22nd Century’s proprietary Very Low Nicotine
technology puts the Company at the forefront of “the most important
public-health initiative of the century.”
Current Cash Balance is the Highest in
Company History.
22nd Century Group, Inc. (NYSE American: XXII), a plant
biotechnology company that is focused on tobacco harm reduction and
cannabis research, announced today the Company’s second quarter
2017 financial results and will provide a business update for
investors on a conference call to be held Thursday, August 10th, at
4:15 PM (Eastern Time).
Henry Sicignano, III, President and Chief Executive Officer of
22nd Century Group, together with John T. Brodfuehrer, Chief
Financial Officer, will conduct the call. Interested parties are
invited to participate in the call by dialing: (800) 344-6491 and
using Conference ID 9326956. The conference call will consist of an
overview of recent business highlights and a summary of the
financials presented in the Company's second quarter 2017 Form
10-Q. Immediately thereafter, there will be a question and answer
segment open to all callers.
Although 22nd Century has not yet received revenues from
licensing or broad commercial sales of the Company’s proprietary
Very Low Nicotine tobacco – which are expected to be considerable –
sales of the Company’s conventional products continue to grow
impressively. Second quarter results show that 22nd Century is
already experiencing the benefits of newly signed manufacturing
agreements. Revenue for the second quarter of 2017 increased to
approximately $3.9 Million – a 37.8% increase over the revenues for
the second quarter of 2016 and the highest quarterly revenue in the
Company’s history. 22nd Century projects that year-end revenue will
exceed $16 Million – a new record for the Company. In addition to
climbing revenues, the Company currently has approximately $17.8
Million in cash, the highest amount of cash on hand in the history
of the Company. 22nd Century’s cash reserves are sufficient to meet
all regular operating expenses through at least March 2019.
On July 28, 2017, FDA Commissioner Scott Gottlieb, M.D. declared
that the FDA was exercising its authority under the Family Smoking
Prevention and Tobacco Control Act to mandate lower nicotine – to
non-addictive levels – in combustible cigarettes sold in the United
States. The Washington Post called FDA’s nicotine mandate, “…the
most important public-health initiative of the century.” 22nd
Century is the only company in the world capable of growing tobacco
with non-addictive levels of nicotine.
FDA Commissioner Dr. Gottlieb further stated: “I’ve followed the
compelling discussion… of FDA’s potential to render cigarettes
minimally addictive or non-addictive by regulating their nicotine
levels. I’ve seen the science in this area and believe it holds
much promise.” The science to which Dr. Gottlieb refers includes
numerous independent clinical trials using 22nd Century’s
proprietary SPECTRUM research cigarettes. To date, the FDA and
other agencies of the U.S. federal government have invested more
than $100 million in this science.
22nd Century’s proprietary Very Low Nicotine cigarettes have
demonstrated that the FDA’s target for cigarettes with
non-addictive levels of nicotine is both achievable and realistic.
The Company believes that the implementation of an FDA mandate that
lowers nicotine levels in all combustible cigarettes sold in the
United States will save millions of lives and billions of dollars
in healthcare costs. Matthew Myers, president of anti-smoking group
Campaign for Tobacco-Free Kids asserted in an August 9, 2017
Bloomberg News article that the new FDA plan could lead to “the
most fundamental change the tobacco industry has ever seen.”
In June 2017, 22nd Century met twice with the U.S. Food and Drug
Administration (“FDA”) to advance the Company’s efforts to gain
regulatory approval for its novel products. On June 15, 2017, 22nd
Century met with the FDA’s Center for Tobacco Products (“CTP”) to
discuss the Company’s BRAND A Modified Risk Tobacco Product
(“MRTP”) application for an over-the-counter cigarette with
labeling that discloses that the product contains 95% less nicotine
than conventional tobacco cigarettes. Based on guidance received
from the FDA/CTP at that meeting, 22nd Century is working to
resubmit its MRTP application with additional consumer perception
data pertaining to the product, together with information from
already completed clinical studies using the Company’s Very Low
Nicotine (“VLN”) tobacco cigarettes and related scientific data. In
2018, 22nd Century intends to submit its revised MRTP application
for the world’s lowest nicotine tobacco cigarette.
On June 20, 2017, Company executives met with the FDA’s Center
for Drug Evaluation and Research (“CDER”) to discuss “X-22,” the
Company’s signature prescription-based smoking cessation aid in
development. Based on this meeting, 22nd Century will work
collaboratively with the FDA/CDER on an appropriate path for X-22
to become a prescription-based cessation aid for smokers in the
United States. Pending FDA authorization, and finding a joint
venture partner or another source of capital, the Company intends
to conduct an X-22 Phase III clinical trial in 2018.
22nd Century also continues to make advancements in hemp
biotechnology. Building on the Company’s groundbreaking zero-THC
industrial hemp plants and technology, 22nd Century is creating
hemp plants that combine zero-THC traits with unique cannabinoid
profiles, including plants with increased levels of other
cannabinoids, including CBC, CBG, and CBD. In Virginia, in
collaboration with research partners at The University of Virginia
(“UVA”), the Company is optimizing hemp plants for growth in the
fertile region of the Southeastern United States known as the
“tobacco belt.” 22nd Century and UVA are also testing 22nd
Century’s hemp plants for their unique phytoremediation properties
– their ability to clean up and reclaim polluted soils. Applying
biotechnology expertise to optimize hemp plants for unique
cannabinoid profiles and for phytoremediation are important
projects that are uniquely suited to the scientists at 22nd Century
and UVA.
Only months after 22nd Century was invited to attend New York
Governor Andrew Cuomo’s “Summit on Growing the Hemp Industry in New
York State” at Cornell University, the New York Governor signed
into law a new measure that aims to treat industrial hemp like any
other agriculture crop in New York State. 22nd Century has applied
for licenses to research, grow and commercialize hemp in the State
of New York, which will allow 22nd Century to expand the Company’s
cutting-edge hemp research at its Buffalo, New York-based
laboratories. When the Company’s license applications are approved,
22nd Century will begin planting its proprietary hemp plants in the
field.
Second Quarter 2017 Financial Summary
As mentioned above, net sales revenue for the second quarter of
2017 was $3,897,206, an increase of $1,069,548, or 37.8%, over net
sales revenue of $2,827,658 for the three months ended June 30,
2016. Net sales revenue for the six months ended June 30, 2017 was
$6,128,723, an increase of $282,009, or 4.8%, over net sales
revenue of $5,846,714 for the six months ended June 30, 2016. The
increase in net sales revenue for the second quarter of 2017 was
primarily the result of a new filtered cigar manufacturing
agreement that commenced in mid-May of 2017.
For the three months ended June 30, 2017, the Company reported
an operating loss of $3,282,525 as compared to an operating loss of
$2,830,830 for the three months ended June 30, 2016, an increase in
the operating loss of $451,695, or 16.0%. The increase in the
operating loss was primarily due to an increase in operating
expenses of approximately $428,000 and an increase in the gross
loss on product sales in the amount of approximately $24,000. For
the six months ended June 30, 2017, the Company reported an
operating loss of $6,252,474 as compared to an operating loss of
$6,059,234 for the six months ended June 30, 2016, an increase of
$193,240, or 3.2%. This increase was primarily the result of an
increase in the gross loss on product sales of approximately
$421,000, partially offset by a decrease in operating expenses of
approximately $228,000.
The Company’s net loss for the three months ended June 30, 2017
was $3,355,624, or ($0.04) per share, as compared to a net loss of
$2,902,354, or ($0.04) per share, for the three months ended June
30, 2016. The increase in the net loss of $453,270, or 15.6%, was
due primarily to an increase in the operating loss of approximately
$452,000. The net loss for the three months ended June 30, 2017
included non-cash expenses consisting of equity based compensation
totaling approximately $154,000 and depreciation and amortization
in the approximate amount of $231,000.
The Company’s net loss for the six months ended June 30, 2017
was $5,976,901, or ($0.07) per share, as compared to a net loss of
$6,154,806, or ($0.08) per share, for the six months ended June 30,
2016. The decrease in the net loss of $177,905, or 2.9%, was
primarily the result of an increase in the operating loss of
approximately $193,000, offset by an increase in net other income
of approximately $371,000. The net loss for the six months ended
June 30, 2017 included non-cash expenses consisting of equity based
compensation totaling approximately $323,000 and depreciation and
amortization in the approximate amount of $460,000.
Adjusted EBITDA (as described in the paragraph and table below)
was a negative $2,897,047, or ($0.03) per share for the three
months ended June 30, 2017, as compared to a negative $2,403,500,
or ($0.03) per share for the three months ended June 30, 2016.
Adjusted EBITDA for the six months ended June 30, 2017 was a
negative $5,469,008, or (0.06) per share, as compared to a negative
$5,143,599, or ($0.07) per share, for the six months ended June 30,
2016.
Below is a table containing information relating to the
Company’s Adjusted EBITDA for the three and six months ended June
30, 2017 and 2016, including a reconciliation of net loss to
Adjusted EBITDA for such periods.
Three Months Ended June 30, 2017
2016 % Change Net loss $
(3,355,624) $ (2,902,354) 16% Adjustments: Warrant liability loss -
net 77,583 9,468 719% Depreciation and amortization 231,474 207,108
12% Loss on investment - 54,839 -100% Interest expense 7,641 9,322
-18% Interest income (12,125) (2,105) 476% Equity based
compensation - Third-party service providers - 8,000 -100%
Officers, directors and employees 154,004 212,222 -27%
Adjusted EBITDA $ (2,897,047)
$ (2,403,500) 21%
Six Months Ended June 30, 2017 2016
% Change Net loss $ (5,976,901) $ (6,154,806) -3%
Adjustments: Warrant liability loss (gain) - net 82,927 (61,597)
-235% Depreciation and amortization 460,483 412,546 12% (Gain) loss
on investment (346,180) 142,071 -344% Interest expense 15,560
19,696 -21% Interest income (27,880) (4,598) 506% Equity based
compensation - Third-party service providers - 30,873 -100%
Officers, directors and employees 322,983 472,216 -32%
Adjusted EBITDA $ (5,469,008)
$ (5,143,599) 6%
Adjusted EBITDA is a financial measure not prepared in
accordance with generally accepted accounting principles (“GAAP”).
In order to calculate Adjusted EBITDA, the Company adjusts the net
loss for certain non-cash and non-operating income and expenses
items listed in the table above in order to measure the Company’s
operating performance. The Company believes that Adjusted EBITDA is
an important measure that supplements discussions and analysis of
its operations and enhances an understanding of its operating
performance. While management considers Adjusted EBITDA to be
important, it should be considered in addition to, but not as a
substitute for or superior to, other measures of financial
performance prepared in accordance with GAAP, such as operating
(loss) income, net loss and cash flows from operations. Adjusted
EBITDA is susceptible to varying calculations and the Company’s
measurement of Adjusted EBITDA may not be comparable to those of
other companies.
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company focused on
technology which allows it to increase or decrease the level of
nicotine in tobacco plants and the level of cannabinoids in
cannabis plants through genetic engineering and plant breeding. The
Company’s primary mission in tobacco is to reduce the harm caused
by smoking. The Company’s primary mission in cannabis is to develop
proprietary cannabis strains for important new medicines and
agricultural crops. Visit www.xxiicentury.com and
www.botanicalgenetics.com for more information.
Cautionary Note Regarding Forward-Looking Statements: This press
release contains forward-looking information, including all
statements that are not statements of historical fact regarding the
intent, belief or current expectations of 22nd Century Group, Inc.,
its directors or its officers with respect to the contents of this
press release, including but not limited to our future revenue
expectations. The words “may,” “would,” “will,” “expect,”
“estimate,” “anticipate,” “believe,” “intend” and similar
expressions and variations thereof are intended to identify
forward-looking statements. We cannot guarantee future results,
levels of activity or performance. You should not place undue
reliance on these forward-looking statements, which speak only as
of the date that they were made. These cautionary statements should
be considered with any written or oral forward-looking statements
that we may issue in the future. Except as required by applicable
law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform
these statements to reflect actual results, later events or
circumstances, or to reflect the occurrence of unanticipated
events. You should carefully review and consider the various
disclosures made by us in our annual report on Form 10-K for the
fiscal year ended December 31, 2016, filed on March 8, 2017,
including the section entitled “Risk Factors,” and our other
reports filed with the U.S. Securities and Exchange Commission
which attempt to advise interested parties of the risks and factors
that may affect our business, financial condition, results of
operation and cash flows. If one or more of these risks or
uncertainties materialize, or if the underlying assumptions prove
incorrect, our actual results may vary materially from those
expected or projected.
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version on businesswire.com: http://www.businesswire.com/news/home/20170809006133/en/
22nd Century GroupInvestor Relations:IRTH CommunicationsAndrew
Haag, 866-976-4784xxii@irthcommunications.com
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