BUFFALO, N.Y., Nov. 08, 2022 (GLOBE NEWSWIRE) -- 22nd Century Group, Inc. (Nasdaq: XXII), a leading agricultural biotechnology company dedicated to improving health with reduced nicotine tobacco, hemp/cannabis, and hops advanced plant technologies, today reported results for the third quarter ended September 30, 2022, and provided an update on recent business highlights. The Company will host a live audio webcast today at 10:00 a.m. E.T.
James A. Mish, Chief Executive Officer of 22nd Century Group, stated: “The past few months have demonstrated tremendous commercial progress in 22nd Century’s reduced nicotine tobacco and hemp/cannabis businesses. Our VLN® product launch has expanded from the exceptional pilot in Chicago to now five states. We plan to expand that base to as many as 18 states over the next twelve months. Doing so would give us access to more than half the $80 billion U.S. tobacco market and position us in most, if not all, of the states that have enacted MRTP excise tax provisions favorable to our unique product authorization. Even just a 1% share, which we view as eminently achievable based on our pilot results, would be transformative to our revenue line. The FDA is also continuing to advance its interests in transformative menthol and reduced nicotine policies, and 22nd Century is positioned at the forefront of this opportunity with the only MRTP authorized 95% reduced nicotine combustible cigarette and years of clinical research documenting the benefits of our products.
“We also reported our first full quarter of hemp/cannabis revenue benefitting from the acquisition of GVB Biopharma this spring. We are now the largest merchant market supplier of CBD in North America and positioned to grow that stake even further. We are moving quickly to complete the startup of our new Prineville crude extraction plant and secure additional certifications for our facilities that will further differentiate our products and make us the premier supplier of hemp-derived extracts and ingredients to consumer and wellness products. Success in these endeavors will enable us to increase our gross margin on this portion of our business and compete from a position of strength in a much larger active ingredient market once FDA announces its highly anticipated new product standards for the industry.
“With a strengthened balance sheet and a clear path to increased revenue and gross margins, we are excited about the path forward as we work to rapidly drive market share and create operating scale across our business units,” concluded Mish.
Recent Key Financial and Business Highlights
Tobacco Business
Hemp/Cannabis Business
Corporate Business Highlights
Third Quarter 2022 Financial Results
Balance Sheet and Liquidity
Third Quarter Earnings Conference Call
22nd Century will host a live webcast today at 10:00 a.m. E.T. to discuss its third 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 22nd Century’s tobacco business, and Hugh Kinsman, chief financial officer, will provide an update on the Company.
Following prepared remarks, 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 by submitting them through the interactive webcast.
The live webcast, interactive Q&A, and slide presentation will be accessible in the Events section on 22nd Century’s Investor Relations website at https://www.xxiicentury.com/investors/events. An archived replay of the webcast 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 Reports filed on May 5, 2022 and August 9, 2022, respectively. 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
Mei Kuo
22nd Century Group, Inc.
Director, Communications & Investor Relations
[email protected]
Darrow Associates Investor Relations
Matt Kreps
T: 214-597-8200
[email protected]
22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands, except per-share data)
September 30, | December 31, | |||||||
2022 | 2021 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,364 | $ | 1,336 | ||||
Short-term investment securities | 41,357 | 47,400 | ||||||
Accounts receivable, net | 4,953 | 585 | ||||||
Inventory | 12,264 | 2,881 | ||||||
Prepaid expenses and other current assets | 3,463 | 2,183 | ||||||
Total current assets | 64,401 | 54,385 | ||||||
Property, plant and equipment, net | 18,279 | 5,841 | ||||||
Operating lease right-of-use assets, net | 2,429 | 1,723 | ||||||
Goodwill | 33,748 | — | ||||||
Intangible assets, net | 18,336 | 7,919 | ||||||
Investments | 981 | 2,345 | ||||||
Other assets | 4,002 | 3,741 | ||||||
Total assets | $ | 142,176 | $ | 75,954 | ||||
LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||||
Current liabilities: | ||||||||
Notes and loan payable | $ | 5,825 | $ | 596 | ||||
Operating and finance lease obligations | 927 | 308 | ||||||
Accounts payable | 5,787 | 2,173 | ||||||
Accrued expenses | 2,468 | 1,489 | ||||||
Accrued payroll | 1,043 | 2,255 | ||||||
Accrued excise taxes and fees | 1,525 | 1,270 | ||||||
Deferred income | 693 | 119 | ||||||
Other current liabilities | 397 | 217 | ||||||
Total current liabilities | 18,665 | 8,427 | ||||||
Long-term liabilities: | ||||||||
Notes payable | 220 | — | ||||||
Operating and finance lease obligations | 1,592 | 1,432 | ||||||
Other long-term liabilities | 611 | 21 | ||||||
Total liabilities | 21,088 | 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: | ||||||||
215,301,603 common shares (162,872,875 at December 31, 2021) | ||||||||
Common stock, par value | 2 | 2 | ||||||
Capital in excess of par value | 333,124 | 244,247 | ||||||
Accumulated other comprehensive loss | (507 | ) | (162 | ) | ||||
Accumulated deficit | (211,531 | ) | (178,013 | ) | ||||
Total shareholders' equity | 121,088 | 66,074 | ||||||
Total liabilities and shareholders’ equity | $ | 142,176 | $ | 75,954 |
22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(amounts in thousands, except per-share data)
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue, net | $ | 19,383 | $ | 7,811 | $ | 42,905 | $ | 22,988 | ||||||||
Cost of goods sold | 18,764 | 7,519 | 41,086 | 21,733 | ||||||||||||
Gross profit | 619 | 292 | 1,819 | 1,255 | ||||||||||||
Operating expenses: | ||||||||||||||||
Sales, general and administrative | 14,569 | 6,830 | 31,355 | 17,846 | ||||||||||||
Research and development | 1,318 | 1,031 | 4,355 | 2,789 | ||||||||||||
Total operating expenses | 15,887 | 7,861 | 35,710 | 20,635 | ||||||||||||
Operating loss | (15,268 | ) | (7,569 | ) | (33,891 | ) | (19,380 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Unrealized loss on investments | (345 | ) | (1,900 | ) | (2,046 | ) | (2,040 | ) | ||||||||
Gain on Panacea investment conversion | — | — | — | 2,548 | ||||||||||||
Realized loss on short-term investment securities | (35 | ) | — | (143 | ) | — | ||||||||||
Interest income, net | 113 | 52 | 211 | 272 | ||||||||||||
Interest expense | (148 | ) | (23 | ) | (230 | ) | (44 | ) | ||||||||
Total other income (expense) | (415 | ) | (1,871 | ) | (2,208 | ) | 736 | |||||||||
Loss before income taxes | (15,683 | ) | (9,440 | ) | (36,099 | ) | (18,644 | ) | ||||||||
Benefit for income taxes | (2,581 | ) | — | (2,581 | ) | — | ||||||||||
Net loss | $ | (13,102 | ) | $ | (9,440 | ) | $ | (33,518 | ) | $ | (18,644 | ) | ||||
Net loss per common share - basic and diluted | $ | (0.06 | ) | $ | (0.06 | ) | $ | (0.18 | ) | $ | (0.12 | ) | ||||
Weighted average common shares outstanding - basic and diluted (in thousands) | 210,131 | $ | 162,721 | $ | 185,269 | $ | 153,998 | |||||||||
Other comprehensive loss: | ||||||||||||||||
Unrealized loss on short-term investment securities | (19 | ) | (28 | ) | (488 | ) | (101 | ) | ||||||||
Reclassification of losses to net loss | 35 | — | 143 | — | ||||||||||||
Other comprehensive income (loss) | 16 | (28 | ) | (345 | ) | (101 | ) | |||||||||
Comprehensive loss | $ | (13,086 | ) | $ | (9,468 | ) | $ | (33,863 | ) | $ | (18,745 | ) |
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 nine months ended September 30, 2022 and 2021, including a reconciliation of these Non-GAAP measures for such periods.
Quarter Ended | ||||||||||||
September 30, | ||||||||||||
Dollar Amounts in Thousands ($000's) | ||||||||||||
(UNAUDITED) | ||||||||||||
$ Change | ||||||||||||
2022 | 2021 | fav / (unfav) | ||||||||||
Net loss | $ | (13,102 | ) | $ | (9,440 | ) | $ | (3,662 | ) | |||
Interest (income)/expense, net | 35 | (29 | ) | 64 | ||||||||
Amortization and depreciation | 1,068 | 341 | 727 | |||||||||
Benefit for income taxes | (2,581 | ) | — | (2,581 | ) | |||||||
EBITDA | $ | (14,580 | ) | $ | (9,128 | ) | $ | (5,452 | ) | |||
Adjustments: | ||||||||||||
Equity-based employee compensation expense | 2,247 | 1,119 | 1,128 | |||||||||
Unrealized loss (gain) on investment | 345 | 1,900 | (1,555 | ) | ||||||||
Inventory step-up | 978 | — | 978 | |||||||||
Adjusted EBITDA | $ | (11,010 | ) | $ | (6,109 | ) | $ | (4,901 | ) |
1Fav = Favorable variance, which increases EBITDA and Adjusted EBITDA; Unfav = unfavorable variance, which reduces EBITDA and Adjusted EBITDA
Year-to-date Ended | ||||||||||||
September 30, | ||||||||||||
Dollar Amounts in Thousands ($000's) | ||||||||||||
(UNAUDITED) | ||||||||||||
$ Change | ||||||||||||
2022 | 2021 | fav / (unfav) | ||||||||||
Net loss | $ | (33,518 | ) | $ | (18,644 | ) | $ | (14,874 | ) | |||
Interest (income)/expense, net | 19 | (227 | ) | 246 | ||||||||
Amortization and depreciation | 1,992 | 932 | 1,060 | |||||||||
Benefit for income taxes | (2,581 | ) | — | — | ||||||||
EBITDA | $ | (34,088 | ) | $ | (17,939 | ) | $ | (16,148 | ) | |||
Adjustments: | ||||||||||||
Equity-based employee compensation expense | 4,566 | 2,871 | 1,695 | |||||||||
Gain on Panacea investment conversion | — | (2,548 | ) | 2,548 | ||||||||
Unrealized loss (gain) on investment | 2,046 | 2,040 | 6 | |||||||||
Inventory step-up | 978 | — | 978 | |||||||||
Adjusted EBITDA | $ | (26,498 | ) | $ | (15,576 | ) | $ | (10,922 | ) |
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.
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