What changed in this filing

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Item 1. Business

2022-03-01 compared with 2021-03-11 · 145 added, 124 removed, 177 unchanged (60% of the section changed)

22nd Century Group, Inc.

was incorporated under the laws of the State of Nevada on September 12, 2005 under the name Touchstone Mining Limited.

On January 25, 2011, we entered into a reverse merger transaction with 22nd Century Limited, LLC, which we refer to herein as the “merger.” Upon the closing of the merger, 22nd Century Limited, LLC became our wholly-owned subsidiary.

After the merger, we succeeded to the business of 22nd Century Limited, LLC as our sole line of business.

22nd Century Limited, LLC was originally formed as a New York limited liability company on February 20, 1998 as 21st Century Limited, LLC and subsequently merged with a newly-formed Delaware limited liability company, 22nd Century Limited, LLC, on November 29, 1999.

Since inception, 22nd Century Limited, LLC has sponsored research and subsequently used biotechnology to regulate the nicotine content in tobacco plants.

22nd Century Group, Inc.

is a biotechnology company developing disruptive, plant-based solutions for the life science, consumer product, and pharmaceutical markets.

We are a focused on technology that allows us to modulate the level of nicotine and other nicotinic alkaloids in tobacco plants and the levels of cannabinoids and terpenes in hemp/cannabis plants through genetic engineering and modern plant breeding techniques.

is a leading agricultural biotechnology and intellectual property company focused on tobacco harm reduction, reduced nicotine tobacco and improving health and wellness through plant science.

In tobacco, hemp/cannabis, and hop plants, we use modern plant breeding technologies, including genetic engineering, gene-editing, and molecular breeding to deliver solutions for the life science and consumer products industries by creating new, proprietary plants with optimized alkaloid and flavonoid profiles as well as improved yields and valuable agronomic traits.

Our mission in tobacco is to reduce the harm caused by smoking by introducing adult smokers to our proprietary Very Low Nicotine Content “VLNC” tobacco and cigarette products.

Our mission in hemp/cannabis is to develop proprietary varieties of hemp with valuable cannabinoid and terpene profiles and other superior agronomic traits, with potential applications in life sciences and consumer products.

We have a significant intellectual property portfolio of issued patents and patent applications relating to both tobacco and hemp/cannabis plants.

Our mission in tobacco is to reduce the harm caused by smoking by introducing adult smokers to our proprietary, VLNC tobacco and cigarettes, which contains 95% less nicotine than conventional tobacco and cigarettes.

Our mission in hops is to leverage our experience with tobacco and hemp/cannabis, a close hop relative, and accelerate the development of proprietary specialty hop varieties or valuable traits, with potential applications in life sciences and consumer products.

We have a significant intellectual property portfolio of issued patents and patent applications relating to both tobacco and hemp/cannabis plants and have further resources directed towards creating and securing additional intellectual property pertaining to all three franchises.

As stated, our mission in tobacco is to reduce the harm caused by smoking by introducing adult smokers to our proprietary, VLNC tobacco and cigarettes, which contain 95% less nicotine than conventional tobacco and cigarettes.

The Food and Drug Administration (“FDA“) publicly announced on July 28, 2017, that tobacco use remains the leading cause of preventable disease and death in the United States.

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The results of these independent clinical studies have been published in peer-reviewed publications (including the New England Journal of Medicine , the Journal of the American Medical Association , and many others).

The results of these studies indicate that our VLNC tobaccos have been associated with reductions in smoking, nicotine exposure and nicotine dependence with little to no evidence of compensatory smoking and without serious adverse events.

These studies indicate that use of our VLNC tobaccos have been associated with reductions in smoking, nicotine exposure and nicotine dependence with little to no evidence of compensatory smoking and without serious adverse events.

A list of completed and published clinical studies using cigarettes made with our VLNC tobaccos is shown on our website at https://www.xxiicentury.com/vln-clinical-studies/published-clinical-studies-on-very-low-nicotine-content-vlnc-cigarettes .

A list of on-going clinical studies using our SPECTRUM ® research cigarettes is shown on our website at

https://www.xxiicentury.com/vln-clinical-studies/on-going-clinical-studies-on-very-low-nicotine-content-vlnc-cigarettes .

A list of on-going clinical studies using our SPECTRUM ® research cigarettes is shown on our website at https://www.xxiicentury.com/vln-clinical-studies/on-going-clinical-studies-on-very-low-nicotine-content-vlnc-cigarettes .

We do not incorporate third party studies or the information on our website into this Annual Report on Form 10-K.

The results of these numerous completed studies provide the independent scientific foundation for the public announcement on July 28, 2017 by the FDA that the FDA plans to enact a new rule to require that all combustible cigarettes sold in the United States contain only minimally or non-addictive levels of nicotine.

On March 19, 2018, the FDA publicly announced its Advance Notice of Proposed Rulemaking (“ANPRM”) to solicit public comments on the FDA’s plan to enact a new nicotine reduction rule.

On July 16, 2018, we publicly submitted to the FDA our formal written response to the ANPRM in which we described how (i) the FDA’s proposed new rule is supported by rigorous independent, published science, (ii) the FDA’s stated goal to render all cigarettes minimally or non-addictive is immediately feasible as evidenced by our production and delivery of millions of VLNC research cigarettes since the year 2011, and (iii) the FDA’s proposed new rule is exceedingly practical and urgently needed in the interests of public health.

After we obtain all necessary regulatory approvals, which includes obtaining a Modified Risk designation, we plan to offer our proprietary VLNC cigarettes for domestic sale under the brand name of VLN ® .

Following approval, we also plan to offer VLN ® for international sale and for licensing by third parties.

This was stated on March 19, 2018, where the FDA publicly announced its Advance Notice of Proposed Rulemaking (“ANPRM”) to solicit public comments on the FDA’s plan to enact a new nicotine reduction rule.

non-addictive is immediately feasible as evidenced by our production and delivery of millions of VLNC research cigarettes since the year 2011, and (iii) the FDA’s proposed new rule is exceedingly practical and urgently needed in the interests of public health.

On December 23, 2021 we were granted authorization to market our VLN ® cigarettes under a Modified Risk Tobacco Product, modified exposure designation.

We subsequently began efforts to offer our proprietary VLNC cigarettes for domestic sale under the brand name of VLN ® within 90 days of the receipt of the Modified Risk Tobacco Product (”MRTP”) marketing order.

We also plan to offer VLN ® for international sale and for licensing by third parties.

Additional information regarding our regulatory activities with the FDA is described below.

FDAs proposed Mandate to Require Minimally or Non-Addictive Levels of Nicotine in all Cigarettes in the United States.

The Family Smoking Prevention and Tobacco Control Act of 2009 (“Tobacco Control Act”) granted the FDA authority over the regulation of all tobacco products in the United States.

While the Tobacco Control Act prohibits the FDA from banning cigarettes outright, it allows the FDA to require the reduction of nicotine in tobacco and cigarette smoke.

The Tobacco Control Act establishes procedures for the FDA to regulate the labeling and marketing of Modified Risk Tobacco Products, which includes cigarettes marketed to (i) reduce harm or the risk of tobacco-related disease or (ii) reduce or eliminate exposure to a substance (“Modified Risk Cigarettes”).

The Tobacco Control Act required the FDA to issue specific regulations and/or guidance regarding applications submitted to the FDA for the authorization to label and market Modified Risk Tobacco Products.

On March 30, 2012, the FDA issued Modified Risk Tobacco Product Applications Draft Guidance .

We believe that our VLNC tobacco cigarettes will qualify as Modified Risk Cigarettes and have applied for an MRTP designation.

The status of this application is discussed below.

Proposed Government Mandates Limiting the Nicotine in Cigarettes.

In a June 16, 2010 press release, Dr.

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Kessler said that the amount of nicotine in a cigarette should drop from about 10 milligrams to less than 1 milligram.

22nd Century’s reduced nicotine cigarettes contain between 0.3-0.7 mg/g nicotine.

In 2015, the World Health Organization (“WHO”) Study Group on Tobacco Product Regulation published an advisory note on a global nicotine reduction strategy 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.

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The WHO report cites 22nd Century’s proprietary SPECTRUM ® research cigarettes as meeting such a low level of nicotine of 0.4 mg/g of cigarette tobacco filler.

The WHO report concluded that the evidence indicates that setting a maximum allowable nicotine content for all cigarettes could (i) reduce the acquisition of smoking and progression to addiction, (ii) reduce the prevalence of smoking in a proportion of addicted smokers as a result of behavioral extinction, (iii) increase the rate of quitting and reduce the number of smokers who relapse, and (iv) increase the development, availability, and use of alternative forms of nicotine, e.g .

smokeless tobacco products, nicotine aerosol products, and medicinal nicotine, which have potential adverse health effects, including maintenance of addiction, but less than those of combusted products or conventional cigarettes.

The WHO report concluded that the evidence indicates that setting a maximum allowable nicotine content for all cigarettes could (i) reduce the acquisition of smoking and progression to addiction, (ii) reduce the prevalence of smoking in a proportion of addicted smokers as a result of behavioral extinction, and (iii) increase the rate of quitting and reduce the number of smokers who relapse.

The WHO report stated that population benefits will result from decreased use of combusted tobacco by current cigarette smokers and from the prevention of addiction of non-smokers to cigarettes, especially among young people.

On July 28, 2017, then FDA Commissioner Scott Gottlieb, M.D., announced the FDA’s plan to exercise its authority under the Tobacco Control Act to require that all combustible cigarettes sold in the United States contain only

minimally or non-addictive levels of nicotine.

In that public announcement, FDA Commissioner Gottlieb stated that (i) the overwhelming amount of death and disease attributable to tobacco is caused by addiction to cigarettes – the only legal consumer product that, when used as intended, will kill half of all long-term users, (ii) unless this course is changed, 5.6 million young people alive today will die prematurely later in life from tobacco use, (iii) envisioning a world where cigarettes would no longer create or sustain addiction, and where adults who still need or want nicotine could get it from alternative and less harmful sources, needs to be the cornerstone of the FDA’s efforts, and (iv) tobacco use remains the leading cause of preventable disease and death in the United States, causing more than 480,000 deaths per year and direct health care and lost productivity costs totaling nearly $300 billion each year.

On August 16, 2017, The New England Journal of Medicine published an article by FDA Commissioner Scott Gottlieb, M.D.

and Mitchell Zeller, J.D., the Director of the FDA’s Center for Tobacco Products (“FDA/CTP”), entitled “A Nicotine-Focused Framework of Public Health.” In this article, FDA Commissioner Gottlieb and FDA/CTP Director Zeller stated that the Tobacco Control Act gives the FDA a regulatory tool called a tobacco “product standard” that can be used to alter the addictiveness of combustible cigarettes, and that such standards may set requirements related to an ingredient or constituent in a tobacco product, or related to any other aspect of product composition, construction, or other property, and that the establishment of the right product standard could alter the addictiveness of combustible cigarettes by setting maximum nicotine levels in such products.

The article further stated that Section 907 of the Food, Drug, and Cosmetic Act authorizes the FDA to establish tobacco product standards that the FDA has determined to be appropriate for the protection of the public health, with the statute specifically noting that such a standard may address nicotine yields, among other characteristics.

Although the statute prohibits the FDA from requiring the reduction of nicotine yields of a tobacco product to zero, the FDA stated in this article that the FDA has clear authority to otherwise reduce nicotine levels.

The FDA concluded in this article that a nicotine-limiting standard could make cigarettes minimally addictive or non-addictive, helping current users of combustible cigarettes to quit and allowing most future users to avoid becoming addicted and proceeding to regular use, and that disrupting that progression – from experimentation to regular use to tobacco-related disease and even death – could save millions of American lives.

In this article, the FDA also stated that the FDA will consider peer-reviewed, scientific studies in proposing a maximum nicotine level, but that rigorous studies of Very Low Nicotine Content cigarettes have evaluated the potential effects of various nicotine levels on smoking behaviors and biomarkers, and findings from such studies could inform decision-making on a possible maximum nicotine level in tobacco filler.

The FDA stated that, as in all matters of public health policy, the FDA will be led by the science in this important area.

On December 5, 2018, the Company submitted to the FDA a new Premarket Tobacco Application (“PMTA”) and on December 27, 2018 we submitted to the FDA a new Modified Risk Tobacco Product application (“MRTPA”), in each case for our VLNC tobacco cigarettes.

Through our applications, we requested a reduced exposure marketing authorization from the FDA to market these products as Modified Risk Cigarettes with product labeling that includes the proposed brand name of VLN ® and states that VLN ® has 95% less nicotine than conventional cigarettes.

On December 17, 2019, the FDA publicly announced that the FDA had authorized the Company to market in the U.S.

our VLNC tobacco cigarettes under the product names of Moonlight ® and Moonlight Menthol ® that were the subject of our PMTA.

Our related MRTPA remains pending with the FDA.

Our Moonlight ® and Moonlight Menthol ® cigarettes are made with our proprietary VLNC tobacco and, as a result, contain very low levels of nicotine.

Our Moonlight ® and VLN ® cigarettes are identical products except in name and were closely modeled after our VLNC SPECTRUM ® research cigarettes.

Our PMTA references more than 50 independent studies conducted using our proprietary SPECTRUM ® research cigarettes.

In its public announcement relating to our PMTA, the FDA stated that following a rigorous science-based review of our PMTA, the FDA had determined that authorizing these reduced nicotine products for sale in the U.S.

is appropriate for the protection of the public health because of, among several key considerations, the potential to reduce nicotine dependence in addicted adult smokers, who may also benefit from decreasing nicotine exposure and cigarette consumption.

The FDA further stated that the FDA had determined that non-smokers, including youth, are also unlikely to start using these products, and those who experiment are less likely to become addicted than people who experiment with conventional cigarettes.

On February 14, 2020, the FDA’s Tobacco Products Scientific Advisory Committee ("TPSAC") conducted its public hearing regarding our MRTPA for our VLNC cigarettes.

This meeting was the first time that TPSAC considered an MRTP application for a modified exposure claim and also TPSAC’s first discussion of an application for a combustible tobacco product.

We presented data in support of our product applications and the FDA also presented

perspectives on the applications and posed questions for the committee members to discuss.

Recordings of the proceedings meeting materials, including briefing materials for the committee provided by the Company and FDA, and presentation given by the different stakeholders are publicly available for review via FDA’s website.

The public comment period on the applications closed on May 18, 2020.

The FDA continues to conduct a comprehensive evaluation of our applications;

it is management’s belief, based on the process that FDA follows for MRTPAs, that we are in the final stages of the review and decision making process.

In summary, since 2011, the FDA, NIDA and other federal government agencies have invested an estimated $125 million in independent clinical studies utilizing 22nd Century’s proprietary tobaccos, with such studies being conducted by scientists at many different and well-known clinical study centers.

During that same time, we have provided more than 31.6 million proprietary SPECTRUM ® research cigarettes for use in such independent clinical studies.

The results of these studies have been published in peer-reviewed articles and reflect the independent scientific support for the planned mandate by the FDA that all combustible cigarettes sold in the United States contain only minimally or non-addictive levels of nicotine.

We believe that our VLNC tobacco technology and our production and delivery of more than 31.6 million proprietary research cigarettes since 2011 reflects that the FDA’s plan to dramatically reduce nicotine in cigarettes is technically achievable.

Cigarettes made with our proprietary VLNC tobacco have been the subject of numerous completed and on-going independent clinical studies.

Accordingly, we are investigating the potential use of our VLNC tobacco in our own products that will be intended to comply with the new FDA regulations, as well as investigating the potential license of the use of our VLNC tobacco by third-parties.

In the United States, we are focused on working with the FDA on its nicotine reduction mandate and on our Modified Risk Tobacco Product application (“MRTPA”).

In April 2021, the New Zealand government announced a six-week consultation (15 April – 5pm, May 31, 2021) on Proposals for a Smokefree Aotearoa 2025 Action Plan.

This consultation included proposals to reduce nicotine in smoked tobacco products to very low levels.

The Company returned a detailed, comprehensive submission to the New Zealand Ministry of Health in full support of the Smokefree proposals [Response Identifier 1048733132, publicly available].

The final Smokefree Aotearoa 2025 Action Plan was launched on December 9, 2021[ https://www.health.govt.nz/our-work/preventative-health-wellness/tobacco-control/smokefree-aotearoa-2025-action-plan ].

The New Zealand government has committed to introducing an amendment Bill in 2022 to allow only very low nicotine levels in smoked tobacco products for manufacture, importation, distribution and sale and introduce product assurance systems to support compliance with these requirements.

We believe that our VLNC tobacco technology and our production and delivery of millions of proprietary variable nicotine research cigarettes since 2011 reflects that the FDA’s plan to dramatically reduce nicotine in cigarettes is technically achievable.

In the United States, we are focused on working with the FDA on its nicotine reduction mandate.

Outside the United States, we will focus on working with WHO-member countries that desire to utilize our proprietary VLNC tobacco to implement the WHO recommendation of limiting the sale of cigarettes to brands with a nicotine content that is not sufficient to lead to development and/or maintenance of addiction.

Starting within 90-days of authorization of our MRTPA by the FDA, we are prepared to launch VLN ® cigarettes in select markets.

Our discussions with key distributors and retail chains have yielded multiple opportunities for initial sales and expansion.

Our sales and marketing plans are well-developed and ready for implementation.

Given that 60% of participants in our perception studies have indicated an intent to use VLN ® cigarettes, we anticipate that there will be a robust market for VLN ® cigarettes.

We also believe that obtaining FDA designation of our VLN ® cigarettes as Modified Risk Cigarettes will create opportunities for us to license our proprietary technology and/or our tobaccos to larger competitors.

SPECTRUM ® Cigarettes and Government Research

NIDA, which is a part of NIH, provides the scientific community with controlled and uncontrolled research chemicals and drug compounds through its Drug Supply Program.

In 2010, NIDA included an option to develop and produce research cigarettes with various levels of nicotine (from very low to conventional) in its request for proposals for a five-year contract for Preparation and Distribution of Research and Drug Products.

We agreed, as a subcontractor to RTI International (“RTI”), to supply cigarettes with different nicotine contents (from very low to conventional) to NIDA.

In August 2010, we met with officials from NIDA, FDA, RTI, CDC and the National Cancer Institute (“NCI”) to finalize certain aspects of the design of these research cigarettes.

These cigarettes for government research produced by us under the mark SPECTRUM ® have been, and continue to be, distributed by RTI for NIDA to independent researchers for scientific clinical studies.

The SPECTRUM ® research cigarette contract was renewed in 2019 for an additional five years.

Since 2011, the FDA, NIDA and other federal government agencies are estimated to have invested more than $125 million in independent clinical studies utilizing our proprietary tobaccos, with such studies being conducted at many well-known locations, including the Mayo Clinic, the MD Anderson Cancer Center at the University of Texas, the Johns Hopkins University, Duke University, the University of Pittsburgh, the University of Minnesota, the University of Vermont, the University of California, and others.

Since 2011, we have provided more than 31.6 million SPECTRUM ® research cigarettes for use in these independent clinical studies.

The SPECTRUM ® product line consists of a series of 24 cigarette styles (11 regular and 13 menthol versions) that have 8 different levels of nicotine – from very low to conventional.

A list of the completed, independent clinical studies on our proprietary tobaccos can be found on our website as discussed above.

We expect that information from such government agency sponsored research studies will assist us, along with our own funded studies, in obtaining the necessary FDA authorizations to market our VLNC tobacco cigarettes under our proposed product name of VLN ® as a Modified Risk Cigarette.

Modified Risk Tobacco Products

The Family Smoking Prevention and Tobacco Control Act of 2009 (“Tobacco Control Act”) granted the FDA authority over the regulation of all tobacco products in the United States.

On December 5, 2018, we submitted to the FDA a new Premarket Tobacco Application (“PMTA”) and on December 27, 2018 we submitted to the FDA a new MRTP application, in each case for our VLNC tobacco cigarettes.

Through our applications, we requested a reduced exposure marketing authorization from the FDA to market these products as Modified Exposure Cigarettes with product labeling that includes the brand name of VLN ® and states that VLN ® has 95% less nicotine than conventional cigarettes.

On December 17, 2019, the FDA authorized us to market in the U.S.

our VLNC tobacco cigarettes that were the subject of our PMTA.

While the PMTA authorized us to market the products in the U.S.

it did not allow us to make product claims which would indicate that the product contained 95% less nicotine.

Such claims would fall under receiving an order from the FDA which is designated as the MRTP.

We made the decision to delay the introduction of our VLNC cigarette products to the market until we received the MRTP order.

On February 14, 2020, the FDA’s Tobacco Products Scientific Advisory Committee ("TPSAC") conducted its public hearing regarding our MRTP application for our VLNC cigarettes.

This meeting was the first time that TPSAC considered an MRTP application for a modified exposure claim and also TPSAC’s first discussion of an application for a combustible tobacco product.

On December 23, 2021, we secured the world’s first and only MRTP designation for a combustible cigarette for VLN ® King and VLN ® Menthol King 95% reduced nicotine content cigarettes.

The FDA authorized the marketing of VLN ® with the following claims, “ 95% less nicotine ”, “ Helps reduce your nicotine consumption ”, and “ Greatly reduces your nicotine consumption ,”.

The FDA also proactively added “ Helps You Smoke Less ” evidence-based headline claim to our requested claims.

In 2019 and 2021, we contracted with farmers to grow considerable quantities of VLNC tobacco in anticipation of FDA authorization of its MRTP and subsequent commercial launch of VLN ® cigarettes.

In January 2022, at our manufacturing facility in North Carolina, we produced the first cartons of our VLN ® reduced nicotine cigarettes, destined for commercial sale as a part of our pilot launch.

Our marketing team has prepared a comprehensive launch plan for VLN ® cigarettes starting with a pilot launch and progressing to a national roll-out.

In March 2022, pending state regulatory authorizations, we plan to launch VLN ® cigarettes in the U.S.

We believe that the commercialization of VLN ® cigarettes will create further opportunities for us to license our proprietary technology tobaccos and the VLN ® brand.

VLN ® Commercialization Plan

As stated above, our comprehensive launch plan for VLN ® cigarettes starts with a pilot launch and progresses to a national roll-out.

The initial pilot program will launch in March 2022 and run for 3 to 6 months.

We are also in advanced discussions with multiple additional regional and national retail partners to carry VLN ® and participate in our retail program as we scale nationally.

Hemp/Cannabis

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in compliance with all other applicable federal and state laws, and (iv) the removal of hemp and hemp derived products from Schedule 1 of the Controlled Substances Act (“CSA”).

As of January 1, 2021, (i) federal law and the laws of 47 states in the United States and the District of Columbia have legalized hemp, (ii) 36 states in the United States, the District of Columbia, Guam, Puerto Rico, and the U.S.

As of February 1, 2022, (i) federal law and the laws of 47 states in the United States and the District of Columbia have legalized hemp, (ii) 37 states in the United States, the District of Columbia, Guam, Puerto Rico, and the U.S.

Virgin Islands have enacted laws and/or regulations that recognize, in one form or another, legitimate medical uses for cannabis/marijuana and consumer use of cannabis/marijuana in connection with medical treatment, and (iii) 18 states in the United States, the District of Columbia, Guam, and the Northern Mariana Islands have legalized cannabis/marijuana for adult recreational use.

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The hemp and the marijuana plants are both part of the same cannabis genus, except that hemp does not have more than 0.3% dry weight content of delta-9-tetrahydrocannabinol (“THC”).

While 2018 Farm Bill legalized hemp and cannabinoids extracted from hemp in the U.S., such extracts remain subject to state laws and regulation by other U.S.

While the 2018 Farm Bill legalized hemp and cannabinoids extracted from hemp in the U.S., such extracts remain subject to state laws and regulation by other U.S.

federal agencies such as the FDA, U.S.

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In the United States, we work only with legal hemp in full compliance with federal and state laws.

We have a license in the State of New York to research and grow hemp in response to the numerous public announcements by New York Governor Andrew Cuomo that New York State intends to become a leading grower and producer of hemp and hemp-derived products.

In Canada, we previously conducted sponsored research on the hemp plant with Anandia in Vancouver, British Columbia, in full compliance with Canadian regulations.

In the State of New York, we had a license to research and grow hemp in response to the numerous public announcements by former New York Governor Andrew Cuomo that New York State intends to become a leading grower and producer of hemp and hemp-derived products.

In Canada, we previously conducted sponsored research on the hemp plant with Anandia Laboratories, Inc.

(“Anandia”) in Vancouver, British Columbia, in full compliance with Canadian regulations.

Anandia was later sold to Aurora Cannabis Inc.

(“Aurora”) and we continue to maintain a relationship with them to license unique technology to other cannabis companies.

Currently, we are in the process of obtaining a license in the State of Maryland to grow hemp.

In Europe and the United States, we are currently working with KeyGene NV (“KeyGene”), a global leader in plant research involving high-value genetic traits and increased crop yields.

In our exclusive, worldwide collaboration with KeyGene, we are focused on developing hemp/cannabis plants with exceptional cannabinoid profiles and other superior agronomic traits for medical, therapeutic and agricultural uses, among many other applications.

We also have an investment in Panacea Life Sciences (“Panacea” or “PLS”) described below.

In 2021, we further enhanced our partnership with KeyGene to extend our relationship for an additional three years and to solidify a governance structure whereby we agree on specific research activities to develop intellectual property jointly with KeyGene in the future.

In late 2019, we made a minority investment in Panacea Life Sciences (“Panacea” or “PLS”), a vertically integrated producer of CBD consumer products.

Since that time our strategy in hemp/cannabis has evolved with our focus now shifting towards developing intellectual property for specific traits of the cannabis plant.

We believe that our

scientific capability will enable us to execute on this strategy and could result in long term royalty streams for us.

To address this, we realigned our relationship with PLS in 2021 as described below.

In 2021, we entered into several research contracts with plant breeders and organizations committed to researching the potential effects which cannabis products have on human cell biology.

We have evolved our strategy to align with companies which provide for excellent synergies to our research efforts.

We continue to review potential candidate companies in the hemp/cannabis field for strategic collaborations, affiliations, joint ventures, investments, and/or acquisitions.

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Panacea is a vertically integrated developer, producer and seller of legal, hemp-derived, CBD products, with extraction, distillation, testing and manufacturing operations located in a 51,000 square foot facility in Golden, Colorado.

Our investment consists of a $7 million convertible note receivable, 3,733,334 shares of Series B preferred stock, and a warrant to purchase additional shares of Series B preferred stock, which upon full exercise will provide us with a controlling equity position in Panacea.

This investment was made at that time as the company was seeking to diversify its product line to augment its current and future sales of tobacco products with sales of branded consumer CBD products—produced and sold by Panacea.

We recently entered into a non-binding agreement with Panacea to potentially restructure our investment and business relationship.

The non-binding agreement with Panacea generally provides for (i) the transfer of $7.2 million in operational assets, including an agricultural facility and various extraction and distillation equipment, from Panacea to us in exchange for the cancellation of the $7 million convertible note receivable plus accrued interest;

(ii) an amendment of transaction documents to remove any future investment rights and obligations of the Company in Panacea, (iii) cancellation of the warrant to purchase additional Series B preferred stock;

and (iv) various other amendments to Panacea’s charter to amend various investors rights therein.

We believe this non-binding agreement to restructure our investment with Panacea will allow Panacea to optimize its focus on creating high-quality CBD and other hemp-based cannabinoid consumer products and provide us with an agricultural asset that will allow us to conduct further commercial research and development on various lines of hemp/cannabis genetics in our intellectual property portfolio.

However, the agreement to restructure our investment with Panacea is preliminary, non-binding, subject to change and may not occur.

Our investment consisted of a $7 million convertible note receivable, 3,733,334 shares of Series B preferred stock, and a warrant to purchase additional shares of Series B preferred stock.

On July 1, 2021, we restructured our investment in Panacea, in line with the ongoing development of our strategic partnership network.

Under terms of the agreements, 22nd Century’s $7 million note in Panacea was exchanged for ownership of Needle Rock Farms, a Colorado hemp/cannabis growing operation consisting of land, water rights and equipment appraised at $2.2 million.

We also received a new $4.3 million note and $500,000 in Panacea’s Series B Preferred Stock (which was subsequently converted to Exactus common stock under the Securities Exchange Agreement;

this balance is reflected in final shares as stated below).

The new note is backed by a mortgage on the Panacea Life Sciences operations building located in Golden, CO, appraised at $10.7 million.

Panacea retained certain farm assets under its own nameplate of PANA Organic Botanicals at Needle Rock.

Also under the agreement, $7.0 million in Panacea Life Sciences Series B Preferred Stock held by 22nd Century was converted into 91 million shares of Exactus, Inc.

We believe this agreement to restructure our investment with Panacea will provide us with an agricultural asset that will allow us to conduct further commercial research and development on various lines of hemp/cannabis genetics in our intellectual property portfolio.

On October 25, 2021, Exactus announced the completion of a 1 for 28 reverse stock split as well as an entity name change to Panacea Life Sciences Holdings, Inc (OTCQB:

Panacea Life Sciences Holdings, Inc.

was assigned a temporary stock symbol of “EXDID” which formally changed to “PLSH” after twenty business days.

As a result of the reverse stock split, our 91,016,026 shares were adjusted to 3,250,573 shares.

On August 30, 2021, we announced our intention to commence research and development in hops, a plant which possesses similar biological characteristics to hemp/cannabis.

Tobacco, hemp/cannabis and hop plants are all considered alkaloid plants and possess certain traits which can be modulated with the genetic engineering techniques we are applying to both tobacco and hemp/cannabis.

In early 2022, we expanded our research agreement with KeyGene to identify specific traits which, if appropriately engineered, could benefit consumers of hop products in both the beer and nutraceuticals segment on the industry.

Additionally, we have focused business development resources in place to further identify such opportunities for the future.

Research & Development (R&D) & Intellectual Property (IP)

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Since 1998, we have had multiple R&D agreements with North Carolina State University (“NCSU”) and others resulting in exclusive worldwide licenses to various patented technologies.

We have utilized the same model employed by many public-sector research organizations, which entails obtaining an exclusive option or license agreement to any invention arising out of funded research.

In all cases, we fund and control all patent filings as the exclusive licensee.

In all such cases,

we fund and control all patent filings as the exclusive licensee.

This model of contracting with public-sector researchers has enabled us to control R&D costs while achieving our desired results, including obtaining exclusive intellectual property rights relating to our outsourced R&D.

In August 2016, we opened our own laboratory on the Buffalo Niagara Medical Campus in Buffalo, New York where we are conducting our own proprietary research and development activities in tobacco and hemp.

On October 30, 2017, we obtained a New York State hemp research and grower license to support our expanding hemp activities in New York.

On June 22, 2018, the Company entered into an amendment to its existing license agreement with NCSU under which the Company exclusively licensed several bright and burley tobacco plant lines with Very Low Nicotine Content that are not genetically modified (non-GMO) plants.

On June 22, 2018, we entered into an amendment to our existing license agreement with NCSU under which we exclusively licensed several bright and burley tobacco plant lines with Very Low Nicotine Content that are not genetically modified (non-GMO) plants.

The amendment provides for the Company to pay NCSU a total exclusive license fee of $1.2 million—refer to Note 8 to our consolidated financial statements for additional information.

The Company will also pay running royalties to NCSU based on a portion of the net sales revenue received by the Company from sales of products that contain any portions of the plant materials that have been received by the Company from NCSU.

On October 22, 2018, the Company entered into a license agreement with the University of Kentucky (“UK”) to license on a non-exclusive basis a next-generation very low nicotine content burley tobacco plant lines that are not genetically modified (non-GMO) plants.

We will also pay running royalties to NCSU based on a portion of the net sales revenue received by the Company from sales of products that contain any portions of the plant materials that have been received by the Company from NCSU.

On October 22, 2018, we entered into a license agreement with the University of Kentucky (“UK”) to license on a non-exclusive basis a next-generation very low nicotine content burley tobacco plant lines that are not genetically modified (non-GMO) plants.

The UK license agreement provides for the Company to pay UK a total license fee of $1.2 million—refer to Note 8 to our consolidated financial statements for additional information.

will also pay running royalties to UK based on a portion of the net sales revenue received by the Company from sales of products that contain any portions of the plant materials that have been received by the Company from UK.

After several field trial evaluations throughout the United States, the Company has produced new non-GMO burley and bright tobacco varieties with 95% reduced nicotine and enhanced flavor notes.

We will also pay running royalties to UK based on a portion of the net sales revenue received by the Company from sales of products that contain any portions of the plant materials that have been received by the Company from UK.

On December 1, 2021, we relocated our own laboratory from Buffalo, New York to Rockville, Maryland, where we are conducting our own proprietary research and development activities in tobacco.

The new laboratory space has over four thousand square feet, is near our strategic research partner, KeyGene, and will help support our continued growth and R&D partnerships.

After several field trial evaluations throughout the United States, we produced new non-GMO burley and bright tobacco varieties with 95% reduced nicotine.

These new varieties include technology previously licensed from NCSU, which is protected with a patent portfolio.

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The freedom to target the QPT gene means that a third party may conduct scientific experiments to try to discover how to alter or affect the QPT gene in ways that may or may not result in a change in nicotine levels in the tobacco plant.

If a third party is able subsequently to learn, over time, how to utilize the QPT gene to alter nicotine levels in the tobacco plant, then such third party would still need to develop and create a unique tobacco plant with very low levels of nicotine (not just a “low nicotine” or “reduced nicotine” plant), which would involve, among many other things, multiple plantings over multiple generations of the plants to try to create stable and reliable VLNC plants, with no assurance that any third party could be successful in such efforts.

We believe that targeting of the QPT gene alone will not result in a VLNC tobacco plant and, hence, that other genes will have to be targeted in the tobacco plant, likely including genes and other intellectual property for which we have continuing patent protection that would need to be used.

We also have exclusive plant variety rights in the United States and may other countries.

We also have exclusive plant variety protection rights in the United States and many other countries.

Plant variety protection certificates are issued in the United States by the U.S.

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Hemp/Cannabis R&D and IP

Our intellectual property enables us to alter the level the levels of cannabinoids in cannabis plants through genetic engineering and modern plant breeding.

Our intellectual property and know-how enables us to alter the levels of cannabinoids in cannabis plants through genetic engineering and modern plant breeding.

The basic techniques include, but are not limited to, those that are used in the production of genetically modified (“GM”) and gene-edited varieties of other crops, which are also known as “biotech crops.” We have developed various types of cannabis plants with agronomically desirable traits for commercial uses and/or unique cannabinoid/terpenoid levels.

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Targeting these newly identified SNPs, we were able to locate and isolate specific sections of genetic code from genome assemblies present in our state-of-the-art hemp/cannabis bioinformatics database.

Our bioinformatics database continues to grow and already contains hundreds of hemp/cannabis genomes and thousands expression datapoints across a wide array of hemp/cannabis varieties and phenotypes.

Our bioinformatics database continues to grow and already contains hundreds of hemp/cannabis genomes and thousands of expression datapoints across a wide array of hemp/cannabis varieties and phenotypes.

The ability to identify specific genetic variations allows researchers to isolate high-value traits, like increased CBD or tetrahydrocannabinol (THC) production, and then introduce those traits in new plant lines using modern plant breeding techniques, including trait tracking using molecular marker profiles and proprietary accelerated breeding.

On December 14, 2021, we announced a three-way non-exclusive agreement to license the Anandia biosynthesis intellectual property jointly owned with Aurora to Cronos Group Inc., intended to assist in the advancement of research and development on the biosynthesis of cannabinoids.

On February 23, 2022, we made a breakthrough in our hemp/cannabis plant research.

We successfully transformed the hemp/cannabis plant genome using a proprietary plant transformation and regeneration technology, resulting in clear protein expression by the introduced genes.

We are one of the first companies to show proof of the successful modification of the hemp/cannabis plant genome via transformation techniques directly leading to functional protein expression in hemp/cannabis.

This new transformation methodology is a critical enabling technology that dramatically enhances our ability to directly and quickly modify specific target genes in hemp/cannabis.

This unique know-how adds another essential tool to our modern plant science capabilities that also includes an extensive library of hemp and cannabis germplasm, a genome database, marker-assisted, rapid-cycle molecular breeding, and mutagenesis, all supported by KeyGene’s bioinformatics and genome sequencing capabilities utilizing machine learning and artificial intelligence.

Together, these tools are being used to create new, proprietary hemp/cannabis plants tailored to differentiate the content of specific major and minor cannabinoids, terpenoids or eliminate unwanted metabolites to develop new commercial lines tailored to the preferences and needs of end-users, often at a fraction of the time and cost of traditional breeding methods.

Tobacco Master Settlement Agreement

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The facility was primarily in a pre-manufacturing stage during 2014 as we sought approval during that time for us to become a subsequent participating manufacturer under the MSA.

Since August 29, 2014, the Company has been a subsequent participating manufacture under the MSA.

Since 2015, we have manufactured and sold our SPECTRUM ® government research cigarettes, as well as third-party MSA-compliant cigarette and filtered cigar brands, at our factory in North Carolina.

Our strategic acquisition of our factory has allowed us to become vertically integrated so that we can control production priorities/timing and maintain the required high quality of our products, including our SPECTRUM ® research cigarettes and our PMTA-designation VLNC cigarettes.

In the future, our factory will also allow us to produce our own VLNC cigarette brands in the event they comply with the FDA mandate for reduced nicotine in cigarettes and if/when the FDA authorizes our MRTPA submissions under our proposed product name of VLN ® .

On August 29, 2014, the Company became a subsequent participating manufacture under the MSA.

Since 2015, we have manufactured and sold our SPECTRUM ® variable nicotine research cigarettes, as well as third-party filtered cigar brands and MSA-compliant cigarette brands, at our factory in North Carolina.

The strategic acquisition of our factory has allowed us to become vertically integrated so that we can control production priorities/timing and maintain the required high quality of our products, including our SPECTRUM ® research cigarettes and our MRTP-designation VLN ® brand cigarettes featuring 95% less nicotine than the top 100 leading brands sold in the United States.

In January 2022, our cigarette manufacturing facility completed production of the first cartons of VLN ® King and VLN ® Menthol King cigarettes destined for retail sale.

Sources of Raw Materials

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We purchase other tobacco through third parties.

In anticipation of the FDA’s authorization of our MRTPA for our VLN ® cigarettes, and in the event the FDA mandates that all combustible cigarettes contain only minimally or non-addictive levels of nicotine, we have increased the amount of tobacco leaf we obtain directly from growers under contract.

In 2021, we plan to increase our growing quantities of VLNC tobacco to supply the potential launch and expansion of VLN ® cigarette sales.

Our North Carolina-based manufacturing facility is prepared to manufacture quantities of VLN ® cigarettes to supply the anticipated launch and roll-out of VLN ® .

In anticipation of the FDA’s authorization of our MRTP application for our VLN ® cigarettes, we increased the amount of tobacco leaf we obtain directly from growers under contract during 2021.

In 2022, we plan to again increase our growing quantities of VLNC tobacco to supply the launch and expansion of VLN ® cigarette sales.

Government Regulation

The development, testing, manufacturing, and marketing of our potential products are subject to extensive regulation by governmental authorities in the United States and throughout the world.

T he Tobacco Control Act, which became law in June 2009, granted the FDA authority over the regulation of all tobacco products in the United States.

The Family Smoking Prevention and Tobacco Control Act (“Tobacco Control Act”) provides the FDA with broad authority to regulate the design, manufacture, packaging, advertising, promotion, sale and distribution of tobacco products;

the authority to require disclosures of related information;

and the authority to enforce the Tobacco Control Act and related regulations.

While the Tobacco Control Act prohibits the FDA from banning cigarettes outright, or mandating that nicotine levels be reduced to zero, it does allow the FDA to require the reduction of nicotine or other compounds in tobacco and cigarette smoke.

The FDA has authority to restrict marketing and advertising, impose regulations on packaging, mandate warnings and disclosure of flavors or other ingredients, prohibit the sale of tobacco products with certain flavors or other characteristics, limit or prohibit the sale of tobacco products by certain retail establishments and the sale of tobacco products in certain packaging sizes, and seek to hold retailers and distributors responsible for the adverse health effects associated with both smoking and exposure to environmental tobacco smoke.

In 2009, the Tobacco Control Act also banned all sales in the United States of cigarettes with flavored tobacco (other than menthol).

In 2009, the Tobacco Control Act also banned all sales in the United States of cigarettes with flavored tobacco (other

than menthol).

As of June 2010, all cigarette companies were required to cease use of the terms “low tar,” “light” and “ultra light” in describing cigarettes sold in the United States.

The Tobacco Control Act, its implementing regulations and its 2016 deeming regulations establish broad FDA regulatory authority over all tobacco products and, among other provisions:

● impose restrictions on the advertising, promotion, sale and distribution of tobacco products;

● establish pre-market review pathways for new and modified tobacco products;

● prohibit any express or implied claims that a tobacco product is or may be less harmful than other tobacco products without FDA authorization;

● authorize the FDA to impose tobacco product standards that are appropriate for the protection of the public health;

● equip the FDA with a variety of investigatory and enforcement tools, including the authority to inspect product manufacturing and other facilities.

Manufacturers of tobacco products must comply with FDA regulations which require, among other things, compliance with the FDA’s evolving regulations on Current Good Manufacturing Practices (“cGMP(s)”), which are enforced by the FDA through its facilities inspection program.

The manufacture of products is subject to strict quality control, testing and record keeping requirements, and continuing obligations regarding the submission of safety reports and other post-market information.

We expect significant regulatory developments will take place over the next few years in many markets, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”).

The FDA has several investigatory and enforcement tools available to it, including document requests and other required information submissions, facility inspections, examinations and investigations, injunction proceedings, monetary penalties, product withdrawal and recall orders, and product seizures.

We expect significant regulatory developments to take place over the next few years in many markets, driven principally by the World Health Organization’s Framework Convention on Tobacco Control (“FCTC”).

The FCTC is the first international public health treaty on tobacco, and its objective is to establish a global agenda for tobacco regulation with the purpose of reducing initiation of tobacco use and encouraging cessation.

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Under the Federal Food, Drug and Cosmetic Act, any product intended to affect the structure or function of the body of humans or animals is considered a drug that must receive premarket approval by the FDA through its new drug application process.

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Department of Justice begins strict enforcement of the CSA in states that have laws legalizing medical and/or adult recreational marijuana, there may be a direct and adverse impact to any future business or prospects that we may have in the marijuana business.

Even in those jurisdictions in which the manufacture and use of medical marijuana has been legalized at the state level, the possession, use, and cultivation of marijuana all remain violations of federal law that are punishable by imprisonment and substantial fines.

Even in those jurisdictions in which the manufacture and use of medical marijuana has been legalized at the state level, the

possession, use, and cultivation of marijuana all remain violations of federal law that are punishable by imprisonment and substantial fines.

Moreover, individuals and entities may violate federal law if they intentionally aid and abet another in violating these federal controlled substance laws or conspire with another to violate them.

We currently conduct sponsored research on hemp in Maryland and the Netherlands with third parties that possess all necessary permits and licenses to engage legally in such activities.

We have conducted hemp research in Virginia, Oregon, and Canada with third-parties possessing all necessary permits and licenses to engage legally in such

We have conducted hemp research in Virginia, Oregon, and Canada with third-parties and in Colorado and New York with Company personnel, while possessing all necessary permits and licenses to engage legally in such activities.

In order to carry out research in other countries, similar licenses are required to be issued by the relevant authority in each country.

We also conduct hemp research in our laboratories in New York under a license granted to us by the State of New York.

Environmental Regulations

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The PEA concluded that the marketing orders would have no significant impact and that environmental impact statements would not be required.

We are not currently aware of any competition to our VLNC tobaccos inside or outside of the United States.

Tobacco products are subject to substantial excise taxes in the U.S.

and other countries.

Significant increases in tobacco-related taxes or fees have been proposed or enacted and are likely to continue to be proposed or enacted at the federal, state and local levels within the U.S.

and other countries.

The frequency and magnitude of excise tax increases can be influenced by various factors, including the composition of executive and legislative bodies.

Federal, state and local cigarette excise taxes have increased substantially over the past two decades.

Tax increases have an adverse impact on sales of tobacco products.

It is possible that our VLNC tobacco cigarettes may compete with FDA-approved smoking cessation aids.

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The industry consists of major domestic and international companies, most of which have existing relationships in the markets into which we plan to sell, as well as financial, technical, marketing, sales, manufacturing, scaling capacity, distribution and other resources, and name recognition substantially greater than ours.

We are also aware that several domestic cigarette competitors are continuing to research very low nicotine tobacco and have filed patent applications.

However, our understanding is that these competitors continue to have a long development horizon to obtain a 95% reduction in nicotine.

We are also not aware of any competition in the creation and provision of VLNC tobacco research cigarettes for use in independent clinical studies.

We are also aware that several domestic cigarette companies and other research groups are working to research and grow very low nicotine tobacco and have filed patent applications.

Cigarette and filtered cigar companies compete primarily on the basis of product quality, brand recognition, brand loyalty, taste, innovation, packaging, service, marketing, advertising, retail shelf space, and price.

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and in some instances, government-owned tobacco enterprises such as the China National Tobacco Corporation.

In the hemp/cannabis and hop industries, there are numerous companies conducting research and development on the hemp/cannabis and hop plants in order to develop new and differentiated products.

Our competitors may render our technologies obsolete by advances in existing technological approaches or the development of new or different approaches, potentially eliminating the advantages that we believe we derive from our research approach and proprietary technologies.

Human Capital Resources

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Corporate Information

We are a Nevada corporation and our corporate headquarters is located at 8560 Main Street, Suite 4, Williamsville, New York 14221.

22nd Century Group, Inc.

was incorporated under the laws of the State of Nevada on September 12, 2005 under the name Touchstone Mining Limited.

After the merger, we succeeded to the business of 22nd Century Limited, LLC as our sole line of business.

Since inception, 22nd Century Limited, LLC has sponsored research and subsequently used biotechnology to regulate the nicotine content in tobacco plants.

Our corporate headquarters is located at 500 Seneca Street, Suite 507, Buffalo, New York 14204.

Our telephone number is (716) 270-1523.

Our internet address is www.xxiicentury.com.

All of our filings with the Securities and Exchange Commission can be accessed free of charge through our website promptly after filing;

All of our filings with the Securities and Exchange Commission, including our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and Current Reports on Form 8-K can be accessed free of charge through our website promptly after filing;

however, in the event that the website is inaccessible, we will provide paper copies of our most recent Annual Report on Form 10-K, the most recent Quarterly Report on Form 10-Q, Current Reports filed or furnished on Form 8-K, and all related amendments, excluding exhibits, free of charge upon request.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business