address current here do question --

with those marketplace, be current do that sheet balance year. With new launch of next ample the plan the cash effect, to into certainly here time our XXXX line under continuing sight combined with do that. cash do capitalize on implementing. to our future. we've believe of opportunities coming in reductions well we here. healthy our to So into the new reduce burn that them as our rate We're to without implementing in we the be or I've done additional our We're all on we'll diligently working into the a lot to above going we and burn goes been of VLN strategy see months mortgaging have into And to actually few rates burn a first

efficiently have to as franchise, only we VLN the and of onto plenty execute So to hand franchise on to not tobacco the shelves cannabis on the well. operate but cash get

of XX VLN from and in, doesn't that. least months year. of coming beyond the of that in somewhere between half cash any revenue including second So all it's next at stream And include

this contract that. the We're work and success at volumes So cost needing not offset put And as a or has time. that a of that into we've But us additional with comfortable John rate us at pricing really as continue into combination position to overall. puts moving of with very has that it planning is that that to we're capital forward. reduce new rate, to we'll burn very position on the good and raises believe I have said I've very said to with and and -- regards side manufacturing a burn efficiency taken that to good have comfortable

to questions. out more color perhaps did again earlier So add to And we've want that few got got I of we question for bit think a a the and appreciate just the time than I little more presentation.

state bear for screen individual and shifted address of sale excise so me. any level? VLN exempt that? our the from cigarette yourself. be My I the Will just MSA a with good is this either or taxes think Could or payments Mike you question federal at

Mike Zercher

Yes or few that And place tax some a products. great an for to reductions states excise apply MRTP put question. into once a have there secured exemptions are would authorization that's MRTP Currently Sure. that VLN. we've

is at So the yes, answer state level. the

and taxation expect of from MSA well. that level payments a we're by an federal We set are MSA are be separate issue and can be and that strategy Congress. agreement. approach successful tobacco to at industry regulation the as taxes settlement legislatures at the sort state governed to level hopeful that payments a so will by are continue

possible products, there's certainly around modified that. be could type excise with a benefit have settlement activity of I that that of could -- taxes. heard it's again, -- for not any MRTP provide lot activity so But some not And of personally although tax to that have

James Mish

can plan please just believe Thank your I got MRTP of putting leverage? also question. you, by more time the I those MRTP. address And on I one solid. Mike. talk in for kind not think approved questions both Number they're very if And is, we've explain you two one combined of backup the I pressure is detail can What FDA the think you your advancing about questions. And FDA? is for these

in the in of said And we've FDA earlier approve is it strongly. believe of not that the conversation, this. months. will when we that believe but part we measured As a matter is it continue if very And to

apply ever-increasing and approach value. about funded the decide this their start amount driving studies and leverage to more around product And being and their a Our plan them the the the less that more FDA through FDA do we studies pressure about them ever-increasing the consumers enable a from to clinical verbally. and let reminding is reinforcing their the job top been to they're and that a effort of up of down with about have respect the channels They plan and this careful is matter to backup the ground establish. leverage and The really those typical from hit shelves and enable to the fits tremendous that. ever-increasing they of very the levels it's into bureaucracy and long-term

of this But about long-term their is resolved channels really more pressure once have the to variety all. and for master strategy plan, their that the we historically. more leverage a anticipate the next into and coming this backup year. it one that we and of spill So the is we're the year – them with leverage to the backup should plan continue the utilizing and get applying and their through technology end same. MRTP If all conversations plan is for the by and support more here We different

utmost decide once consumers it we clinical And the the let it to the tries us approval. it's value. marketplace. success – very opportunity in product collaborative which that will demonstrate is as up effort final and So get its that And gives a the That it shelves have we being believe. the the suggested, the consumer on MRTP that confidence have be studies the we'll a clearly the we've will outcome end

James Mish

So that updates developments, to make And for our the the I we're for we're questions time we how business. on our we and call for of across We're hope trying and your base the franchises questions. with regular on that all of up to value listen you provide company pretty be all and opportunity and transparent the continue openness much this strategy shareholders. for aspects our and new how sense our the shareholder really provided wraps to shareholders striving a plans has going to

your of time and your As thank always, questions your we for continued thoughtful for Century. you XXnd support

sure any have forward. following questions a xxiicentury.com today's good to to at try not could today moving you get Mei Relations have that out at questions we to please Thank answer and If reach be the to you again call we'll here further Investor day. and

Operator

This Thank conclude you. does today's call.

You may now disconnect.

22nd Century (XXII) 5 Nov 202020 Q3 Earnings call transcript