Good day, and welcome to the 22nd Century Group Third Quarter 2015 Business Update. Today's conference is being recorded. At this time, I would like to turn the conference over to Tom James, General Counsel for 22nd Century Group. Please go ahead, sir..

Good morning. My name is Thomas James and I'm the Vice President, General Counsel and Corporate Secretary of 22nd Century Group, Inc. Before we begin this conference call, I need to make the following Safe Harbor disclaimers on forward-looking statements that may occur during this call.

The statements made on today's call that are not based on historical information are forward looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements include, but are not limited to, statements regarding our Company's business strategy, future plans and objectives, and future results of operations or that may predict, forecast, indicate or imply future results performance or achievements.

The words estimate, project, intend, forecast, anticipate, plan, expect, believe, will, will likely, should, may or the negative of such words, or words expressions of similar meanings are intended to identify forward-looking statements.

These forward-looking statements are not guarantees of future performance and all such forward-looking statements involve risk and uncertainties, many of which are beyond our Company's ability to control. Actual results may differ materially from those expressed or implied by such forward-looking statements.

As a result of various factors, including but not limited to the risk factors disclosed in our Company’s most recent Annual Report on Form 10-K as filed with the Securities and Exchange Commission on February 5, 2015.

22nd Century does not undertake and disclaims any obligation to update any forward-looking statements or to announce revisions to any of the forward-looking statements.

During this conference call, we will also disclose certain non-GAAP financial measures including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation and amortization as adjusted by 22nd Century for certain non-cash and non-operating income and expense items described in our Company's earnings press release for the quarter ended September 30, 2015, as issued yesterday on November 9, 2015 and which is also available on our Company's website.

And with that, I'll turn it over to our Chief Financial Officer, John Brodfuehrer..

Good morning everyone and thank you for dialing into our third quarter 2015 conference call. My name is John Brodfuehrer and I am the Chief Financial Officer of 22nd Century Group.

I am very pleased this morning to provide you with a summary of the Company's financial results for the three and nine months ended September 30, 2015 and provide a brief look ahead at the remainder of the year.

As you know, we filed our Form 10-Q yesterday with the SEC and issued a press release containing a summary of the financial results for the three and nine months ended September 30 of this year. I will use my time this morning to review and elaborate on those reported results.

We are pleased to report that our third quarter net revenues were nearly $2.7 million, a net increase of approximately $361,000 or 15.6% over our second quarter net revenues up $2.3 million were significantly higher than our first quarter 2015 net revenues of approximately $616,000.

Our net revenues for the nine months ended September 30, were nearly $5.6 million putting the company on a trajectory for annual net revenues in excess of $8 million with the calendar year 2015. Our current projection of $8 million in net revenues for the year exceeds our prior projection last quarter of $5 million in net revenues for the year.

We’ve experienced the net loss for the third quarter of this year of $2.76 million or a negative $0.04 per share as compared to a net loss of $2.72 million or negative $0.05 per share in the third quarter of 2014, a small increase in the loss of approximately $37,000.

The small increase in the third quarter loss was primarily due to an increase in the gross loss on product sales of approximately $40,000 and a decrease in net other income expense of approximately $115,000 partially offset by a decrease in operating expenses of approximately $117,000.

Furthermore approximately $622,000 of the third quarter loss was attributable to net non-cash expenses as compared to approximately $800,000 in net non-cash expenses for the third quarter of 2014, a decrease of approximately $178,000.

This decrease is primarily a result of a decrease in equity-based compensation to officers, directors, employees and other third-party service providers in the amount of approximately $343,000 partially offset by an increase in amortization and depreciation expense and a decrease in the warrant liability gain through the third quarter of 2015 when compared to the third quarter of 2014.

Turning to the nine months ended, we experienced a net loss for the nine months ended September 30 of approximately $8.2 million or negative $0.12 per share as compared to a net loss of $10 million or negative $0.17 per share for the nine months ended September 30, 2014 a decrease in the net loss of approximately $1.8 million.

This decrease in the nine-month loss is primarily a result of a decrease in the warrant liability loss of approximately $4.50 million and other income received of $1 million from a litigation settlement.

These items were offset by an increase in the gross loss on product sales of approximately $623,000 and an increase in operating expenses of approximately $2.54 million.

Approximately $1.439 million of this increase in operating expenses is attributable to non-cash increases in equity based compensation expense, primarily to Crede as part of the six-month consulting agreement that expired at the end of the first quarter of 2015 and other third-party service providers to our company.

The amount associated with Crede non-cash equity compensation expense of nearly $2 million in the first quarter of 2015 represents the fair value assigned to the warrants issued with exercise prices of $3.36 and $2.59 per share at the time of issuance.

Approximately $3.7 million of nine-month 2015 loss was attributable to non-cash expenses as compared to approximately $6 million in non-cash expenses for the first nine months of 2014, a decrease in net non-cash expenses of $2.3 million.

This decrease in net non-cash expenses is primarily the result of decrease in the warrant liability payment loss as previously mentioned in the amount of $4.50 million again partially offset by the increase in non-cash equity base compensation of $1.439 million as I just described above plus an increase in the amortization and depreciation expense and approximately in the amount of $237,000 and an increase in the loss on our equity investment in Anandia in the amount of approximately $99,000.

As Tom mentioned well we like to look at non-GAAP financial measurement tool for adjusted EBITDA to valuate our financial position in conjunction with traditional GAAP financial measurements.

The adjusted net loss for certain non-cash and non-operating income expense items to rise as adjusted EBITDA, which means earnings before income taxes, depreciation and amortization.

Adjusted EBITDA was a negative $2.1 million and a negative $1.9 million for the three months ended September 30, 2015 and 2014 respectively and increase in the negative EBITDA of approximately $200,000.

Adjusted EBITDA was a negative $5.4 million and a negative $2.9 million for the nine months ended September 30, 2015 and 2014 respectively and increase in the negative EBITDA of approximately $1.5 million.

Both the three and nine-month increases in negative EBITDA are primarily attributable to an increase in the gross loss on product sales and the approximate amount of 40,000 and 622,000 for the three and nine months ended September 30, 2015 and an increase from the cash related operating expenses of approximately $188,000 and $861,000 for the three and nine months ended September 30, 2015.

I will once again as we did last quarter mention or address the gross loss on product sales for the three and nine months ended September 30, 2015 with approximate amount of $281,000 and $591,000 respectively. Our excess manufacturing capacity above current production requirements results in the gross loss on product sales.

We are continuing our efforts to expand our third-party contract manufacturing base, working towards the goal of eliminating the gross loss. We are making progress on this front.

We also consumed cash of approximately $482,000 during the nine months ended September 30, 2015 for working capital needs relating to operations as compared to $1.36 million consumed during the first six months of the year, a decrease of approximately $880,000 indicting positive management of our working capital assets.

We have cash on hand at September 30, 2015 of $6.7 million as compared to cash on hand at June 30, 2015 of $8.2 million, a decrease of approximately $1.46 million.

This decrease consist of $2.1 million used to support the cash loss for the quarter approximately $200,000 used in investing activities primarily for patent costs offset by a decrease in cash used for working capital needs relating to operations in the approximate amount of $880,000 as discussed above.

Not including the potential milestone payments of up to $7 million from BAT and not including deposits from potential strategic partnerships, we believe that the cash on hand at September 30, 2015 coupled with revenues from ongoing product sales will be adequate to sustain operations and meet all current obligations as they come due through June of 2016.

Thank you for your time and consideration. I’ll now turn the remainder of the conference over to our CEO, Henry Sicignano he will provide you with some business highlights and updates. Thank you again..

Thank you, John, thank you Tom and thanks to all the investors who made time for us this morning. Well, I think I’ll take a different tact this quarter rather than simply reviewing the business highlights that we’ve already outlined in our press release. I think I’ll highlight the most significant drivers of our business in the near-term broadly.

I thought I take this opportunity in particular to discuss our technology steaming from very low in nicotine tobacco.

In brief, the three most obvious products that we should look for steaming from this technology are number one our MAGIC cigarettes, number two BRAND A, the company’s first modified risk tobacco product candidate, and three X-22 22nd Century Smoking Cessation Aid in the form of compatible cigarette.

The first point I should make here is that all of these products have a foundation built on our company’s very low nicotine tobacco. This is obviously a huge competitive advantage. At the same time this factors in certain challenges and limitations.

I realize that some shareholders have expressed disappointment that we have not more quickly rolled out MAGIC very low nicotine cigarettes in Europe. I also understand that some shareholders are surprised that we introduced an American tasting cigarette in Spain. Let me go over few points to explain our thinking.

MAGIC 01 Europe is made primarily with the flue-cured tobacco that is proprietary to 22nd Century. Even though it has virtually zero nicotine, this tobacco has a robust full body taste. It conversely European cigarettes generally contain a flue-cured Virginia tobacco as well as Burley, and Oriental tobaccos.

What this means it that all European cigarettes relatively speaking have tasted in somewhat more blend or more mild than American cigarettes. We are not aware of these differences when we introduced MAGIC 0 is the market in Spain.

At this time however, we realized that American Sprit cigarettes at least when I worked at the company where the consummate American blend cigarettes and had eventually done quite well across Europe nonetheless.

American Sprit cigarettes where introduced internationally without a blend change primarily on the strength of the additive free all natural market in claim. We believe and continue to expect that our 0.0 milligram nicotine disclosure on every pack of MAGIC will be very important to European consumers to try the product.

That said we do wish to do everything possible to make the cigarettes taste characteristic consistent with products that consumers are custom to in Europe. So even now we cannot simply just changed the tobacco blend that comprises the world’s only virtually nicotine free tobacco cigarette.

In the past few moths we have altered the structural components of our MAGIC cigarettes in a way that we believe will significantly reduce the intensity of our American blend cigarettes for European consumers. For more details stay tune, we intend to make a detailed disclosure of this technology in up coming press release.

The next product I would like to discuss is BRAND A, we have already prepared the bulk of our modified risk tobacco product application for a very low nicotine BRAND A and we intend to submit the final application to the FDA before the end of this year.

The only hurdles between now and our submission of the application is third-party laboratory testing needed to confirm precise nicotine levels of our tobacco blend and of our finished cigarette that will be submitted to the FDA is part of our application.

As you know compared to all other tobacco cigarettes made by any other company, BRAND A has the world’s lowest nicotine content. This fact is undisputed and it’s fundamentally the basis of our request to label and market our BRAND A products as cigarette was reduced its nicotine exposure.

It is a symbol of that, we are seeking authorization to make very narrow reduced exposure marketing claims. And accordingly we believe 22nd Century will be the first company approved by the FDA to label and market our modified risk tobacco product. This is a very different strategy that native one of our most significant competitors.

I will take a moment now to note a few points about Natural American Spirit cigarettes a brand that I know well and that many of you have heard me speak off previously.

Santa Fe Natural Tobacco Company is American Spirit brands all owned by tobacco conglomerate, Reynolds American has approximately 2% market share and it’s the 10 largest premium cigarette brand in the country. American Spirit is the fastest growing premium cigarette brand in the United States.

That said in August of this year the FDA sent a warning letter to Santa Fe and Reynolds stating that American Sprit natural and additive free labeling and advertising represent explicitly or implicitly that the products or their smoke present a lower risk of tobacco related diseases or less harmful than other tobacco products.

The Reynolds and Santa Fe will surely argue that their products are not in fact making in play health claims. 22nd Century strategy is to stay far above to fray. As I’ve discussed today, our strategy is to actually win the rights to label our product as modified risk tobacco, and what does this actually mean, what does it mean for our company.

Following the strategy for market and advertising the FDA is very likely a Holt American Sprit has built quite a franchise. Just one-month after receiving the FDA warning letter Reynolds sold its international American Sprit business to Japan Tobacco for $5 billion. The figure that is 30 times sales not earning, not EBITDA of 30 times sales.

Noted Wells Fargo tobacco analyst Bonnie Herzog now values the remaining U.S. American Sprit franchise at $8 billion. Considering that the American Sprite brand to currently represents approximately 2% market share it appears that one should value market share for premium cigarette growth potential at $1 billion for each one quarter of 1%.

This kind of metric is what is so exciting for our company. This is the kind of comparable that might suggest to investors that when 22nd Century wins the rights to market are very low nicotine cigarettes as modified risk products.

We will have the opportunity with both our own brands and with possible latencies to achieve tremendous market cap upside.

Consider from the notion of a very long nicotine Camel cigarette or perhaps the very low nicotine American Spirit brand style or simply 22nd Century proprietary brand as the world’s first combustible modified risk tobacco product.

Again applying the comparable valuation used by Bonnie Herzog for each quarter of 1% of the market, our company should be worth a $1 billion when we achieve a quarter point share. Before I end I will briefly address the third 22nd Century very low nicotine product that has tremendous market potential for 22nd Century.

X-22 is our company’s prescription- cigarette and developed for smoking cessation. Though I have a room full of lawyers listening here this morning and going to state clearly and for the record. I believe X-22 is the world’s most effective smoking cessation aid or none.

I am confident that unlike the market leading Chantix, our product has no new side effects. And perhaps most importantly, more significantly I am 100% sure that our smoking cessation cigarette as compared to pills, gum, lozenges or the nicotine patch is far in a way the most attractive smoking cessation aid or product for consumers.

Seven independent cessation trials with very low nicotine cigarettes have demonstrated that our product works by itself, it works in conjunction with nicotine replacement therapy and it increases the efficacy of Chantix. Five Phase II clinical trials have been conducted and two Phase III trials.

Trials have been conducted in the United States, in New Zealand and in England and all of these trails at the end of the day say that very low nicotine cigarettes provide greater relief from withdrawal and cravings compared to all other nicotine replacement therapies.

Compensatory of smoking does not occur; instead there is a decline in cigarette smoked per day in smoke exposure. And the third very low nicotine cigarettes provide relief from negative effect of withdrawal from conventional cigarettes.

So that’s why we think very little of X-22 because until we have a strategic partner, we are not prepared to go with Phase III clinical trial.

We’ve put in great efforts over the last six months in particular over the last quarter, I was at convention in Munich, Germany last week Europe and we met with 18 pharmaceutical companies all of them have expressed interest in discussing further our very low nicotine tobacco cigarettes and smoking cessation aid.

None of whom deny the efficacy that’s demonstrated by our IR independent clinical trials. If and when we are able to find a strategic partnership with a pharmaceutical company or a nutraceutical company, we will go into Phase III clinical trials and I believed we will be on our way to having the world’s most effective smoking cessation aid.

These things I believe again will increase shareholder value beyond any of the things that John’s reporting on this quarter. All of things that we have done in setting up our factory and attaining MSA Compliance and achieving state directory listing in all 50 U.S. states. All of these things have been setting the table, have been preparing.

We are preparing our company to be able to market our products with the strength and the leverage that modified risk authorization we will provide and hopefully ultimately to prepare products according to FDA protocol and good manufacturing practices to actually produce a prescription product available at pharmacies across the country.

And in short, we are building a multi-billion dollar company and though many of you have been disappointed as we have with short-term fluctuations in the share prices, we really don’t concern ourselves with day-to-day moves in the stock price.

As one of the company’s largest shareholders I don’t know if the stock will be $10 in a day, a week, a month a year. But eventually I am quite confident that The Street will realize the value of our technology and of our science and our share price will appreciate dramatically.

The analysts [indiscernible] has a $9 price target and we hope to far exceed that over time. In my opinion it’s not a matter of win, but if, oh my goodness it’s simply not a matter of when not if. Thank you for joining me this morning. I appreciated we will open up the call to questions and I will address any concerns you may have..

[Operator Instructions] And we will take our first question from Jim McIlree from Chardan Capital. Your line is open..

Hi, thanks and good morning Henry and John..

Hi, Jim..

Hi, Jim..

Hi, Jim..

For the MAGIC in Europe are you going to be stop with some inventory that you have to write-off or free deploy?.

No, we won’t Jim, we are selling through the inventory we have in Spain and we haven’t need additional quantities of MAGIC preciously because we’re going to be changing the structure of the cigarette..

And the timeframe on getting the newly designed cigarette to Spain?.

Well, we are going to launch likely in Holland before we replace inventory in Spain and I think it’s a matter of weeks before we launch the new product in Holland. We will sell through the Spanish product and replace it as it sells with the new product probably I don’t know by the end of the year is that process will start..

And what broad about the realization that it was the taste that was objected to by consumers or you?.

I don’t think it was objected to I just – we think we will have higher conversions of consumers I mean really the product has been out less than six months.

So I am not sure we have enough data to say that it’s been objection of all, but what we found is that simply the taste is more intense even out of 0.0 milligram of cigarette, 0.0 milligram nicotine cigarette than conventional European products.

So we thought though but we are not trying to be something we are not, we thought if we could make the products more consistent with European taste we simply do better.

So the early feedback came from frankly shop owners in stores across Spain where we launched the product and we decided to act on that rather than pushing – as I mentioned American Sprit at least when I was part of the company they went forward with American Sprit with the American tasting cigarette and simply push forward with the additive-free claim and if you are interested in the additive-free claim and you accepted the American tasting cigarette and you smoke the products.

I think we can do the same thing with MAGIC 0 that again if we were able to change or lessen the intensity of the cigarette I think we will simply to better faster..

Okay got it.

The press release yesterday said that you are in 600 stores now for RED SUN is that the 600 that you are aware off or is that your guesstimate of how you are at right there?.

It’s the 600 we are aware off, we are probably in some 100s more than that, but 600 we are aware of and again I have been focusing on select market so people on the calls depending on what market you are – see our product in any of the stores in your area, but we are focusing in the Pacific Northwest, California, Colorado and select markets in the east, but really that’s our strategy is to focus first on market leading stores in markets that will be susceptible for a product or amenable to a product like ours..

Okay great and just a couple more if you don’t mind. Can you discuss further the Anandia developments? I am not exactly sure what you are trying to accomplish with that when that would be accomplished..

Sure. I guess we have - it’s a good problem to have when you have more technology and more opportunities than time and resources to address them all. And I guess that’s where we are – we are consistently juggling priorities and opportunities that the company has.

And as I discussed earlier in the year our mission is reduce to the harm cause by smoking that’s our primary mission, that’s how the company was established and that’s going to be our focus.

On the other hand we have some pretty incredible intellectual property associated with cannabis and so we are not going to let that die on the vine taking into account that the product is not yet legal on the federal level in the United States, we obviously can’t pursue a whole host of commercial opportunities in the United States yet, but we are going to pursue developments of our opportunities in Canada with our partners at Anandia.

So most recently you are probably seeing in our press release we brought on Dr. Rushton, who is our plant biochemist and he has a significant interest in cannabis and bringing him on not only strengthens our bench, but it also bring someone to the team who has interest and ability in cannabis world.

So he has interest and he has already invited the principles of Anandia for summit here in Buffalo in November will be spending time with Anandia principles and sort of mapping out our priority list of projects going forward into 2016 and adds time and financial resources, we are going to exploit those opportunities..

But it’s most likely something that will semi business in Canada first and wait until the federal government decides do about the schedule one designation?.

They are pretty much by definition that’s true and last of course we developed a THC free health product which of course could be exploit in the United States very readily and very soon..

Great.

And then my last one you settled with the former CEO is that going to result in any cash or non-cash charges this quarter or next?.

No, it won’t..

Okay, great. Thanks a lot..

Thanks Jim..

Thank you. We will move next to [Lawrence Andrews]. Your line is open..

Good morning..

Good morning. This is Larry Andrews in Dallas.

And my concern is with the results of the poor sales there was $500,000 loss or any profit in the sales of the products and I’m wondering if there is a need for stronger marketing I’ll give you an example I look far around in Dallas area and the near Texas area and I can’t find anybody selling 22nd Century products like RED, MAGIC or any of those.

Is there a need for a stronger marketing?.

Okay, that’s a good question. And the question touches on several important points. I guess we’ll start with the loss that you are talking about is primarily related to the fact that we have more capacity in the factory then we are currently utilizing making all of our products both the company’s proprietary brand as well as contract cigarettes.

As you see our sales continue to grow that loss will evaporate. So I appreciate your – we should all in the sense of urgency of eliminating those losses and certainly we do here, but that won’t be eliminated until we absorb all that excess capacity.

In terms of marketing the products and selling them, what we are doing is we are marketing the products in strategic locations where those products will be most readily received. And I have been to Dallas many times and the Dallas market is a very high end, but different market from the market that might be more receptive to our products.

Our products make more sense in forward thinking college educated young mobile markets where people are trying new things and are on the forefront of new technology and new products and the folks in the Western California and Pacific Northwest and even the folks the rigid individuals in Colorado and the people who really appreciate [indiscernible] smaller companies all of those kinds of folks are really the folks that we are going to targeting with our RED SUN product.

Now, if and when I actually believe when we achieved modified risk authorization from the FDA than everything changes.

Right now essentially we are establishing a base of business, we are absorbing some of our capacity at the factory, but when we have a modified risk authorization to market our products has reduced exposure products with the world’s lowest nicotine tobacco cigarette, that’s very different.

I think that product then to be made available to smokers in every state, in every city across the country and I think smokers would be very respective to that reduced exposure product.

So I got to stay tuned, again as I mentioned in our primarily remarks we are building a base and we are going to exploit that base when we have authorization to market our products with all the tremendous product attributes that those products have.

Right now, our hands are tied, we can’t really communicate to consumers how extraordinary our very low nicotine cigarettes are..

Henry, I appreciate your answer. I think you are doing a great job and I wish you great success and we will sit back and be patience knowing that you will be successful. Thank you..

Thank you very much. We appreciate that..

Thank you. We will move next to [Alan Brochstein]. Your line is open..

Hey Henry. Thank you for taking my call..

Good morning..

I focus on the cannabis space and so that will be the line of my questions and I appreciate you, the response you gave to Jim. When you took over a year ago that was right after that deal have been announced and you kind of table that.

I’m curious why you’ve really engaged, I mean what changed in your mind that gave you the confidence to move forward with that project?.

Well, I guess the biggest answer is just a matter of priorities and over the last year our primary priority has been to establish a tobacco sales, especially in the United States for RED SUN to get our factory to start to absorb the capacity that we have in our factory, to introduce the product in Europe, essentially to get all those parts of our business up and running.

Until the last couple of months, our primary Scientific Officer here Dr. Michael Moynihan was really the extent of the staff we had and he would spread very thin across all of these different products. You can broaden that including modified risk application, X-22 and then essentially establishing growing programs outside of the United States. Dr.

Moynihan was focused on all of these disparate projects. And I simply didn’t think that there was enough time or resources nine months ago to really give cannabis it’s due. Now again with the strength of Dr. Rushton here, and now we have another person Gregg Gellman who is Director of New Business and Regulatory Affairs helping Mike.

I think we have more management capacity and I think we are ready to start to look at cannabis. And as I mentioned earlier, we are going to obviously focused on work and research that needs to be done in Canada. And it’s pretty mature to start talking about product launches in the United States..

Sure, do you have an estimate of how much you are willing to invest in this effort?.

Well, at this point, no I guess in the coming weeks as I mentioned the principles from Anandia will be coming to visit us here in Buffalo, and really the agenda of those meetings is to set out the priorities over the next two to three years and to start to map our budgets.

So I mean I’m not sure we have the money to do every project that we like to do that’s cannabis related, but we certainly like to attack the top two or three projects and we like to allocate the appropriate moneys behind those projects..

I think Jim was kind of alluding at this, but do you have a timeframe for when we could actually have a product into Canada?.

The earliest product that is probably eligible for the market will likely be a hemp product and I can’t tell you, but I would have to guess it would be at least a year away..

Okay. And then one last question. As I look at your financials and I apologize I mean really trying to get out the speed on your company.

There is still a cash burn and I know you have some cash on the balance sheet and you some warrants that if the stock price holds up could be exercised, but just do you – you have an estimate of when your company can get to cash flow leasing up, burning cash any longer clearly given that in terms of time or revenue level or anything like that?.

As John mentioned excluding potentially $7 million of BAT milestone payments and excluding any deposits we would receive from a strategic partner on X-22 or potentially BRAND B excluding all those payments, we have cash at that will last us through the beginning in next summer.

But in terms of growing concern consumer products business that is generating profitable sales, I guess that’s really going to depend in my opinion on a modified risk authorization. If we get a modified risk authorization or when we get a mid of modified risk authorization I think we become profitable very, very quickly.

Without that authorization we are going to invest slowly and carefully because they do otherwise will be improvement..

Okay. Well thank you so much and congratulations on getting that litigation result as well..

Thanks very much..

Thank you. We will take our next question from Rex Wiggins. Your line is open..

Yes, another good job Henry great quarter. I love in the [indiscernible] I think that shows strategic direction as you are going in.

I think the only thing I would add and I think you are starting do this more I mean if I heard it right, like a quarter with some market share equals a billion dollar valuation and if you did get at the authorization I mean 2% to 3% to 4% market share will be nothing when you are doing that math you are way after in the billions of dollars.

If your current market cap has been reflective of that what so ever I mean people are to down and looking at the cigarette sales if you didn’t get carried up for the business, your market cap probably would be higher, if you were true to look that as biotech firm, so I would start to do the – and going to conferences whether the biotech conferences, [indiscernible] partnership those are ways that are truly, truly going and tell me - dramatically increase valuation of the company and of course right now since the good time were people of buying your guys are doing the last [indiscernible] where they do a lot of Biotech investing and for guys, maybe they can introduce you some more institutional investors but in the Biotech space.

But I think the more you touch yourself on that lot much higher to your stock price suppose people learn about million dollars or lots of million of dollars.

So good job, like the direction you are going?.

Thank you, very much and I could have said it better you are exactly correct we often scratch our heads and we want people and we believe the people should look at the company as a Biotechnology company.

Our factory and the sales that we have with REN SUN and MAGIC all of that is simply a precursor to when we have a modified risk authorization with our proprietary products.

So we sort of this preparation that’s all it is – its preparation having a factory, having MSA, having 50 state directory listings having relations with more than dozen distributors across the country and 100s of stores across the country all of these things are simply setting up the company to exploit the opportunity once we are given the modified risk authorization.

You are exactly right and frankly the biotech investors and the pharmaceutical companies that we speak with they do in fact to recognize that our company is drastically under valued and several have told me over the last month that they are making substantial investments in our company stock on the open market, because they believe there are $100 million valuation and is quite low given our opportunities in our potential.

We both modified risk and smoking cessation. So thank you very much I think your questions are spot on..

Good job. Keep it up..

Thank you. And we will move next to Akash Patel. Your line is open..

Hi, Henry I have a question regarding your application for the modified risk authorization from the FDA. I understand that does take some time, but if it is rejected.

Do you guys have a Plan B for marketing the MAGICs in the U.S.?.

No, there is no Plan B we don’t believe its possible to reject our application to be very honest and I don’t mean to be too bold here but we have the worlds most nicotine cigarette it has 95% less nicotine than conventional brands and we are simply asking to make the claim that is reduced exposure product.

We think it’s simply and possible to deny that request it’s irrefutably a reduced exposure product.

Now how long that takes and what we need to go through I am not sure yet we believe that it will be 12 months perhaps and we’ve made the strategic to hire Gregg Gellman who is going to shepherded the product and the application through the FDA regulatory approval process to address any concerns that they may have as early as we possibly can, but public health officials, researchers anyone looks at our technology and our products agrees unanimously no one can deny that we have a reduced exposure cigarette that precisely the claim that we are asking for..

So you guys are not applying for the reduced risk statement on the cigarette, it’s only reduced exposure?.

Right, reduced exposure is essentially a sub-category of modified risk tobacco products so we’ll be I guess regulated as a modified risk tobacco products, but the claim that we are seeking is as reduced exposure product..

Okay, that’s good to hear. I’m excited about your product. I’m a pharmacist industry I can tell you guys that there is not anything really effective for smoking cessation and this looks like something very promising..

We appreciate that and it’s interesting we’ve been speaking to more and more pharmacists and pharmaceutical companies who happen to own pharmacies and they are telling us the same thing, they are telling us that there is tremendous unmet medical need in smoking cessation and our products could really disrupt the entire marketplace.

Thank you very much..

Thank you..

Thank you. We will take our next question from [Marian Green]. Your line is open..

Good morning, so far very interesting and great job..

Thank you..

Very great job and I am very happy and I’m just curious is anything going on with the Cigar industry?.

Well, that’s a great question and to be very honest not yet, as I mentioned earlier there is a long list of great projects that we could work on and we are focusing our time and resources, our limited financial resources and really that the lowest hanging fruit right now.

So I think the most strategic near-term catalysts or business opportunities are clearly modified risk and perhaps our X-22 smoking cessation aid, those are really the brands of our near-term focus.

Cannabis is probably a second to those priorities and then of course all our commercial business domestically and internationally are going to simply support all of those main priorities, but cigar is an interesting opportunity I spoke with an investor recently who is asking about taking the caffeine out of cheese in much the same way that we have taken the nicotine out of tobacco that there are host of incredible opportunities that could use our proprietary technology and we appreciate you pointing out yet another..

Thank you so much..

Okay, have a good day..

You too have a very good day..

Thank you. And we’ll move now to [indiscernible]. Your line is open..

Good morning..

Good morning..

Yes, I wonder scientist is there at the table..

No, not right now, I’m sorry we don’t have a scientist in the room, too many lawyers taking our all the seats here..

Well, the reason why I’m calling is the pens we have, could that be used for the entire tobacco plant family? Not just the tobacco plant because our people who have [indiscernible] the only thing that change to help it as the nicotine and then we could raise the nicotine in tomato’s or green peppers or people have parkinson's could smoke our cigarettes is seems to be going in the health family?.

Those are interesting point and I apologize we do not have one of our scientist in the room right now, but I will note it’s sound like you realized it we are working on – well we have the capacity to grow the worlds highest nicotine content tobacco plants and its conceivable to that technology certainly it’s a similar technology in the Canada’s plant and its conceivable that technology could be used in other plants, but I guess I am not going to say anymore about that topic without counsel of our scientist, so but thank you for raising the issue and we’ll certainly give some thought for that..

Thank you sir, good bye..

Okay, bye-bye..

Thank you. [Operator Instructions] We will move next to [Elite Robins]. Your line is open..

Hi Henry, small investor here in Chicago, very excited about a lot of the developments that are underway.

A little concerned about the cash position, we fell off from $8.2 to $6.7 from June 30 of this year to September 30 and only cash on hand including revenues coming in believe to last for the next nine months is opposed to a year which we typically like to hear.

As you said here now, do you have any plans or any needs do you believe to raise capital after nine months in order to keep your levels of investment and operating expenses up?.

We have no current plan to do so and as John mentioned I guess this is important cash on hand and of course including excepted revenues and whatever profits from sales are [indiscernible] to your number, but what John did mentioned to is that number excludes potential payments from BAT of up to $7 million and excludes any deposits or payments from any partner associated with X-22 or within international license.

So I guess my answer to you is we have no current plans. I guess I would be disappointed if we didn’t have some other extraordinary source of cash in the next six months. And I’ll also remind you that I’m a large shareholder and the last thing I’d like to see is dilution.

So rest of shares will be doing everything that we can to generate sales, deposits and royalties that will preclude the need from us raising additional funds..

Just one quick follow-up, can you shed any light on that $7 million milestone that would have to be achieve to get that produced to back all money, can you elaborate on that at all?.

There were actually four separate milestones each of them generating between $1.5 million and $2.5 million in cash, two were related to very low nicotine tobacco, two were related to high nicotine tobacco and I guess all I can say about those things are that we are in constant communication with BAT and that BAT is working diligently on the science that it needs to perform in order to achieve those milestones and 22nd Century is prepared to assist in anyway they can..

Very good. And then one separate area of questioning I was pleased to hear that things been resolved with Mr. [indiscernible] and that is going to act as consultant.

One thing as the shareholder that I am constantly trying to figure out is [106 point] however many million shares he had is there anyway of indicating how much he actually still continues to hold.

I understand that he can continue to sell shares for another year or 18 months, but is that something that the public can be informed about, because that one point he was a holder of over 6 million shares..

Yes, I think – I can’t speak for Joe, so I am not going to speak for Joe, but I believe not 100% certain I believe he all in the neighborhood of 5.5 million shares today. Some of the numbers you are referencing might include warrants or options, but I believe he owns approximately 5.5 million shares. And then I certainly can’t and won’t speak for Joe.

I can say that has I believe the company’s second largest shareholder that Joe very, very much wants to increase shareholder value in the near-term and in the long-term. Obviously, he would like to see those shares at $10 or $20 or $30 a share as opposed to the dollar and wherever they are today.

So I know that’s Joe’s mindset, I know that he will be valuable to the company as a consultant working on some very special projects and I know because Joe had signed a lock up that he won’t be selling any shares until at least the beginning of 2017..

Henry your enthusiasm is capable. I appreciate your candor and I am excited about the future of this company..

Well, thank you so much. We appreciate having you with an investor..

Thank you. End of Q&A.

Thank you and this does conclude our conference. I would like to thank everyone for your participation and you may disconnect at any time..