22nd Century Group, Inc. (NYSE MKT: XXII) today announced that
the Company filed its 2014 Annual Report on Form 10-K with the U.S.
Securities and Exchange Commission. Due to travel schedules over
the next several days, the Company will be unable to conduct a
quarterly conference call this week; instead, 22nd Century will
provide a business update for investors on a conference call to be
held Wednesday, February 11th at 11:00 AM (EST).
Henry Sicignano, III, President and Chief Operating Officer of
22nd Century Group, together with John T. Brodfuehrer, Chief
Financial Officer, and Richard M. Sanders, an independent Director
of 22nd Century Group, will conduct the call. Interested parties
are invited to participate in the call by dialing: 888-820-9418 and
using Conference ID 8237107.
The conference call will consist of an overview of recent
business highlights and a summary of the financials presented in
the Company's 2014 Annual Report. Immediately thereafter, there
will be a question and answer segment open to all callers.
As expected, the Company’s 2014 financial performance reflects a
period of transition. As 22nd Century concluded its phase as a
company focused primarily on research and development, the Company
experienced a net loss of $15.6 million (which includes $9.5
million of non-cash expenses) on revenues of $529,000; during this
period in 2014, the Company also invested and/or committed to
invest $3.7 million in cash and $2.7 million in stock on intangible
assets and intellectual property related assets.
Moving forward, with a management team focused on monetizing the
Company’s vast intellectual property portfolio, 22nd Century has
recast its priorities to emphasize: (i) commercialization of RED
SUN® super-premium cigarettes in the US, (ii) launch of MAGIC® very
low nicotine cigarettes (“VLN”) internationally, (iii)
establishment of a base of third-party cigarette and filtered cigar
contract manufacturing business at the Company’s NASCO
manufacturing facility in Mocksville, North Carolina, (iv) pursuit
of FDA authorization for one or more of the Company’s modified risk
cigarettes in development, (v) contracting with a suitable joint
venture partner to fund and conduct a Phase III clinical trial for
X-22, the Company’s tobacco-based smoking cessation aid in
development, and (vi) establishment of substantial multi-year sales
contracts for the Company’s proprietary tobacco leaf and/or
finished tobacco products internationally (with immediate focus on
Asia).
Recent Business
Highlights
- As previously reported, on October 25,
2014, the 22nd Century Board of Directors terminated the employment
of Joseph Pandolfino, our former Chief Executive Officer. Although
Mr. Pandolfino will not be re-joining us as an employee or officer,
he remains a member of the Board of Directors.
- As the first company in more than six
years approved to become a new signatory to the MSA (as a result of
our acquisition of NASCO Products, LLC), the Company moved forward
with the regulatory process of listing its cigarette brands on the
state tobacco directories of approved products in each of the 50
states. To date, the Company has succeeded in listing RED SUN on 35
state directories, in addition to the directory of the District of
Columbia; RED SUN directory listings are pending in the remaining
15 states. The Company has begun production of RED SUN and began
shipping RED SUN to distributors in January 2015.
- Also in January 2015, the Company
established its “Trade Partners Program” as a strategic incentive
plan for the trade. Participating cigarette distributors earn a
credit of $1.00 worth of 22nd Century common stock as a rebate for
each carton of RED SUN purchased in 2015 and participating
retailers earn a credit of $3.00 worth of 22nd Century common stock
as a rebate for each carton of RED SUN purchased in 2015. The
Company believes the novel Trade Partners Program offers members of
the trade a strong incentive to carry and promote RED SUN brand
cigarettes.
- Further, in January 2015, the Company’s
wholly-owned subsidiary, NASCO Products, LLC, made its first
shipment of Smoker Friendly (“SF”) private label cigarettes after
the approval of the multi-year manufacturing agreement between the
Company and Smoker Friendly International, LLC by the 46 Settling
States, the District of Columbia, and 5 U.S. territories under the
MSA. Currently, the Company’s factory is increasing its production
and shipment of Smoker Friendly products as the prior manufacturer
of Smoker Friendly products winds down its inventory. Both
manufacturers will ship Smoker Friendly’s “SF” brand cigarettes
until March 31, 2015, at which time the prior manufacturer will
cease shipments and NASCO will have the exclusive right to both
manufacture and ship “SF” brand cigarettes to distributors who
serve more than 800 Smoker Friendly stores throughout the United
States.
- The Company continues to move forward
with potential joint venture opportunities in Asia. In January
2015, a team of tobacco executives and scientists from China
visited the Company’s manufacturing facility in Mocksville, North
Carolina. Recently, the Company formed a joint venture with Crede
CG III, Ltd and Century Champion Investments, Ltd. to conduct the
potential business of the joint venture. To further facilitate 22nd
Century’s business opportunities in China, the Company is in the
process of establishing a Wholly Foreign-Owned Enterprise (“WFOE”),
a customary and usual business entity formed under China law for
foreign parties that desire to conduct business in China. 22nd
Century executives are planning to make another trip to China in
March 2015. The Company is also investigating other potential
business opportunities in other parts of Asia for the Company’s
unique tobaccos and finished cigarettes. The Company is optimistic
that it will be able to announce one or more business contracts
with Asian partners in 2015.
- The Company continues to move forward
with efforts to launch its MAGIC brand of very low nicotine
cigarettes in Europe and Asia. Packaging approvals for the novel
product have been secured in Spain. Orion, the Company’s contract
cigarette manufacturer in Europe, will begin production of our
MAGIC brand in February 2015 for a product launch in Spain planned
for Q1 2015.
2014 Financial Summary
For the year ended December 31, 2014, revenue was $529,000
compared to $7,278,000 of revenue for the year ended December 31,
2013. The 2014 revenues consist of $448,000 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,
with the balance generated from the manufacture and sale of
filtered cigars. Revenues for the year ended December 31, 2013
included licensing revenue from British American Tobacco
(Investments) Limited of $7,000,000.
For the year ended December 31, 2014, the Company reported an
operating loss of $11.7 million as compared to operating income in
the amount of $1.8 million for the year ended December 31, 2013.
The decrease in operating income of $13.5 million is primarily the
result of a decrease in revenues of $6.8 million, an increase in
non-cash stock based compensation of $2.2 million, startup expenses
incurred at our manufacturing facility of $1.2 million, costs
related to a severance liability of $0.6 million, an increase of
$0.3 million in depreciation and amortization, and an increase in
other operating expenses of $2.4 million.
The Company’s net loss for the year ended December 31, 2014 was
$15.6 million or ($0.26) per share as compared to a net loss of
$26.2 million or ($0.60) per share for the year ended December 31,
2013. The results for the year ended December 31, 2014 included
non-cash expenses from (i) a change in the fair value of
derivatives (warrant liability) of $3.7 million, (ii) stock based
compensation of $4.5 million, and (iii) an inducement expense of
$145,000 from the amendment of certain warrants.
Adjusted EBITDA (as described in the paragraph and tables below)
for the year ended December 31, 2014 was a negative $6.1 million or
($0.10) per share and $4.3 million or $0.10 per share for the year
ended December 31, 2013.
Below are tables containing information relating to the
Company’s Adjusted EBITDA for the years ended December 31, 2014 and
2013, including a reconciliation of net loss to Adjusted EBITDA for
such periods.
Years Ended
December 31,
2014
2013
%
Change
Net loss $ (15,595,358) $ (26,153,158) -40% Adjustments:
Warrant liability loss - net 3,676,691 23,602,711 -84% Warrant
amendment inducement expense 144,548 3,736,313 -96% Depreciation
and amortization 462,772 144,289 221% Loss on equity investment
101,165 - 100% Interest expense and amortization of debt discount
7,094 748,605 -99% Stock based compensation 4,524,468 2,361,962 92%
Severance costs 637,301 - 100% Income tax credit refund - (122,024)
-100% Gain on the sale of machinery and equipment
(71,121) - 100%
Adjusted EBITDA
$
(6,112,440)
$
4,318,698
-242%
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 exclusively controls 128
issued patents plus an additional 52 pending patent applications;
the patents owned by us or exclusively licensed to us include
patents issued in 96 countries. 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, 2014, filed on February 5, 2015,
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
22nd Century (AMEX:XXII)
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