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

Thank you very much everyone for joining the call today. Please bear with me, while I read the required legal Safe Harbor text. The statements made on today's call that are not based on historical information are forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include, but are not limited to, statements regarding our company's business strategy, plans and objectives, and future results of operations or that may predict, forecast, indicate or imply future results performance or achievements. The words estimate, project, intend, forecast, anticipate, plan, expect, believe, will, will likely, should, may or the negative of such words, or words of similar meanings are intended to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and all such forward-looking statements involve risk and uncertainties, many of which are beyond our company's ability to control. Actual results may differ materially from those expressed or implied by such forward-looking statements. As a result of various factors, including but not limited to the risk factors disclosed in our company's most recent Annual Report on Form 10-K for the year ended December 31, 2017 as filed with the Securities and Exchange Commission on March 7, 2018. 22nd Century does not undertake and it disclaims any obligation to update any forward-looking statements or to announce revisions to any of the forward-looking statements. During this conference call, we will also disclose certain non-GAAP financial measures including adjusted EBITDA, which we define as earnings before interest, taxes, depreciation and amortization as adjusted by 22nd Century for certain non-cash and non-operating expenses as described in our company's earnings press release for the quarter-end March 31, 2018 as publicly issued yesterday on May 3, 2018, and which is now available on our company's website. And with that, I'll turn it over to our Chief Financial Officer, John Brodfuehrer.

Thanks, Tom. Good afternoon everyone, and once again thank you for calling into 22nd Century's first quarter 2018 conference call. For those of who you are new to the call, my name is John Brodfuehrer and I am the Chief Financial Officer of 22nd Century Group. Today's conference call will be one hour in duration and we'll conclude at 5:00 pm. We will take questions at the end of the presentation as time permits. This afternoon I will provide you with a summary of the Company's financial results for the first quarter of 2018 ending on March 31, 2018. First of all as reported in our Form 10-Q as filed with the SEC yesterday and as stated in yesterday's press release, net of sales revenue for the first quarter of 2018 in the amount of $6,116,000 was the highest quarterly amount for product sales in the Company's history. The net sales revenue for the first quarter of 2018 of approximately $6.11 million represents an increase of approximately $3.88 million or 174.1% over net sales of approximately $2.2 million to $3 million for the first quarter of 2017. The increase was primarily result of continued additional net sales revenue generated from the contract manufacturing existing brands of filtered cigars that commenced in mid May of 2017. During the first quarter of 2018, we generated gross product -- gross profit on product sales of $71,000 as compared to a gross loss on product sales of $274,000 during the first quarter of 2017. The swing from the gross loss of $274,000 in the first quarter of 2017 to a gross profit of $71,000 in the first quarter of 2018 represents an improvement of $345,000. During the first quarter of 2018, we began approaching efficient production capacity at our manufacturing facility in North Carolina.…

Thank you, John. Good afternoon and thank you again to our conference call participants for joining us today. It is always a pleasure to talk with investors when we issue a great quarterly report. Indeed, our first quarter results demonstrate the 22nd Century's management is focused squarely on achieving our most important objectives. For example, as an important step forward in establishing the self-sufficiency of our North Carolina factory, 22nd Century once again achieved record the product sales in the first quarter. As John reported, overall sales for the Company in the quarter were more than $6 million. We are very pleased with this result. As John further explained, another notable event recognized in the first quarter is increasing value of our investment in Anandia laboratories, a Vancouver-based biotechnology lab focused on cannabis and hemp. You might recall, it was through our partnership within Anandia that we successfully created zero THC hemp plants last year, and right now, together with in Anandia, we are developing additional novel hemp plant streams with other highly desirable cannabinoid profiles. Because of new accounting standards, we are required to recognize the fair value of any investments. Accordingly, after an Anandia completed a very successful eight figure capital raise earlier this year, we recorded $6 million gain on the value of our in the Anandia holdings in event that contributed to 22nd Century's profitable first quarter. As just last week we met with investors at our company's Annual Meeting of shareholders. It was a great event. I had an opportunity to meet with dozens of our shareholders and 22nd Century management enjoyed learning from and conversing with both industry specialists and investors alike. Since not everyone was able to attend the meeting, I wanted to share with you today some of the topics we discussed…

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

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

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

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

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

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

Months.

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

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

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

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

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

I have two quick questions. First one relates to last quarter's conference call and 10-Q that was issued. You mentioned you were in negotiations with multiple companies that have many different industries and obviously we haven't seen a press release that you signed a deal. So I'm assuming none had been signed. My question is, is there a certain trigger event that is a holding up any of those negotiations from being fulfilled into a contract?

I don’t think there was any particular trigger, but we certainly wouldn't announce the deal until we had signed a completed contract that that's what's most important. So I think what we said on our last call was that we, we have several parties that we've been in discussions with around the world and I guess I could tell you we’re continuing to have those discussions, but we have not signed a contract, we have not signed a partnership agreement.

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

Can I stop on that? There is no particular trigger event, but one could imagine. I mean if, if the company is successful with MRTP application, well I mean that would be a mass trigger event and I think we'll do an awful lot of important things before that point. But the FDA mandate moving through the FDA approval process and an MRTP application being submitted to FDA, MRTP application, going to tip sack, all of those things are, I guess they're triggers or catalysts.

Yes sir. No, thank you very much for that additional input, I appreciate that. One more question because I don't want to take up too much time. Because of your close relationship with the government having but so many cigarettes over the years for their trials, I mean $24 million worth, I believe, or it's even more. I can't know the number on the top of my head, but my question is, are we beholding to them in any sense of signing a license, a potential buy out in the future. Does the government have any say into our business on how we move forward into monetizing all of the IP and everything that you've work so hard for?

That's a great question. First, I should say we've actually sold 24 million SPECTRUM research cigarettes but not dollars, I wish it were $24 million, but it's not quite that much. But, yes, the government does not have any rights to or licenses for any of our products. So they simply buy those research cigarettes and then distribute those to independent researchers who have the funding and the approvals to do work with the product. But we have no continuing obligations.

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

My question has to do with the -- will become non-combustible MRTP application that the Big Tobacco put in right after the FDA announcement of the -- of course, rule change. That was not received, there was not a new holding back and since there's still a time. You still to have to use some more time before you can get the combustible in. Is there a possibility that, that they will get their done first? And then deeper one is, is that a likely -- are they likely to get their application approved for this non-combustible product? That’s it.

I'm not sure, I’ll let Tom chime in here in a second, but I think that we have as good a chance as anyone, if not a greater chance of having the first MRTP approved product in the world. The Swedish match has been working on their products for years and has spent an awful lot of money and I'm sure -- I'm not as familiar with how much exactly, but you could probably find that in their filings and I know that the Altria application was -- I believe over 3 million pages and they don't seem to have adequate success in the first quarter of this year. But, where we stand and where it looks like public health official stand on very low nicotine cigarettes. I have to believe that we have the best chance in the world for the first and perhaps even the only modified risk tobacco product. Tom, would you like to...

No, I think Henry said that very well. To answer your question, the activity was IQOS and mechanical devices have nothing to do with us. The FDA’s action with respect to them, we applaud because they're not safe. They rejected the science that was submitted there. But yet they've gone forward on the mandate based on the science that they’ve paid for on our tobacco. So, we're clearly and they are clearly confident in the science that supports our application. But as Henry said, our application for a less addictive combustible cigarette is wholly different than their mechanical devices that don't have sufficient science supporting it.

Well, I certainly understand that not related. I was just wondering about whether that technology -- I think you’ve answered me though that technology has got any promise as at MRTP, a different way to go. Your last statement may it appears that you don't think so, and of course, you don’t know what the -- what the FDA takes, but is that a correct way for me look at this, that you're really don’t think if they have highly science behind theirs.

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

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

I think you can take public notice of what the FDA did in rejecting the science that was submitted to them under IQOS. I don't need to comment about that. I think it's apparent on its face, it was not acceptable. You can compare that with the FDA moving forward on the nicotine mandate based on more than $1 million of independent science on only our tobacco.

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

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

What kind of seeds are you describing?

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

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

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

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

I love that, problem but we right now we're running ultimately two shifts five days a week and then at sometimes were running one shift six days a week. If pushed into show we can certainly run three shifts seven days, but in all likelihood, if we were successful as you and I believe we will be the licensing of the technology would enable other big tobacco companies to produce their own cigarettes using our tobacco at their own facilities.

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

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

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

I want to offer my condolences for the loss of Dr. Swauger to you and to the 22nd Century's family, and ask who are within the company is not thinking over his work with the application and additionally, two other questions, one is you know after the most anticipated and single biggest catalyst in our company's history. We've seen a significant slide in the price of our stock I wonder if you can identify any action by companies who may be under threat priority or investment groups whose investments may be damaged by the potential of our IP that may have contribute to that movement, if you could speak to it. And what kind of on the hemp side and the hemp space were kind of high-minds of catalysts might be able to discuss to talk about realizing profit in that area?

And will start with the first one on Dr. Swauger work, I guess the best way to describe as it's been divided. There are three people in house right now if they are overseeing the projects that he had been leading. J. P. Tambrino from British American Tobacco, is a primary person. We have our Regulatory Chief, Karen Delaney, and we also have on our other our Chief Scientist of R&D, Paul Rushton. Those are our internal folks. And then externally I'm not going to give the names but we have, let's call them certain regulatory experts acting as consultants to the company where we've essentially engaged these individuals. We bought between 80% and 100% of their time and this was actually done while Jim Swauger was still here. So we have a team of call it a half dozen people that are actually leading the effort, and then of course. we have research institutions and people who are underground actually performing the clinical studies and the perception studies and all the mathematics behind gathering and compiling all the data. So does that answer your question? Is that helpful?

Yes, that's very helpful. Yes.

No, we do in fact intend to bring another regulatory leader onboard, but we have not yet identified that person and even when we do identify that person because we're already in the thick of things in the projects have already moved forward. We don't intend to change what's, already been put into place. The six people they're running the show right now and they are leading our efforts, will continue to lead those efforts and when that regulatory expert comes in that person will just sort of be bolted on and be part of the process, likely not lead the process that's already on its way. The second question was about our share price slide. And to be honest with you, I can't give you the reasons or the rationale. I mean, I can make guesses, but I'm probably not supposed to do that. We know that there are short sellers that make a living by taking short positions on stocks and then knocking the company's, associated with those stocks and then cashing out. So I would expect that some folks have done that. I think in the long-term, um, if you make a bet on the company and you're a long-term investor, I think you'll be very pleased. And I always have said this before on conference calls. I believe actions speak louder than words. I personally have never sold a share of stock. So I guess you know, where my bet is, my bet is on the long-term future of the company. And for those folks that are, that are, you know, that aren't going to bet that it's going to go down a quarter or $0.50 or whatever it's going to go down, you know, best of luck to them. I think the long-term shareholders are going to do quite well holding onto the stock. Is that helpful?

Yes, very. I’ll agree with you, I'm not going anywhere either and I know that the future in the market is uncertain. I just -- given that you are probably a small, but with IP as huge threat to very established industry. I didn't know if you guys had identified any actions and movements against you that might be meant to, to affect the process going forward.

You know, I can say anecdotally, I was at a conference last fall and I met with lots of executives from some of our competitors in different companies in the industry. And I was surprised but very happy to learn that many of these executives who work at companies that are competitors of ours, they've personally bought our stock. And I thought that was pretty impressive that our company has attracted the attention of individual investors who work at competitor companies. So I'll guess I'll leave it at that. And then the last question was the timeline on hemp and I don't know Tom, if you want to show anything?

Yes, I think you asked about catalyst and again talking only about public information, we see very happily that Mitch Mcconnell, the leader of the majority party in the Senate wants to fully legalized hemp, like corn and wheat and fast track that lift legislation. So that's very robust for us as well as you've seen, we've already moved forward in the state of New York where Governor Cuomo has said a similar thing. He wants to grow it like its corn, wheat or soybeans. So we see this market opening up, we see some controversies going on with respect to Marijuana and CBD and extracts with what's going on with the FDA and GW Pharma. So we're very pleased to be in the hemp space and seeing what's changing ahead of us as that’s all public information.

Alright, excellent well. Listen, I'm sorry, I'm sure that's a question you in the IR Department have fielded a number of times about the share price and I don't mean the pylon, I just was hoping to hear some comments, if I could ask one last quick question. Is there at any point going to be any identification of the company or persons who bought the warrants at 262 in the future?

So, we actually, we haven't -- they weren’t warrants. So let's -- so that was, that was a franchise to direct offering. So, I'll just, we do have NDAs so we cannot disclose who those folks were. I think some of that information is actually in the public domain but we do have NDAs with the investors so we cannot do that, but it was a non warrant deal at 262 and that's a good point. Those are some pretty sophisticated people investing eight figures. I believe, some of them. And, yet I guess some shareholders must think they know more than those guys because, they are selling the stock at levels under 262. Now, do I know that every single share that they, that those larger investors purchased, it continues to be held. No, I don't know that, but I'm fairly confident that the great number of those shares are still held and it surprises me every day when I see people selling the stock at levels below that 262, where very sophisticated people invested 8 figures.

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

Thank you, we appreciate. Have a good weekend.

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

First and foremost, thank you so much for opening the Q&A to private investors. It's much appreciated. I have had a question about the age of the patents. If there are any worry that the Big Tobacco is just going to beat out the clock on our patents or we will protect it?

Yes, Patricia, we feel very comfortable and well protected. We would direct people to read our disclosure and our annual report on Form 10-K for the year-ended December 31, 2017. We'll be talked about in old patent family coming off patent. And what that means and practical terms and to summarize for everybody that haven't read it on the call, that 10-K disclosure says that just because a particular gene is now allow to be researched doesn't mean that other researchers will be successful and have the manipulator change the gene to be able to make nicotine go up or down, and be able to make it go down sufficiently that it's a very low nicotine, and be able to have that resulting plan via very robust crop to be able to grown in sufficient commercial quantity support of product. We clearly have done that and as Henry said earlier, that's the basis of selling 24 million spectrum research cigarettes and having an inventory ready to go and all that science being based on our tobacco. So, we don't see anybody else doing it out there that have anything to do anything close to what we're doing. So we feel very confident and where we're at and with the IP discussion the finishing point is every step that I just described in that scientific process requires and to grow up the resulting plant the couple of times to prove it up. All that timeline together plus maybe, maybe, maybe if they lucky enough, we feel very comfortable that that's old technologies we're not concerned with.

And I'll just add one last point there. It's important to realign that what the FDA wants and what it believes will be very important to public health "very low nicotine tobacco" and the FDA hasn't officially designated the definition of very low nicotine tobacco, but we are very confident especially given the October 2015, New England Journal Medicine study. That the level of nicotine will be 85% below conventional levels or lower, and in fact we believe the optimal level is likely 95% less nicotine than a conventional cigarette and lower. So companies that say they have low nicotine tobacco or they developed low nicotine stream. They never say what that is, but I'll explain to you if you give someone a cigarette with 20% less nicotine they tend to smoke more. If you give someone a cigarette with 50% less nicotine they may smoke twice as much. So it's very, very important that for FDA purposes to make a minimally or non-indicative cigarette that the nicotine levels are at least 85% less than conventional plans and probably 95% less nicotine content than conventional plans. Is that helpful?

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

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

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

I know that's a big deal.

We're pleased with the quarter.

Yes, yes, very happy with that. Thank you. Question, a lot of people have no clue about your company. They don't -- people that have money, it just doesn't mean anything. Is it possible that we could take instead of putting money within investor relations people to take and ad out in the Wall Street Journal, and let them know that what we have is available?

Well, I guess that possible, we have engaged some folks not in investor relations, but in public relations, what I would like even more than in adding the Wall Street Journal I'd like an article, the Wall Street Journal, and I think that as people become more and more familiar with the FDA mandate, and the ANPRM process, I think you will likely find the big news outlets perhaps the Wall Street Journal, perhaps CNN, perhaps CNBC, I think you'll start to have some of these major news organizations covering very low nicotine tobacco and by definition covering our small company. Anecdotally, some of these folks have talked to us in the past and we provided them with quite a bit of background information on our technology in a very low nicotine tobacco, and then they've gone off and reported on the products, but they've told us that don't like to mention microcap company stock because if they mention the microcap company in the report generally, the stock price goes up very, very quickly because of the exposure and they don't want to cause a commotion with stock prices. So, believe it or not that's what we've been told, but I think that will only be the case for so long. At some point this FDA mandate is going to be important enough and big enough news that the whole story will come out, but I can report to you I'm very proud to report to you that 22nd Century, a little company that six years ago or seven years ago we had fewer than 200 shareholders today we have more than 83,000 shareholders more than 83,000 shareholders. I think it is for fortunate to join the Russell and if our share price continues to appreciate, I think what you'll find is your point institutional investors contended by quite a bit of stock and you tend to hold that stock for a decade or more. I think you'll start to find those folks becoming investors and starting to own shares in our company, and I think that will and also a lot for the company and for our stock.

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

And we can probably do some kind of a corporate ad like that. There are lots and lots of restrictions on actually discussing products in particular products. If we had an MRTP approval then of course we would be able to say exactly what the product is and what it does. But before we actually have that marketing orders actually called before we have that marketing order for our MRTP product, we can't actually describe the product in detail with the brand and with a pack but we can't talk a lot about our company technology yes the technology and the company and I really appreciate you know, certainly investors like you and others on the call and at the annual meeting continuing to talk about the product and spreading the word. I think that's the start of something much bigger.

Absolutely, I'm waiting.

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

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