22nd Century (US:XXII)2019-03-08 03:56Financial Data and Key Metrics Changes - Net sales revenues for the year ended December 31, 2018, were $26,426,000, a 59.2% increase from $16,600,000 in 2017, marking the highest annual net sales revenue in the company's history [12][13] - Gross profit on product sales for 2018 was $899,000, a positive change of $1,607,000 from a gross loss of $708,000 in 2017, primarily due to increased factory utilization [14] - Net loss for 2018 was $7,967,000, or a negative $0.06 per share, compared to a net loss of $13,029,000, or a negative $0.13 per share in 2017, reflecting a decrease in net loss of 38.9% [16] - Adjusted EBITDA for 2018 was a negative $19,489,000, worsening from a negative $11,411,000 in 2017, primarily due to increased operating expenses [20] - Cash position at December 31, 2018, was $56.4 million, sufficient to cover normal monthly operating expenses of approximately $850,000 for several years [21] Business Line Data and Key Metrics Changes - The increase in net sales revenue was primarily attributed to additional revenue from contract manufacturing of cigarettes and filtered cigars [13] - Operating expenses for 2018 were $20,388,000, an increase of 90.5% from $10,703,000 in 2017, largely due to expenses related to the Modified Risk Tobacco Product (MRTP) application with the FDA [15] Market Data and Key Metrics Changes - The company is actively engaged in the hemp cannabis market, which has seen significant legislative changes, including the 2018 Farm Bill that legalized hemp [33][34] - The FDA's plan to reduce nicotine content in cigarettes is expected to complement the company's MRTP initiative, which seeks to commercialize very low nicotine content cigarettes [29][31] Company Strategy and Development Direction - The company aims to advance its MRTP application for very low nicotine content cigarettes while simultaneously increasing investment in hemp cannabis research and development [37][49] - The strategic vision includes forming partnerships and alliances to enhance its biotechnology efforts in the hemp cannabis industry [38][41] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the FDA's commitment to nicotine reduction and the progress of the MRTP application, noting more than 20 conversations with the FDA in recent months [30][46] - The company believes it is well-positioned to capitalize on opportunities in the hemp cannabis market, with a strong cash position and ongoing research initiatives [49] Other Important Information - The company is facing frivolous class action lawsuits, which management believes are without merit and intends to defend vigorously [42][44] - The company has a unique competitive advantage in producing very low nicotine tobacco, which is distinct from other low nicotine products in the market [72] Q&A Session Summary Question: Can you provide clarity on expenses for 2019? - Management indicated that expenses related to the MRTP application would decrease significantly, with an anticipated $1.5 million in additional expenses for the application [52][56] Question: What are the top priorities for the company moving forward? - The top priorities include advancing the MRTP and PMTA applications and building out the hemp franchise [57][58] Question: How does the company plan to address the potential delays in the MRTP timeline? - Management expressed confidence in the cash position, stating there is more than four years of cash available, and noted that the MRTP process is progressing smoothly [65][66] Question: What is the competitive landscape in the hemp business? - Management acknowledged that while there are competitors, the company believes it has a significant head start in developing unique hemp strains with zero THC [95][96]