UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(d) of the
Securities
Exchange Act of 1934
Date
of Report (Date of earliest event reported): August 4, 2015
22nd
Century Group, Inc.
(Exact
Name of Registrant as Specified in Charter)
Nevada |
001-36338 |
98-0468420 |
(State or Other Jurisdiction of
Incorporation) |
(Commission File Number) |
(I.R.S. Employer
Identification No.) |
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9530 Main Street
Clarence, New York
(Address of Principal Executive Office) |
14031
(Zip Code) |
Registrant’s telephone number, including
area code: (716) 270-1523 |
Check the appropriate box below if the Form 8-K filing is intended
to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ¨ | Written communications pursuant to Rule 425 under the
Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b)
under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c)
under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 2.02. | Results of Operations and Financial Condition. |
On August 4, 2015,
22nd Century Group, Inc. (the “Company”) issued a press release announcing its financial results for the second quarter
ended June 30, 2015. A copy of the press release is furnished as Exhibit 99.1 herewith and is incorporated herein by reference.
| Item 9.01(d). | Financial Statements and Exhibits. |
Exhibit 99.1 Press Release dated August
4, 2015.
SIGNATURES
Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned
hereunto duly authorized.
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22nd Century Group, Inc. |
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/s/ Henry Sicignano, III |
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Date: August 4, 2015 |
Henry Sicignano, III |
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President and Chief Executive Officer |
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Exhibit 99.1
22nd Century Group Files Second Quarter
2015 Financial Results
And Announces Conference Call to Provide
Business Update
August 4, 2015
CLARENCE, N.Y.--(BUSINESS WIRE)--22nd Century Group, Inc. (NYSE
MKT: XXII) announced today that the Company filed its second quarter 2015 report on Form 10-Q with the U.S. Securities and Exchange
Commission and will provide a business update for investors on a conference call to be held Wednesday, August 5th, at 10:00 AM
(EasternTime).
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: 800-289-0544 and using Conference ID 8262329.
The conference call will consist of an overview of the financials
presented in the Company's second quarter 2015 Form 10-Q and a discussion of business highlights and updates. Immediately thereafter,
there will be a question and answer segment open to all callers.
While still not at full production capacity, in the second quarter
of 2015 the Company continued to grow revenues substantially through sales of RED SUN premium cigarettes, contract manufacturing
of a third-party MSA cigarette brand, and continued contract manufacturing of filtered cigars. The Company also recorded initial
sales of its proprietary “0.0mg nicotine” cigarette, MAGIC, in Europe during the second quarter. Revenues during
the second quarter of 2015, in the amount of $2,307,000, exceeded previously announced revenue expectations of $1,500,000 and were
dramatically higher than revenues of $529,000 for the entire year of 2014. The Company reported a net loss for the three months
ended June 30, 2015 of approximately $1.3 million (with approximately $484,000 of such amount consisting of net non-cash expenses,
and income of $1,000,000 from a non-recurring litigation settlement).
Going forward, the Company continues to expect to generate more than $5 million in revenue for the year.
Business Highlights and Updates
| · | We successfully obtained approval from all 50 states to sell our RED SUN super-premium cigarette brand across the country.
Subsequently, through tradeshows, distributor and retail partnerships, and targeted consumer marketing efforts, we have continued
to introduce and to grow our RED SUN brand in select markets across the United States. Earlier this summer, 22nd Century
added a significant consumer-oriented component to our RED SUN advertising efforts. In a campaign designed to convert premium-brand
smokers to RED SUN, we began employing information-based consumer advertising to increase awareness of both RED SUN
and 22nd Century Group more broadly. Notably, the RED SUN Brand Ambassador Program enables Company representatives to work
closely with owners and managers of independent smoke shops and tobacconists to offer special in-store RED SUN gift certificates
to smokers of competitive brands in opinion leading markets across the United States. |
| · | We successfully launched MAGIC, the world’s only “0.0mg nicotine” tobacco cigarette brand, in more
than 900 state-licensed retail shops in Spain in April 2015. In June, with pre-orders in hand for 150 tobacconists in the UK, the
Company intended to begin distribution of MAGIC cigarettes across England, Wales, and Scotland. However, due to a required change
in consumer warning labels on the packs, this introduction was postponed until the fall. Accordingly, this fall the Company intends
to launch Magic 0 and Magic 2 brand cigarettes in the UK, the Netherlands, Italy, and France. We also continue to explore possibilities
of launching MAGIC in other areas of Europe and in Asia.
|
| · | Aiming to become the first company in the world authorized by the FDA to market a reduced exposure combustible cigarette, this
quarter we dramatically increased work on our submissions to the FDA for our modified risk cigarettes in development. We trademarked
a new brand to be included in FDA submissions, designed proposed packaging and consumer advertisements, began focus group testing,
and engaged researchers to conduct modeling required for our application to the FDA. We now intend to submit to the FDA in the
fall of 2015 a completed application for our proprietary BRAND A very low nicotine tobacco cigarettes. If sufficient funds
are secured for additional exposure studies, we intend to submit in 2016 an application to the FDA for our BRAND B modified
risk cigarettes in development. Compared to all other cigarettes – made by any other tobacco company – we believe BRAND
B has the world’s lowest-tar-to-nicotine ratio. |
| · | Through the granting of new patents and the filing of new patent applications, we dramatically increased our intellectual property
portfolio this quarter. 22nd Century currently owns or exclusively controls more than 185 issued patents and more than an additional
54 pending patent applications around the world. We believe the true value of our Company – based solely on our extensive
intellectual property portfolio and not even considering the considerable value of the many other parts of our business –
is substantially greater than the value implied by our current share price. |
| · | We continue to move forward in our efforts with respect to (i) contracting with a joint venture partner to fund a Phase III
clinical trial for X-22, our smoking cessation product in development, and (ii) potential joint ventures and other business
opportunities in Asia for our unique tobaccos and finished cigarettes. The Company remains optimistic that it will be able to announce
one or more business contracts with Asian partners in 2015. |
| · | We continued to increase the base of third-party cigarette and filtered cigar contract manufacturing business at our NASCO
manufacturing facility in Mocksville, North Carolina. Even as we have realized significant early success in these efforts, our
factory has substantial manufacturing capacity above current production requirements. Going forward, we intend to use this excess
capacity to take on new manufacturing contracts that will generate additional revenue for the Company while also strengthening
our relationships in the industry. |
Second Quarter 2015 Financial Summary
For the three and six months ended June 30, 2015, net revenues
were $2,307,000 and $2,923,000, respectively, as compared to $16,000 and $464,000 for the three and six months ended June 30, 2014,
respectively. As discussed above, revenues for the three and six months ended June 30, 2015 were generated from the sales of various
cigarette and filtered cigar products manufactured at the Company’s factory and from sales of MAGIC cigarettes in
Europe. The sales for the three months ended June 30, 2014 in the amount of $16,000 were derived from the production of filtered
cigars, and the remainder of the revenue during the six months ended June 30, 2014 was generated from the sale of SPECTRUM
research cigarettes.
For the three and six months ended June 30, 2015, the Company
reported operating losses of $2.35 million and $6.47 million, respectively, as compared to operating losses of $2.04 million and
$3.23 million, respectively, for the three and six months ended June 30, 2014.
The Company’s net loss for the three months ended June
30, 2015 was $1.29 million or ($0.02) per share and $5.41 million or ($0.08) per share for the six months ended June 30, 2015,
as compared to a net loss of $1.97 million or ($0.03) per share for the three months ended June 30, 2014 and $7.28 million or ($0.13)
per share for the six months ended June 30, 2014. The Company’s losses decreased $0.68 million and $1.87 million, respectively,
for the three and six months ended June 30, 2015, as compared to the three and six months ended June 30, 2014. The decrease in
the net loss for the three months ended June 30, 2015 was primarily due to other income of $1,000,000 from the litigation settlement
offset by a decrease in gross loss of approximately $296,000. The decrease in the net loss for the six months ended June 30, 2015
was primarily a result of a decrease in the warrant liability gain (loss) - net of approximately $4,165,000 and the other income
of $1,000,000 from the litigation settlement, offset by a decrease in gross loss of approximately $583,000 and an increase in operating
expenses of approximately $2,658,000 (approximately $1,805,000 of this increase in operating expenses was the result of a non-cash
increase in stock based compensation expense).
Adjusted EBITDA (as described in the paragraph and tables below)
for the three months ended June 30, 2015 was a negative $1.8 million or ($0.03) per share and a negative $3.29 million or ($0.05)
per share for the six months ended June 30, 2015, as compared to Adjusted EBITDA of negative $0.85 million or ($0.01) per share
for the three months ended June 30, 2014 and negative $2.04 million or ($0.04) per share for the six months ended June 30, 2014.
Below are tables containing information relating to the Company’s
Adjusted EBITDA for the three and six months ended June 30, 2015 and 2014, including a reconciliation of net loss to Adjusted EBITDA
for such periods.
| |
Three Months Ended June 30, | |
| |
2015 | | |
2014 | | |
% Change | |
| |
| | |
| | |
| |
Net loss | |
$ | (1,288,703 | ) | |
$ | (1,965,815 | ) | |
| -34 | % |
Adjustments: | |
| | | |
| | | |
| | |
Warrant liability gain - net | |
| (112,620 | ) | |
| (74,117 | ) | |
| 52 | % |
Amortization and depreciation | |
| 188,332 | | |
| 124,344 | | |
| 51 | % |
Loss on equity investment | |
| 40,834 | | |
| - | | |
| 100 | % |
Interest expense | |
| 13,753 | | |
| 1,769 | | |
| 677 | % |
Stock based compensation | |
| 357,658 | | |
| 1,068,746 | | |
| -67 | % |
Settlement proceeds | |
| (1,000,000 | ) | |
| - | | |
| 100 | % |
| |
| | | |
| | | |
| | |
Adjusted EBITDA | |
$ | (1,800,746 | ) | |
$ | (845,073 | ) | |
| -113 | % |
| |
Six Months Ended June 30, | |
| |
2015 | | |
2014 | | |
% Change | |
| |
| | |
| | |
| |
Net loss | |
$ | (5,405,442 | ) | |
$ | (7,280,943 | ) | |
| -26 | % |
Adjustments: | |
| | | |
| | | |
| | |
Warrant liability (gain) loss - net | |
| (171,833 | ) | |
| 3,993,153 | | |
| -104 | % |
Warrant amendment inducement expense | |
| - | | |
| 144,548 | | |
| -100 | % |
Amortization and depreciation | |
| 373,729 | | |
| 195,613 | | |
| 91 | % |
Loss on equity investment | |
| 91,815 | | |
| - | | |
| 100 | % |
Interest expense | |
| 19,261 | | |
| 3,518 | | |
| 447 | % |
Stock based compensation | |
| 2,798,863 | | |
| 994,049 | | |
| 182 | % |
Settlement proceeds | |
| (1,000,000 | ) | |
| - | | |
| 100 | % |
Gain on the sale of machinery and equipment | |
| - | | |
| (85,621 | ) | |
| -100 | % |
| |
| | | |
| | | |
| | |
Adjusted EBITDA | |
$ | (3,293,607 | ) | |
$ | (2,035,683 | ) | |
| 62 | % |
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 expense items listed in the tables 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, 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 Group is a plant biotechnology company focused
on technology which allows it to increase or decrease the level of nicotine in tobacco plants through genetic engineering and plant
breeding. The Company’s mission is to reduce the harm caused by smoking. 22nd Century currently owns or exclusively controls
more than 185 issued patents and more than an additional 54 pending patent applications around the world. The Company’s strong
IP position led to a licensing agreement with British American Tobacco (“BAT”), the world’s second largest tobacco
company. Visit www.xxiicentury.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, 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.
Contacts
Investor Relations:
IRTH Communications
Andrew Haag, 866-976-4784
xxii@irthcommunications.com
or
Redington, Inc.
Tom Redington, 203-222-7399
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