Good day and welcome to the 22nd Century First Quarter 2018 Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over Mr. Tom James; Vice President, General Counsel and the Corporate Secretary. Please go ahead, sir..

Thank you very much everyone for joining the call today. Please bear with me, while I read the required legal Safe Harbor text. 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, 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 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 for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on March 7, 2018.

22nd Century does not undertake and it 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 expenses as described in our company's earnings press release for the quarter-end March 31, 2018 as publicly issued yesterday on May 3, 2018, and which is now available on our company's website.

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

Thanks, Tom. Good afternoon everyone, and once again thank you for calling into 22nd Century's first quarter 2018 conference call. For those of who you are new to the call, my name is John Brodfuehrer and I am the Chief Financial Officer of 22nd Century Group. Today's conference call will be one hour in duration and we'll conclude at 5:00 pm.

We will take questions at the end of the presentation as time permits. This afternoon I will provide you with a summary of the Company's financial results for the first quarter of 2018 ending on March 31, 2018.

First of all as reported in our Form 10-Q as filed with the SEC yesterday and as stated in yesterday's press release, net of sales revenue for the first quarter of 2018 in the amount of $6,116,000 was the highest quarterly amount for product sales in the Company's history.

The net sales revenue for the first quarter of 2018 of approximately $6.11 million represents an increase of approximately $3.88 million or 174.1% over net sales of approximately $2.2 million to $3 million for the first quarter of 2017.

The increase was primarily result of continued additional net sales revenue generated from the contract manufacturing existing brands of filtered cigars that commenced in mid May of 2017.

During the first quarter of 2018, we generated gross product -- gross profit on product sales of $71,000 as compared to a gross loss on product sales of $274,000 during the first quarter of 2017.

The swing from the gross loss of $274,000 in the first quarter of 2017 to a gross profit of $71,000 in the first quarter of 2018 represents an improvement of $345,000. During the first quarter of 2018, we began approaching efficient production capacity at our manufacturing facility in North Carolina.

The production volume under our contract manufacturing agreements that commenced in the second quarter of 2017 continue to increase during the first quarter of 2018, helping to reduce -- helping to produce gross profit for the quarter.

Our net cash operating expenses that exclude non-cash equity based compensation, amortization and depreciation increased during the three months ended March 31, 2018 by $1,886,000 or 82.1% from $2,298,000 for the three months ended March 31 of 2017 to $4,184,000 for the three months ended March 31, 2018.

This increase in our net cash operating expenses of approximately $1,886,000 during the three months ended March 31, 2018 consisted primarily of an increased in our net cash research and development expenses of approximately $1,759,000.

Such increase was primarily the result of an increase in expenses related to our Modified Risk Tobacco Product application with the FDA for our BRAND A Very Low Nicotine cigarettes in the amount of approximately of $1,244,000, with the balance of the increase, mainly attributable to increases in research and development costs relating to personal expenses, sponsored research and costs associated with our lab in Buffalo New York.

We also incurred a net cash increase in other operating expenses related to general and administrative and sales and marketing expenses of approximately $127,000 for the first quarter of 2018 as compared to the first quarter of 2017.

We had net income for the three months ended March 31, 2018 in the amount of $1,387,000 or $0.01 per share as compared to a net loss for the three months ended March 31, 2017 in the amount of $2,621,000 or a negative $0.03 per share.

The change from a net loss in the first quarter of 2017 to a net income position for the first quarter of '18 represents an improvement of $4,008,000 or 152.9% and consists primarily of the following.

An increase in net other income in the amount of $6,007,000that will be addressed in more detail shortly and a positive change in our gross profit on product sales discussed above in the amount of $345,000, partially offset by an increase in our net cash operating expenses of $1,886,000 as discussed earlier and an increase in non-cash expenses related to depreciation and amortization and equity based compensation in the amount of $458,000.

The net increase in other income of $6,007,000is primarily the result of an unrealized gain recorded for our investment in Anandia Laboratories in Canada in the amount of $6,147,000, which resulted from the adoption of a new accounting standard that became effective at January 1, 2018.

The new accounting standard required us to state our investment in Anandia at fair value. With such fair value being based on observable price changes in orderly transactions for the identical or similar investments in Anandia.

In other words, the new standard required us to increase the value of our investment in Anandia to fair value resulting in the reported unrealized gain.

Our adjusted EBITDA non-GAAP financial metric previously defined by Tom James in his opening statement, for the three months ended March 31 of 2018 was a negative $4,113,000 or negative 0.03 per share as compared to a negative 2, 572,000 or a negative 0.03 per share for the three months ended March 31, 2017 an increased in the negative adjusted EBITDA of approximately 1,541,000 or 59.9%.

The increase is the results of the increase in our non-cash operating expenses of 1,886,000 discussed above as partially offset by an improvement in our gross profit on product sales of sales of 345.

We continue to be in a strong to cash position with the total of cash, cash equivalents and short-term investment securities totaling 59.4 million at March 31, 2018 and amount we believe will be adequate to cover normal operating expenses of approximately $950,000 and meet all current obligations as they come due for a number of years.

In addition, we expect to incur an estimated amount of approximately $8 million in expenses relating to or Modified Risk Tobacco Product application with the FDA over approximately the next 6 to 12 months. That concludes my remarks. Thank you for your time and consideration.

22nd Century, I will now turn the remainder of this conference call over to our President and CEO, Henry Sicignano, who will provide you with the business review and update. Thank you again..

Thank you, John. Good afternoon and thank you again to our conference call participants for joining us today. It is always a pleasure to talk with investors when we issue a great quarterly report. Indeed, our first quarter results demonstrate the 22nd Century's management is focused squarely on achieving our most important objectives.

For example, as an important step forward in establishing the self-sufficiency of our North Carolina factory, 22nd Century once again achieved record the product sales in the first quarter. As John reported, overall sales for the Company in the quarter were more than $6 million. We are very pleased with this result.

As John further explained, another notable event recognized in the first quarter is increasing value of our investment in Anandia laboratories, a Vancouver-based biotechnology lab focused on cannabis and hemp.

You might recall, it was through our partnership within Anandia that we successfully created zero THC hemp plants last year, and right now, together with in Anandia, we are developing additional novel hemp plant streams with other highly desirable cannabinoid profiles.

Because of new accounting standards, we are required to recognize the fair value of any investments. Accordingly, after an Anandia completed a very successful eight figure capital raise earlier this year, we recorded $6 million gain on the value of our in the Anandia holdings in event that contributed to 22nd Century's profitable first quarter.

As just last week we met with investors at our company's Annual Meeting of shareholders. It was a great event. I had an opportunity to meet with dozens of our shareholders and 22nd Century management enjoyed learning from and conversing with both industry specialists and investors alike.

Since not everyone was able to attend the meeting, I wanted to share with you today some of the topics we discussed at our shareholder meeting. I began the meeting by acknowledging the host of excellent question shareholders have raised in recent weeks and have explained that I'm often asked these same sorts of important questions.

I suspect those of you on the phone today have also wondered about the following.

How long before FDA takes the next step or finalizes the new nicotine rules? When will the Company receive approval for the MRTP application? When will the Company sign a licensing deal? As you can imagine, these types of questions are difficult to answer because they ask me to predict the future.

That said, we do know that the future as envisioned by the FDA includes a dramatic reduction in nicotine content for all cigarettes. I believe strongly in the FDA's commitment to this unprecedented but vitally important initiative.

Under the FDA's mandate, I'm 100% confident that all cigarettes sold in the United States will no longer create or sustain addiction.

Given the incredible opportunities that lay before us to positively impact public health and to improve the lives of millions of people, I think it is important to describe how we think this exciting path forward will unfold. First some background. On July 28, 2017, FDA Commissioner Dr.

Scott Gottlieb, announced what the Washington Post is called "the most important public-health initiative of the century". In fact the FDA's ground breaking plan to lower nicotine in cigarettes to non-indicative levels is a titanic-like shift for the tobacco industry.

Underpinning the FDA's plan to dramatically lower nicotine in cigarettes is more than $100 million of independent research utilizing 22nd Century's proprietary SPECTRUM research cigarettes.

In support of our research cigarettes in commercial operations, 22nd Century has grown our Company proprietary very low nicotine tobacco at dozens of independent farms across the U.S. tobacco belt.

Indeed only 22nd Century has commercially grown non-indicative tobacco that will comply with the new FDA mandate for minimally or non-indicative cigarettes.

And from our extraordinary very low nicotine tobacco, 22nd Century has made and shifted more than 24 million SPECTRUM research cigarettes that have been used in numerous independent clinical studies across the country.

The results of these peer-reviewed and publish clinical studies show that 22nd Century's very low nicotine cigarette have been associated with a number of -- excuse me, have been associated with a number of cigarettes smoked, a reduced to dependence and urge to smoke and increased quite attempts.

These independent clinical studies are the scientific foundation of the FDA's plan to reduce nicotine to non-indicative levels in all cigarettes sold in the United States. Six weeks ago, on March 16, 2018, the FDA issued an Advance Notice of Proposed Rule Making, or ANPRM, that is an important step forward in the FDA's official rule making process.

We are very pleased and proud to see that the ANPRM is specifically named 22nd Century several times, as being the provider of our proprietary very low nicotine cigarettes to many pivotal government funded clinical studies.

The ANPRM references, previously completed research that found "An absolute limit of 0.4 milligrams to 0.5 milligrams of nicotine per cigarette should be adequate to prevent or limit the development of addiction in most young people." 22nd Century provided all of the proprietary very low nicotine cigarettes that made possible the clinical trials in numerous independent clinical studies that are the foundation for the FDA's nicotine reduction plan.

In discussing the FDA's ANPRM, FDA Commissioner, Dr. Gottlieb explained, this milestone places a squarely in the road toward achieving one of the biggest public health victories in modern history and saving millions of lives in the process. But now to the road ahead.

Following the FDA's publication of the ANPRM, we are currently in a public common period at a schedule to end of June 14th. That said, Big Tobacco has already fallen back to its tiered refrain of stall tactics by requesting a 90-day extension to the period public comment.

Whether the FDA does or does not grant Big Tobacco's request for 90-day extension, it will not matter. When all the common period closes, the FDA will review the comments and then publish in the Federal Register a draft written rule.

The FDA will then provide an opportunity for the public to submit written comments in proposed changes to the draft rule. After the FDA completes its review of these comments, then the FDA could proceed to a final rule or initiate another round of comments before publishing the final rule.

Estimates vary -- will take the FDA to arrive at this final rule. But given FDA Commissioner Gottlieb's numerous public addresses, rigorously promoting the agencies proposed nicotine standard and the desire to save millions of people's lives and billions in healthcare cause, it would appear that the FDA is pursuing a final rule with all do speed.

That said, from now until the FDA's final rule is made official, there will be numerous milestones to mark progress towards the lower nicotine mandate. In fact each step that the FDA takes towards the addiction free future, in the cigarette industry, will be an important catalyst for 22nd Century and for our stock.

While other companies are likely to have great difficulty complying with the FDA's reduced nicotine product standard, 22nd Century is ready now. Indeed, we are uniquely qualified to provide the tobacco industry with our proprietary and commercially viable very low nicotine tobacco.

22nd Century is the only Company in the world that has publicly announced an inventory of very low nicotine tobacco varieties at minimally or non-addictive levels. And 22nd Century is currently developing additional improved very low nicotine tobacco varieties including non-GMO varieties for futures sales to tobacco companies around the globe.

Our ability to respond to the FDA's call for minimally or non-addictive tobacco is what sets us apart from all other companies. 22nd Century your company in mind is at the very epicenter of the science that demonstrates how powerful, very low nicotine technology really is.

But 22nd Century is not just waiting for the FDA to ball move forward, even now our team of scientists, regulatory experts and consultant specialists are pushing hard to prepare robust and thorough MRTP application for 22nd Century's Brand A very low nicotine cigarettes.

As a part of our enhanced application, we are conducting three limited clinical trials in order to reconfirm and improved data previously collected by independent researchers. Our new trials will also broaden the spectrum of demographic populations investigated and will enforce consistency in laboratory protocols.

And because of this intense focus on our MRTP application even before FDA arrives at its own nicotine reduction mandate, 22nd Century maybe the first and only company in the world to win FDA approval to market a combustible cigarette as a Modified Risk Tobacco Product in the United States.

That said, because we want to submit the most robust MRTP application and that has the highest likelihood of success and approval by the FDA versus an application of this merely adequate or sufficient, we have substantially increased our spending on our MRTP initiatives. Six months ago, Dr.

Jim Swauger, the prior Chief Science and Regulatory Officer of R. J. Reynolds joined our company as our Chief Science and Regulatory Officer because he saw how real and how disruptive our very low nicotine tobacco could be in changing the landscape of tobacco addiction in the United States and around the world. Under Dr.

Swauger's guidance, commenced work on a substantially strengthened MRTP application. And despite the recent passing of Dr. Swauger, our team of internal and external experts is continuing work on the project seamlessly in an effort to achieve something that no other company in the world has achieved, approval of a successful MRTP.

We cannot and will not quote front run at the FDA by commenting in detail on our MRTP ongoing initiatives. Rather, we will let our MRP applications to be crisped out itself from the FDA review process. We will publicly announce our re-filing of our MRTP application with the FDA when it happens but not before that time.

As investors, you can take comfort in knowing that highly qualified team of experts inside and outside of the Company has carefully planned and are currently executing the completion and filing of a robust MRTP application to give our company the absolute best possible chance of success.

Nonetheless, as we aggressively push forward in the MRTP process, keep in mind these key points. One, the FDA's plan to mandate a reduction in nicotine content in cigarettes to quote a minimally or non-addictive level, surge to strengthen significantly 22nd Century's MRTP claim for very low nicotine cigarettes.

Two, owing the world's potentially only tobacco product with an MRTP claim will serve as a launching point in lightening route for commercial sales of 22nd Century's proprietary very low nicotine brands. And three, in MRTP Claim will also open multiple licensing opportunities for 22nd Century's proprietary tobacco in both the U.S.

and in international markets. While we are confident in the published results from the existing scientific clinical studies regarding very low nicotine cigarettes more research is always underway. More and more scientists are advancing the case for implementing reduced nicotine policies here and around the world.

Last year in March 2017, scientists completed their investigation and submitted their research for peer-review for a highly anticipated Phase 3 clinical study.

This 1250 patient 20 week study compared smokers who have given an immediate reduction to very low nicotine cigarettes versus those that signed to a gradual reduction in the nicotine content of their cigarettes although the study is officially in peer-review still at this time. On April 2, 2018, Dr.

Dorothy Hatsukami, one of the principal investigators in that study give a lecture at the Brown University School of Public Health that revealed important details about the seminal studies key findings. The slides from Dr. Hatsukami's discussion are available online. From these slides I can give you some highlights.

First, 22nd Century SPECTRUM very low nicotine cigarettes were associated with reduced number of cigarettes, smoked reduced dependence and urge to smoke and increase quit attempts. The study scientists concluded broadly that. Number one, reducing nicotine to minimally addictive levels can potentially reduce the prevalence of smoking.

Number two, the best approach would be an immediate rather than a gradual reduction, while a gradual reduction in nicotine was associated with greater smoke exposure at moderate nicotine doses an immediate reduction resulted in greater decreases independence and higher rates, and duration of abstinence.

And lastly, scientists found no evidence of adverse health effects as a result of smoking 22nd century's very low nicotine cigarettes. In conclusion, Dr. Hatsukami characterized her results as quote aligned with the FDA's nicotine strategy in the quote and equally important. Dr.

Hatsukami definitively identified tobacco with nicotine content equal to or less than 0.4 milligrams per gram as quote-on-quote minimally addictive. I cannot stress how important this research is to our company and to smokers worldwide. I cannot overstate the importance of Dr. Hatsukami's study.

Our company technology is nothing less than absolutely destructive. It makes possible the most important public health policy changes in generations, and in fact very low nicotine cigarettes represent unprecedented change that has shaken the stodgy tobacco industry to its core.

But along much of the recent news about 22nd century has been focused on our tobacco technologies, we are also making commendable progress with our hemp biotechnology.

In partnership with the University of Virginia last summer we grew several experimental hemp varieties that are well suited for use in Virginia, North Carolina and other areas of the tobacco belt. We are already in the process of expanding our hemp research and hemp growing activities with the University of Virginia.

We will plant more hemp for phytoremediation, we will plant more hemp for commercial industrial purposes, and we will plant more hemp for medically focused cannabinoid extraction research. In addition, we recently signed an industrial hemp research partner agreement with the New York State Department of Agriculture and markets.

As a result of partnering with New York State, we will be able to greatly expand our hemp research at our company-owned laboratories here in Buffalo. Our hemp research objectives for the next year are to protect hemp varieties for use in Virginia, North Carolina and other areas of the tobacco belts.

To expand our hemp activities in New York and to further develop our zero THC and other hemp plants with unique cannabinoid profiles for medical and industrial purposes. So the road ahead, it may have its fair share of challenges 22nd Century is exactly where it needs to be.

Given the FDA's plan to mandate dramatically reduced levels of nicotine and given our rapidly expanding hemp science and capabilities. I think you will agree, 22nd Century's future has never been brighter. Through it all, we remain firmly committed to our most important mission to reduce the harm caused by smoking.

And we are quite sure that our company and our shareholders will do incredibly well by continuing to do what is simply good. Thank you so much for joining us today and for your continued interest in our extraordinary company. At this time, I'm going to open up the call for questions and we will keep the call open until 5 PM..

[Operator Instructions] We'll take our first question from Jim McIlree with Chardan Capital..

Henry, are you talked about a three limited trials, for the MRTP, are those taking place sequentially or simultaneously?.

Simultaneously, Jim, they're taking place simultaneously in several sites across the country and they're already underway..

And when you said limited, what does that mean? Limited in numbers, time, dollars, something else?.

All three, they are not like Phase 3 trials for drug. These are much smaller in scope and much less expensive and much faster..

Can you put a timeframe or range around how much, how much time it'll take?.

Months..

So the $8 million that you talked about should cover all of the MRTP application.

Is that right?.

Well, at this point, that's what we believe..

Okay, good.

And then, is this $6.1 million in revenue from the contract manufacturing? Is that sustainable?.

Yes. I think, I think we're going to do our best to grow it as well..

And we'll take our next question from Brad Williams with [Sintec Financial]..

I have two quick questions. First one relates to last quarter's conference call and 10-Q that was issued. You mentioned you were in negotiations with multiple companies that have many different industries and obviously we haven't seen a press release that you signed a deal. So I'm assuming none had been signed.

My question is, is there a certain trigger event that is a holding up any of those negotiations from being fulfilled into a contract?.

I don’t think there was any particular trigger, but we certainly wouldn't announce the deal until we had signed a completed contract that that's what's most important.

So I think what we said on our last call was that we, we have several parties that we've been in discussions with around the world and I guess I could tell you we’re continuing to have those discussions, but we have not signed a contract, we have not signed a partnership agreement..

Okay, no problem. I just didn't know if there was the specific trigger people are waiting for it to be appears to review or passing of the ANPRM to the next level or it's no problem. Second question..

Can I stop on that? There is no particular trigger event, but one could imagine. I mean if, if the company is successful with MRTP application, well I mean that would be a mass trigger event and I think we'll do an awful lot of important things before that point.

But the FDA mandate moving through the FDA approval process and an MRTP application being submitted to FDA, MRTP application, going to tip sack, all of those things are, I guess they're triggers or catalysts..

Yes sir. No, thank you very much for that additional input, I appreciate that. One more question because I don't want to take up too much time. Because of your close relationship with the government having but so many cigarettes over the years for their trials, I mean $24 million worth, I believe, or it's even more.

I can't know the number on the top of my head, but my question is, are we beholding to them in any sense of signing a license, a potential buy out in the future.

Does the government have any say into our business on how we move forward into monetizing all of the IP and everything that you've work so hard for?.

That's a great question. First, I should say we've actually sold 24 million SPECTRUM research cigarettes but not dollars, I wish it were $24 million, but it's not quite that much. But, yes, the government does not have any rights to or licenses for any of our products.

So they simply buy those research cigarettes and then distribute those to independent researchers who have the funding and the approvals to do work with the product. But we have no continuing obligations..

And we’ll take our next question from Paul Slattery, a Private Investor..

My question has to do with the -- will become non-combustible MRTP application that the Big Tobacco put in right after the FDA announcement of the -- of course, rule change. That was not received, there was not a new holding back and since there's still a time. You still to have to use some more time before you can get the combustible in.

Is there a possibility that, that they will get their done first? And then deeper one is, is that a likely -- are they likely to get their application approved for this non-combustible product? That’s it..

I'm not sure, I’ll let Tom chime in here in a second, but I think that we have as good a chance as anyone, if not a greater chance of having the first MRTP approved product in the world.

The Swedish match has been working on their products for years and has spent an awful lot of money and I'm sure -- I'm not as familiar with how much exactly, but you could probably find that in their filings and I know that the Altria application was -- I believe over 3 million pages and they don't seem to have adequate success in the first quarter of this year.

But, where we stand and where it looks like public health official stand on very low nicotine cigarettes. I have to believe that we have the best chance in the world for the first and perhaps even the only modified risk tobacco product. Tom, would you like to....

No, I think Henry said that very well. To answer your question, the activity was IQOS and mechanical devices have nothing to do with us. The FDA’s action with respect to them, we applaud because they're not safe. They rejected the science that was submitted there.

But yet they've gone forward on the mandate based on the science that they’ve paid for on our tobacco. So, we're clearly and they are clearly confident in the science that supports our application.

But as Henry said, our application for a less addictive combustible cigarette is wholly different than their mechanical devices that don't have sufficient science supporting it..

Well, I certainly understand that not related. I was just wondering about whether that technology -- I think you’ve answered me though that technology has got any promise as at MRTP, a different way to go.

Your last statement may it appears that you don't think so, and of course, you don’t know what the -- what the FDA takes, but is that a correct way for me look at this, that you're really don’t think if they have highly science behind theirs..

We're not here to comment on other people's applications..

Okay. But on the science all I really asked you to comment on, not the application. Okay, I understand..

I think you can take public notice of what the FDA did in rejecting the science that was submitted to them under IQOS. I don't need to comment about that. I think it's apparent on its face, it was not acceptable.

You can compare that with the FDA moving forward on the nicotine mandate based on more than $1 million of independent science on only our tobacco..

And we’ll go to Private Investor, Jorge Garcia Goldrick..

I had a couple of questions some have been asked already, but the seeds for the U.S. market, I believe that you have seeds to supply the U.S.

market, right now?.

What kind of seeds are you describing?.

The tobacco seeds, I’m sorry this was from a previous conference call that….

Henry can describe in greater detail, but we have -- as we've disclosed soon certainly a significant amount of seeds because we have a significant amount of finished inventory. We’re producing SPECTRUM on regular basis. So, yes, we’re actively involved with that..

And producing this year, this summer actually, we’ve quite a bit more very low nicotine tobacco. So, yes, I have confidence that if and when the time comes with an FDA mandate that we would be ready and prepared and excited about partnering with any other tobacco company that wanted to use our technology in their products..

Excellent, and that's what I was hoping you would answer.

So with the MRTP once it gets approved I'm confident I can say that I believe it's going to be improve but anyway once it's approved you have two shifts at the plant and my concern and I'm guessing but my concern is, once the MRTP is approved and let say the sales volumes starts increasing will we be able to keep up with the demand..

I love that, problem but we right now we're running ultimately two shifts five days a week and then at sometimes were running one shift six days a week.

If pushed into show we can certainly run three shifts seven days, but in all likelihood, if we were successful as you and I believe we will be the licensing of the technology would enable other big tobacco companies to produce their own cigarettes using our tobacco at their own facilities..

And what we also have a chance and this would be a great opportunity to co-manufacture at other facilities. So you are turning the tables now that you can co-manufacture your cigarettes or exact 22nd Century's cigarettes at other facilities with those competitors.

Would that be a possibility as well?.

Certainly, we would certainly be able to do that. So, those are the kinds of partnership that I envision too..

And will take our next question from Elea Lautenberg, a Private Investor..

I want to offer my condolences for the loss of Dr. Swauger to you and to the 22nd Century's family, and ask who are within the company is not thinking over his work with the application and additionally, two other questions, one is you know after the most anticipated and single biggest catalyst in our company's history.

We've seen a significant slide in the price of our stock I wonder if you can identify any action by companies who may be under threat priority or investment groups whose investments may be damaged by the potential of our IP that may have contribute to that movement, if you could speak to it.

And what kind of on the hemp side and the hemp space were kind of high-minds of catalysts might be able to discuss to talk about realizing profit in that area?.

And will start with the first one on Dr. Swauger work, I guess the best way to describe as it's been divided. There are three people in house right now if they are overseeing the projects that he had been leading. J. P. Tambrino from British American Tobacco, is a primary person.

We have our Regulatory Chief, Karen Delaney, and we also have on our other our Chief Scientist of R&D, Paul Rushton. Those are our internal folks. And then externally I'm not going to give the names but we have, let's call them certain regulatory experts acting as consultants to the company where we've essentially engaged these individuals.

We bought between 80% and 100% of their time and this was actually done while Jim Swauger was still here. So we have a team of call it a half dozen people that are actually leading the effort, and then of course.

we have research institutions and people who are underground actually performing the clinical studies and the perception studies and all the mathematics behind gathering and compiling all the data.

So does that answer your question? Is that helpful?.

Yes, that's very helpful. Yes..

No, we do in fact intend to bring another regulatory leader onboard, but we have not yet identified that person and even when we do identify that person because we're already in the thick of things in the projects have already moved forward. We don't intend to change what's, already been put into place.

The six people they're running the show right now and they are leading our efforts, will continue to lead those efforts and when that regulatory expert comes in that person will just sort of be bolted on and be part of the process, likely not lead the process that's already on its way. The second question was about our share price slide.

And to be honest with you, I can't give you the reasons or the rationale. I mean, I can make guesses, but I'm probably not supposed to do that. We know that there are short sellers that make a living by taking short positions on stocks and then knocking the company's, associated with those stocks and then cashing out.

So I would expect that some folks have done that. I think in the long-term, um, if you make a bet on the company and you're a long-term investor, I think you'll be very pleased. And I always have said this before on conference calls. I believe actions speak louder than words. I personally have never sold a share of stock.

So I guess you know, where my bet is, my bet is on the long-term future of the company. And for those folks that are, that are, you know, that aren't going to bet that it's going to go down a quarter or $0.50 or whatever it's going to go down, you know, best of luck to them.

I think the long-term shareholders are going to do quite well holding onto the stock.

Is that helpful?.

Yes, very. I’ll agree with you, I'm not going anywhere either and I know that the future in the market is uncertain. I just -- given that you are probably a small, but with IP as huge threat to very established industry.

I didn't know if you guys had identified any actions and movements against you that might be meant to, to affect the process going forward..

You know, I can say anecdotally, I was at a conference last fall and I met with lots of executives from some of our competitors in different companies in the industry. And I was surprised but very happy to learn that many of these executives who work at companies that are competitors of ours, they've personally bought our stock.

And I thought that was pretty impressive that our company has attracted the attention of individual investors who work at competitor companies. So I'll guess I'll leave it at that.

And then the last question was the timeline on hemp and I don't know Tom, if you want to show anything?.

Yes, I think you asked about catalyst and again talking only about public information, we see very happily that Mitch Mcconnell, the leader of the majority party in the Senate wants to fully legalized hemp, like corn and wheat and fast track that lift legislation.

So that's very robust for us as well as you've seen, we've already moved forward in the state of New York where Governor Cuomo has said a similar thing. He wants to grow it like its corn, wheat or soybeans.

So we see this market opening up, we see some controversies going on with respect to Marijuana and CBD and extracts with what's going on with the FDA and GW Pharma. So we're very pleased to be in the hemp space and seeing what's changing ahead of us as that’s all public information..

Alright, excellent well. Listen, I'm sorry, I'm sure that's a question you in the IR Department have fielded a number of times about the share price and I don't mean the pylon, I just was hoping to hear some comments, if I could ask one last quick question.

Is there at any point going to be any identification of the company or persons who bought the warrants at 262 in the future?.

So, we actually, we haven't -- they weren’t warrants. So let's -- so that was, that was a franchise to direct offering. So, I'll just, we do have NDAs so we cannot disclose who those folks were.

I think some of that information is actually in the public domain but we do have NDAs with the investors so we cannot do that, but it was a non warrant deal at 262 and that's a good point. Those are some pretty sophisticated people investing eight figures. I believe, some of them.

And, yet I guess some shareholders must think they know more than those guys because, they are selling the stock at levels under 262. Now, do I know that every single share that they, that those larger investors purchased, it continues to be held.

No, I don't know that, but I'm fairly confident that the great number of those shares are still held and it surprises me every day when I see people selling the stock at levels below that 262, where very sophisticated people invested 8 figures..

Yes I agree with that. It gives a lot of people a lot of confidence so it added to the surprise once it's sold below. Thanks guys so much for being us directed as you're able with the information that you can share. And thank you very much. Looking forward to the journey..

Thank you, we appreciate. Have a good weekend..

We'll take our next question from Private Investor, Patricia Gustine..

First and foremost, thank you so much for opening the Q&A to private investors. It's much appreciated. I have had a question about the age of the patents.

If there are any worry that the Big Tobacco is just going to beat out the clock on our patents or we will protect it?.

Yes, Patricia, we feel very comfortable and well protected. We would direct people to read our disclosure and our annual report on Form 10-K for the year-ended December 31, 2017. We'll be talked about in old patent family coming off patent.

And what that means and practical terms and to summarize for everybody that haven't read it on the call, that 10-K disclosure says that just because a particular gene is now allow to be researched doesn't mean that other researchers will be successful and have the manipulator change the gene to be able to make nicotine go up or down, and be able to make it go down sufficiently that it's a very low nicotine, and be able to have that resulting plan via very robust crop to be able to grown in sufficient commercial quantity support of product.

We clearly have done that and as Henry said earlier, that's the basis of selling 24 million spectrum research cigarettes and having an inventory ready to go and all that science being based on our tobacco. So, we don't see anybody else doing it out there that have anything to do anything close to what we're doing.

So we feel very confident and where we're at and with the IP discussion the finishing point is every step that I just described in that scientific process requires and to grow up the resulting plant the couple of times to prove it up.

All that timeline together plus maybe, maybe, maybe if they lucky enough, we feel very comfortable that that's old technologies we're not concerned with..

And I'll just add one last point there.

It's important to realign that what the FDA wants and what it believes will be very important to public health "very low nicotine tobacco" and the FDA hasn't officially designated the definition of very low nicotine tobacco, but we are very confident especially given the October 2015, New England Journal Medicine study.

That the level of nicotine will be 85% below conventional levels or lower, and in fact we believe the optimal level is likely 95% less nicotine than a conventional cigarette and lower. So companies that say they have low nicotine tobacco or they developed low nicotine stream.

They never say what that is, but I'll explain to you if you give someone a cigarette with 20% less nicotine they tend to smoke more. If you give someone a cigarette with 50% less nicotine they may smoke twice as much.

So it's very, very important that for FDA purposes to make a minimally or non-indicative cigarette that the nicotine levels are at least 85% less than conventional plans and probably 95% less nicotine content than conventional plans.

Is that helpful?.

And we'll take our last question for from Private Investor, Marian Green..

Hi, Henry. Doing a great job, love to see profit from a micro cap..

Well, thank you, Marian. I appreciate that. We're very pleased with the quarter..

I know that's a big deal..

We're pleased with the quarter..

Yes, yes, very happy with that. Thank you. Question, a lot of people have no clue about your company. They don't -- people that have money, it just doesn't mean anything.

Is it possible that we could take instead of putting money within investor relations people to take and ad out in the Wall Street Journal, and let them know that what we have is available?.

Well, I guess that possible, we have engaged some folks not in investor relations, but in public relations, what I would like even more than in adding the Wall Street Journal I'd like an article, the Wall Street Journal, and I think that as people become more and more familiar with the FDA mandate, and the ANPRM process, I think you will likely find the big news outlets perhaps the Wall Street Journal, perhaps CNN, perhaps CNBC, I think you'll start to have some of these major news organizations covering very low nicotine tobacco and by definition covering our small company.

Anecdotally, some of these folks have talked to us in the past and we provided them with quite a bit of background information on our technology in a very low nicotine tobacco, and then they've gone off and reported on the products, but they've told us that don't like to mention microcap company stock because if they mention the microcap company in the report generally, the stock price goes up very, very quickly because of the exposure and they don't want to cause a commotion with stock prices.

So, believe it or not that's what we've been told, but I think that will only be the case for so long.

At some point this FDA mandate is going to be important enough and big enough news that the whole story will come out, but I can report to you I'm very proud to report to you that 22nd Century, a little company that six years ago or seven years ago we had fewer than 200 shareholders today we have more than 83,000 shareholders more than 83,000 shareholders.

I think it is for fortunate to join the Russell and if our share price continues to appreciate, I think what you'll find is your point institutional investors contended by quite a bit of stock and you tend to hold that stock for a decade or more.

I think you'll start to find those folks becoming investors and starting to own shares in our company, and I think that will and also a lot for the company and for our stock..

I have no doubt about that that. I just think it's a time that we just take an ad out instead of instead what's going on today with the nicotine, the ads that are going on about the cigarette company to take any ads out but nicotine is addicting everybody and we have the answer. As in the newspaper and they'll come to us like crazy..

And we can probably do some kind of a corporate ad like that. There are lots and lots of restrictions on actually discussing products in particular products. If we had an MRTP approval then of course we would be able to say exactly what the product is and what it does.

But before we actually have that marketing orders actually called before we have that marketing order for our MRTP product, we can't actually describe the product in detail with the brand and with a pack but we can't talk a lot about our company technology yes the technology and the company and I really appreciate you know, certainly investors like you and others on the call and at the annual meeting continuing to talk about the product and spreading the word.

I think that's the start of something much bigger..

Absolutely, I'm waiting..

Well, very good. Well, thank you for calling Marian, and we promised that at hard 5 o'clock deadline. So, I'm going to say have a happy weekend and I will look forward to updating you in the coming weeks to months, okay..

This concludes today's call. Thank you for your participation. You may now disconnect..