22nd Century Group Inc. reported Thursday a significantly larger loss during the second quarter, primarily caused by higher operational costs.

The company reported an $8 million loss, compared with a $6.7 million loss a year ago.

Based in Williamsville, N.Y., 22nd Century opened cigarette-manufacturing operations in Mocksville in 2014 through spending $3.22 million on the production equipment of the defunct Renegade Tobacco Inc. It has 70 employees at the plant and 79 overall.

It also is involved in the development of hemp and cannabis products.

There was an earnings loss of 6 cents, compared with an earnings loss of 5 cents a year ago. There is no analyst forecast for 22nd Century from Zacks Investment Research.

22nd Century reported a 15.9% decrease in second-quarter revenue to $5.8 million.

The bulk of 22nd Century’s revenue comes from production of traditional tobacco products, such as filtered cigars, and from very-low-nicotine cigarettes, its Spectrum-branded line, sold to government agencies for use in public-health studies. The company landed a new filtered-cigars production contract in May 2018.

The company has not received revenue from licensing or broad commercial sales of its very-low-nicotine tobacco products.

The decreases in net sales revenue were primarily the result of a decrease in production volumes under various filtered cigar manufacturing contracts where revenue is recognized over time.

22nd Century said it spent $1.89 million during the quarter on expenses related to settling a lawsuit involving Crede CG III Ltd. and Terren Peizer in U.S. District Court for the Southern District of New York.

22nd Century reported $2.46 million in expenses for the first half of fiscal 2019 related to filing its modified-risk tobacco product application to the Food and Drug Administration for its Brand A very-low-nicotine traditional cigarette. The FDA has accepted the application and the review is in the third of the four-stage process.

The company could play a pivotal role in the FDA’s quest to drastically cut nicotine levels in traditional cigarettes. Approval of the very-low nicotine cigarettes could lead to a sharp increase in revenue and a potential buyout by a global tobacco manufacturer.

22nd Century said the FDA conducted a comprehensive inspection of the Mocksville plant on April 30 as part of its review process.

The review featured observing production of the very-low-nicotine cigarettes, as well as reviewing raw material receiving and storage procedures, quality control processes, manufacturing equipment and systems, tobacco processing methods, and finished-products analyses procedures.

The FDA released in July 2017 its very-low-nicotine recommendations, which must gain approval from other federal agencies before being implemented. The company’s theory behind producing very-low-nicotine cigarettes is that by making them less addictive, smokers would consume fewer cigarettes.

Some anti-smoking advocates express concern that the very-low-nicotine traditional cigarettes will lead some smokers to use more cigarettes, thus potentially raising their exposure to carcinogens from the burning of tobacco leaves.

On Monday, 22nd Century named Clifford Fleet, former Philip Morris USA chief executive and president, as its chief executive, effective Aug. 3. Fleet served in those roles from November 2013 to May 2017. Fleet has been elected to the company’s board of directors. Fleet became an adviser to 22nd Century in December.

He replaces Henry Sicignano III, who resigned unexpectedly from the company and board July 26.

In October 2017, 22nd Century sold 20.57 million shares in a direct public offering that yielded gross proceeds of $54 million. The company reported Thursday that it had $47 million in cash and cash equivalents as of June 30.

The company sold the shares at $2.62 each. Its 52-week share price range is $1.12 to $3.29.

22nd Century closed trading Thursday at $1.64, up 13 cents.

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rcraver@wsjournal.com 336-727-7376 @rcraverWSJ

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