XXII 22nd Century Group Inc

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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22nd Century GroupInvestor Relations:IRTH CommunicationsAndrew Haag, 866-976-4784xxii@irthcommunications.com