08/09/2022 | Press release | Distributed by Public on 08/09/2022 04:06
BUFFALO, N.Y., Aug. 09, 2022 (GLOBE NEWSWIRE) -- 22nd Century Group, Inc. (Nasdaq: XXII), a leading agricultural biotechnology company dedicated to improving human health with reduced nicotine tobacco, hemp/cannabis, and hops advanced plant technologies, today reported results for the second quarter ended June 30, 2022, and provided an update on recent business highlights. The Company will host a live audio webcast today at 10:00 a.m. ET.
James A. Mish, Chief Executive Officer of 22nd Century Group, stated: "Our VLN® pilot in Chicago is exceeding expectations, driving us to accelerate and expand our launch plans. The pilot and consumer studies have made clear that our approach focusing on awareness, education and trial is working with adult smokers. We are now testing specific offers designed to increase trial and repeat purchase among existing smokers looking to smoke less/reduce their nicotine consumption while also expanding our presence in Chicago and the State of Illinois.
"We are also expanding our VLN® launch to the state of Colorado ahead of plan. Colorado offers a reduced taxation rate for MRTP authorized products, providing a favorable cost structure for our VLN® products in that state as compared to traditional premium cigarettes. Additionally, and more importantly, we are working closely with a major consumer packaged goods (CPG) distributor and a long-standing specialty distributor covering convenience, grocery, and drug stores across the state, giving us full access to a broad range of more than 3,000 targeted statewide potential points of sale.
"We continue to be confident about proposed federal policy changes and independent state actions that could take our game-changing product and its FDA authorized claims nation-wide in the U.S. Doing so would dramatically change the tobacco marketplace by offering smokers a real choice; a product that can help adult smokers to smoke less. It is clearer than ever that there is real commitment from both adult smokers, the federal government, and the states to change tobacco consumption practices, which includes reducing the nicotine content in cigarettes for the betterment of public health."
Significantly, the Company has also acquired GVB Biopharma, a leading hemp/cannabis extraction and white label CDMO, effective May 13, 2022. The transaction is expected to double 22nd Century's total revenue and provide consumers with hemp/cannabis products that have the highest levels of quality, reliability, consistency, and stability.
"The addition of GVB gives 22nd Century a global leading extraction, ingredients, and CDMO product capability with a world-scale expansion of extraction capabilities nearing completion. Integration of the companies is effectively complete, leading to an approximate doubling of our revenue going forward. We believe 22nd Century is now the most comprehensive vertically integrated supply chain in hemp/cannabis, offering distinct competitive advantages from plant genetics to finished white label goods on the shelf for consumers," continued Mish. "We are actively pursuing additional contracts in the industry to accelerate GVB's existing growth opportunities while at the same time working to integrate our high-yield plant strains into GVB's supply chain, further enhancing the productivity and profitability of this franchise. We expect our hemp/cannabis operations to be cash positive at the first quarter 2023 as a result of the investments we are making today."
Recent Key Financial and Business Highlights
Tobacco Franchise
Hemp/Cannabis Franchise
Hops Franchise
Corporate Business Highlights
Second Quarter 2022 Financial Results
Balance Sheet and Liquidity
Second Quarter Earnings Conference Call
22nd Century will host a live webcast today at 10:00 a.m. ET to discuss its second quarter 2022 financial results and business highlights. During the webcast, James A. Mish, Chief Executive Officer of 22nd Century Group, together with John Miller, President of the tobacco division, and Hugh Kinsman, Chief Financial Officer, will provide an update on progress made in each of the Company's three franchises.
Following prepared remarks, including an accompanying slide presentation, the Company will host a Q&A session, during which management will accept questions from interested analysts. Investors, shareholders, and members of the media will also have the opportunity to pose questions to management by submitting questions through the interactive webcast during the event.
The live and archived webcast, interactive Q&A, and slide presentation will be accessible on the Events web page in the Company's Investor Relations section of the website, at https://www.xxiicentury.com/investors/events. An archived replay of the webcast and the event transcript will also be available shortly after the live event has concluded.
About 22nd Century Group, Inc.
22nd Century Group, Inc. (Nasdaq: XXII) is a leading agricultural biotechnology company focused on tobacco harm reduction, reduced nicotine tobacco and improving health and wellness through plant science. With dozens of patents allowing it to control nicotine biosynthesis in the tobacco plant, the Company has developed proprietary reduced nicotine content (RNC) tobacco plants and cigarettes, which have become the cornerstone of the FDA's Comprehensive Plan to address the widespread death and disease caused by smoking. The Company received the first and only FDA MRTP authorization of a combustible cigarette in December 2021. In tobacco, hemp/cannabis, and hop plants, 22nd Century uses modern plant breeding technologies, including genetic engineering, gene-editing, and molecular breeding to deliver solutions for the life science and consumer products industries by creating new, proprietary plants with optimized alkaloid and flavonoid profiles as well as improved yields and valuable agronomic traits.
Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.
Learn more about VLN® at tryvln.com.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this press release are forward-looking statements. Forward-looking statements typically contain terms such as "anticipate," "believe," "consider," "continue," "could," "estimate," "expect," "explore," "foresee," "goal," "guidance," "intend," "likely," "may," "plan," "potential," "predict," "preliminary," "probable," "project," "promising," "seek," "should," "will," "would," and similar expressions. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in "Risk Factors" in the Company's Annual Report on Form 10-K filed on March 1, 2022 and in the Company's Quarterly Report filed on May 5, 2022. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.
Investor Relations & Media Contact
Joseph T. Schepers
22nd Century Group, Inc.
Vice President Investor Relations and Communications
[email protected]
Darrow Associates Investor Relations
Matt Kreps
T: 214-597-8200
[email protected]
22nd CENTURY GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) ($ in thousands, except per-share data) |
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June 30, | December 31, | |||||||
2022 |
2021 |
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ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,668 | $ | 1,336 | ||||
Short-term investment securities | 23,574 | 47,400 | ||||||
Accounts receivable, net | 4,655 | 585 | ||||||
Inventory | 10,018 | 2,881 | ||||||
Prepaid expenses and other current assets | 3,765 | 2,183 | ||||||
Total current assets | 44,680 | 54,385 | ||||||
Property, plant and equipment, net | 14,434 | 5,841 | ||||||
Operating leases right-of-use assets, net | 2,348 | 1,723 | ||||||
Goodwill | 44,200 | - | ||||||
Intangible assets, net | 7,890 | 7,919 | ||||||
Investments | 1,326 | 2,345 | ||||||
Other assets | 4,583 | 3,741 | ||||||
Total assets | $ | 119,461 | $ | 75,954 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Notes and loan payable | $ | 6,328 | $ | 596 | ||||
Operating lease obligations | 788 | 308 | ||||||
Accounts payable | 4,523 | 2,173 | ||||||
Accrued expenses | 2,616 | 1,489 | ||||||
Accrued payroll | 930 | 2,255 | ||||||
Accrued excise taxes and fees | 1,656 | 1,270 | ||||||
Deferred income | 1,083 | 119 | ||||||
Other current liabilities | 189 | 217 | ||||||
Total current liabilities | 18,113 | 8,427 | ||||||
Long-term liabilities: | ||||||||
Notes payable | 253 | - | ||||||
Operating lease obligations | 1,652 | 1,432 | ||||||
Other long-term liabilities | - | 21 | ||||||
Total liabilities | 20,018 | 9,880 | ||||||
Commitments and contingencies (Note 9) | ||||||||
Shareholders' equity | ||||||||
Preferred stock, $.00001 par value, 10,000,000 shares authorized | ||||||||
Common stock, $.00001 par value, 300,000,000 shares authorized | ||||||||
Capital stock issued and outstanding: | ||||||||
197,661,566 common shares (162,872,875 at December 31, 2021) | ||||||||
Common stock, par value | 2 | 2 | ||||||
Capital in excess of par value | 298,393 | 244,247 | ||||||
Accumulated other comprehensive loss | (523 | ) | (162 | ) | ||||
Accumulated deficit | (198,429 | ) | (178,013 | ) | ||||
Total shareholders' equity | 99,443 | 66,074 | ||||||
Total liabilities and shareholders' equity | $ | 119,461 | $ | 75,954 | ||||
22nd CENTURY GROUP, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) ($ in thousands, except per-share data) |
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Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue, net | $ | 14,477 | $ | 8,371 | $ | 23,521 | $ | 15,177 | ||||||||
Cost of goods sold | 13,585 | 7,922 | 22,321 | 14,214 | ||||||||||||
Gross profit | 892 | 449 | 1,200 | 963 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 1,897 | 903 | 3,036 | 1,758 | ||||||||||||
Sales, general and administrative | 9,471 | 6,185 | 16,785 | 11,015 | ||||||||||||
Total operating expenses | 11,368 | 7,089 | 19,821 | 12,774 | ||||||||||||
Operating loss | (10,476 | ) | (6,640 | ) | (18,621 | ) | (11,811 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Unrealized gain (loss) on investments | (885 | ) | (176 | ) | (1,702 | ) | (140 | ) | ||||||||
Gain on Panacea investment conversion | - | 2,548 | - | 2,548 | ||||||||||||
Realized gain (loss) on short-term investment securities | (108 | ) | - | (108 | ) | - | ||||||||||
Interest income, net | 48 | 108 | 98 | 220 | ||||||||||||
Interest expense | (77 | ) | (14 | ) | (82 | ) | (21 | ) | ||||||||
Total other income (expense) | (1,022 | ) | 2,466 | (1,794 | ) | 2,607 | ||||||||||
Loss before income taxes | (11,498 | ) | (4,174 | ) | (20,415 | ) | (9,204 | ) | ||||||||
Income taxes | - | - | - | - | ||||||||||||
Net loss | $ | (11,498 | ) | $ | (4,174 | ) | $ | (20,415 | ) | $ | (9,204 | ) | ||||
Other comprehensive loss: | ||||||||||||||||
Unrealized loss on short-term investment securities | (69 | ) | (41 | ) | (469 | ) | (73 | ) | ||||||||
Reclassification of (gain) loss to net loss | 108 | - | 108 | - | ||||||||||||
Other comprehensive loss | 39 | (41 | ) | (361 | ) | (73 | ) | |||||||||
Comprehensive loss | $ | (11,459 | ) | $ | (4,215 | ) | $ | (20,776 | ) | $ | (9,277 | ) | ||||
Net loss per common share - basic and diluted | $ | (0.06 | ) | $ | (0.03 | ) | $ | (0.12 | ) | $ | (0.06 | ) | ||||
Weighted average common shares outstanding - basic and diluted (in thousands) | 182,004 | $ | 154,811 | $ | 172,632 | $ | 149,564 | |||||||||
Reconciliations of Non-GAAP Measures
Below is a table containing information relating to the Company's Net loss, EBITDA and Adjusted EBITDA for the three and six months ended June 30, 2022 and 2021, including a reconciliation of these Non-GAAP measures for such periods.
Quarter Ended | ||||||||||||
June 30, | ||||||||||||
Dollar Amounts in Thousands ($000's) | ||||||||||||
(UNAUDITED) | ||||||||||||
$ Change | ||||||||||||
2022 | 2021 | fav / (unfav) | ||||||||||
Net loss | $ | (11,498 | ) | $ | (4,174 | ) | $ | (7,324 | ) | |||
Interest (income)/expense, net | 29 | (93 | ) | 122 | ||||||||
Amortization and depreciation | 595 | 302 | 293 | |||||||||
EBITDA | $ | (10,874 | ) | $ | (3,965 | ) | $ | (6,909 | ) | |||
Adjustments: | ||||||||||||
Equity-based employee compensation expense | 1,106 | 1,245 | (139 | ) | ||||||||
Gain on Panacea investment conversion | - | (2,548 | ) | 2,548 | ||||||||
Unrealized loss (gain) on investment | 885 | 176 | 709 | |||||||||
Inventory step-up | 978 | - | 978 | |||||||||
Adjusted EBITDA | $ | (7,905 | ) | $ | (5,092 | ) | $ | (2,813 | ) |
1Fav = Favorable variance, which increases EBITDA and Adjusted EBITDA; Unfav = unfavorable variance, which reduces EBITDA and Adjusted EBITDA
Year-to-date Ended | ||||||||||||
June 30, | ||||||||||||
Dollar Amounts in Thousands ($000's) | ||||||||||||
(UNAUDITED) | ||||||||||||
$ Change | ||||||||||||
2022 | 2021 | fav / (unfav) | ||||||||||
Net loss | $ | (20,415 | ) | $ | (9,204 | ) | $ | (11,211 | ) | |||
Interest (income)/expense, net | (16 | ) | (199 | ) | 183 | |||||||
Amortization and depreciation | 924 | 590 | 334 | |||||||||
EBITDA | $ | (19,507 | ) | $ | (8,813 | ) | $ | (10,694 | ) | |||
Adjustments: | ||||||||||||
Equity-based employee compensation expense | 2,319 | 1,752 | 567 | |||||||||
Gain on Panacea investment conversion | - | (2,548 | ) | 2,548 | ||||||||
Unrealized loss (gain) on investment | 1,702 | 140 | 1,562 | |||||||||
Inventory step-up | 978 | - | 978 | |||||||||
Adjusted EBITDA | $ | (14,508 | ) | $ | (9,469 | ) | $ | (5,039 | ) |
1Fav = Favorable variance, which increases EBITDA and Adjusted EBITDA; Unfav = unfavorable variance, which reduces EBITDA and Adjusted EBITDA
Notes regarding Non-GAAP Financial Information
In addition to the Company's reported results in accordance with generally accepted accounting principles in the United States of America ("GAAP"), the Company provides EBITDA and Adjusted EBITDA.
In order to calculate EBITDA, the Company adjusts net (loss) income by adding back interest expense (income), provision (benefit) for income taxes, and depreciation and amortization expense from intangible assets. Adjusted EBITDA consists of EBITDA adjusted by the Company for certain non-cash and non-operating expense, including adding back equity-based employee compensation expense, (gain) loss on investments, inventory step-up amortization, and any unusual or infrequently occurring items.
The Company believes that the presentation of EBITDA and Adjusted EBITDA are important financial measures that supplement discussion and analysis of its financial condition and results of operations and enhances an understanding of its operating performance. While management considers EBITDA and Adjusted EBITDA to be important, these financial performance measures 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) 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.
Released August 9, 2022