Good day, and welcome to the 22nd Century Fourth Quarter 2018 Business Update Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Thomas James. Please go ahead, sir..

Thank you very much. Thank you, everyone, for joining the call today. My name is Thomas James, the Vice President, General Counsel and Corporate Secretary of 22nd Century Group. And thank you also for listening to the required legal Safe Harbor text that I'll now read.

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 of expressions of similar meanings are all intended to identify forward-looking statements.

These forward-looking statements are not guarantees of performance, and all such forward-looking statements involve risks 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, 2018, as filed with the U.S.

Securities and Exchange Commission yesterday on March 6, 2019. The company 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 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 year ended December 31, 2018, as publicly issued yesterday on March 6, 2019, and which is available on our Company's website.

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

Thank you, Tom. Good afternoon, everyone, and thank you for participating in the 22nd Century's business update call for the year of 2018. For those of you that may be new to the call, my name is John Brodfuehrer, and I am the CFO of 22nd Century Group. Today's conference call will be 1 hour in duration and will conclude properly at 5:00 PM.

We will take questions at the end of the presentations as time permits. This afternoon, I will provide you with a summary of the Company's financial results for the year ended December 31, 2018. I'll now address some of our financial disclosures for the 2018 year. First, I will discuss our net sales revenues generated from product sales.

As reported in our Form 10-K filed with the SEC yesterday and stated in yesterday's press release, net sales revenues for the year ended December 31, 2018 was $26,426,000, the highest annual net sales revenue in our history, as compared to net sales revenue for the year ended December 31, 2017 of $16,600,000.

Accordingly, net sales revenue increased by $9,826,000 or 59.2% for the year ended December 31, 2018, as compared to the net sales revenue for the year ended December 31, 2017.

The net sales revenue increase is primarily the result of additional net sales revenue generated from our contract manufacturing of cigarettes and filtered cigars during 2018, as compared to 2017. Next, I will address our gross profit on product sales.

Our factory in North Carolina continued to utilize additional production capacity that resulted in the increased net sales revenue, as just discussed above. As a result, we generated gross profit on net sales revenue for the year ended December 31, 2018, in the amount of $899,000.

In comparison, we experienced a gross loss on net sales revenue for the year ended December 31, 2017 in the amount of $708,000. The positive change from the gross loss to gross profit amounted to $1,607,000 for the year ended December 31, 2018, as compared to the year ended December 31, 2017.

And this improvement is primarily the result of increased factory utilization. Next, I'll move on and discuss our operating expenses.

Our net cash operating expenses that exclude non-cash equity based compensation, amortization and depreciation for the year ended December 31, 2018 was $20 million, $388,000, an increase of $9, 685,000 or 90.5% from net cash operating expenses of $10,703,000 for the year ended December 31, 2017.

The increase was primarily due to increased expenses attributed to our Modified Risk Tobacco Product application with the FDA for our BRAND A Very Low Nicotine content cigarettes. Our expenses related to the MRTP application amounted to approximately $9,800,000 for the year ended December 31, 2018. Next I'll address our net loss.

We experienced the net loss for the year ended December 31, 2018 in the amount of $7,967,000 or a negative $0.06 per share, as compared to a net loss of $13,029,000 for the year ended December 31, 2017 or a negative $0.13 cents per share, which is a decrease in our net loss of $5,062,000 or 38.9%.

The decrease in the net loss of $5,062,000 was primarily attributable to the aggregate realized gains in the Anandia award transactions in the amount of $14,493,000 and unrealized gain on the Aurora stock warrants in the amount of $284,000 and increase in net interest income of $1,176,000 and an increase in our gross profit on product sales of $1,607,000.

Those numbers were partially offset by an increase in net cash operating expenses of $9,685,000, as discussed earlier, in increase in equity based compensation of $2,246,000 and an increase in depreciation and amortization expense of $395,000.

The significant gain on the Anandia award transactions in the amount of $14,493,000 consisted of the following three items. A realized gain of $4,516,000 when our equity investment in an Anandia was acquired by Aurora Cannabis in the third quarter of 2018.

We received 1,947,943 shares of Aurora common stock and a warrant to purchase 973,971 shares of Aurora common stock as a result of the acquisition of Anandia by Aurora.

Number two, a gain of $3,830,000 on the subsequent sale of the Aurora common stock that we received in the acquisition of Anandia by Aurora, which also occurred in the third quarter of 2018. The sale of the Aurora common stock also generated $13,052,000 in net cash proceeds for the company.

And thirdly, an unrealized gain in the first quarter of 2018 in the amount of $6,147,000 under U.S. GAAP accounting rules on our investment in Anandia, this amount became a realized gain upon the acquisition of Anandia by Aurora, but those three numbers aggregate to the $14,493,000 realized gain.

It should be noted that we still own the warrant to purchase 973,971 shares of Aurora common stock that does not expire until August of 2023. The Aurora stock warrants had a value of $3,092,000 at December 31, 2018 and we recorded an unrealized gain and the adjustment to fair value in the amount of $284,000 for the year ended December 31, 2018.

At future quarter and year-end dates and if the warrant is still owned by us at that time, we will record the fair value of the warrant and any unrealized gain or loss will be included in net income or loss for that quarter or year-end. Next, I'll address – we'll address our adjusted EBITDA.

Our adjusted EBITDA, a non-GAAP financial metric, previously defined by Tom James in his opening statement, for the year ended December 31, 2018, was a negative $19,489,000 or negative $0.16 per share, as compared to a negative $11,411,000 or negative $0.11 per share for the year ended December 31, 2017, which is an increase in the negative adjusted EBITDA of approximately $8,078,000 or 70.8%.

This increase is primarily the result of the previously discussed increase in our net cash operating expenses of $9,685,000, as partially offset by an improvement in our gross profit on product sales of $1, 607,000. Finally, I will discuss the cash position of the company at December 31, 2018.

We continue to be in a strong cash position with cash, cash equivalents and short-term investment securities totaling $56.4 million at December 31, 2018, an amount we believe will be adequate to cover normal monthly operating expenses of approximately $850,000 and meet all current obligations as they come do for a number of years.

In addition, we expect to incur an estimated amount of approximately $1.5 million in additional expenses relating to our Modified Risk Tobacco Product application with the FDA by the end of the second quarter of 2019. That concludes my remarks. Thank you for your time, consideration and continued interest in 22nd Century Group.

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

Thanks, John. Good afternoon, and thank you again to our conference call participants for joining us. Today I have a host of important issues to discuss. In brief, I will discuss Dr. Scott Gottlieb's recently announced decision to resign as commissioner of the FDA and what his departure may mean to 22nd Century shareholders.

Two, I'll talk a bit about the FDA's plan to dramatically reduce the nicotine content of all cigarettes sold in the United States. Three, provide an update on 22nd Century's modified risk tobacco product application and its progress at the FDA.

And four, perhaps most significantly, I will talk about 22nd Century's hemp cannabis research initiatives and strategic vision. At the end of our time together, I will also briefly touch on the holy frivolous class action lawsuits that have been filed against our company in recent weeks.

First things first, as you likely know, this week we learned that Dr. Scott Gottlieb has decided to resign as commissioner of the FDA. This is an unfortunate. Dr.

Gottlieb has moved the ball forward on a number of important FDA initiatives, including speeding the approval process for important new drugs, addressing the opioid epidemic, questioning the place for flavors in e-cigarettes and of course in advancing the FDA's broad nicotine reduction plans across a host of tobacco products.

We appreciate the work Dr. Gottlieb has done and we will miss him as commissioner. However, it is important to point out, 22nd Century's modified risk tobacco product or MRTP application is under review at the FDA Center for Tobacco Products also known as the CTP, not the FDA at large.

Accordingly, Mitch Zeller, Director at the FDA's Center for Tobacco Products is actually the one who was overseeing our MRTP application. It is also important to realize that the FDA's Center for Tobacco Products is the division of the FDA that is advancing the agency's plan to limit nicotine in all cigarettes sold in the U.S.

to minimally or non-addictive levels. With respect to this larger plan, national mandate, Dr. Gottlieb was a terrific champion. He was not, however, the beginning or the end of the FDA's nicotine reduction movement. Actually the FDA began to collaborate on 22nd Century's SPECTRUM research cigarette initiative in 2011, which was six years before Dr.

Gottlieb arrived on the scene. The FDA and various agencies of the U.S. federal government spent many tens of millions of dollars on independent research with very low nicotine contents cigarettes long before Dr. Gottlieb made his historic 2017 announcement that all cigarettes in the United States should contain drastically lower levels of nicotine.

Indeed, there were many at the FDA who are working on the very low nicotine initiative long before Dr. Gottlieb came into office and there are many more who will continue to work on the nicotine reduction plan after Dr. Gottlieb leaves the FDA. That said, in a March 5th, 2019 New York Times article, Dr.

Gottlieb indicated that they actually plans to advance the FDA's pending tobacco regulations before he leaves. And indeed, I'm quite sure that the FDA itself is absolutely committed to enacting it's new rule to require that all cigarettes sold in the U.S.

is only minimally or non-addictive levels of nicotine in order to assist the more than 30 million Americans smokers who are addicted to conventional cigarettes. And the 2000 youth under the age of 18 across the United States who smoked their first addictive cigarettes each and every day.

Of course, the FDA's efforts to limit nicotine in all cigarettes are complimented by 22nd Century's modified risk tobacco products or MRTP initiative. In December, our company submitted a premarket tobacco application in an MRTP application to the FDA's Center for Tobacco Products for our company's proprietary, very low nicotine content cigarettes.

With these applications, 22nd Century is seeking the FDA's authorization to commercialize the company's very low nicotine content cigarettes under the proposed brand name VLN. And to advertise to consumers that VLN cigarettes contain 95% less nicotine as compared to the 100 leading cigarette brands in the United States.

Since the beginning of this year, 22nd Century regulatory specialists and scientists have been in virtually constant communication with FDA regulators charged with reviewing the company's PMT and MRTP applications. In fact, in the last two months we have had more than 20 conversations with the FDA on matters relating to our MRTP application.

We believe this is a very positive sign. While our PMTA and MRTPA efforts are independent of the FDA's plan new rule to limit the nicotine in all cigarettes to minimally or non-addictive levels. We view the two initiatives as complimentary and wholly reinforcing.

Our very low nicotine content tobacco is the foundation of our VLN cigarettes and at the same time our very low nicotine content tobacco makes possible the FDA's plans to nicotine reduction rule.

It is precisely because of this connection that we continue to believe that the FDA and public health will benefit from the approval of 22nd Century's PMTA and MRTPA submissions.

In this way, the FDA will have a commercial, very low nicotine contents cigarette on the market to prove the feasibility of the agency's nicotine reduction plan and to generate real world consumer data in support of the FDA's proposed new rule to reduce nicotine in all cigarettes sold in the United States.

And of course, potentially the world's only approved MRTP products will greatly enhance 22nd Century's commercialization efforts and will pave the way for lucrative third-party licensing opportunities.

All of that said, and it's important as our tobacco initiatives are for the company and for our shareholders, our strategic initiatives in hemp and cannabis together with significant recent legislative changes have combined to give our biotechnology efforts a massive boost in the emerging hemp cannabis industry.

At the conclusion of 2018, more than half of U.S. states had approved the sale and use of medical cannabis, with another 10 states allowing adult recreational consumption. Even more importantly and an effort led by U.S. Senate majority leader Mitch McConnell, the U.S.

federal government enacted the 2018 Farm Bill, including an important provision to legalize hemp, which is defined as the cannabis plant containing not more than 0.3% THC.

The enactment of this new federal law has accelerated hemp cannabis biotechnology developments in spurred a slew of multimillion dollar investments in hemp cannabis production and extraction. 22nd Century is well positioned to take advantage of the opportunities represented by these changes in the federal law.

Our company's foundation and hemp cannabis research is already well established.

In 2014 a wholly-owned subsidiary of 22nd Century entered into a worldwide license agreement with Anandia Laboratories in Canada through which our company was granted an exclusive sub license in the United States and the co-exclusive sub license in the remainder of the world excluding Canada.

To patents and patent applications relating to the hemp cannabis plant that are required for the production of cannabinoids, the major active ingredients in the hemp cannabis plant. It is important to note, these incredible valuable licenses survive the Aurora Cannabis acquisition of Anandia.

What's more our subsequent investments in research with Anandia generated important new cannabis strains, including one with zero THC.

Besides Anandia, 22nd Century is entering the third year of a research agreement with the University of Virginia to optimize our company's proprietary hemp plants for growth in the historical tobacco belt states and the southern part of the United States.

Further, we already possess a valuable New York State hemp research licensed for our research laboratory in New York.

Utilizing our proprietary technology 22nd Century's primary mission in hemp cannabis is to develop proprietary hemp cannabis plant lines for important new medicines and robust agricultural crops in order to improve the health and lives of people around the world.

Going forward, I am pleased to announce, 22nd Century will substantially increase the company's investment in the development of hemp cannabis intellectual property. While our company's molecular biotechnology laboratory is an important component in achieving our mission of creating new varieties of hemp cannabis.

Our strategy also includes assembling an entire network of accomplished hemp and cannabis researchers, partner companies and universities. In addition to our existing research relationships, we are currently in negotiations to enter into several new strategic alliances.

22nd Century is forming a vertically integrated hemp and cannabis nexus that combines research, production, and extraction.

In combining our technology with the assets and abilities of our strategic partners 22nd Century will have access to advanced gene editing techniques, valuable hemp cannabis germ plasm, extensive growing facilities, dozens of experienced hemp and cannabis scientists and much more.

The foundation of any biotechnology effort is the acquisition of genetic material. To this end, we have already developed or acquired exclusive rights to dozens of unique and proprietary varieties of hemp and cannabis plants, each with valuable agronomic traits and/or exceptional cannabinoid profiles.

Though we are continually adding towards genetic library, we already have an incredible inventory of genetic variability. Literally the building blocks for dozens of new improved plant varieties. Our library of hemp cannabis germ plasm is unique and crucial and crucial importance to our research objectives.

It sets us apart as a major player in the hemp cannabis biotechnology field.

Using genome sequences from the hemp cannabis varieties to which we have developed and/or acquired exclusive rights, we're working to identify genes responsible for regulating cannabinoid biosynthesis, drought tolerance, disease resistance, increased flower production, increased cannabinoid production and overall plant growth and yields.

Currently in our own labs 22nd Century is working to reproduce cannabinoid biosynthesis independent of the hemp cannabis plant. In this way, we hope to develop hemp plants that yield single high value cannabinoids instead of the cocktail of cannabinoids produced by conventional hemp cannabis plants.

A single cannabinoid plant that produces high levels of a rare cannabinoid would be a boon for our own extraction activities and for third-party extractors. Each project that we initiate is expected to lead to valuable intellectual property and products.

All of our hemp and cannabis research must support our mission to develop new varieties of hemp and cannabis plants to improve the health and lives of people around the world.

As we assemble hemp/cannabis strategic partnerships as we develop new biotechnologies methods for manipulation of plant genes and as we create new hemp cannabis varieties to improve lives, we will simultaneously enhanced shareholder value.

Although we do not intend to enter the complex regulatory arena of marketing hemp/cannabis based consumer goods, we do plan to become a source of highly coveted hemp/cannabis genetics, plant varieties and high value extracted cannabinoids.

Now, after a discussion of such positive meaningful progress that the company has made over the last year, I'm obliged to say a few words about the holy frivolous class action lawsuits that have been filed against the company and certain of its executive officers and recent weeks that alleged violations of federal security laws.

We believe that any claims alleging violations of security laws by the company and its executive officers are without merit and we intend to vigorously defend our position.

As you likely know, the lawsuits appear to be based on information taking from Seeking Alpha short articles by Fuzzy Panda Research, which were written by authors who were admittedly “source in 22nd Century stock”. As you realize, this means that the authors had an economic motive to suggest improper action by 22nd Century.

The lawsuits repeatedly referred to these articles without any apparent effort to determine whether the statements in the articles are accurate.

For example, the lawsuits include an incomplete photocopies of an SEC Response Letter to a Freedom of Information Act request that misleads and uninformed reader to incorrectly believe that 22nd Century is under some sort of SEC Enforcement Action.

Let me state unequivocally 22nd Century has not received any notice of, and the company has no knowledge of any enforcement proceeding against 22nd Century by the SEC or by any other regulator.

Simply put, 22nd Century believed the statements and the charges and such class action lawsuits are like the misleading short articles, incorrect and meritless, and the company intends to defend it vigorously against these lawsuit claims. But in spite of these legal issues, our company is really is an a terrific place.

Our SPECTRUM research cigarettes make possible the FDA's proposed plan to limit nicotine in all cigarettes sold in the United States to minimally or non-addictive levels. The next step and the FDA's plan is to issue a notice of proposed rulemaking or NPRM.

In this notice, the FDA will spell out the proposed product specifications and the details for how the agency will implement its new nicotine reduction rule. The FDA has publicly indicated that the NPRM should be expected this year.

Following the NPRM, including a public common period, the FDA should thereafter and move forward with a final rule and a time schedule for the implementation of the new rule. We believe the FDA is moving at a steady, deliberate pace in this initiative.

That said, a much sooner opportunity for 22nd Century comes in the form of our company's MRTP application for our VLN cigarettes with 95% less nicotine then contained in conventional cigarettes. Our company's proprietary VLN cigarettes are modeled after the lowest nicotine content style of our SPECTRUM cigarettes.

Our recently accepted for review MRTP application relies on numerous independent clinical studies funded by more than $125 million from U.S. federal government agencies on our SPECTRUM research cigarettes. The same scientific studies that the FDA itself references in conjunction with its proposed new nicotine reduction rule.

The review process by the FDA for our PMT and MRTP applications is already well underway. We're encouraged by the FDA's prompt attention to our applications and we look forward to the approval and the launch of what may very well be the world's first modified risk tobacco product.

Finally, intense demand from consumers combined with the legalization victories have resulted in a number of companies playing catch up with massive multiyear speculative investments in cannabis.

In contrast, 22nd Century has been building on a foundation and hemp/cannabis research and unique plant development for several years through our partnerships with Anandia Labs, the University of Virginia, the work done in our company's own labs and the work done with other strategic partners.

We are assembling an extra ordinary hemp/cannabis germplasm library of unique plants, a talented team of experienced researchers and a number of strategic corporate partners to accelerate our hemp and cannabis biotechnology. Now is clearly the time to capitalize on opportunities in hemp/cannabis.

As we strive to improve the health and lives of people everywhere with our hemp/cannabis technology 22nd Century intends to deliver a very substantial value in this area for our shareholders.

With so many momentous events converging for the company, we are incredibly excited for the future and we're eager to share more good news with you in the coming weeks and months. Thank you so much for joining us today, and for your continued interest in 22nd Century. At this time, I will open up the call to your questions..

Thank you. [Operator Instructions].

Operator, are we ready?.

Yes. We'll take our first question from Jim McIlree with Chardan..

Yes. Thank you, and good afternoon Henry and Tom and John. Can I start with expenses? So, last year expenses were $25 million, give or take. But this year you're not going to have the $10 million or so of the application and expenses, but it sounds like you're going to ramp up in the hemp area.

Can you just kind of help me understand how much you're going to spend on hemp and if there's anything else out there that would soak up the savings from the $10 million of the applications expenses that are going away?.

Hi Jim, this is John. First of all, right, in 2018, we had nearly $10 million spent on our MRTP application, which accounts for most of the difference between 2018 and 2017 expenses. We can't really comment at this time on the quantity of the amount of expenses that we’ll spend in the hemp/cannabis area..

It'll be significantly less than the $10 million, Jim..

Yes. So, you're right. On the $10 million difference between the two years..

And are there any other initiatives that would require a meaningful amount of expenses in 2019?.

As we said, Jim are, there could be a small amount. We anticipate approximately $1.5 million of additional expenses on our MRTP application. And at this point we really can't comment on any other significant additional expenses..

Okay. Let's see.

Henry, I don't want you to, I don't expect you to be up to comment in detail about what you can do with the FDA as far as the NPRM goes, but can you talk about what it is you do to help move the process along with the MRTP and the PMTA? And, it sounds like when you're looking at this year, your priorities are building out the hemp franchise and then advancing the MRTP and the PMTA.

Is there anything else that is a top priority for you that you control.

So, again, excluding the FDA schedule on the NPRM?.

Well, those are in fact the top priorities. In terms of pushing the MRTP along the best thing that we can do is to answer all the FDA's questions on a timely basis.

And having had more than 20 conversations with the FDA in the last 60 days, we think that's given us an opportunity that we didn't have in prior years, and we've really appreciated that dialogue with the FDA. So we think that's our [indiscernible] pushing that forward.

We don't believe that will add any additional [indiscernible] we'll have some addendums that we're working on [indiscernible] in common weeks, but everything seems to be on pace and actually going smoothly and quicker than we had anticipated. Hemp/cannabis we anticipate [indiscernible] those investments in multiyear investment. So I guess stay tuned.

I hope that we'll have some [Technical Difficulty] I can't say much more than that, but pretty excited about the opportunity [indiscernible]..

And as far as [indiscernible] for the MRTP, [indiscernible] engage with you now about your application.

Is there – I guess does that imply that, does that imply anything about the likelihood of acceptance or is it more of they're going to get all of their information and then give you the thumbs up, thumbs down, whatever, three months, six months, nine months from now?.

Yes. All I can say, Jim, is that we think it's a very good sign. When we submitted our preliminary application in 2015, we had very sparse dialogue. We had a meeting early on in the process [indiscernible]..

Okay. Okay. Okay, very good. And then my last one on the revenue.

Is there any – is there anything about the $26 million or so in revenue generated this year that would – that was onetime-ish in nature or that would that has a feature to it that would suggest that you can't do the same thing this year?.

No, we expect to do at least that much. So as long as we weren't to lose any contracts, and if we were to gain additional business, we would expect that number to grow..

Yes, yes, of course. Okay, great. Thanks a lot. Good luck with everything..

Thanks, Jim..

Thank you. We'll take our next question from Greg Etimos..

Hi. Yes, thank you for taking my call here. Just if you could just walk us through maybe your business plans, God forbid the MRTP timeline or the mandate even kind of drags out longer than expected half way through 2020. As the dates go on, maybe we can – we have a pretty large cash burn and with further expenses coming up possibly on the hemp side.

I think day by day maybe even our patents, our technology could be less valuable at the negotiating table with any type of company.

Can you explain – give us some advice on that?.

Well, I think you should cheer up. I mean, I think things look a lot better than you've implied. By my math, with regular operating expenses, we have about four years worth of cash – more than four years worth of cash in the bank. So that's good news.

There are some outstanding warrants, that must only be exercised for cash that will bring in at the $2.15 exercise price, $23 million or $24 million additional that further supplement that four years of cash.

So I think in terms of cash I think we're in great shape and I'm very pleased that we were able to raise the money we did a year and a half ago. So that's all good news.

In terms of the calendar, as I just mentioned, when I was talking with Jim McIlree, MRTP, I think it's going more smoothly and more quickly than we ever imagined it could, given our experience in 2015.

So what we're very excited about that, I can't guarantee or sort of predict the timeline, but I think it's going really, really smoothly and much more rapidly than we expected. In terms of the national mandate, that we certainly have no effect or influence over. But Dr.

Gottlieb had mentioned in a Wall Street Journal interview in the fall that that he had planned for the NPRM to be issued in 2018, I believe. In December of 2018 he said, he expected the rule to be published, he said, this year I think was the quote. So I don't know if this year he meant 2019 or if he meant 2018. If he meant 2018, I guess FDA missed.

If he meant 2019, well then that's pretty exciting news that rule would be coming out sometime this year. So I hope that's helpful. I think we're in a good place with cash. MRTP is going very well and I think the national mandate remains on track..

Okay. Now thank you for that. Lastly, just on the hemp side, cannabis side of our business here. Pretty much just about anything related to cannabis or hemp, CBD or anything recently has just been booming.

And now I understand our philosophy a little bit on the not PR-ing and everything as you do choose to really only PR most of the important things that you tend to release to shareholders here.

But it's kind of feel that though many shareholders and also an investing group that I'm sure are listening to this as well, we feel that we are mainly left to our own devices by finding, doing our own due diligence and finding patents that are awarded to the company that are not PR-ed and we have to do some extreme digging.

Now we're back to share price of levels of back to prior to the 2017 first movement that Gottlieb even started on the mandate here. I mean, I understand share prices, you don't want to artificially pump up, but we certainly are undervalued now.

If you feel that you should maybe move a little bit stronger towards releasing some news on the hemp side to provide some investor confidence or even some information to that would attract new investors because we do have great technology and it seems like moving forward, there's a lot of opportunity for our business to be able to provide some significant new revenue streams.

I just feel that there are a lot of potential investors out there that do not know this and do not know anything about 22nd Century due to the lack of media exposure. And do you plan to change that, whether it is to possibly try to get on new media outlets, whether in CNBC or anything, anything that can get our name out there.

What do you feel about that?.

Yes, those are all good points. And I guess, let me try to answer them as directly as I can. We're very careful. You're exactly right, we're very careful about what we press release because we don't want to provide a roadmap to our competitors of have exactly what we're attempting to do.

In either cannabis or in tobacco, we feel that we have a tremendous competitive advantage in terms of very low nicotine tobacco. I'm going to tell you squarely, definitively, we believe we're the only company in the world that can grow tobacco with 95% less nicotine, full stop. So that's really important to realize.

Of course, big tobacco companies have been working on this kind of technology.

We're aware of the fact that that some of them might be able to grow low nicotine tobacco, but there is a world of difference between low nicotine tobacco, which may be, I don't know, as 20% or 30% less nicotine and tobacco that is very low nicotine at the levels of 95% less nicotine and below which make them minimally or non-addictive levels of nicotine.

So that's the reason why we're not out there press releasing all of our tobacco patents in particular, but maybe even more so with cannabis. It's such a rapidly developing industry. We're out right now competing behind the scenes with essentially scientific labs that we want to work with us and not with our competitors.

And so we're being very cautious about press releasing names or specifics of any of these folks. That said, some of our – especially some of our investments that will be material, they'll be 8-k'ed and you're going to know about them.

So I guess I'd keep your eyes open for those and as we're able to describe the projects that we're working on, we'll certainly do that broadly. We'd like to keep our shareholders informed and that's the whole point of today's discussion and of the press releases we do, we do issue.

But understand, we have some folks who are litigating against us saying that we “pump up the company” and puff our achievements. And then we've got folks like you who are asking us to pump up our achievements and brag a little bit on CNBC. So, at the end of the day, we're very proud of what we do achieve.

We're never going to exaggerate our accomplishments or the technology that we have. So that's the fine line we need to walk, but we don't have a bunch of time. So I should move on to our next caller. Thank you very much. Your questions were very good..

Yes. Thank you..

Thank you. We'll take our next question from [indiscernible].

Yes, thank you. This has been very informative, Henry, Tom and John. And my son and I are private investors in the company, very excited about everything, of course, you spoke about here today and then all that we've read prior.

And I appreciate all the comments you just made from the previous question about being very careful about what you say and it makes perfect sense.

The concern I have is that the bad press that comes out with the Business Wire, frivolous lawsuit statements and actually asking for people to contact and they're almost soliciting people to jump into this fray.

And from a comment back from the company, fighting back vigorously defending, I'm sure that's going to happen behind the scenes and in ways that you need to do it. But statements that could in some way, shape or form leave potential investors or existing investors a bit more comfortable with the fact that this is all nonsense.

And I don't see much of that coming..

Well, I mean, I said sort of what I could say about pending litigation today on our conference call, but I would strongly encourage you to look at Page 31 on our 10-K, Page 31, Page 32 and there's extensive detail there about these lawsuits, including the names of the folks who filed them and including the number of shares that they hold.

And I think that speaks volumes. I think there were a couple of shareholders there and off the top of my head I think they own fewer than 4,000 shares, and I don't know, what more can I say? That should speak for itself. You can read about those on Page 31 and Page 32 of the 10-K..

Yes. And I appreciate that and I will certainly look at that too to get to the detail that you're saying. I guess, I was more speaking about these blast statements that come out on Business Wire and such, and perhaps it's just not a good practice for you to respond to in any way, shape or form, which I guess in some ways it makes sense.

But I guess I suspect it would feel so much better to hear something coming out to say these are frivolous and at least in some way, shape or form to offset some of the bad press that it sends..

Yes. Well, you're exactly right. And I've tried to – I think I used that word frivolous at least twice, maybe three times in my talk. And I don't exactly understand how these lawyers work, but obviously, we've seen some of those – I think what they're doing is they're trolling for clients.

To the best of my knowledge, there have been only four suits filed. And I know there are far more lawyers that are looking for plaintiffs on the Internet and then the four suits that have been filed. So it looks to me like those are hungry lawyers looking for clients..

Yes, yes. I don't doubt that at all. I appreciate the comments. Thank you for taking my question..

Thank you very much, sir..

Thank you. We'll take our next question from Robert Branciforte with Morgan Stanley..

Thanks. Thanks for taking my question. I hate to beat a dead horse with the litigation stuff and it is frivolous, it's obvious. And we all know the type of lawyers that are getting involved in that. But rather than just playing defense on this, which is costly in terms of my money – our money and human capital.

The reputational damage that it does and the share price destruction to certain extent that it's caused, I think what's wrong with filing a counter claim for damages against these sleazebag lawyers? I mean, we'll play a little offense and most companies don't do that and maybe you don't want to get involved in that, but this is ridiculous.

I mean, generally you see one or two law firms, but I think I've seen four, five, six it's just the jumping on the bandwagon. So that's one thing.

Very quickly on the cannabinoid situation, the strategic partnership, corporate partners, you're probably not in a position to name who those corporate partners may be, but with Canada producing so many startup companies doing this and the other thing, I mean, our companies like Canopy accelerate some of the major companies, would they be potential strategic partners?.

I'm going to ask Tom to address the lawsuit question and he might as well talk a little bit about the cannabinoid [ph]..

Sure. Robert, this is Tom James, the General Counsel. As you rightly point out, we cannot when midst of litigation discuss details but we are investigating all options and we're not afraid of pursuing all options. We're not going to sit back idle by as Henry said, we feel that lawsuits are without merit.

They're frivolous and we intend to defend them vigorously, what other options we may take? You'll have to wait and see, again – but the most we can say at this time for that.

On Cannabis we cannot, as you can imagine mentioned strategic partners are ones that we're in discussions with, nobody's off the table, but we feel that we've got great advantages. We're not a grower.

We're a producer of unique plants that will also grow and also extract the germ plasma that we have people come and we are very concerned to be careful about who we affiliate with. So we talked to a lot of people internationally, globally, not just Canada and we will announce them appropriately when the time is right.

So that's the best we can say at this point in time. And I hope that's comforting to you..

Yes. Thanks guys. Keep up the good work. I appreciate it..

Thanks very much..

Thank you. We'll take our next question from Paul Siladi with Private Investor..

Yes. Sir, thank you very much for taking my call, my question has to do with the competitive situation in your hemp business.

You've got many times as I have pointed out, did you have – you believe you have only zero – close to zero nicotine tobacco, but are there other companies that actually can safely make hemp that has zero THC or what is the competitive landscape in that part of your business?.

So Paul, this is Tom James. I'll answer that question. We in 2017, two years ago decided to go after the, the low to no THC plan because at that time, the 2014 Farm Bill did not allow for crop insurance to farmers.

So if their crop grew above the legal limit for hemp, we called it growing hot that have to destroy their entire crop and so that was a problem. So we came out with the zero THC as a solution to that. The 2018 Farm Bill clears that problem by allowing crop insurance for farmers.

So a zero THC plants, interesting we say in our 10-K but it's not dispositive. There needs to be other agronomic traits of robust cannabinoid profile or higher yield, things of that nature that make agronomic sense.

So there are other people that would like to say, oh they've come out with a zero THC plant too and again, that's scientifically interesting, it's two years behind us and they'd like to try and get rare cannabinoids they are again behind us and so there are people that are going to come out and claim a whole lot of things, but we know what we have and we've publicly stated what we have and we will continue to say when appropriate of the things that we achieve, not before, because as Henry said, we don't want to give a roadmap to our competitors as to where we're going.

We will state once we've achieved where we intend to be. So you can take comfort in that..

So is that a safe to say that there's a fair number of potential competitors and you've got a couple of years as start of last year [indiscernible] competitive advantage, but this is really a race in its early days on the hemp side..

Yes. Don't take the zero THC as being competitive we're in race and whatnot that's an interesting scientific plan, but again after the 2018 Farm Bill, it's in need of other agrinomic qualities and we think we're substantially ahead from a number of players that are involved.

And when we are ready to publicly announce, we'll let people know why we feel that way..

All right, well thank you. I certainly feel that my questions been answered and thank you for taking..

Thank you..

Thank you. We started about five minutes late, so we're going to hold the call open for about five minutes after the hour and I apologize to those of you who won't get through. I see that there are quite a line of callers waiting, but we'll go as quickly as we can see if we can answer a few more questions..

Thank you. We'll take our next question from Brian [indiscernible]..

Yes, thank you guys. Most of my questions have been answered.

I just wanted to – I think John may have commented on his initial remarks, but how much spend is left with the FDA on the MRTP? Is it 90% where we are, I guess how much are we looking at in the future, whether it be this year kind or kind of finish the quarter?.

By current projections we think 90% is about right, there's probably less than $2 million.

Now, the only caveat there is if FDA came up with some new thing that they might ask us to do and then we'd have to do a budget new for whatever that new project is, but at this point we do not expect any new science or any new projects or any new studies to have to be done.

So all we need to do is sort of pay the bills for the remaining things that we're just tying up now..

Perfect. The balance sheet is in amazing shape looks like a growth company that's been making money for years, you guys are way ahead of the game on that and then congrats on the balance sheet position..

Thank you very much..

Thank you..

Thank you. We'll take our next question from Frank Goldberg..

Hi. Thank you for taking my question. I noticed of course the yesterday or so that the value of the stock went down tremendous amount.

I read that it was because of the resignation of the FDA Chairman, I guess is that your opinion number and what was the main reason for such a high volume and such a tremendous drop in the stock?.

I think you're right.

I think that bit of news probably sparked some selling and then I think there are some folks who showed our stock who used that bit of news to scare investors who didn't realize that actually the Center for Tobacco Products is the agency that is reading our modified risk tobacco product application and that in fact the financial mandate is under the Center for Tobacco Products.

So I think you're exactly right. I think that's what sort of sparked people's – I don't know what the word is – sparked people concern and then I think you have folks out there that fed on that concern, because they had a bet that gave them economic incentive to drive the price of our stock down..

I was watching it. It was down $0.16 with about a half hour to go before closing. And the next thing I saw was down $0.50 and actually was down as much as $0.80 and came back a little bit and of course it came back today after, but it went down a little bit say because the market went down. But I was shocked.

I mean, I'd never seen a percentage like that. I mean, it must have shocked you too..

Yes, of course it did. And all we can do is keep doing the best job that we can here. And at the end of the day, I think we're going to look back and see this as a blip.

I don't know if you are a shareholder in 2011, our stock went from something like $0.70 to $0.15 one day and a lot of people threw in the towel and I don't know all those folks that bought stock at $0.15 or $0.16 are quite pleased..

Yes. I noticed one thing and then I'll let you go to someone else if you have time. There's an ETF that carries a lot of your shares. I think you should have advertise that in some way. I think it's the harvest something that has a big share of your shares or your company. I think that's a good thing.

What do you think about that?.

Well, I think sure. I think it's a good thing when any holder masters large position, especially if it's for the long-term. I think that's a good thing. I'm not sure the appropriateness of promoting that facts, but we do notice those disclosures when they're made and I agree with you. I think it's a positive development..

Okay. Thank you so much for your call and good luck to the future..

Thank you sir. Appreciate it. I think this will be our last question. We will take one..

Thank you. We'll take our next question from Jim Skelton..

Yes, gentlemen thank you for the call. I'll be brief here. There's one significant products which haven't been seen niche in the last year. And that is at one point you were talking about putting out a smoking cessation kits that would include the VLN cigarettes along with other devices to help people get off the cigarettes.

Can you tell me where we stand with that?.

Yes, sir. That was actually sort of my favorite project and that's actually the project that they encouraged me personally to invest in 22nd Century in 2010.

I was very excited about that project and we championed for many years, but why we haven't been as active with that product since July of 2017 is because the national mandate would essentially make that product obsolete in the United States at least, the national mandate would require that every single cigarettes sold would contain 95% less nicotine than a conventional cigarette.

And our X-22 a smoking cessation product in development was exactly that. It was a cigarette designed to be sold through prescription from your doctor, with a 95% less nicotine contents.

So I guess if there were – if the national mandate wherever to be put on pause, we would immediately pick up the prescription, smoking cessation product or, or avenue, but right now we believe that the bigger opportunity and the most important opportunity for public health is to make all cigarettes in the United States non-addictive.

Does that help?.

I couldn't agree with you more. Yes, it is. So that sort of dead in the water and it's unnecessary. If we can just get the VLN brand out there and start marketing that, then people can do their own smoking cessation, such as myself, I had been a 50 year smoker and suffered tremendous health disabilities because of that.

Thank you very much for your time and let's just look onward and upward..

Thank you very much, sir. Thank you. We appreciate your support..

Thank you..

Okay, so I think we're going to wrap up the call now. I appreciate everyone's participation and I apologize that we weren't able to answer everyone's questions, but we'll certainly have another call in a couple of months and we'll take questions again then..

Thank you. Ladies and gentlemen, this concludes today's teleconference. You may now disconnect..