22nd Century Group, Inc. (NYSE MKT: XXII), a plant
biotechnology company that is a leader in tobacco harm reduction,
announced today the Company’s third quarter 2016 financial results
and will provide a business update for investors on a conference
call to be held on Wednesday, November 9th, 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: 800-768-6563 and
using Conference ID 3559524.
The conference call will consist of an overview of the
financials presented in the Company's third quarter 2016 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.
Recent Business Highlights
- In August 2016, the World Health
Organization (WHO) Study Group on Tobacco Product Regulation
recommended that all member countries adopt a policy limiting the
sale of cigarettes only to products with a very low nicotine
content. The WHO report explains that government-mandated nicotine
reduction strategies utilizing Very Low Nicotine cigarettes could:
1) decrease the number of smokers addicted to cigarettes, 2)
increase the number of smokers who are able to quit, and 3) reduce
the number of former smokers who relapse. Commenting on the WHO
report, Drs. Dorothy Hatsukami, Ghazi Zaatari and Eric Donny
concluded that the WHO recommendation to limit nicotine content to
a level below what is needed to sustain addiction “…has the
potential to save millions of lives...”
- The Company’s wholly-owned subsidiary,
Botanical Genetics LLC, announced in September 2016, an expanded
cannabis research program to include multiple new research projects
in support of its core mission, which is to develop proprietary
cannabis strains for important new medicines and commercially
viable agricultural crops. More specifically, Botanical Genetics
is: 1) actively is working to optimize hemp strains for broad
production in varied U.S. climates, 2) developing new technologies
to manipulate the cannabis plant genome, 3) together with its
partners, developing and refining cannabis varieties with cannabis
profiles that eliminate THC and boost production of medically
important CBD and CBC, and 4) developing the means to produce
cannabinoids in tobacco plants.
- In September 2016, 22nd Century also
announced results from two separate independent surveys showing
that strong consumer demand mirrors physicians’ willingness to
prescribe the Company’s X-22 smoking cessation aid in development.
Nearly 90% of smokers identified the X-22 smoking cessation product
as their preferred means to help them quit smoking. At the same
time, a vast majority of physicians (more than 88%) indicated that,
if the product were made available, they would prescribe X-22 for
their patients.
Third Quarter 2016 Financial Summary
Net sales revenue for the third quarter of 2016 were $3,098,000,
an increase of $430,000, or 16.1%, over net sales revenue of
$2,668,000 for the three months ended September 30, 2015. Net sales
revenues for the nine months ended September 30, 2016 were
$8,944,000, an increase of $3,353,000, or 60.0%, over net sales
revenue of $5,591,000 for the nine months ended September 30,
2015.
For the three months ended September 30, 2016, the Company
reported an operating loss of $2,596,000 as compared to an
operating loss of $2,758,000 for the three months ended September
30, 2015, a decrease in the operating loss of $162,000. The
decrease in the operating loss is primarily due to a decrease in
operating expenses of $65,000 and a decrease in the gross loss on
product sales in the amount of $97,000. For the nine months ended
September 30, 2016, the Company reported an operating loss of
$8,655,000, as compared to an operating loss of $9,238,000 for the
nine months ended September 30, 2015, a decrease of $583,000. The
decrease is primarily the result of a decrease in equity based
compensation of $2,504,000, a decrease in the gross loss on product
sales of $389,000, partially offset by an increase in other
operating expenses (excluding equity based compensation) in the
amount of $2,310,000.
The Company’s net loss for the three months ended September 30,
2016 was $2,680,000, or ($0.03) per share, as compared to a net
loss of $2,762,000, or ($0.04) per share, for the three months
ended September 30, 2015. The results for the three months ended
September 30,2016 included non-cash expenses consisting of (i)
equity based compensation totaling $205,000 and (ii) depreciation
and amortization in the amount of $211,000. The Company’s net loss
for the nine months ended September 30, 2016 was $8,835,000, or
($0.11) per share, as compared to a net loss of $8,167,000, or
($0.12) per share, for the nine months ended September 30, 2015.
The results for the nine months ended September 30,2016 included
non-cash expenses consisting of (i) equity based compensation
totaling $708,000 and (ii) depreciation and amortization in the
amount of $624,000. The net loss for the nine months ended
September 30, 2015 also included proceeds from a legal settlement
with an unrelated third-party in the amount of $1,000,000 reported
during the second quarter of 2015.
Adjusted EBITDA (as described in the paragraph and table below)
for the three months ended September 30, 2016 was a negative
$2,180,000, or ($0.03) per share, and a negative $2,148,000, or
($0.03) per share, for the three months ended September 30, 2015.
Adjusted EBITDA for the nine months ended September 30, 2016 was a
negative $7,323,000, or ($0.10) per share, and a negative
$5,455,000, or ($0.08) per share, for the nine months ended
September 30, 2015.
Below is a table containing information relating to the
Company’s Adjusted EBITDA for the three and nine months ended
September 30, 2016 and 2015, including a reconciliation of net loss
to Adjusted EBITDA for such periods.
Three Months Ended September 30, 2016
2015 % Change Net loss $ (2,679,988) $
(2,761,691) -3% Adjustments: Warrant liability loss (gain) - net
46,995 (27,723) -270% Depreciation and amortization 211,161 197,371
7% Loss on equity investment 29,997 33,211 -10% Interest expense
9,315 8,702 7% Interest income (2,131) (10,101) -79% Equity based
compensation - Third-party service providers - 97,969 -100%
Officers, directors and employees 204,860 314,743
-35%
Adjusted EBITDA $ (2,179,791) $
(2,147,519) 2% Nine Months Ended
September 30, 2016 2015 %
Change Net loss $ (8,834,794) $ (8,167,133) 8% Adjustments:
Warrant liability gain – net (14,602) (199,556) -93% Depreciation
and amortization 623,707 571,100 9% Loss on equity investment
172,068 125,026 38% Interest expense 29,011 27,963 4% Interest
income (6,729) (24,424) -72% Equity based compensation - Crede
consulting agreement - 1,978,785 -100% Third-party service
providers 30,873 232,187 -87% Officers, directors and employees
677,076 1,000,603 -32% Settlement proceeds -
(1,000,000) -100%
Adjusted EBITDA $
(7,323,390) $ (5,455,449) 34%
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.
Company Announcements Made Subsequent to the Close of the
Second Quarter of 2016
- On October 19, 2016, the Company closed
a registered direct stock offering and received approximately $11.4
million in gross proceeds through the sale of units priced at
$1.3425 per unit, which is $0.0625 per share above the closing
price of the Company’s common stock on the NYSE MKT on October 13,
2016, the date immediately prior to the signing of the stock
purchase agreement. The transaction included a total of 8,500,000
shares of the Company’s common stock and 66-month warrants to
purchase 4,250,000 shares of common stock at an exercise price of
$1.45 per share (exercisable after six months). The net proceeds of
the financing will be used for general corporate purposes,
including working capital.
- The Company announced results from two
separate independent clinical studies, each adding to the merit of
our Very Low Nicotine tobacco. In the October 2016 issue of
Psychopharmacology, a new independent clinical study concluded
that, even among vulnerable populations, 22nd Century’s Very Low
Nicotine tobacco cigarettes significantly reduce nicotine
withdrawal and craving symptoms. Also in October 2016, the
Addiction Journal published online a report that investigated
smokers’ cost sensitivity for Very Low Nicotine cigarettes. Led by
Dr. Eric Donny of the University of Pittsburg Cancer Institute, the
new publication focused on the real-world context of “normally
priced” cigarettes and found that, compared to conventional
cigarettes, 22nd Century’s Very Low Nicotine cigarettes reduced the
number of cigarettes that the participants estimated they would
smoke at every price range tested.
- The Company announced in October 2016,
the hiring of Michael Zercher as the Company’s Vice President of
Business Development. Mr. Zercher previously headed Santa Fe
Natural Tobacco Company’s international business operations based
in Zurich, Switzerland and will lead the Company’s efforts to form
strategic partnerships with companies capable of widely
commercializing 22nd Century’s proprietary brands and
products.
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 is to reduce the harm caused by smoking.
22nd Century currently owns or exclusively controls more than 200
issued patents and more than 50 pending patent applications around
the world. 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, 2015, filed on February 18, 2016,
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/20161108005272/en/
Investor Relations:IRTH CommunicationsAndrew Haag,
866-976-4784xxii@irthcommunications.comorRedington, Inc.Tom
Redington, 203-222-7399
22nd Century (AMEX:XXII)
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