Welcome to 22nd Century Group’s Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. 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.

Thank you, Brock. Good morning and welcome to 22nd Century’s second quarter earnings conference call. Joining me today are Jim Mish, our Chief Executive Officer, Mike Zercher, our Chief Operating Officer, and John Franzino, our Chief Financial Officer. Before we begin, we would like to remind everyone that some of the statements made today are forward-looking. Forward-looking statements are not guarantees of future performance, and are subject to risks, uncertainties, and other factors that may cause actual results to differ materially from those contemplated by these statements. Additional information regarding these factors can be found in our Form 10-K filed March 11 2020 and Form 10-Q filed earlier today. During this call, we will also discuss non-GAAP financial measures, including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation and amortization as adjusted for certain non-cash and non-operating expenses, all describing today's earnings press release, including a reconciliation of adjusted EBITDA to GAAP net income, which you can find on our website at xxiicentury.com. An archive replay of the webcast will be available shortly after the live event has concluded. And with that, I'll turn the call over to Jim.

Thanks, Mei. Good morning and welcome everyone. Before we dive into our quarterly update, I'd like to take the opportunity to introduce myself, provide you with some color on my background and my early impressions since joining the company at the end of June. I started my career as a research chemist for Pfizer pharmaceuticals before moving on to executive leadership roles at several chemical and ingredients companies, operating in the consumer products, pharmaceutical and cannabinoid spaces, where I sharpened our focus in product innovation and developed and improved their operational and financial performance. My experience in driving transformational growth at these science-driven organization leads me to believe that there is an opportunity to do the same at 22nd Century. Since joining the company at the end of June, I spent time getting to know our business by speaking with various stakeholders and familiarizing myself with the tobacco industry. Together with the company's leadership team and Board of Directors, we are now formulating a multi-year strategic plan for our company to include key areas of focus, along with near and long-term financial targets and operational initiatives. I appreciate that our investors are eager to hear from management on where we are headed and how and when we are getting there. Suffice it to say one month isn't sufficient to thoroughly evaluate all of the opportunities ahead. However, I look forward to sharing with you on our next earnings call in early November, my vision for the company and the strategies we will pursue to achieve that vision. I'll end my introduction by saying that with the addition of our new General Counsel, Steve Przybilla, who joined us last week, we now have a world-class leadership team in place, with the deep commercial experience needed for the 22nd Century to be…

Thank you, Jim. I know I speak for the entire management team when I say we're energized by your arrival and commitment to steering the company towards realizing our shared vision of becoming a leading Life Sciences company. Since our last earnings call, the public comment period on our MRTP application has closed. We are now in the final action stage of our application. At this time, we've provided the FDA with all of the information they've requested and need in order for them to make a final decision. While the FDAs authorization can come at any time, it is prudent to note that some employees from the FDA center for tobacco products has been redeployed to work for the US public health service in response to COVID-19. Therefore, it is reasonable to expect that this can potentially have an influence on the timing of the FDAs authorization of our application. That said, just last month, the FDA authorized its second MRTP application. It is clear that despite COVID the FDA is still at work and continues to make progress in reviewing outstanding MRTP applications, and more broadly on their comprehensive plan for nicotine - for tobacco control and nicotine regulation. We're hopeful for the FDAs continued momentum and a positive outcome for our application. In the interim, we're already setting the stage for successful launch of VLN. We've engaged the agency's developing our marketing sales programs and discussions are underway with national, regional and independent retailers and wholesalers to finalize our plans to bring VLN to market. Our most recent crop of reduced nicotine tobacco was harvested last year, and is now in the final stages of processing. Our factory is ready to go, and we're already taking steps where we can to complete state level registrations needed to…

Thank you, Mike. And good morning, everyone. So I'd also like to welcome each of you to today's call. And thank you for joining us. I'm honored and excited about the opportunity to serve as the company's Chief Financial Officer and to help identify the best path forward for 22nd Century. My discussion this morning will include a review of our second quarter and year-to-date financial performance, my initial observations and a sense of what to expect in the near term. Let's begin by diving into the numbers, unless I say otherwise, all numbers presented are rounded for ease of reference, and comparisons. I will be referring to on a year-over-year basis unless otherwise noted. Net sales revenue for the second quarter into the first half of 2020 was up approximately 11%. The increases were primarily driven by higher volume and pricing in our Contract Manufacturing business. For the second quarter gross margin improved by 460 basis points, and for the first half of the year gross margin improved by 520 basis points. The improvements were primarily the result of lower labor and overhead costs and price increases. Operating loss for the second quarter improved by $276,000. The improvement was driven by positive gross profit, which was partially offset by higher operating expenses. Year-to-date operating loss improved by $1.5 million. This improvement was driven by favorable gross profit of $488,000 and lower operating expenses. Operating expenses decreased as a result of lower R&D expense, which was partially offset by an increase in SG&A expense. The majority of the decrease in R&D expense was driven by lower personnel and contract costs this year, and a reduction in expenses related to our MRTP [ph] application in the prior year. The increase in SG&A expense was driven by higher consulting and professional services,…

Thank you. This does conclude today's call. You may now disconnect.