XXII 22nd Century Group Inc

22nd Century Group, Inc. (NYSE MKT: XXII) today announced that the Company filed its third quarter 2014 report on Form 10-Q with the U.S. Securities and Exchange Commission.

Recent Business Highlights

• 22nd Century engaged a major contract research organization (“CRO”) with extensive experience in tobacco exposure studies to assist the Company in certain regulatory activities at the Center for Tobacco Products (“CTP”) of the U.S. Food and Drug Administration (“FDA”) related to the Company’s research to support the development of potentially less harmful or modified risk cigarettes. The Company and the CRO met with the CTP on November 12, 2014 to discuss the development plan for Brand B, a cigarette that produces smoke containing an extraordinarily low amount of “tar” per milligram of nicotine. Michael Moynihan, Vice President of R&D noted, “We are encouraged by the CTP’s constructive feedback, and plan to submit the complete study protocol for the initial exposure study of a Brand B investigational tobacco product in the 1st quarter of 2015.”
• The Company announced significant leadership changes; Company President, Henry Sicignano III, was appointed Chief Operating Officer and was charged with commercializing 22nd Century’s proprietary tobacco products and monetizing the Company’s intellectual property portfolio. The Company’s Board of Directors named James W. Cornell Chairman of the Board and also established an Executive Committee of the Board to provide direction for senior management while the Company conducts an executive search for a new CEO.
• The Company continued to move forward with two potential joint venture opportunities in Asia and with plans to sell commercial cigarettes in Europe. Samples of the Company’s very low nicotine cigarettes were manufactured for testing in both Europe and Asia. Samples of the Company’s proprietary “high nicotine” tobacco were also cured and prepared for both laboratory and sensory testing.
• The Company successfully closed a $10 Million private placement transaction with a strategic investor who became the Company’s largest single shareholder. The Company raised these funds through the sale of common stock at a price of $2.58 per share in order to finance (i) one or more potential joint ventures in Asia, (ii) exposure studies related to the Company’s modified risk products in development, and (iii) general working capital requirements.
• The Company became a signatory of the U.S. tobacco Master Settlement Agreement (“MSA”). Through the acquisition of NASCO Products, LLC, 22nd Century Group became the first company in more than six years allowed to become a new signatory to the MSA. Now, as a signatory to the MSA, the Company is in the process of listing its super-premium brands, RED SUN® and MAGIC®, on the state tobacco directories of approved products across the United States. The Company has begun production of RED SUN and intends to begin shipping in January 2015.
• The Company entered into a multi-year manufacturing agreement to produce Smoker Friendly private label cigarettes for Smoker Friendly International, a network of approximately 800 independently owned and operated stores across the United States.

Third Quarter 2014 Financial Highlights

For three and nine months ended September 30, 2014, revenue was $64,000 and $528,000 compared to $52,500 of revenue for the three and nine months ended September 30, 2013, respectively. The revenues consist of $80,000 generated from the manufacture of filtered cigars, including $64,000 in the third quarter, with the remainder of the revenue generated from the sale of SPECTRUM research cigarettes to the National Institute on Drug Abuse (“NIDA”), which is part of the National Institutes of Health (“NIH”), United States Department of Health and Human Services.

For the three and nine months ended September 30, 2014, 22nd Century Group reported operating losses of $2.82 million and $6.05 million, respectively, compared to operating losses of $1.09 million and $4.10 million, respectively, for the three and nine months ended September 30, 2013.

The Company’s net loss for the three months ended September 30, 2014 was $2.72 million or ($0.05) per share and $10.00 million or ($0.17) per share for the nine months ended September 30, 2014, compared to a net loss of $15.37 million or ($0.32) per share for the three months ended September 30, 2013 and $18.33 million or ($0.44) per share for the nine months ended September 30, 2013. The results for the nine months ended September 30, 2014 included non-operating expenses from (i) a non-cash change in the fair value of derivatives (warrant liability) of $3.85 million, (ii) a non-cash inducement expense of $145,000 from the amendment of certain warrants, and (iii) other net non-operating income of $40,000.

Adjusted EBITDA (as described in the paragraph and tables below) for the three months ended September 30, 2014 was a negative $1.93 million or ($0.03) per share and a negative $3.95 million or ($0.07) per share for the nine months ended September 30, 2014, compared to Adjusted EBITDA of negative $0.70 million or ($0.02) per share for the three months ended September 30, 2013 and negative $1.67 million or ($0.04) per share for the nine months ended September 30, 2013.

Below are tables containing information relating to the Company’s Adjusted EBITDA for the three and nine months ended September 30, 2014 and 2013, including a reconciliation of net loss to Adjusted EBITDA for such periods.

   

Three Months Ended September 30,

2014

 

2013

 

% Change

  Net loss $ (2,724,309 ) $ (15,372,517 ) -82 % Adjustments: Warrant liability (gain) loss - net (142,858 ) 13,727,891 -101 % Depreciation and amortization 130,349 63,518 105 % Loss on equity investment 26,057 - 100 % Interest expense and amortization of debt discount 1,788 557,821 -100 % Stock based compensation   778,323     322,591   141 %   Adjusted EBITDA $ (1,930,650 ) $ (700,696 ) 176 %      

Nine Months Ended September 30,

2014

 

2013

 

% Change

  Net loss $ (10,005,252 ) $ (18,331,675 ) -45 % Adjustments: Warrant liability loss - net 3,850,295 13,485,564 -71 % Warrant amendment inducement expense 144,548 - 100 % Depreciation and amortization 325,962 173,118 88 % Loss on equity investment 26,057 - 100 % Interest expense and amortization of debt discount 5,306 745,223 -99 % Stock based compensation 1,772,372 2,259,522 -22 % Gain on the sale of machinery and equipment   (71,121 )   -   100 %   Adjusted EBITDA $ (3,951,833 ) $ (1,668,248 ) 137 %  

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 expenses 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 income, net income 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.

For additional information, please visit: www.xxiicentury.com

About 22nd Century Group, Inc.

22nd Century is a plant biotechnology company whose proprietary technology allows for the levels of nicotine and other nicotinic alkaloids (e.g., nornicotine, anatabine and anabasine) in the tobacco plant to be decreased or increased through genetic engineering and plant breeding. The Company’s technology also allows the levels of cannabinoids to be decreased or increased in the cannabis plant. 22nd Century owns or is the exclusive licensee of 129 issued patents in 78 countries plus an additional 51 pending patent applications; 22nd Century also holds co-exclusive rights to another 16 patent applications. Goodrich Tobacco is focused on commercial tobacco products and potentially less harmful cigarettes. Botanical Genetics is focused on novel cannabis plant varieties and on cannabis-based products. Hercules Pharmaceuticals is focused on X-22, a prescription smoking cessation aid in development.

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. 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, 2013, filed on January 30, 2014, 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.

Redington, Inc.Tom Redington, 203-222-7399