Greetings from the Forge Wood section of Crawley, Foose, and our band of merry men. Rains like Hell here. Probable cause for huge trees throughoutbthe English countryside.
Yeah Foose, in regard to advising us to listen the last two minutes of yesterday evening's presentation.
Got those down below.
Thanks for your guidance to the heavily scripted Questions and Answers song and dance. Most of us listened to and read the whole session by now.
Real data on company standing beld up front. BS dreams and possibilities
Thinking most of us listening, reading and wanting to dicuss implications od our quarterly cattle call.
On that note, kudos to Parkmart, Speed of Light and Abew for their insights into possible extensions on delistment dates you insisted was written in stone.
Here's the last FANTASY moments of the investors call in. You should know, I'm still pushing INVESTORS' RIGHTS in this mess created by Jim Haywerth.
Damn shame your promoting this crap as an investment opportunity.
Here's the BS Jim Hayward scripted and you're promoting:
Now this concludes my prepared remarks. Operator, please open the call to questions.
Question-and-Answer Session
Operator Thank you. We will now begin the question and answer session. [Operator Instructions] Our first question today comes from Brian Kinstlinger with AGP. Please go ahead.
Andrew Lieber
Hi, this is Andrew chiming in on for Brian. First off, could you quantify what percent of revenue is related to the cotton industry?
Beth Jantzen
Historically, our cotton business has been around 20% to 25% of our revenue. So, it was in fiscal '18. And then typically our larger cotton order comes in the last quarter of the fiscal year.
Andrew Lieber
Got it. Outside of the cannabis license, could you talk about maybe order next to the largest revenue verticals for you guys.
James Hayward
Next two largest verticals was that the question?
Beth Jantzen
Outside of cannabis licensing.
James Hayward
Sure. Our focuses on textiles as a large source of revenue, in particular, on the growing utility of synthetic textiles. And added to that is the business we call LineaRx. And that has an interesting future in terms of its revenue source. The customers that come to us initially come to us as CRO customers contract research customers. And those tend to the lower priced relationships and short term. There are really valuations of technologies that just a year ago, most scientists didn't believe were available at scale, that is linear DNA.
They then revert to a CMO relationship, where they need larger quantities. And the revenue can expect it to go up 10 to 100 times. But as they develop faith in this new platform, it's likely to lead to licensing relationships with large, onetime, licensing fees not unlike the TheraCann deal we just finished talking about. But different than that, they are typically followed by milestones, as we work together with the customer to approach the clinic or achieve the clinic or achieve results in the clinic. So those are the three.
Andrew Lieber
Thanks. Could you also talk about a little bit more about the progress has been on the Colorcon pilot. And one more still needs to be done before you commercialize that. I know you mentioned there's still a lot of extensive testing that has to go on, but can you just talk into more detail about from your expectations beyond that and some timing about that as well?
James Hayward
Sure. The portion of the Colorcon portfolio where we have completed stability studies that I said represented about 40% of their offering. Those are essentially ready to bring to market now. And we have filed the DNS with FDA that makes that happen. Meanwhile we have plans of improving that DNS and meeting with the Emerging Technologies Team or ETT which had FDA is formed to accelerate tech, access to technologies that would normally take a little while to penetrate the industry.
So we're hoping for that 40% with our interaction with ETT that we may be able to accelerate the commercialization of some of our work with Colorcon. Meanwhile, we will stay on the stability studies in the characterization of this 60% of their portfolio and continue to move ahead, Now Colorcon has been developing some particular relationships as potential initial sales. And these are customers who could help us very much from a compliance point of view when it comes to FDA.
Andrew Lieber
Got it. Could you give us some outlooks excluding the initial license fee, when do you expect to begin generating revenue, protecting the cannabis supply chain and how much we might expect to see from this business line in 2020?
James Hayward
We expect to see revenue in 2020 from our cannabis relationship with TheraCann. Remember, they have been cultivating somewhere between two and three dozen relationships, including with some of the very large recognizable names and brands in the marketplace. Compliance for cannabis is the same whether you are large or small company. And of course we'd like to initiate our rollout with those companies whose needs are the largest.
We have also been talking to states, government, regulatory authorities in the U.S. and have received a great acceptance there. Because in that case, we can help out not just with safety and efficacy and compliance with the established rules, but we can also relate to the ability to monitor tax based revenue to the state using our DNA platforms.
So were we think that that is one of our fastest moving categories and were very excited.
Andrew Lieber
Got it. Last one from with regards to TheraCann, are there any changes to the contract pricing or what not accepting stock instead of cash?
James Hayward
No, only ones that benefited us. So their obligation to us went from $4 million to $5 million with interest. So there was no compromise. And we expect that because of their nearness to their listing as I described at the opening that they will be able to make that payment to us quite soon.
Andrew Lieber
Got it. Thanks for taking my questions.
James Hayward
Okay very welcome. Thank you.
Operator
Next question today comes from Jeremy Pearlman with Maxim Group. Please go ahead.
Jeremy Pearlman
Hi good evening, I have a question to continuing on the cannabis thread. Do you think that’s going to be a main source of revenue for the future? And also are you proactively seeking other companies for potential partnerships?
James Hayward
We have an exclusive relationship with TheraCann, it's been a worthwhile exclusivity in our view. Frankly, I've been in business for 35 years and I have found them to be remarkably upright and straightforward. And we enjoy doing business with them very much. Their reach is global, China, Africa, Latin America, the U.S., Europe. And they many MOUs already signed and even contracts. I think the key issue for them is to the get their listing complete and get the lid off. And once that happens, I expect them will be running to keep up.
Jeremy Pearlman
Okay. And then another question regarding your cash burn, it seems like looking year-over-year on your cash flows, cash burn from operating activities has gone up and looks like that seems to be the trend. Is there anything you're doing? I know you said you reduce headcount, I looked in the report. Anything else aside from that to try and reduce that burn a little bit?
James Hayward
No, if you notice, in fact, our monthly cash burn has been steadily diminishing, not growing. And so we're very, very concerned about our rate of our growth of revenues. Why we totally restructured our sales team, why we eliminated certain verticals within the company that were not generating new sales at the rate that we required, why we eliminated headcounts, eliminated consulting groups.
So we made -- we stay alert steadily to our operating costs. Beth stays very close to it. And we talk about it frequently. Of course, we need a combination of cost savings and revenue growth. And as we mentioned, both last quarter and at the outset here, we expect to see revenue growth in three categories, not just the cannabis you asked about, but also textiles, where we've been working two years on an integrated supply chain that has brought us to some remarkable brands.
And we expect to be implementing tagging with some of those brands before the end of this fiscal year, just a couple. And to see more happening in the following year.
Our position in LineaRx is unique in the marketplace. No one else can do what we can do. And as I say we're getting some very prestigious companies lining up asking us to do difficult things that we've been successful at doing. So I suspect that we’ll see licensing agreements with milestones, long-term revenue, long-term supply, both before the clinic and after.
And so we're excited about the long-term prospects. We just have to really manage the short term very carefully. We've got to get through our NASDAQ issue. And we're determined to do that.
Jeremy Pearlman
Okay, so we can expect to see no revenue increase outside of cannabis like you said in textiles and biopharmaceuticals for the end of this year or, that are more likely in the 2020?
James Hayward
No, that's not what I said. What I said was the primary drivers for revenue were in the categories I gave you. We are expecting to see revenue and other categories we have just yesterday or last week we announced our relationship with Schreiner, MediPharm, who is a company that specializes in the tagging of medical products. They're ready our customers beginning to use our materials.
We're making progress finally, with our Videojet business and looking at the capacity of labeling drinks materials at the request of law enforcement and international business. We are still working very steadily with the defense logistics agencies and with an unnamed federal agency to deliver new product. So, I -- you're mistaken to say we won't see revenue from other categories.
Jeremy Pearlman
No, I said will see.
James Hayward
Yes, we will see revenue…
Jeremy Pearlman
Yeah, not won’t. Yeah, just like towards the end of 2019 into 2020, we will see revenue increase from other sources. That's what I asked.
James Hayward
Yes, we will. Absolutely.
Jeremy Pearlman
Okay. Yeah. Okay. All right. That's all I have.
James Hayward
Thanks.
Operator
[Operator Instructions]. Our next question comes from Craig Pierce with Morgan Stanley. Please go ahead.
Craig Pierce
Good afternoon, Jim and company.
James Hayward
Good afternoon, Craig. Thank you for listening.
Craig Pierce
Thank you for having the call. First off, what I think I understood you to say is that TSSV has completed the review. TheraCann is expecting to be -- I mean, I'm sorry, the reviewing authorities have completed review, TheraCann expects to be listed in the second half of September on TSSV. And at that point in time $4 million plus $1 million would be paid to Applied. Did I understand that correctly?
James Hayward
So you were quite close. The $4 million would be paid to Applied in exchange for our convertible preferred stock. However, the convertible debt is callable at our option. And so, whether or not we collect that extra $1 million, I think Beth, you know more of those details than I.
Beth Jantzen
Right. So we can have it converted into their publicly traded common stock or at their option, they can pay it back once they do their IPO. Otherwise it will get paid back at the end of the term in cash.
Craig Pierce
And what is the end of the term
Beth Jantzen
Two years
Craig Pierce
Alright. What's, not real clear in my mind and I probably just needed to research but easier to ask right now. Fiscal year 2020, is TheraCann going to be paying Applied anything during fiscal 2020?
James Hayward
Yes, we're expecting it. And as we roll out, we will be paid for our materials as we always are and our services as well. We have a revenue sharing relationship with TheraCann that will kick in at a later date once we reached certain revenue milestones.
Craig Pierce
Because I think, I remember there's what a 15 year different numbers escalating each year.
James Hayward
That's right. It escalates to a maximum $20 million per year as it gets closer to the end, yes. So that escalation starts either in year three or soon. The gross revenues minus our payments is enough for TheraCann to have earned back the $4 million that they’ve paid us.
Craig Pierce
So, revenue anticipated in fiscal year 2020. But the step ladder or the stair step, numbers going through year '15. The next stair step year is fiscal 2021? Is that correct?
James Hayward
We expect to see incremental revenues from TheraCann with every year. So there's not too much left to our fiscal year in '19. So I'm not expecting that to have a big impact on fiscal '19. But it could will start in fiscal '19 before this quarter closes, given their proximity to listing and given the fact that they have preexisting relationships already.
However, in 2020, starting for us in October, we expect that we'll see revenue growth from the number of customers I've already indicated, that have relationships with TheraCann and us across the globe.
Beth Jantzen
Just one small clarification that I think, Craig to answer your part of that question the minimums in the contract start in year three.
Craig Pierce
Okay, that's exactly what I was asking. Okay. So, ideally, and you're anticipating revenue in 2020. But the, the contract minimums, for the next year that we see that as your three and then stepping up each year from there more or less.
James Hayward
Yes, the contract minimums and the revenue sharing. But the revenue sharing would start the moment they've earned a certain amount of money.
Craig Pierce
Okay. You had mentioned used the phrase, I believe, in regards to Colorcon on the 40% that you use that one point the phrase, I believe accelerate revenue from that relationship. Do you have a sense of the timeframe of the acceleration when I mean not -- when that point in time where revenue would begin to really ramp up?
James Hayward
Yeah, well Colorcon already has, Blue Blood Biotech and Pharma Company is interested in our platforms, just been waiting to get through this stability issues. And so we know we have companies who are interested in using our platform, but have to get through the FDA issues. And with that stability data and our DMS filed, we're well poised to help.
Craig Pierce
Any seal for how many more months, years are needed to get the required stability time period out of the way?
Beth Jantzen
Well, stability testing will be --
Craig Pierce
I [indiscernible] voice.
Beth Jantzen
Yeah. I would say in another six to nine months of, -- it's sort of a tiered approach, right. Some of them are going to end and others are going to continue, because they were brought on to the program later.
Craig Pierce
Later. Yeah. So six to nine months to complete, -- to start seeing the completion of some of the stability testing.
Beth Jantzen
Yeah, I would say so.
Craig Pierce
And at that point in time, that they could actually then start bringing to market, and actually, retail sales, generating revenue flowing back to applied.
Beth Jantzen
Discussions and marketing can happen, before the exact end of that. But that's a good milestone for you to keep in mind.
Craig Pierce
Okay, so basically, have the picture of the bar, with patrons all ready to go, the kegs of beer up on the wall, and just waiting for midnight of the day that prohibition was ended, that everybody can start drinking.
Beth Jantzen
I like your analogy.
Craig Pierce
Okay. So, get the bar ready. And…
James Hayward
As long as you're buying?
Craig Pierce
Hey, just get the bar ready. I'll apply. Wanted to ask I mean, with all of these delisting, I mean, you've got bad news is pretty intense. You've got good news is pretty intense, up and down various supply chains. Are you getting any pushback in terms of questioning your company's liability?
James Hayward
Well, it's a natural consequence. The people are curious about what our circumstances are. We're confident and we're honest. So we provide those answers and what our expectations are. And on that basis, we're selling quite well. We placed orders, two of them just yesterday and today.
Craig Pierce
And finally, you had used the expression majority owned LineaRX. Who's -- who else, if anybody owns a minority stake in LineaRX?
James Hayward
Yes, we acquired Vitatex just this last week. And that acquisition was largely stock driven. So if Vitatex achieves all of their milestones for their earned out. They would be paid a total of $1 million in cash and shares. Those shares would constitute about $800,000 out of the million in total. So out of a $20 million pre-money value given to LineaRX $800,000 post money was used to pay the current check the prior shareholders of Vitatex.
Now quite honestly, that acquisition increase the value of LineaRX quite substantially, especially given the fact that it was valued only two years before at over $20 million.
Craig Pierce
So, what that translates into as you that Applied owns, assuming all of that pays out that, Applied would still own 95%-ish of LineaRx.
James Hayward:Yes, that's a fair assessment.
Craig Pierce
Okay.
James Hayward That our shareholders own 95%.
Craig Pierce
Okay. Well, thank you. And, it sounds to me like 2020 is going to be a very different year with a very different tune than what you've been forced to sing for the last couple of years.
James Hayward
I'll be honest with you, Craig. I think the fourth quarter of 2019 could be described the same way.
Craig Pierce
That's just that's just terrible, terrible. But we’ll all try to live with that.
