Good day, and welcome to the 22nd Century Fourth Quarter and 2016 Year-End Business Update Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Tom James, General Counsel of 22nd Century Group. Please go ahead, sir.

Thank you. Good afternoon, everyone, and thank you for joining us on our call. Thank you also for bearing with as I read obligatory 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, focus, our 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 or expressions of similar meanings are all intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and all such forward-looking statements involve risk and uncertainties, many of which are beyond our company’s ability to control. Actual results may differ materially from those expressed or implied by such forward-looking statements. As a result of various factors, including but not limited to the risk factors disclosed in our company’s most recent Annual Report on Form 10-K as filed with the SEC yesterday on March 8, 2017. 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 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-end December 31, 2016 as publicly issued yesterday on March 8, 2017, 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, and thank you for calling into the 22nd Century’s fourth quarter and year-end 2016 conference call. For any first time callers, my name is John Brodfuehrer and I’m the Chief Financial Officer of 22nd Century Group. I’m pleased this afternoon to provide you with the summary of the company’s financial results for the fourth quarter and the year ended December 31st, 2016. First off, net sales revenues for the fourth quarter of 2016 were $3,336,000, an increase of $405,000 or 13.8% over net sales revenues of $2,931,000 for the three months ended December 31st, 2015. Fourth quarter net sales revenues were approximately 7% higher than the analysts’ projections. Net sales revenues for the year ended December 31st, 2016 were $12,280,000, an increase of $3,758,000 or 44% over net sales revenues of $8,522,000 for the year ended December 31st, 2015. Our gross loss on product sales for the year ended December 31st, 2016 was $430,000 as compared to a gross loss of $581,000 for the year ended December 31st of 2015, an improvement of $151,000 or 26%. We continue to make progress in overcoming the underutilization of our factory resources. Our net cash operating expenses which exclude non-cash equity based compensation, amortization and depreciation decreased during the three months ended December 31st, 2016 by $156,000 from $2,239,000 for the fourth quarter of 2015 to 2,083,000 for the fourth quarter of 2016. Our next cash operating expenses for the year ended December 31st, 2016 were $9,205,000, an increase of $2,101,000 from the $7,103,000 for the year ended December 31st, 2015. After adjusting for non-cash expenses, our operating expenses for the fourth quarter of 2016 were approximately 14% lower than the analysts’ projections. The increase in our net cash operating expenses for the year ended December 31st, 2016…

Thank you, John. Good afternoon and thank you again to all our conference call participants for joining us today. 2016 was a very good year for 22nd Century and I am proud of our accomplishments. In 2015, 22nd Century’s Very Low Nicotine technology captured the attention of scientists and public health officials around the world. Over the course of the year, we’ve reported to shareholders the results of six new independent clinical studies investigating the efficacy and the comparative safety of Very Low Nicotine cigarettes. At the same time, well respected independent scientist published four compelling recommendations calling on governments worldwide to adopt 22nd Century VLN cigarettes as essential part of efforts to reduce smoking prevalence around the world. Chief among organizations endorsing our company’s VLN cigarettes was the World Health Organization Study Group on Tobacco Product Regulation. The WHO report recommended “a policy of limiting the sale of cigarettes to brands with a nicotine content that is not sufficient to lead to the development and/or maintenance of addiction.” 22nd Century is the only company in the world capable of producing compostable tobacco cigarettes at this very low level of nicotine without any artificial extraction or chemical processes. Later in the year in October, 22nd Century announced that a group of leading scientists from the United States and New Zealand published a special paper in Tobacco Control Journal strongly advocating for a “national nicotine reduction policy.” The paper outlined the compelling and urgent case for enacting a national nicotine policy in order to dramatically lower smoking rates. Once again, 22nd Century’s proprietary VLN cigarettes surge as the cornerstone for this important public policy recommendation. Also in October, we announced the hiring of Michael Zercher, the Company’s new Vice President of Business Development. With an impressive background running Santa Fe Natural…

Thank you, Henry. In 2016, 22nd Century took a huge step forward in the development and acquisition of important technology. With the humping of our own laboratories in Buffalo start with the team of experienced and talented scientists, we have now taken much of our research and development work in-house. From our company and laboratories, our team of scientists is working to develop the next generation tobacco and kind of these products. Bringing our projects in-house that means that we will directly own at lower costs the intellectual property that we produce. In contrast, sponsored research and universities also requires the sponsors to pay twice everything, once for the research itself and again for the license to commercialize the intellectual property. I know 22nd Century already has an impressive portfolio of tobacco products, we are not standing still. We are an ambitious company that is looking to produce both improved second generation products and new products in tobacco and in cannabis. Our current Very Low Nicotine tobacco forms the basis of many of our tobacco products including BRAND A, X-22 and SPECTRUM Research Cigarettes. In our laboratories in Buffalo, we are now working and creating a new second generation Very Low Nicotine tobacco using the latest genome editing techniques. The genetic targets are already part of our extensive patent portfolio. Importantly, this new second generation Very Low Nicotine tobacco plant varieties will be an improvement on our already very impressive existing technology, because our new tobacco plant varieties will be non-GMO. While GMO products now issued in the United States, the removal of GMO designation from our products and puts up many new international markets for us. Additionally, these new tobacco varieties will be protected by new patterns and plant variety projections which will further extend our competitive advantage. In…

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

Yeah. Thanks a lot, and good evening, everybody. Hey, Henry, can you talk a little bit about how the items that have been discussed so far are going to affect operating expenses. I hear what you’re saying about the shift from commercial - pursuing the commercial markets to and instead it’s regulatory affairs and Dr. Rushton did a great job of describing some of the research projects. But I’m interested on the financial impact of that, that if the shift is just a dollar per dollar shift out of one bucket into another or if it results in an increase or a decline in current operating expense levels.

I think current operating expense levels will be decrease but more importantly as our revenues are projected to increase substantially this year, I think you’ll see our losses at a factory virtually eliminated.

Right, so that’s on the gross profit side, I’m talking more on the SG&A and R&D, what the changes that you’re doing will have on those lines, are you saying that those are going to go down?

They will.

Okay, great. And then what’s the - can you help us understand what might come first in terms of the regulatory relief that you’re seeking, it kind of sounds you are much more optimistic on U.K. right now than I’ve heard you in the past, is that the low hanging fruit or is it the U.S.?

Jim, I guess that would just be a guess, but we were working in the U.K., we’re having some discussions in Central America, we are having conversations in Asia. And then as you know we’ve got meetings scheduled with the FDA. So we’re going to push forward on all four of those fronts and whatever happens first will be very pleased. And our feeling is really that once we have some sort of regulatory success anywhere in the world will be that much easier to succeed in other countries.

Right, I got it. And I should have processed that question with it’s very difficult to predict when regulators are going to do, what they’re going to do, I realized that I didn’t want to assume that you have a crystal ball on that front. Okay. And then the next step with the FDA, is that a face to face meeting or you working up response to something, what happens next with the FDA?

Okay. We’ve got two products that we’re working with two different parts of the FDA. The X-22 Smoking Cessation products we have a meeting with CDER in June. And I mean that’s pretty exciting because as - the purpose of that meeting is actually got to map out the path forward to commercializing the product. So that could result in a Phase III trial, that could result in perhaps there not being a need for a Phase III trial that could - as you know there is a Phase III 1,250 patients study that just wrapped up I think this March that the National Institute of Health funded looking at our Very Low Nicotine cigarettes versus a step down approach to our Very Low Nicotine cigarettes, we are hopeful that we’ll be able to use the results of that trial in our submission to FDA in June. So I guess the answer is we hope walk out of that meeting with a clear pathway to commercialization for X-22 and that’s going to be really important meeting in June. Now separate from that with the Center for Tobacco Products which is an entirely different department or division of the FDA, as you know we’ve gotten some guidance on our BRAND A modified risk application and we are right now in the process of reassembling additional clinical data with the FDA to review the MRTP Application. So that is completely different pathway with a completely different part of the FDA. I can’t tell you which is going to go faster. I can’t tell you which is going to be more successful. But it’s kind of we have shorts on go with two very important products with the FDA.

And I think you said in your response that you are reassembling clinical data, so there is no additional trials that you need to run rather it sounds like you just you need to present for the FDA’s record data that’s already available. Am I hearing you correctly?

Right, at this point FDA has not asked us to conduct any additional clinical trials. They’ve only asked for additional data from trials that have already place. So that’s very encouraging and we are hoping to submit our completed new application or revised application really in the first half of the year.

And there is so far there is no indication that international regulatory bodies would require additional testing or trials? Are we still too early to even come to that kind of conclusion?

We think the FDA’s standards for approval will be the highest. And frankly we know there are some countries that say once the FDA gives us an approval, lot of an automatic approval in those international countries. But I can’t tell you for certain not a country by country basis what’s going to be required.

Right, right, I got it. Okay, great. And then one last one for John. John, you talked about cash available through May of I think you said 2018 and that’s assuming what Henry referred to earlier that you get this increase in your sales and that results in positive gross margin, so that’s kind of built into that forecast, is that right?

We are not - Jim, I’ll jump in. It’s Henry. We are not assuming any additional gross margin with that number. It’s a very conservative number. We’re not assuming any kinds of commercialization payments from BAT or not assuming any additional spectrum in government research cigarettes orders. So that’s essentially at steady state where we are now. Cash is available and sufficient, can be all regular operating expenses through May of 2018.

Right, that’s great, great news. Okay, very good. Well, I’ve exhausted my list of questions. Thanks a lot guys. Good luck with every think.

Thank you, Jim.

Thanks Jim.

We’ll take our next question from Anthony Belosa [ph], a private investor. Please go ahead.

Hi. How is it going?

Good.

Related to previous conference call in which you had mentioned I believe that BAT has on its deadline until about September 2017 to enter commercial agreement, is that still a hard deadline?

Yeah, I think it’s right around October 1st. So BAT has until I believe the date is October 1st to actually commercialize our technology. And if they choose not to then they were free to sign a licensing deal with any other company in the world.

I see, okay. My second question was, this generally regarding the sentiment of the FDAs falling the reduction of the MRTP, because in mind it seemed extreme to reject when I feel it’s within their power to just keep the application open and ask for additional data rather than requiring entire resubmission. If they do, when they ask for resubmission, they give any evidence that they might fast track the MRTP Application, what are your thoughts on that?

Okay, well, there is lots of things and there are lot of important elements to you question and I am assigned to this. But I do know, it’s very clear they did not reject our application. What they did is they gave us guidance on our application, feedback on our application which led us to withdraw the application so that we could resubmit the application actually in two parts. One as a Modified Risk Tobacco Product Application and the other is Remarket Tobacco Product Application, which each I guess are reviewed by different parts of the agency and each have essentially a different timeline. So the FDA did not, as a matter of fact, the FDA asked if we have the option of leaving our application with FDA so that they could continue their evaluation process. But based on their guidance and the feedback that they gave us, we decided to withdraw and resubmit this application in two parts. So actually - we actually through that was kind of good news, I mean because if they want to reject the application that would be like starting over and we might need to do trials. And this was a more of a fine-tuning and separate the application, give us additional data from some of the trials that already happened. So we were pretty encourage by that. And then you other question you asked about fast track. And my understanding of the fast track process is that that’s part of the drug approval process which is very relevant to our X-22 Smoking Cessation Aid. But to my understanding, there is no fast track process in the Modified Risk Tobacco Product Application side of things. Does that make sense?

Yes, that makes sense. Good to know. Can I ask one last question?

Sure.

When the FDA requested additional data, does that include the March trial that wrapping up right now and that way you are waiting until I guess the end of the first half of the year before you resubmit the MRTP, so that you can have that March trial data in with your application?

No, they didn’t actually, they didn’t ask for data about that trial. But - and it’s not like we are waiting for midyear to submit the application. We’re actually working on it right now. It’s just a tremendous amount of data and paper and studies. And it’s just - it’s a lot of administrative work. So we’re certainly not waiting. We’ll submit as soon as we possibly can. And we’ve got outside attorneys and inside people and consultants. Then we’ve got whole team of people working on this. But literally what we’re talking about is many, many, many thousands of pages and all of these pages have to be compiled and they have to be embedded and then they have to be integrated into the submission. So we’re working on that feverishly right now.

But if there is also March trial are, only as no matter to you - the resubmission, correct?

That’s exactly right. That’s exactly right. And for both products really, it could have very positive implications for BRAND A and it could have very positive implications for X-22 product as well. So we’re very eager to get those final results.

Okay. Alright, thank you very much.

Thank you. Those were great questions.

We’ll take our next question from Chris Johnson, a private investor. You line is open.

Hey gentlemen, thanks for taking the question. Just two questions. I don’t if Mike is in the room with you guys, but I was wondering if on the Reynolds recent filing with the American Sprit and taking of Natural. Is that something that as encouraging for you guys to see or is that something else you guys are going to look at when you submitting for these labeling items?

You know that’s interesting. Mike is not in the room right now, but I guess my take on that is that you know obviously FDA is concerned with Natural, additive free and those kinds of things is that they might imply to consumers that those products are somehow that’s one fold than commercial cigarettes. So that that really does is that underlying the importance of the modified risk product category and we continue to believe even as we are working to resubmit our MRTP Applications, we continue to believe that we will be the first company in the worlds authorized by FDA to go to market and to label and market our own products as reduced exposure products. And it’s clear that consumers JP Morgan study I think from 2010 indicated 90% of American smokers will try a reduced exposure or quote on quote safer cigarettes if one were available. I mean many smokers may like to smoke, but 90% of those smokers really would like to try something this reduced exposure or a reduced risk product, so we're pretty excited and this new FDA I guess agreement with Reynolds just underlines the importance of modified risk.

Okay. And then on the other front on the hemp and cannabis side, is that monetization of that probably a couple years out or is that something you see more near term?

Well, Paul and I are messing about this every day, and he would just leaning forward to give some kind of answer, but we just had a heated discussion about this yesterday in a management meeting, and if I get my way it's going to be by the end of this year. Paul might block a little bit and suggest the 2018 is more likely, but I guess for the closure that’s where we stand, I’m hoping for 2017 and Paul wants the edge his best and he is talking about 2018.

Yeah, I think the problem with this is and when we have something that's really exciting, but the one thing you can't speed up is, how long it takes for a plant to go from seed to seed and it needs to do a number of things even it was ready to go today, you stop the bulk of seed to make it available to commercial levels. And so all those things do take time, but I think you know we're really excited about where we're going with this, and my feeling is that these Zero-THC lines could form the basis for a whole new generation, I mean that the way forward would be first of all make it Zero-THC, which takes away the whole reason in theory why they should be legal. And then after that go for the important things like yield disease resistance drought tolerance, but use those Zero-THC lines as your basis for the huge generations which is why I chose my words very carefully, when I said you know a next generation of products.

I brought Paul a big giant bag of miracle growth to sort of feed things out.

I appreciated that guys. And one last - what is X-22 rebranded and that really moving forward faster as far as price point is it going to be in line with essentially pack of cigarettes, is it going to be priced slightly higher, slightly less or you don't have any inside under that?

Yes, we do. X-22 is being developed as a prescription smoking cessation aid, and right now the market leader and smoking cessation is really Pfizer’s Chantix, and so our current intention is actually to price change X-22 as the prescription product very close to where Chantix is priced, which is Chantix it's priced it somewhere in the order of $500 a 30-day supply not mistaken. And of course, X-22 as currently developed is a six week cessation program where Chantix is a 12 week prescription protocol. Now in terms of the BRAND A, BRAND A would be sold as over-the-counter cigarette with all the major national brands Marlboro, Winston, Camel, American Spirit, so our thought is that BRAND A will be positioned us super premium priced right in line with American Spirit cigarettes.

Okay, appreciate it guys. Thanks for the insight.

Thank you.

We'll take our next question from Ivan Paningsoro. Your line is open.

Hi, Henry.

Hello.

Could you tell me the high nicotine technology being used or going to be used by that and their heat not burn products?

That is an excellent question, and BAT chooses to commercialize before October 1, I would venture to bet it will be in fact, but they have not yet indicated they will commercialize, so I can't tell you definitively at this point.

No you're telling me they're not using the technology in Japan in global product right now?

No, no one is using our technology yet in a commercial basis.

Okay. I have one more question.

Certainly.

A lot of the state climate hemp programs are using hemp seeds from Europe and Canada or lows Canadian seeds being supplied by Anandia labs?

No, the season of supply to for example the industrial hemp product projects in New York State and in the Commonwealth of Virginia. Commercially grown variety has directly source from Canada, so one of the things that we're doing is we have our own growers, and we have our own varieties, and so one of the things that they're excited about is we can bring new varieties that aren't available come by the France, Poland or Canada. And those seeds also come in with problems in terms of growing taking seeds and growing on the next generation using for breeding, so the varieties don't even had zero-THC a major input into these industrial hemp pilot projects in different states.

I see. Could you also tell me, are we trying to certify our seeds in Colorado or another way to put as why weren't our seeds the first to be certified in Colorado?

Well, we have not yet, we will certify seeds when we get to that point, I think the biotech approach is our first one to do some of the other companies can’t do. And so we have those and those who we are our major products moving forward, but we will have seeds that become certify, but we haven't gone on that yet, I think that what we will need to do is to take the varieties that are available to us and find out which ones are best suited for the different places, different locations within the states. A seed will be certified in Colorado may not be suitable to New York state also Virginia. So I think that little bit mostly done before we do that, but obviously the end of the day you want to see that because it protects your variety.

Okay, I understand. Thank you very much.

Thank you Sir.

We'll take our next question from Mary Rodriguez from Ace Credit. Please go ahead. Your line is open.

Hello.

Mary Rodriguez from Ace Credit, your line is open. Please go ahead.

I think we’ve lost the caller.

All right. We'll move on to Marion Green a private investor. Please go ahead, your line is open.

Hi Marion.

Hi Henry, thank you so much, very informative conference call.

Thank you.

Question is the one of my side with Creed Group, do you plan to work out to sue them?

I usually get into trouble when I make comments on legal matters, so I'm going to ask Tom James to address the question.

Hi, Marion.

Hi.

Hi, the answer to your question, because as you can understand and litigation we cannot and will not give out our strategies, but to summarize for everybody that doesn't know of course, we split the case into two parts in two different jurisdictions in New York, creed withdrew the part of relating to the claims about China, and we're moving and we have been granted a right of going forward with summary judgment before even discovery, which is almost unheard of in the other part of the case remaining in New York City. So we look forward to a very quickly and efficient disposition of the case in our favor, but we cannot or when will predict as far as different strategies that we might employ and we would hope you understand why.

Okay, because I’m ready to go with the class action against them, so.

Okay, we appreciate your enthusiasm and your continued support Marion, thank you very much.

Thank you, Henry.

Okay.

We'll take our next question from Michael Samples with Raymond James. Please go ahead, your line is open.

Yeah, just a couple of quick questions for you guys. Have you done any talk or looking into the different syntax if you will on the tobacco products, if there's any kind of discount which you guys might be able to wiggle your way in so to speak?

My understanding is this as a means of encouraging smokers to try Very Low Nicotine products. Some countries in the world, I guess New Zealand top among those have been considering eliminating or greatly reducing applicable taxes to a Very Low Nicotine cigarettes so that there would be I don’t know say 20% or 30% cost differential market place to encourage smokers to trade in their customary brands for other Very Low Nicotine products. Now to my knowledge no country has yet implemented such a tax policy, but we are aware the fact that I know with these two countries that have contacted us about the possibility of implementing such a system.

That’s very encouraging. Now the question I have and this is more of a long term look - you're working on the tobacco products working on the hemp, but I'm no say Dr. Rushton has done quite a bit of work on drought resistant crops, and I think temperature resistant, disease resistant. Is that something that may continue after tobacco in the hemp issues are resolved?

I think certainly with the hemp, I mean we're starting to trying produce varieties for a whole new crop, and there's really a list of desirable traits that you'd go for, I think once the THC levels are down to zero or near zero, then you're looking at things like yield drought tolerance disease resistant or those sort of things that have experienced in the crop plants. And in some respects I need to get my research stock into that as well. But I think there's a much order to do these things. And once we have the THC zero lines and that's what we'll do next. And it may be that some of our research either in for GDO in an NDO is going to give us leads in that direction anyway. So even though we're looking at a certain limited number of things at the moment, I think we'll get some interesting leads and I'm pretty confident we can do this.

That’s all the questions I have. Great work guys.

Thank you very much, sir.

We'll take our next question from Rex Wiggins a private investor. Please go ahead, sir.

Hey Henry, how is it going?

Hi, Mr. Wiggins, how are you?

Doing good, doing good. I just have one quick question, you may not know the answer yet, but your guy that you hired in October kind of explore partnerships with other tobacco companies to help on commercialization around the world. Is he got name to far enough to tell whether those companies are just interested in tobacco or some of those are interests in tobacco plus, hemp and cannabis in other words we need a separate commercialization strategy there or might it be I mean I know whether these companies will that also?

You are very perceptive, I'm not sure I haven’t heard any of them have interest in hemp, but I have heard that that he’s had some very interesting conversations with companies around the world about cannabis even when the focus of the conversations would most be tobacco. So I’m not going to get into much more detail than that, but there has certainly been interest in both of those technologies from some very large companies around the world.

To me it’s - I think hemps are wonderful more of a crop which is wonderful, don't get me wrong, there is so many people going so on things and everything else, but I would think that some tobacco companies would also begin interest. But I was just curious whether that's good to hit and now be interest about so. A lot of the financing above the market rate like the cash position and hopefully don’t have solution and good job, keep it up.

Thank you very much Mr. Wiggins.

And we'll take our next question from John Elliot, a private investor. Your line is open. Please go ahead.

Hey, Henry and team of 22nd Century, how you guys doing?

Hey John, well. How are you?

Good, good. Yeah, I just have a few questions on the cannabis hemp area. You know it’s exciting stuff obviously with many of the states going recreational this year and cannabis certainly look very encouraging. The question now since both cannabis and hemp main schedule, one with the new administration there's some waffling at best in terms of how they're going to deal with this category. What do you guys see, I mean sort of crystal ball out there or is this all still you know under research projects?

This is Tom James, General Counsel of the company. And I'll answer first and then let Paul talk with you. The farm bill at the federal level defined that if it’s 0.3% or less, it's hemp and it's fully legal at the federal level as long as whatever state you're working in has also a hemp program. So we'd followed that in dealing only with hemp below the 0.3% THC including high medical cannabinoid for extraction purposes as you heard earlier. Our goal with the zero-THC is to come up with the whole new crop that eliminates the whole dialogue and discussion about what is this thing and can somebody grow or does it have to be destroyed. The White House through directly and the press secretary as well as the DOJ and Sessions have all said that hemp and medical marijuana are not their focus, they have concerns about recreational dope use, but whether they will or won't do something and what they may do remains to be seen with respect to recreational, but they made very clear, they're not going to upset the applecart when it comes to hemp or medical marijuana derived from hemp.

Yeah, I'm going to just add one small thing to that, for our purpose is obviously we're only using industrial hemp and medical marijuana, but the cannabis sativa is one specious, so all of the biotech techniques that we develop are equally applicable to any usable plant. And so by producing these things we can use and who knows where these may give in the future, so at the moment everything we do is legal and we're doing research and development which may lead in a number of directions in the future.

Right, so do I understand correctly then that if you have hemp products that are below the 0.3% level that you can actually commercialize those in the states were its legal?

Yeah.

Okay, great, great, that’s very promising.

Yeah.

I guess the second question I have is in an organic space like hemp, cannabis, but let's stick on hemp side at this point, how the GMO products end with pretty solid consumer when it comes to understanding the hemp and CBD and its various varieties?

Yeah, to give you the broad answer there, we're working with state agriculture departments, major research universities in those states, growers, processors, retailers, consumers. So we're taking the full damage of everyone that will be involved in any way shape reform with the plan in the industry. And what we have found is that when people realize, we're not adding foreign jeans, pig jeans or creating Frankenstein activity, we know how to plant works, so we help the plant do more or less of what it does naturally. So when traditional plant growers hear us say instead of taking 10 to 20 years of traditional plant breeding to come up with a slightly elevated CBD plant like Charlotte's Web, we'll be able to do that exponentially quicker matter of months as opposed to decades and be able to come out with differentiated varieties that have these various profiles of cannabinoids that are exactly what people want, whether it's going to be the high CBD or mixture, there's an entourage effect of different things. And for those who don't know there are over one hundred known cannabinoids THC is one of a 100, CBD is one of a 100, some of the under express cannabinoids in the plants are exponentially stronger, medically than CBD. So we look forward also to over expressing those cannabinoids that are naturally under expressed for research purposes will be the sole source of that unique cannabinoids.

I actually want to say one other thing about that going back to our zero-TCH hemp, one of the important things about that is non-GMO. So it's actually based on a commercial varieties just growing well, it's non-GMO, So when we commercialize the zero-TCH variety from that it will perfect for human consumption and there won’t be any problems in terms of how we made it.

Just on Paul’s point. GMO in the U.S. is a non-issue, soybean and corn are the most GMO products in the world, so there's no issue culturally or otherwise in the U.S. and in the cannabis industry itself that we have found, people are very excited about working with us and what we can bring to bear. Around the world, it is a matter of culture and more working with various countries in a similar manner for what will be acceptable in each country.

All right, well, that's great news. And I think if the end result to the consumer is that you can provide a variety of these cannabinoid rich hemp products earlier than they might expect to breathing or other techniques, I think I'm hoping as I'm sure all my co-investors are that they would come on board quickly, because that is a very misunderstood part of the plant or you know whole cannabis species at this point provides tremendous benefits to people. And if it can be bred and they can understand that you know this is just better quality hemp products that happen to be available years earlier, I am not sure I totally agree that GMO is not an issue in the U.S. but it can be overtime I think with Africa's products, so excited about that for sure.

We agree. Thank you, John.

Okay, guys, good news on the earnings on the cash position and on the potential upcoming deals and we are excited go sabers.

Alright, go sabers.

All right, thanks guys.

Thank you.

Bye.

And will take a follow-up question from Mary Rodriguez with Ace Credit. Please go ahead.

Hey, guys. Thank you for taking my calls. The call dropped earlier. Good job so far through the entire quarter. My questions are regards to the British American tobacco purchasing, $46 billion, have you guys been approached by anybody trying to buy you guys out because pretty much you have a monopoly on the market right now?

My General Counsel is making all kinds of emotions over here that mean I am not supposed to talk about things. What I can say is that we’re always in contact with tobacco companies all over the world. And if - sure, we’d be surprising if companies more interested in 22nd Century. But at the same time, our stock trading at $0.95 a share or $0.90 a share or whatever it is today and I didn’t sell any stock. So I have no intentions to selling the whole company when we’re trading at such a lower market cap. That makes sense?

Absolutely, thank you.

Thank you.

We’ll take our next question from Sebastian Fasanello, a Private Investor. Please go ahead.

Hi, guys. You answered all my questions with respect to the hemp and I think that sounds very promising, so I’m going to withdraw. Thank you.

Thank you, Sebastian. Thank you very much.

Thanks, Sebastian.

Okay.

And we’ll take our next question from Kevin Fernandes, is a private investor. Your line is open.

Great afternoon, guys. How are you?

Hello, Mr. Fernandes.

So my questions that I have are probably not so hard line like the other ones the more questions out of curiosity. The first one I guess is directed to Mr. Rushton in regards to gene editing in a tobacco plant. I know you’re able to manipulate different applied levels nicotine produced chemical absorption an individual smoking a cigarette. But I was wondering is it possible to manipulate the stench of combustible tobacco?

I suppose, it’s difficult to pin down individual components of a smell in the tobacco smoke. I suppose theoretically you could try but it would probably be a very untargeted attempt. I think about gene editing is you go in and hit a specific gene to knock it out. This is very complex like a plant is not, the something can stick. I think it will be easier to a big genesis project, it doesn’t involved gene editing and just see if you can find some tobacco that doesn’t smell in the same way and then find out what it is the cause that not so smell. I think it’s the other way round. But yes, I don’t know how much of a market I would be for it, but yes you could see that not in gene editing.

While, they never thought that the ability to control make it two levels in tobacco what’s ever possible and then everything, I know as a tobacco smoker, probably be one of the biggest no knows or I guess the most people will spent behind in the area we smoke cigarette. And I think that as a consumer how has been so that might actually appeal. People like iPhones and Apple phones, they are better phone but don’t looks like. So with this more like kind of aspect. And also thinking about how the cannabis industry is growing not just domestically but internationally, we have a lot of countries that are actually moving forward with commercialization of cannabis plant. But as in that industry in that add group look also industry starts to grow, where is the - of the smell of the plant.

Yeah.

You know when it plenty of them, so I would - certainly ability to have well control so that sense might mitigate that acting of cannabis going forward.

Actually that’s quite true and we have a list of traits the where interested in obviously someone were important than others, but reduced stink is actually one of those traits in cannabis.

My other question with the tobacco, has anyone approached to though about creating another aspect of the cigarette that might give you a one-off in comparable consent to others tobacco cigarettes and that’s perhaps it by degradable cigarette but one of the biggest think that I hate too is finding cigarette butts all of the house that been there for over a month-to-month and they go nowhere. Has then anyone been able to think of a method or is that ever came up in a conversation?

Well, I think you probably have a shot of this. But I think our aim is more just stop smoking generally or reduce smoking. But maybe there’s a possibility there, and it depends on the type of filter we use. And lots of our filters are not made in the same way as normal ones that based on carbon technology. So they would be quite the same anyway. But maybe that’s something that we could look at but it’s not honest of that product in the moment.

I know it wouldn’t be listed already but also in one of the study that I read was that not only way the tobacco using in helping an individual cut down the amount of tobacco cigarette that they consume throughout but that effect actually continued to smoke this brand of cigarette so that they would still continue to see a reduction in harmful effects, it pay so choose to continue to be a smoker. And if they were other caveats are paying a premium would be not being able to have to deal with that. There’s a lot of people who would see that as a major plus, they would be willing to pay an extra premium for that kind of aspect of the cigarettes as well. So those are the kind of few things that I kind of thought about I’ve been following your company for many years. I read a lot of the reports avidly, growth is coming very well slower than I had anticipated for a product of this dynamics but these are just other aspects like were interesting food with thought as the industry continues to grow and accept not only cannabis but the possibility of a stop smoking cigarettes.

Thank you very much. We appreciate your support.

Thank you, gentlemen. Have a great and awesome day.

Thank you.

Thank you.

And we’ll take our next question from Nick Perry a Private Investor. Your line is open.

Hey, guys. How are doing?

Hi, Mr. Perry.

I got a question about the heat-not-burn product part coming out, how does the high nicotine tobacco option in the heat-not-burn, what makes that, what - would it make it to appear, how is that work in the heat-not-burn?

Well, the I guess the concept behind it’s is there is a - look the reason why e-cigarette are so unsatisfactory to smokers is because this nicotine transfer is very inefficient with these cigarettes. So essentially the smokers don’t get the nicotine that they have to. Combustible cigarettes, nicotine delivery is much more efficient and the smoker is satisfied with the much greater level of nicotine. Heat-not-burn is sort of a cross between those products that the products uses instead of water vapor as you know, it uses plant material where it’s heated just below the point of combustion. And in sort of doing, it’s still not sufficient as the combustible tobacco cigarette but it is more efficient than water based e-cigarette. So to increase the nicotine delivery, these big companies want the highest concentration of nicotine in the leaves that they can possibly find. Does that make sense?

Absolutely, so it’s somewhat the technology is desired by the big guys, am I right?

That’s exactly right.

Okay. Another question and it will work for IQS, correct or Marlboros IQS?

I don’t have direct knowledge, but I think in theory it would, yes.

Okay. One other question, regarding BRAND B, you had done some work with the FDA at least some proof of concept trial I think through last quarter. What’s going on with BRAND B right now, I believe you said the premium concept trial went very well. What can we look forward to regarding BRAND B and what’s going on with the FDA with that?

Yes. BRAND B, so to be honest with you, BRAND B the exposure starting that we’ve actually planned for more than six months now had not taken place. We’re actually waiting for FDA approval to conduct the trial. So it’s a very small trial but nonetheless there are regulatory procedures required. And so at this point, we’re now expecting to actually conduct the trial in April. So we’re sure about the agency’s mercy right now waiting for them to respond to the request to move forward with it.

Okay. And that - and you haven't done any proof-of-concept trial at all that friendly with the FDA?

That’s exactly right. We are waiting for FDA’s permission to actually conduct the exposure study.

Okay, got it. Thanks lot guys, appreciate it.

Thank you very much.

Thank you. And we'll take our next question from George Garcia, a private investor. Your line is open.

Good afternoon guys. Very impressed with the team and with the company, I see a great future, so keep going.

Thank you.

So I have a few questions. First, it's with the pre-market tobacco application it requires only 180 days right? The PMTA.

Yeah, that’s exactly right.

Okay. So with that is - there is a fast track on that one though, correct?

No. Anything for tobacco products under the home modified risk process does not have a fast track.

Maybe, I misread, maybe I misread that. Okay, so there's a meeting that you're going to participate in with the FDA with is with the Tobacco Product Scientific Advisory Committee on April 6. What are the benefits with that for us as a company? So what could be the outcome of that?

I'm sorry. One more time could you repeat that?

Sure, there's a meeting on April 6, with the TPSAC, Tobacco Products Scientific Advisory Committee?

Okay.

So this is an FDA meeting, so what is the benefit for us and participant I mean what could be the outcome for us?

The question is TPSAC meeting is to do with MLTPs?

Exactly.

Discussing the moving forward what is required and so forth. That’s an important meeting for us, because it will help us hold our own MLTP application. First of all MLTP is, there hasn't been one, that’s actually got to the end of the process yet, it is a new process. So I think the TPSAC meeting is largely to try and work out additional ways and making sure that the process works. So what they decide has direct relevance for us, we would actually be that directly, but we will be interested in finding out what the TPSAC committee actually size.

So I thought you were going to be participating. And then the studies that came out in March with the over 1,000 people that would be available for that meeting right?

We don't know when those results will be made public, but…

Okay.

To our knowledge, that study has finished.

Yes, okay. Very good. So moving along with Europe, the MAGIC sales I know that there were issues logistics issues and what the filters, have those been resolved now?

No, they were all resolved and then the European Union came along and changed labeling requirements. We are tobacco companies will required to disclose nicotine levels, in May of 2016 new legislation came about, we're now in the European Union you may not disclose nicotine content on every pack.

That’s what you mentioned before.

When we’ve decide to what country-by-country basis seek approval for nicotine disclosure on our MAGIC packs before we expand distribution in Europe.

Okay, I heard you mentioned this in the call, I'm sorry, I didn't put the two together. So with that which you just said now New Zealand is I would say that it's aggressively looking for reduced nicotine products, am I mistaken in saying that?

No I think you're right, I think New Zealand has shown tremendous interest in our products and we staying ready to assist New Zealand with whatever quality it ultimately adopts. But I know New Zealand has looked at - they looked at national nicotine policy, they looked at tax policy that would give advantages to variable nicotine products. They’ve looked at lot of things. And I think we stand ready to move forward. So I hope that make a decision soon.

Okay. And I understand you know we're not a large company, but great I mean wonderful ideas and has again great potential, I know those resources are limited, so with that going into a friendly environment like New Zealand, you were talking about applying those resources to meet with the different governments. So I'm hoping that this would be one that you have been in your site and I'm sure it is.

Thank you, thank you very much.

So my next question would be concerning Asia with the crude Creed lawsuit no longer preventing us from participating there. Is there - is that another market, because they are the largest consumers of cigarettes in the world. And I'm sure that the Chinese government sees the medical costs associated with smoking. And I've read articles where they are very interested in reducing that. So would that be another target or have you already been to Asia or somebody been to Asia?

Those are all good questions. And I’ll tell you, we make frequent trips and we met with some folks will just stay from Asia in New York City two weeks ago and we're planning another trip in April, so you're exactly right, it’s an outstanding opportunity for us and we're exploring Asia actively.

Okay, very good. Here in the U.S. with the RED SUN sales how exact going?

Well, you know RED SUN sales are very good in select market, but we have what we’ve taken a step back in terms of national distribution. And the main reason is that we are still prohibited from disclosing to consumers any of the potential benefits of our RED SUN cigarette without regulatory approval. So what we’ve decided, I think RED SUN cigarette are an important conduit for 22nd Century to speak with consumers directly, that's a very important I guess role for the product for us, but right now our plan is to stay in those select markets and not to expand from where they currently sell well.

Understood. So now with the North Carolina plant, can you say, I don't know if you can at what level of capacity we are at, is it 40%?

You know well I could say, I could tell you we still have a tremendous amount of capacity on used. But by the end of 2017 as I mentioned earlier in the call, I think we’ll be pretty close to breakeven on factory operations.

Okay. We won't be at 100%.

Nowhere near.

Okay. That’ s it. So in the previous conference call, there was talk about maybe a joint venture with big pharma as for the X-22, any progress been made on that?

Well, we've certainly have a lot of meetings, we've talked to a lot of potential partners, and we have not found a deal that was acceptable to 22nd Century and our board. So all I can tell you is we’re working hard on that, and we don't have it makes sense for us this time.

Very good.

Now, if you look at this Phase III trial of FDA is sponsoring on with our age that trial along with our guidance meeting in June, we think those are catalyst events that will in all likelihood for a greater discussions with potential pharma parents.

Excellent. With the bad agreement concluding in October, so I just want to make sure I'm understanding this, do they have exclusivity right now with our technology?

No, it’s only a research agreement and it is only on I don't know very small fraction of patents actually. But we retain the rate to use the technology in our own products, so PET has the right to conduct research using I don't know some 30 plus or minus patents that we have on a non-exclusive basis relative to our rates. Is that helpful?

Yes, because I’ve seen the royalty and licensing, I think you mentioned it earlier on the call, and that's going to be a great opportunity for us. So I just wanted to make sure that it's not exclusive for that. Okay. So and my last question, I'll leave you alone. So we own 25% percent of Anandia Labs or did I misread that?

Well our initial equity stake was 25% and I think Anandia has had at least two or three things additional financings. So right now if I had to guess, I would guess that we are somewhere in the neighborhood of 20% of Anandia?

Okay, and you're still on the board with them?

Yes.

And with the Canal Royalty that's one of the companies that acquired part of their shares, so does that open up opportunities for us as well or not?

Well, it's certainly were better known at opens up for our exposure opportunities that Canal Royalties investment was a significant one and I think that’s probably the biggest reason why own 20% now plus or minus relative to 25%, but you never know I mean what at all does and the market cap value that invested implies that our initial investment is worth substantially more than we made the investment.

Now, and actually there’s certain opportunity to market our products with others that's well, so okay so that's all I had and I really do commend all you guys it was just great work, I’m very impressed with not only the leadership, but with the people working at XXII and love the company, so keep it up.

Thank you appreciate that’s absolutely.

Thank you.

Thank you and we'll take our next question from Michael Michaud with Pfizer. Your line is open.

Hi Mike.

Hi gentleman, how are you doing?

Great, how are you?

Terrific, one thing that’s been sticking in my mind. Unfortunately I have to frame that’s the hypothetical, but it will help my understanding, if let's say a country Choose one let’s say Great Britain. We’re to approve very low nicotine cigarettes gat the market as such and labeled as such. It seems to me that consumers or advocacy groups could make belief and suggest that they could be used for smoking cessation. How do they differ let’s say BRAND A from X-22 and could the two products co-existing in the same market in other words still allowing for to be prescribe in X-22?

Well, first of all the cigarettes are different in terms of components and the tobacco is the same in terms of components of cigarettes are very different, and there are of course the protocol. The use is very different, one will be sold and over-the-counter product with no claims whatsoever and the other would be under the guidance of our physician, so there's a prescription and there is a fields there is different papers or different validation I mean there are different cigarette so if constructed they met for in different purposes with different indications s on the packaging.

So it's unlikely one consumer would make the leap and say well they're both Very Low Nicotine why would I expand X-dollars perhaps 22 prescription maybe I should try the VLN version and I can quip you’re like yeah I think it's unlikely.

Yeah, I think it’s unlikely and that would be a would be a great problem for us to have two products in the market one and over the counter products properly labeled as Very Low Nicotine 95% less negative on a conventional products and also have our small pieces cessation products in a pharmacy is available by prescription and then having a problem of what during which product should support the board more. I look forward to having that problem

Okay. So that does clarify it and my mind and help my understanding? Thanks for addressing.

And we’ll take our next question from John Ford a private investor.

Hi Mr. Ford?

Hey guys, just a quick question, so you file MRTP again in June let's say and the last time around what 14 months or something, so are we looking at you know roughly I don't know a year and a half, year and three quarter before we hear back from the FDA about that product?

No I don't think so, not at all, when FDA contacted us. They basically said that their intention was to move much quicker at this station of process. We could request meetings, they actually said when they call here that we could e-mail a questions and have dialogue back and forth by e-mail, so they've given us encouraging feedback to suggest that the timetable will be much, much shorter than it was during our first year. And anecdotally it's our understanding that Swedish match has similar experienced where the feedback they initially received took some time over a year, but then after that first year it seemed like there was much more communication and things moved much more rapidly, that’s my understanding.

Okay, so you know maybe where a year out from today or it we're likely to get the application process in six months?

Yeah, Paul starts working on this, and we spend a little more time maybe we can spend this thing in April as opposed to June, it depends company breaks politics.

The other question just has to do with X-22 if you do require another Phase 3 trial when would commercialization take place when you include that I don't know I assume that’s the multi-year as well, I don't really know.

The trial would probably - the trials only six weeks - with six week follow-up and it would be likely that we would do a six months follow-up in addition. So if we said, that we did a trial I don’t know in the third quarter of this year then you'd probably be looking at 18 months before would be commercialize.

Okay, got it. All right thanks guys, that’s it my questions.

Thanks very much.

And we'll take our last question from Irvin Rosenfeld from Newbridge Securities. Please go ahead.

Gentleman, good afternoon how are you all?

Good, how are you?

Good.

I'm doing well, and I really have more of a cognitive question, I've been a federal patient now for almost 35 years, and when I first start talking about cannabis nobody knew about it, and it's so nice to hear all these regular people understanding the part about cannabis and how important it could be. And I hope people realize that if you're able to modulate the different cannabinoids by into raising the level or lowering the level this is tremendous, and the best part about this is it helps patients, and that's what people have to understand that this is a doubt money will be made, okay but what you're doing is going to be compassionate for patients and to help patients, and so for that I congratulate you all, keep up your good work.

Thank you very much, we appreciate your support very much, thank you.

Thank you, Irvin.

And we have no further questions.

Okay. Well thank you very much. We appreciate your participation in the call today. And we'll look forward to updating everyone as we have more exciting developments in the coming weeks and months.

This does conclude today's program. Thank all of you for your participation. And you may disconnect at any time.