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That’s an old habit that’s hard to break....dropping on good news happens more often than not.
Up on news? That’s a new one. Wondering what some of the other ‘old timers’ on here think. (And I mean that in the nicest way) lol.
Did ya miss me?
Shares held by institutions up to 36%.... thoughts?
Wow... Closed up on a press release day... Maybe we've turned the corner!
I stopped by the XXII office today (since it is down the street from my daughters orthodontist) and Henry was kind enough to sit down with me for a few minutes and brief me on information that was shared at the share holders meeting. (My husband and I could not attend even though we are 'locals'.) I'm not sure how many on this board were able to attend the meeting, but I don't recall anyone mentioning the brochure that was placed on everyone's seat...and that surprises me. It is a beautiful and informative piece related to 'Magic'.
I'm not sure about others on this board, but when my husband initially approached me about investing in a 'cigarette' company my knee jerk reaction was a resounding NO. We do not smoke, and do not wish to promote smoking. The piece of the company that peaked my interest and finally changed my opinion about investing was the companies interest in reducing harm and assisting in smoking cessation...and Magic is a good step in the right direction.
I have been and will continue to be a 'long' with this company...once the we get through the government red tape required to fully market our products...the sky is the limit!
22nd Century’s Fox Business Network Appearance Rescheduled
12:17pm ET, 04/28/2015 - Business Wire
“Varney & Co” Segment Moved to Wednesday, April 29, 2015 at 12:50 p.m. EDT
CLARENCE, N.Y.--(BUSINESS WIRE)--Apr. 28, 2015-- 22nd Century Group, Inc. (NYSE MKT: XXII), a leader in very low nicotine tobacco technology and tobacco harm reduction, today announced that due to the extensive coverage of the ongoing Baltimore unrest, the previously announced interview of 22nd Century’s President and Chief Executive Officer, Henry Sicignano III, by Stuart Varney of Fox Business’ “Varney & Co” has been moved from today to Wednesday, April 29, 2015 at 12:50 p.m. EDT.
Revised Varney & Co. with Stuart Varney programming details are as follows:
Date: Wednesday, April 29, 2015
Start Time: 12:50 p.m. EDT
Live TV: Fox Business Network
Probably the same guy that caused a ruckus at last years meeting...it got a little tense..he was belligerent.
Good Morning...I just wanted to let those of you who I have seen at previous shareholder meetings that unfortunately I will not be attending this year. It just happens to be opening day for our kids little league and our family also has a Bat Mitzvah to attend that afternoon. I look forward to the notes that will be shared after the meeting...and am curious as to what the 'gift' will be this year! GLTA...see you next year!
Em
That is Alternative Brews...there has been some discussion on the board about this. I can't remember who mentioned it, but there was a post stating that they have yet to get any in stock. You might want to call them first. If you find out that they do have some in stock please update us. I would like to purchase some as well.
Did Alt. Brews sat when they expected to get them in?
I bet they'll be even higher in NY. I'm going to buy a pack this weekend here in WNY...I'll let you know how much.
Yup...looking forward to it! I wouldn't miss this one for the world!
awesome...thanks!
Thanks! Can you do the same for the Pandolfino case?
Come on now...there are worse places than Clarence (an affluent suburb of Buffalo)! Great schools, low crime, low cost of living just to name a few positives! Sure we are buried with snow right now, but there is more too our area than that! Take a look!
His point is that he wants the product to present itself as the premium product that it is...like a craft beer... Convenient stores sell Budweiser... Specialty beer/liquor stores sell microbrews etc.
22nd Century Group Establishes Trade Partners Program to Promote the Sale of RED SUN Cigarettes
8:51am ET, 01/12/2015 - Business Wire
CLARENCE, N.Y.--(BUSINESS WIRE)--Jan. 12, 2015-- 22nd Century Group, Inc. (NYSE MKT: XXII) today announced that the Company has established its “Trade Partners Program” to provide retailers and distributors the opportunity to receive shares of 22nd Century Group common stock as a rebate for purchases of RED SUN brand cigarettes. The Company filed with the U.S. Securities and Exchange Commission on January 9, 2015 a prospectus supplement relating to the Trade Partners Program, in which up to $3.0 million of the Company's pre-existing $45 million Form S-3 shelf registration statement (File No. 333-195386) may be used for common stock issuances under the program (not to exceed 300,000 shares).
The Company established its Trade Partners Program as a strategic incentive plan to give eligible cigarette distributors and retailers the opportunity to earn publicly tradable shares of the Company's common stock in consideration for purchases of the Company's RED SUN brand of cigarettes. Participating distributors will earn $1.00 worth of 22nd Century common stock as a rebate for each carton of RED SUN purchased in 2015 and participating retailers will earn $3.00 worth of 22nd Century common stock as a rebate for each carton of RED SUN purchased in 2015.
Various incentive and rebate programs are already prevalent in the cigarette industry; however, for awarding common stock that is freely tradable on the NYSE MKT exchange, the Trade Partners Program is truly unique. The Company believes that the novel program will be a compelling vehicle to incent cigarette distributors and retailers to purchase and promote RED SUN cigarettes.
Positioned to compete with leading brands like Marlboro® and Camel,® RED SUN is a highly innovative cigarette designed to appeal to upscale, educated consumers while also winning the loyalty of specialty retailers and distributors who were instrumental in building Santa Fe Natural Tobacco Company’s Natural American Spirit® brand.
22nd Century’s President and Chief Operating Officer, Henry Sicignano III, explained, “While spearheading sales and marketing efforts at Santa Fe Natural Tobacco Company, I had opportunities to talk with and learn from hundreds of tobacconists who championed American Spirit. Though they appreciated the sales and profits afforded by American Spirit, these small business owners expressed to me widespread disappointment that they never had the opportunity to own equity in the brand or in Santa Fe Natural Tobacco Company.”
“22nd Century is changing all that,” Mr. Sicignano continued. “Through our Trade Partners Program we are offering retailers and distributors an extraordinary opportunity to become 22nd Century Group shareholders… and a strong incentive to grow RED SUN sales in 2015.”
Many retailers who have committed to stocking 22nd Century products have informed the Company that they have already purchased the Company’s common stock on the open market. 22nd Century’s Chief Financial Officer, John Brodfuehrer explained, “We believe all of the retailers and distributors who are aware of the next phase in our Company’s development – especially pertaining to our modified risk cigarettes in development – are impressed that 22nd Century has a mission of reducing the harm caused by smoking. Furthermore, tobacconists understand that there is a huge market demand for a reduced risk combustible cigarette. We intend to meet that demand.”
For additional information about 22nd Century Group, please visit: www.xxiicentury.com
Additional Information about the Trade Partners Program
The Company has filed a registration statement (including a prospectus and prospectus supplement) on Form S-3 (File No. 333-195386) with the Securities and Exchange Commission (“SEC”) for the offering to which this communication relates. For more information on the Trade Partners Program, you should read the prospectus in that registration statement, the prospectus supplement filed on January 9, 2015 forming a part thereof, and other documents that the Company has filed with the SEC for more complete information about the Company and this offering. You may obtain these documents for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively, the Company will arrange to send you copies of the prospectus and most recent prospectus supplement if you request such documents by calling us at (716) 270-1523.
This is not an offer to buy or the solicitation of an offer to sell any security of the Company nor will there be any offer, sale or solicitation of any security in any jurisdiction in which such offer, sale or solicitation would be unlawful.
Notwithstanding anything to the contrary contained herein, the above summary of the Trade Partners Program is qualified in its entirety by the more detailed and most current official rules of the Trade Partners Program contained in the most recently filed registration statement (including all prospectuses and prospectus supplements) relating thereto.
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company whose proprietary technology allows for the levels of nicotine and other nicotinic alkaloids (e.g., nornicotine, anatabine and anabasine) in the tobacco plant to be decreased or increased through genetic engineering and plant breeding. The Company’s technology also allows the levels of cannabinoids to be decreased or increased in the cannabis plant. 22nd Century owns or is the exclusive licensee of 128 issued patents plus an additional 53 pending patent applications; 22nd Century also holds co-exclusive rights to another 2 patents and 16 patent applications. Goodrich Tobacco Company, LLC, Hercules Pharmaceuticals, LLC and Botanical Genetics, LLC are wholly-owned subsidiaries of 22nd Century. Goodrich Tobacco is focused on commercial tobacco products and potentially less harmful cigarettes. Hercules Pharmaceuticals is focused on X-22, a prescription smoking cessation aid in development. Botanical Genetics is focused on novel cannabis plant varieties and on cannabis-based products.
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. 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, 2013, filed on January 30, 2014, 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.
Source: 22nd Century Group, Inc.
Redington, Inc.
Tom Redington, 203-222-7399
(0413-2246)
22nd Century Group Reports Third Quarter 2014 Financial Results
10:12am ET, 11/14/2014 - Business Wire
CLARENCE, N.Y.--(BUSINESS WIRE)--Nov. 14, 2014-- 22nd Century Group, Inc. (NYSE MKT: XXII) today announced that the Company filed its third quarter 2014 report on Form 10-Q with the U.S. Securities and Exchange Commission.
Recent Business Highlights
22nd Century engaged a major contract research organization (“CRO”) with extensive experience in tobacco exposure studies to assist the Company in certain regulatory activities at the Center for Tobacco Products (“CTP”) of the U.S. Food and Drug Administration (“FDA”) related to the Company’s research to support the development of potentially less harmful or modified risk cigarettes. The Company and the CRO met with the CTP on November 12, 2014 to discuss the development plan for Brand B, a cigarette that produces smoke containing an extraordinarily low amount of “tar” per milligram of nicotine. Michael Moynihan, Vice President of R&D noted, “We are encouraged by the CTP’s constructive feedback, and plan to submit the complete study protocol for the initial exposure study of a Brand B investigational tobacco product in the 1st quarter of 2015.”
The Company announced significant leadership changes; Company President, Henry Sicignano III, was appointed Chief Operating Officer and was charged with commercializing 22nd Century’s proprietary tobacco products and monetizing the Company’s intellectual property portfolio. The Company’s Board of Directors named James W. Cornell Chairman of the Board and also established an Executive Committee of the Board to provide direction for senior management while the Company conducts an executive search for a new CEO.
The Company continued to move forward with two potential joint venture opportunities in Asia and with plans to sell commercial cigarettes in Europe. Samples of the Company’s very low nicotine cigarettes were manufactured for testing in both Europe and Asia. Samples of the Company’s proprietary “high nicotine” tobacco were also cured and prepared for both laboratory and sensory testing.
The Company successfully closed a $10 Million private placement transaction with a strategic investor who became the Company’s largest single shareholder. The Company raised these funds through the sale of common stock at a price of $2.58 per share in order to finance (i) one or more potential joint ventures in Asia, (ii) exposure studies related to the Company’s modified risk products in development, and (iii) general working capital requirements.
The Company became a signatory of the U.S. tobacco Master Settlement Agreement (“MSA”). Through the acquisition of NASCO Products, LLC, 22nd Century Group became the first company in more than six years allowed to become a new signatory to the MSA. Now, as a signatory to the MSA, the Company is in the process of listing its super-premium brands, RED SUN® and MAGIC®, on the state tobacco directories of approved products across the United States. The Company has begun production of RED SUN and intends to begin shipping in January 2015.
The Company entered into a multi-year manufacturing agreement to produce Smoker Friendly private label cigarettes for Smoker Friendly International, a network of approximately 800 independently owned and operated stores across the United States.
Third Quarter 2014 Financial Highlights
For three and nine months ended September 30, 2014, revenue was $64,000 and $528,000 compared to $52,500 of revenue for the three and nine months ended September 30, 2013, respectively. The revenues consist of $80,000 generated from the manufacture of filtered cigars, including $64,000 in the third quarter, with the remainder of the revenue generated from the sale of SPECTRUM research cigarettes to the National Institute on Drug Abuse (“NIDA”), which is part of the National Institutes of Health (“NIH”), United States Department of Health and Human Services.
For the three and nine months ended September 30, 2014, 22nd Century Group reported operating losses of $2.82 million and $6.05 million, respectively, compared to operating losses of $1.09 million and $4.10 million, respectively, for the three and nine months ended September 30, 2013.
The Company’s net loss for the three months ended September 30, 2014 was $2.72 million or ($0.05) per share and $10.00 million or ($0.17) per share for the nine months ended September 30, 2014, compared to a net loss of $15.37 million or ($0.32) per share for the three months ended September 30, 2013 and $18.33 million or ($0.44) per share for the nine months ended September 30, 2013. The results for the nine months ended September 30, 2014 included non-operating expenses from (i) a non-cash change in the fair value of derivatives (warrant liability) of $3.85 million, (ii) a non-cash inducement expense of $145,000 from the amendment of certain warrants, and (iii) other net non-operating income of $40,000.
Adjusted EBITDA (as described in the paragraph and tables below) for the three months ended September 30, 2014 was a negative $1.93 million or ($0.03) per share and a negative $3.95 million or ($0.07) per share for the nine months ended September 30, 2014, compared to Adjusted EBITDA of negative $0.70 million or ($0.02) per share for the three months ended September 30, 2013 and negative $1.67 million or ($0.04) per share for the nine months ended September 30, 2013.
Below are tables containing information relating to the Company’s Adjusted EBITDA for the three and nine months ended September 30, 2014 and 2013, including a reconciliation of net loss to Adjusted EBITDA for such periods.
Three Months Ended September 30,
2014
2013
% Change
Net loss $ (2,724,309 ) $ (15,372,517 ) -82 %
Adjustments:
Warrant liability (gain) loss - net (142,858 ) 13,727,891 -101 %
Depreciation and amortization 130,349 63,518 105 %
Loss on equity investment 26,057 - 100 %
Interest expense and amortization of debt discount 1,788 557,821 -100 %
Stock based compensation 778,323 322,591 141 %
Adjusted EBITDA $ (1,930,650 ) $ (700,696 ) 176 %
Nine Months Ended September 30,
2014
2013
% Change
Net loss $ (10,005,252 ) $ (18,331,675 ) -45 %
Adjustments:
Warrant liability loss - net 3,850,295 13,485,564 -71 %
Warrant amendment inducement expense 144,548 - 100 %
Depreciation and amortization 325,962 173,118 88 %
Loss on equity investment 26,057 - 100 %
Interest expense and amortization of debt discount 5,306 745,223 -99 %
Stock based compensation 1,772,372 2,259,522 -22 %
Gain on the sale of machinery and equipment (71,121 ) - 100 %
Adjusted EBITDA $ (3,951,833 ) $ (1,668,248 ) 137 %
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 expenses 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 income, net 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.
For additional information, please visit: www.xxiicentury.com
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company whose proprietary technology allows for the levels of nicotine and other nicotinic alkaloids (e.g., nornicotine, anatabine and anabasine) in the tobacco plant to be decreased or increased through genetic engineering and plant breeding. The Company’s technology also allows the levels of cannabinoids to be decreased or increased in the cannabis plant. 22nd Century owns or is the exclusive licensee of 129 issued patents in 78 countries plus an additional 51 pending patent applications; 22nd Century also holds co-exclusive rights to another 16 patent applications. Goodrich Tobacco is focused on commercial tobacco products and potentially less harmful cigarettes. Botanical Genetics is focused on novel cannabis plant varieties and on cannabis-based products. Hercules Pharmaceuticals is focused on X-22, a prescription smoking cessation aid in development.
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. 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, 2013, filed on January 30, 2014, 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.
Source: 22nd Century Group, Inc.
Redington, Inc.
Tom Redington, 203-222-7399
(0413-2246)
I believe Grape is referring to the Red Sun website...
http://redsuncigarettes.com/
It has been 'coming soon' for months...,
Well... He poked the button... All done now...
Ugh....Joe....stop doing live interviews...please...
Thanks!
I can follow the link...but can't find the show...
Since it's a quiet day today I thought I would liven things up a bit with a celebratory post... For those wondering...Henry and Colleen welcomed a baby boy into the XXII family on the afternoon of the big call! Jimmy can into this world weighing a healthy 9 lbs 5 oz! Congrats to Henry and Colleen!
Notice how the questions are being addressed to Henry...
I agree....I think Joe would be a good speaker to an audience of customers/smokers... Henry is a more polished speaker and should take the lead when speaking to a 'professional' audience.
Print
22nd Century Group Granted Meeting with FDA to Advance Development of a Potential Modified Risk Cigarette
7:22am ET, 09/25/2014 - Business Wire
CLARENCE, N.Y.--(BUSINESS WIRE)--Sep. 25, 2014-- 22nd Century Group, Inc. (NYSE MKT:XXII) announced today that the Center for Tobacco Products (“CTP”) of the U.S. Food and Drug Administration (“FDA”) has granted the Company a meeting on November 12, 2014 to discuss the further development of the Company’s potential modified risk tobacco product, code-named BRAND B (“BB-1”), which is a cigarette that is designed to provide an exceptionally low tar-to-nicotine yield ratio. As compared to other commercial low-yield cigarettes, the only differentiating factor of the BB-1 cigarette is that 22nd Century’s proprietary high-nicotine tobacco is used, which tobacco is planted, grown, harvested, cured, and processed in exactly the same manner as conventional commercial tobacco.
Pursuant to the Family Smoking Prevention and Tobacco Control Act of 2009 (“Tobacco Control Act”), the Company intends to demonstrate, through BB-1 exposure studies, compelling scientific evidence that 22nd Century’s cigarettes (i) reduce exposure to tobacco toxins and (ii) are reasonably likely to result in a measurable and substantial reduction in morbidity or mortality among individual tobacco users. The purpose of the Company’s meeting with CTP will be to seek the Agency’s concurrence that 22nd Century’s proposed BB-1 clinical study is adequate to support the development of BB-1 as a potential modified risk tobacco product.
22nd Century believes that BB-1 will allow smokers to obtain a satisfactory amount of nicotine per cigarette while inhaling less smoke, including “tar” and carbon monoxide. Commercial cigarette brands average a tar-to-nicotine ratio of approximately 13 to 1, meaning that the smoker must inhale 13 parts “tar” for every 1 part nicotine. The tar-to-nicotine ratio of BB-1 is approximately 6 to 1.
By utilizing a combination of 22nd Century’s proprietary high-nicotine content tobacco and a special low-yield cigarette design, BB-1 has the nicotine yield of a commercial full flavor cigarette, but the “tar” yield of an “ultra-light” commercial cigarette. Consequently, the Company expects that BB-1 cigarettes will curtail the compensatory smoking behaviors (such as taking bigger puffs and more puffs per cigarette) associated with what were formerly known in the United States as “light” and “ultra-light” cigarettes due to diluted nicotine amounts in the smoke, as compared to their full flavor (high yield) counterparts. The Tobacco Control Act banned the use of “light,” “ultra-light” and similar descriptors on the labeling and advertising of cigarettes since these types of cigarettes generally do not reduce smoke exposure.
Joseph Pandolfino, Founder and CEO of 22nd Century Group, explained, “BB-1 is designed to deliver a conventional amount of nicotine to smokers – with substantially less smoke. We look forward to working with the FDA during the development of this exciting product.” With FDA concurrence, 22nd Century will conduct an exposure study on BB-1 in the first quarter of 2015.
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company whose proprietary technology through genetic engineering and plant breeding allows (i) the level of nicotine (and other nicotinic alkaloids) in the tobacco plant to be decreased or increased and (ii) the levels of cannabinoids in the cannabis plant to be decreased or increased, in addition to the cannabinoid profile being tailored. 22nd Century owns or is the exclusive licensee of 129 issued patents in 78 countries plus an additional 51 pending patent applications, and 22nd Century has co-exclusive rights to another 16 patent applications. Goodrich Tobacco is focused on commercial tobacco products and potentially less harmful cigarettes. Botanical Genetics is focused on natural cannabis-based products for human health, well-being and nutrition, in addition to industrial products refined from cannabis. Hercules Pharmaceuticals is focused on X-22, aprescription smoking cessation aid in development.
For additional information, please visit: www.xxiicentury.com
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. 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, 2013, filed on January 30, 2014, 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.
Source: 22nd Century Group, Inc.
Redington, Inc.
Tom Redington, 203-222-7399
The article came to me via a notification from my Schwab account... just thought I would share...
**Article posted this morning....
INSIGHT-As Big Tobacco takes up e-cigarettes, investors look ahead
6:17am ET, 09/12/2014 - Reuters
* Sector not as attractive for private funds as it once was
* NJOY piques interest of Big Tobacco and Pharma-sources
* Gamucci close to fund raising, new product launch-CEO
* BAT says nicotine inhaler licensed as medical product
By Martinne Geller and Jilian Mincer
LONDON/NEW YORK, Sept 12 (Reuters) - As electronic cigarettes flew off shelves on both sides of the Atlantic in recent years, investors flocked to a business some hope will be the future for tobacco.
Now sales growth is slowing from a 2011 peak and private funds are more cautious about the smokeless devices, making it harder for independent e-cigarette firms to raise capital and hitting their share prices.
The entry of Big Tobacco and a push for tighter regulation has led outside investors to question the potential of the e-cigarette market, where sales are at a modest $3.5 billion worldwide but still growing faster than for most consumer goods.
"Everybody knows regulation is coming so investors are concerned about investing in companies that won't be able to meet those rules," said Craig Weiss, CEO of NJOY, one of the more established e-cigarette makers, which sources say could pursue an IPO or a takeover by tobacco or healthcare firms.
The World Health Organization last month called for bans on indoor use, advertising and sales to minors of the metal tubes that heat nicotine-laced liquid into vapor, arguing that the jury was still out on how safe they were.
This would go further than the European Union's rule coming into force in 2016 to ban advertising and regulate nicotine content, and a proposal by the U.S. Food and Drug Administration (FDA) to ban sales to minors.
"For smaller companies, it is challenging - they have to answer for FDA uncertainty and questions about Big Tobacco," Weiss said.
Gamucci, one of Britain's earliest e-cigarette makers, has been seeking capital for about 12 months, while rival E-Lites weighed options for a year before agreeing in June to sell out to Big Tobacco's No. 3 player, Japan Tobacco.
With sales of traditional cigarettes declining in many countries due to health concerns, almost all the major tobacco companies have either bought e-cigarette companies or set up in-house development.
This means the independent players must be extra nimble.
Gamucci CEO Tony Scanlan, who worked at a leading tobacco company for 17 years before branching out, told Reuters Gamucci is close to securing an injection of about 20 million pounds ($32.4 million) and may weigh going public when it gets bigger.
It is planning a new range that is refillable rather than disposable in line with market trends and is considering marketing products as medical devices, as British American Tobacco's Nicoventures unit is doing.
Innovation is now key to survival in a business whose products have piqued consumer interest, but not loyalty.
"Last summer ... you were seeing a big build-up of consumer trial, but that trial hasn't come through to regular usage," said Martin Deboo, an analyst with Jefferies.
He cited research showing that half of all smokers had tried e-cigarettes but only 10 percent said they were regular users.
"The first generation 'cig-a-likes', from a smokers' point of view, have only been a partial solution," Deboo said.
Lorillard, America's No. 3 tobacco firm and No. 1 e-cigarette firm, said e-cigarette sales fell 35 percent to $37 million in the quarter to June 30, but its retail market share fell only 1.1 percent, which suggests the entire category shrank dramatically.
"APPLE PIE" TO "ZOMBIE JUICE"
Some vapers complain that with the slim, disposable e-cigarettes, poor vapor quality makes the nicotine hit weaker than with tobacco, that battery life is too short, and that they are too pricey, at as much as $15 a day for a very heavy user.
As such, they have been losing share to next-generation models that pack a bigger puff at a lower price in a market of which 70 percent is in the United States and Europe.
"You'd be hard-pressed for someone to invest today in the smaller, independent e-cigarette companies because it's tough to know whether they'll ever get distribution," said a source financially involved in the sector.
"Investors are shifting their attention now, trying to figure out what other areas they should be investing in."
One such area is so-called vaping products, a rainbow of do-it-yourself tanks, batteries and e-liquids.
U.S. financial services giant Wells Fargo estimates that business at $1.1 billion of a $2.5 billion U.S. vapor market including e-cigarettes. Particularly bullish, it says vaping could surpass smoking in the U.S. in the next decade.
Data gatherer Nielsen, which tracks retail sales but not online or at specialty "vape shops", says that for the 52 weeks ended August 23 e-cigarette and tank revenue in the US grew 19 percent. But that was down from 125.5 percent growth for the same period ending in 2013, 133 percent in 2012 and almost 1,103 percent for 2011.
Some predict regulation may slow that down further due to fears vaping may become a gateway to smoking for kids, with e-liquids in thousands of flavors with names ranging from the quaint Apple Pie to the outlandish Zombie Juice.
A recent drop in the value of a group of e-cigarettes companies trading mostly over-the-counter on the Pink Sheets in the U.S. highlights the growing caution.
Nine companies had a combined market capitalization of $743.3 million at the close of trading on Wednesday, down nearly 60 percent from a March peak of $1.84 billion, though still up on a year ago.
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Graphic http://link.reuters.com/tym82w
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Electronic Cigarettes International Group, by far the largest, saw its shares close at just $5.50 on Wednesday, down from the high teens in March.
It went public in a reverse merger last year, and has since done a string of deals as small players seek consolidation in a market still home to hundreds of brands.
"The key driver is that by doing this, they're better able to compete with the tobacco companies," said Mark Winkler of Fleming Family & Partners, who advised British e-cigarette maker Skycig on its sale to Lorillard in October for 30 million pounds ($49.58 million) plus future payments.
In May, Michigan-based ECIG filed for a follow-on public offering to raise up to $149.5 million and in July announced a $20 million investment from an arm of Egypt's Mansour Group.
Shares in the second-biggest traded firm, 22nd Century Group , have more than halved since its March high of $6.34, even though its shareholders at the time of filings this summer included funds managed by the likes of Vanguard, Fidelity and TIAA-CREF.
BIG TOBACCO VS PHARMACEUTICALS?
The major tobacco companies do not face the same pressure, since their investments in the sector are tiny compared with the size of their traditional businesses and serve as a hedge against declining tobacco sales.
British American, the world's No. 2 tobacco firm, set up a unit in 2011 to develop smokeless alternatives and bought UK based CN Creative the following year. It sells an e-cigarette called Vype in Britain, while Reynolds American, in which it holds a large stake, is rolling out an e-cigarette called Vuse across America.
U.S. Marlboro maker Altria Group bought Miami-based Green Smoke for $110 million in April, and in July Lorillard agreed to sell Skycig and Blu, which it bought for $135 million in 2012, to Gauloises maker Imperial Tobacco.
Before exploding in the last four years, e-cigarettes were simple devices largely sold on the Internet, so even though there was venture capital and private equity interest, capital needs were relatively modest.
Now that they grace shelves all along the high street, many companies must invest in slotting fees, quality control, supply chain and marketing to drive and keep market share. That crimps cash flow, making them less attractive to private equity firms who need near-term profits to service their debt, said Winkler.
And while some independent companies may still be able to sell out to a bigger company or go public, he said there is concern that many others may get trampled, leaving investors with no exit strategy.
"There will be some independents who will be very successful, but I anticipate that many may struggle to achieve an exit at the end of the day," Winkler said.
The healthcare industry may be some help.
NJOY, which has had several fund injections from private equity and venture capital funds and others including Silicon Valley heavyweight Sean Parker, has attracted interest from both major tobacco and pharmaceutical firms, according to two sources familiar with the matter. It was not clear which companies, or whether any talks took place.
Buying e-cigarette makers may eventually make sense for healthcare companies since they threaten the nicotine replacement therapies offered by the likes of Pfizer and GlaxoSmithKline.
BAT's Nicoventures unit, in conjunction with Consort Medical and Kind Consumer, has had a new nicotine inhaler called Voke licensed in the UK as a medical product, the companies said on Friday.
NJOY, which just launched new lines of rechargeable and vape products in flavors like blood orange and butter crunch, declined to comment on any such approaches, but CEO Weiss said, "if the right type of investor approached us, I would have to listen". (1 US dollar = 0.6203 British pound) (Additional reporting by Vincent Flasseur, Anjuli Davies and Frey Berry in London and Olivia Oran in New York; editing by Philippa Fletcher)
(0413-2246)
MSA!!!!!!!
22nd Century Group Becomes Member of Tobacco Master Settlement Agreement
12:24pm ET, 09/02/2014 - Business Wire
CLARENCE, N.Y.--(BUSINESS WIRE)--Sep. 2, 2014-- 22nd Century Group, Inc. (NYSE MKT:XXII) announced today that the Company has become a member of the U.S. tobacco Master Settlement Agreement (MSA) through the acquisition of NASCO Products, LLC, a federally licensed tobacco product manufacturer and participating member of the MSA since 2005.
22nd Century Group, NASCO Products, and the Settling States of the MSA have executed an Amended Adherence Agreement under which 22nd Century Group and its subsidiaries have agreed to comply with the MSA and other requirements regarding the Company’s manufacturing and marketing of tobacco products.
The MSA is an agreement among 46 U.S. states, the District of Columbia, 5 U.S. territories (Settling States) and certain participating tobacco product manufacturers, which became effective in November 1998 and is administered by the National Association of Attorneys General (NAAG). In brief, participating manufacturers of the MSA have agreed to various restrictions on tobacco product marketing and to contribute funds in perpetuity to the Settling States based on unit sales of cigarettes.
In exchange for these settlement payments and marketing restrictions, the Settling States agreed to release and discharge certain past, present and future legal claims against the participating manufacturers of the MSA such as claims that relate to the use of or exposure to tobacco products manufactured in the ordinary course of business, including without limitation any future claims for reimbursement of health care costs allegedly associated with the use of or exposure to tobacco products.
Now that 22nd Century’s super-premium priced brands, RED SUN® and MAGIC®, are MSA brands, the Company will ramp up production of its products within the next 30 days and will launch sales and distribution efforts across the United States. Since the introduction of 22nd Century’s brands in early 2011, sales have been intentionally curtailed by the Company in order to limit the complexity and costs associated with becoming a signatory of the MSA.
Joseph Pandolfino, Founder and CEO of 22nd Century Group, stated, “We are very pleased to have been approved by the Settling States as a participating manufacturer of the MSA so that we can now sell our brands under the MSA, which will assist in producing sustainable revenue for the Company. Management greatly appreciates our shareholders’ patience during this lengthy, but now concluded process.”
The MSA and other state laws and regulations have made it extremely burdensome for non-participating manufacturers (to the MSA) to operate. Further, there has not been a new participating manufacturer approved under the MSA since 2007. Approximately 97% of cigarette unit sales in the U.S. are subject to the MSA. The Settling States have been paid more than $90 billion in MSA payments since the inception of the settlement agreement in 1998. 22nd Century will pay approximately $17,000 this week to the MSA in a settlement payment for sales of its commercial brands before 22nd Century became an MSA signatory.
For additional information, please visit: www.xxiicentury.com
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company whose proprietary technology allows for the levels of nicotine and other nicotinic alkaloids (e.g., nornicotine, anatabine and anabasine) in the tobacco plant to be decreased or increased through genetic engineering and plant breeding. 22nd Century owns or is the exclusive licensee of 129 issued patents in 78 countries plus an additional 44 pending patent applications. Goodrich Tobacco Company, LLC and Hercules Pharmaceuticals, LLC are wholly-owned subsidiaries of 22nd Century. Goodrich Tobacco is focused on commercial tobacco products and potential less harmful cigarettes. Hercules Pharmaceuticals is focused on X-22, a prescription smoking cessation aid in development.
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. 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, 2013, filed on January 30, 2014, 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.
Source: 22nd Century Group, Inc.
Redington, Inc.
Tom Redington, 203-222-7399
(0413-2246)
22nd Century Group Partner NASCO Products Enters into Agreement with Smoker Friendly International
8:22am ET, 08/29/2014 - Business Wire
CLARENCE, N.Y.--(BUSINESS WIRE)--Aug. 29, 2014-- 22nd Century Group, Inc. (NYSE MKT:XXII) announced today that NASCO Products, LLC, a federally licensed tobacco product manufacturer and participating member of the tobacco Master Settlement Agreement (MSA), entered into a multi-year manufacturing agreement with Smoker Friendly International to produce the Smoker Friendly private label cigarette brand.
Smoker Friendly International, LLC licenses retailers to use its “Smoker Friendly” name and sell its “SF” products. Currently, Smoker Friendly has approximately 800 stores throughout the United States under license. These stores are independently owned and operated. The SF brand has been on the market for over 20 years and is the private label brand in Smoker Friendly stores. Starting in January 2015, the SF brand of cigarettes will be made by NASCO Products in the Mocksville, North Carolina factory, which 22nd Century Group purchased earlier in 2014.
Barry Saintsing, Plant Manager and former Master Product Developer at RJ Reynolds Tobacco Company, stated “The factory is in tip-top shape and ready to begin work on the important Smoker Friendly contract.” In fact, after a few months of refurbishing and optimizing the machinery – mainly by ex-RJR mechanics and operators – the factory commenced producing and selling various brands of commercial filtered cigars in June 2014. Mr. Saintsing added, “In addition to the products the factory is already manufacturing, we are in discussions with a half dozen other parties to contract manufacture additional brands, including some brands for export.”
As previously reported by the Company, upon all the settling states of the MSA executing NASCO Product’s amended Adherence Agreement to the MSA, 22nd Century’s acquisition of NASCO will immediately become effective, and 22nd Century’s super-premium brands will be produced by NASCO Products. At which time, NASCO Products will become a wholly-owned subsidiary of 22nd Century Group. 22nd Century’s management expects this to occur imminently.
In anticipation of MSA authorization, last week 22nd Century made a presentation at the Smoker Friendly Tobacco Festival and Conference in Boulder Colorado to announce the new Smoker Friendly manufacturing agreement and to introduce RED SUN® to Smoker Friendly retailers. Henry Sicignano III, 22nd Century Group’s President reported, “Smoker Friendly retailers were delighted with our RED SUN brand.” Embracing the extraordinary tasting cigarette that smokers describe as “The Best Cigarette Ever Made,” retailers believe RED SUN will strike a chord with well-heeled smokers who seek a super-premium brand that, in fact, is a relevant and differentiated brand to consumers, as compared to the best-selling commercial brands. Mr. Sicignano added, “Based on the feedback we received at the conference, we expect hundreds of Smoker Friendly stores to carry RED SUN upon the brand becoming an MSA brand.”
For additional information, please visit: www.xxiicentury.com
About 22nd Century Group, Inc.
22nd Century is a plant biotechnology company whose proprietary technology allows for the levels of nicotine and other nicotinic alkaloids (e.g., nornicotine, anatabine and anabasine) in the tobacco plant to be decreased or increased through genetic engineering and plant breeding. 22nd Century owns or is the exclusive licensee of 129 issued patents in 78 countries plus an additional 44 pending patent applications. Goodrich Tobacco Company, LLC and Hercules Pharmaceuticals, LLC are wholly-owned subsidiaries of 22nd Century. Goodrich Tobacco is focused on commercial tobacco products and potential less harmful cigarettes. Hercules Pharmaceuticals is focused on X-22, a prescription smoking cessation aid in development.
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. 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, 2013, filed on January 30, 2014, 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.
Source: 22nd Century Group, Inc.
Redington, Inc.
Tom Redington, 203-222-7399
(0413-2246)
The GeoTeam, GeoInvesting (483 clicks)
Long/short equity, special situations, growth, small-cap
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22nd Century Group: A Lot Of Smoke, Not Enough Fire
Aug. 27, 2014 10:15 AM ET | 2 comments | About: 22nd Century Group, Inc. (XXII), Includes: VGR
Disclosure: The author is short XXII. (More...)
Summary
A number of factors lead us to the conclusion that 22nd Century Group (XXII) is severely overvalued and likely worth no more than $0.20 per share.
In the past, the SEC charged XXII CEO Joseph Pandolfino, Jr. for stock manipulation of two stocks.
Insiders have enjoyed exorbitant wealth at the expense of shareholders.
This company is no stranger to massive dilution, and we believe more is on the way.
Project abandonment, failed repackaged ventures, absence of sales and advertising, fluff press releases and a huge accumulated deficit translate into a bleak future for XXII.
22nd Century Group, Inc. (NYSEMKT:XXII) became public on January 25th, 2011 through a reverse merger with shell company Touchstone Mining Limited (source 21).
We believe investors will come to the same conclusion that we have-XXII is just rekindling a story that already has failed in the past. From 2011 to the beginning of 2014, the stock was trading well below where it's trading today, spending the past couple years trading as low as $0.20, or what we believe the fair value of this stock to be.
However, shares of XXII have been propelled by whispers of the company being the "next big thing" in the tobacco marketspace - and even in the marijuana space. The company's stock, after spiking violently in early 2014 to over $5.00 (we believe largely as a result of a promotion), has now settled at around $3.20.
In 2011, the company touted the potential of its X-22 product as its future growth driver. We feel that investors should note initial FDA trials of X-22 failed and that per XXII's 2013 10-K filing, the company admitted that it would be suspending its X-22 FDA clinical trials. They claim to be looking for a partner to sponsor new trials, but the company has admitted they won't be sponsoring new trials for the product. Instead, the company has offloaded X-22 to Hercules Pharmaceuticals, LLC, who is tasked with trying to find someone to sponsor new FDA trials. What it seems like to us is that the company doesn't want to pour any more money into X-22. So, why should investors?
The company attempts to build legitimacy by disclosing an arrangement where it has licensed X-22 to a third party, Hercules Pharmaceuticals, LLC. However, Hercules is just a subsidiary of XXII. Regardless, the company now wants investors to focus attention to new product endeavors, but it has seemingly not met milestones related to continuing to license certain cigarette cessation technology. This seems to have been XXII's M.O. through its history-which has been riddled with false promise and failed product launches.
The stock trades at a market cap near $190M, yet the company has run up an accumulated deficit of roughly $47.21M and has reported revenue of just $16,114 during its most recent quarter ended June 30, 2014. So, what has management done in response to this dismal performance? They have quadrupled the stock's share count to roughly 59 million and paid themselves hundreds of thousands of dollars in total compensation per annum.
Not only that, but more dilution appears to be right around the corner since the company shows in its Q2 2014 filing that its cash on hand is only sufficient to fund operations for the next 3 to 4 quarters.
(click to enlarge)
The short thesis behind this company isn't some complex speculative thesis that is going to be difficult to understand. In this piece, we're simply going to show that:
Insiders are paying themselves exorbitant amounts of money from the shareholder's pockets, despite the fact that the company has run up an accumulated deficit of roughly $47.21 million;
Dilution has caused the company's share count to nearly quadruple, and we see no signs that the dilution will not continue to be a staple of management's strategy;
We believe the company has ties to stock manipulation and promotion;
the company has a small dissipating pile of cash;
Based on the company's unsuccessful attempts to meaningfully monetize a product, we have little confidence that they can do so in the future;
The Company has a history of abandoning projects;
The Company has repackaged a business plan that has failed in the past;
A Large tobacco company spent $25M on advertising for Quest branded modified nicotine cigarettes before giving up on the product;
The Company has admitted it's suspending funding its X-22 FDA clinical trials, necessary to move further in monetizing the product;
The Company's paltry revenue from this past quarter came from $16k in filtered cigars;
The CEO has a history of stock manipulation - the SEC charged CEO Pandolfino with manipulating the prices of two stocks by mailing anonymous letters with false information;
The company has known associates that are tied to stock promotion;
The bull's argument of XXII's own brand of standard cigarettes, which are supposedly set for national distribution at some point in the future have been trumpeted by the company since 2011 with no sales and no advertising spending to date;
The company has issued press releases dating back to 2011 touting potential "big things" which still haven't panned out or that they've stopped talking about without major explanation.
Life has been good at 22nd Century Group
Right off the bat, looking at XXII's insider transaction record from the last two years, it's clear that the officers, directors, and beneficial owners haven't been doing too badly for themselves, even though the company has made little operational gains. From March 26th, 2013, to December 10th, 2013, the company's insider trading record shows 35 instances of selling stock and just 1 purchase. The proceeds from the sales combined equaled $447,515. Since December 10th, 2013, we've seen option exercises and sales totaling $611,300 (source 40).
In addition to that, the 2013 proxy statement (source 41) notes that CEO Pandolfino drew a total salary (cash + bonus + stock awards + all other compensation) of $687,969 in 2013 and $476,109 in 2012. Other C level executives are also enjoying lofty six figure salaries that the shareholders are paying for.
(click to enlarge)
Directors James Cornell and Joseph Dunn also received $15,000 in cash compensation.
In our report, we'll show that promotional agencies, consultants, and those providing services to the company have also been doing quite well at the cost of common share dilution.
The shareholders are paying for everything this company does to operate.
The company's recent listing on the NYSE MKT in March 2014 and subsequent addition to the Russell 2000 index at the end of June 2014 have increased the amount of eyes on this small company from Clarence, NY. Through this increased liquidity, 22nd Century Group has found themselves sporting a market cap near $167M, despite what we believe to be numerous red flags, not the least of which is that the company isn't making any money and has posted net losses every year since it has been a public company.
XXII is a non-profitable, 9 employee entity that manufactures SPECTRUM reduced nicotine cigarettes for government researchers. There is a chance that the company's sole source of paltry revenue (the government) could terminate if North Carolina State University cancels its agreement with XXII, of which the company is technically in default. There is also no guarantee of future orders in this realm, as it is dependent on demand, which seemed to dry up judging by the zero orders in all of 2013 and only one small order in 2014.
The company also aims to eventually be a producer of consumer brand cigarettes, and it has two lines for doing so: RED SUN and MAGIC regular and menthol additive free cigarettes. The company has been "aiming" for major retail cigarette distribution for years. What they really appear to be doing, in essence, is simply just selling shares to pay themselves.
The company also has genetically modified nicotine content cigarettes-a business that's still in development. Further, the company has been touted a couple of times as having a niche for the marijuana craze. Like many marijuana touted stocks, however, we believe this thesis to be all smoke and no fire.
The company began its public stages with a product called X-22, which it touted up until 2011. When the product failed a clinical trial to end 2011, investors stopped hearing much about it. We believe that much of the hype around X-22 is what allowed XXII to perform its reverse merger and bring on private placements to fund the business thus far.
X-22 does, however appear on the company's archaic website, which on the front page also boasts biographies of Albert Einstein and Christopher Columbus, among others. We're going to go out on a limb and suggest this company is going to be slightly less revolutionary than the likes of Columbus and Einstein.
(click to enlarge)
We believe that this company is slated for long-term declines and has little to no chance of pulling its act together.
A Trail of Stock Manipulation by the CEO and an Alternative Tobacco Story that is almost Two Decades Long
Joseph Pandolfino, Jr. is the Chairman and CEO of the company. He's the largest owner of stock, holding 6 million shares (roughly a 10% stake in the company).
On April 6, 1992, Pandolfino incorporated Tobacco Alternative Inc., a marketer of herbal cigarettes and the predecessor to XXII. At the time of Tobacco Alternative's founding, Pandolfino was a graduate student at SUNY Buffalo and already the subject of an SEC case regarding a fraudulent stock promotion he orchestrated in April, 1991.
The SEC charged Pandolfino with manipulating the prices of two stocks by mailing anonymous letters with false information. The case was settled with Pandolfino neither admitting nor denying the charges and accepting a fine equal to the amount he profited in the scheme. He also agreed to refrain from such activities in the future. This was sourced from the SEC News Digest from 1992.
You can read the electronic copy of this document, still available at the SEC's website, listed as (source 2):
(click to enlarge)
From there, Mr. Pandolfino went on to "Tobacco Alternative, Inc." We believe Pandolfino has been peddling the "Tobacco Alternative" concept since 1994. We have obtained what appears to be a mailer for "Tobacco Alternative, Inc." from around the same time period:
(click to enlarge)
The location on the letterhead leads us to what appears to be 1 of 6 apartment buildings located in Buffalo, New York:
(click to enlarge)
(source: Google Maps)
After this time, Pandolfino had changed the name of "Tobacco Alternative" to "Alternative Cigarettes, Inc." and partnered with Smokin' Joe's, a Tuscarora Indian Nation-based cigarette manufacturer and retail shop north of Buffalo. From the partnership, Pandolfino sought domestic production and distribution of his products.
Smokin' Joe's was, and is, owned by Joseph Anderson, a longtime partner of Pandolfino's. Anderson and his controller at this time, Richard Saffire (source 3), owned over 10% of XXII at the time it went public in 2011. Saffire still owns 2.6M shares, or 4.4%, and additional warrants. His family owns Milhem Attea & Bros (source 19), which has historically been the largest distributor of cigarettes to Indian tribes in New York State. (Sometimes the company is called Attea Milhem & Bros.)
Saffire had a controlling interest in two cigarette companies, Windward Tobacco and Sovereign Tobacco. Windward ceased operations in 2006 after being sued by the State of New York for failure to collect taxes on cigarettes sold on Indian reservations (Milhem Attea was the primary defendant in the case). Sovereign Tobacco was sold in 2009 to the Oneida Indian tribe in New York for $6.6M (source 20).
Joseph Anderson is a leader on the Tuscarora Indian Reservation in Niagara County, New York, about 10 miles north of Buffalo. In addition to owning Smokin' Joe's, he has interests in a number of local businesses (source 4).
During the mid-1990s, Anderson and Milhem Attea & Bros were the distributor and supplier, respectively, to a cigarette smuggling ring that sold untaxed cigarettes in Canada (source 5).
In 2004, Anderson pled guilty to bribing the mayor of Niagara Falls for favorable treatment related to a real estate development project (source 6).
XXII's Prior Attempt to Monetize its Cigarette "Technology" is a $25 Million Disaster
A key to XXII's bull story is technology that allows it to genetically alter the nicotine content in cigarettes. On July 14th, 1997, XXII's predecessor company, Alternative Cigarettes, obtained an exclusive license to such technology from North Carolina State University ("NCSU"). Indeed, 22nd Century Limited LLC was formed as a separate entity in 1998 to be the umbrella for modified nicotine products going forward. Through 2001, cumulative payments totaling $377K were made for the exclusive license and research work done by NCSU.
XXII did not have the resources to develop this product internally (source 7). In 1999 they sublicensed the technology to the large tobacco company Vector Group (NYSE:VGR) which planned to develop a new low nicotine brand called Quest. Vector went on to spend over $25M on advertising alone for Quest branded modified nicotine cigarettes before giving up on the product.
Vector started production and marketing of Quest in January 2003 and also began the FDA approval process to market the cigarettes as a smoking cessation product. However, initial sales of $26M in 2003 quickly fell to $14M by 2004 and just $10M by 2005. With the FDA still withholding approval, Vector decided in 2006 to end the application process with the FDA and cease further development of Quest as a smoking cessation product.
Vector kept Quest on the market for a few more years, but consumers didn't like the product. One review said, "They've almost genetically altered the tobacco to turn it into the taste of the lettuce leaf cigarettes. BAD." In 2009, Vector finally ceased production of Quest altogether, with XXII retaining the NCSU license to the technology.
Following Quest's failure, XXII began work on its own modified nicotine products. The first, X-22, was intended to be a smoking cessation product for which XXII planned to seek FDA approval, despite Vector's failure. Yet at the end of 2011, XXII's Phase IIB trial showed that X-22 did not help people quit smoking.
After that, XXII refocused its pitch on two retail-branded cigarettes with modified nicotine levels: Brand A (very low nicotine content) and Brand B (higher nicotine content than other "light" or low tar cigarettes). XXII intends to seek FDA approval to market these products as "modified risk" tobacco products.
The original license agreement with NCSU was amended in August, 2012 to give XXII more time to meet milestones with regards to FDA Phase III trials and commercialization. The amendment called for XXII to initiate Phase III trials by the end of 2013, submit an FDA application based on trial data by the end of 2014, and launch commercial products in 2015. The first milestone was not met and no further announcements have been made regarding the status of this licensing agreement.
The Company has a Wicked Habit of Dilution Tied into Financing and Promotions; Total Shares have More Than Quadrupled Since 2010
The company knows that dilution is its biggest concern. Perhaps that's why it is listed first under "Risk Factors" in the 2011 and 2012 10-K and third down in the 2013 10-K (sources 1, 35, 36):
(click to enlarge)
As this chart shows, XXII has aggressively diluted its common shareholders and has been quick to issue warrants and other equivalents in conjunction with financings and payments. The company's total share count has more than quadrupled since its inception in 2010 (source: XXII public filings).
12/31/2010
12/31/2011
12/31/2012
12/31/2013
6/30/2014
Common
16,000,000
27,209,646
34,286,979
56,902,770
59,601,688
Warrants
-
8,651,978
12,972,664
10,653,469
9,440,784
Other Equivalents
-
6,632,040
6,463,782
1,160,000
-
TOTAL
16,000,000
42,493,664
53,723,425
68,716,239
69,042,472
Since the company has been public, its share count has been on the constant rise. In order to fund operations after its reverse merger, the company has been selling stock, including:
The company's reverse merger private placement, 5.4M units at $0.81/unit. Each unit contained one common share, a half-warrant at $1.50 and a half warrant at $3.00.
$4.4 million raised in subsequent offering to fund clinical trials of X-22
In December 2011, they raised $1.7M selling one-year notes to 24 investors with a face value of $1.9M convertible into 2.5M shares at $0.75, with 3.1M warrants exercisable at $1.50. In January 2012, they paid their legal counsel 1M shares to satisfy a debt of $260K.
In January 2012, they paid ProActive Capital 25K shares for investor relations services. (See below for more on ProActive.) (source 38)
In May, they raised $1M by selling 1.7M shares of stock with 1.7M warrants at $0.60 per unit. The warrants had an exercise price of $1.00.
In June, Chardan Capital Markets (150K) and Maxim Group (62.5K) were issued shares for placement agent services. (See below for more on Chardan.) Someone named Michael Pisani was given 30K shares for investor relation services. (source 38)
In August, the company issued $220K of convertible notes at a 6% discount. The notes were convertible into stock at $0.60. If converted, the holders receive 100% warrant coverage. If not converted, but redeemed by the company, the holders receive 50% warrant coverage. The warrants had an exercise price of $1.00.
In November, XXII issued another 3.2M shares of its common stock and 1.7M warrants for $809.5K, or $0.25 per unit. XXII only received $681K in cash, however while the rest was exchanged for a reduction in accounts payable and directors' fees owed. The warrants had a strike price of $1.00. (source 1)
In January 2013, Chardan again acted as the placement agent on a $2.12M net offering, receiving a 10% cash commission as well as 416K shares. (source 1)
In May 2013, New Castle Consulting was given 160K shares for consulting services. New Castle is run by Leonard "Len" Panzer, who put in some time in the early 2000's working for the notorious financial IR firm, Liviakis Financial Communications. (source 37)
In May and June, a total of 350K additional shares of common stock were issued to Chardan for investor relations services. (source 38)
In June 2013, Crede Capital Group, LLC was given 860K shares for investor relations services. In October, Crede filed a 13G showing an additional 2M shares were also acquired in June for a 5.9% position.
In November 2013, 10,000 shares were issued to IBIS Co. for investor relation services (source 1)
In December 2013, 300,000 shares were issued to Chardan Capital Markets, LLC for "professional services" (source 1)
(source: company press releases and SEC filings, sources 1, 36, 37, 38)
Ties to Questionable Analysts, Promoters and Convictions of Bank Fraud
Crede is a partnership controlled by veteran stock promoters Terren Peizer and Michael Wachs. Peizer has a long and sordid history, including for example, Hythiam Inc's failed Prometa addiction treatment miracle program and Hollis-Eden Pharmaceutical's failed miracle AIDS cure Immunitin (source 39). Wachs pled guilty to bank fraud in 1997, spent 11 months in federal prison and agreed to be barred from the brokerage business (source 22). Wachs has for many years run CEOCAST, an investor relations and stock promotion company (source 23). CEOCAST acted as a paid promoter of XXII back in late 2011, where one of its letters confirmed that XXII was paying them "fifteen thousand dollars per month in cash and stock" (source 45).
In June 2013, it would seem that the big stock promotion began. After sliding from January's peak of $1.00 to $0.60 at the end of May, there was suddenly an explosion in trading volume and price beginning on June 7th. 4.8M shares traded that day, 10 times the previous peak trading day back on November 26, 2012.
(click to enlarge)
XXII put out a press release on the following Monday, June 10th, with a corporate update on multiple fronts, highlighting a potential business collaboration with an unnamed US Tobacco company (this turned out to be NASCO Products, see below) and projecting expanded distribution of MAGIC and RED SUN branded cigarettes in the second half of 2013 (which did not occur) (source 25).
The stock was up 60% by August.
In August and November, the company instituted warrant exchange programs where the exercise price of several series of warrants was lowered to induce cash exercise. In total during 2013, 15M warrants were exercised. (While 12M warrants were issued during the year.)
In December, Chardan was paid $320K and issued another 300K shares of common stock for "professional services."
Less than three weeks later, on January 10, 2014, Chardan initiated research coverage on XXII with a "Buy" rating and $9 price target, with shares then trading at $2. They reiterated this rating and price target on March 6th and July 15th .
Chardan Capital makes up 3 of the 4 analyst reports listed on the company's website. The other is Rodman & Renshaw (see ProActive above) (source 24):
(click to enlarge)
Rodman & Renshaw found themselves short of capital in 2012, and their parent company's name change to Direct Markets Holdings Corp. (source 42) did little to prevent their stock from eventually trading under a penny on the OTC.
(click to enlarge)
In 2013, they filed for bankruptcy, listing $1M in assets and $10.6M in liabilities (source 43).
By mid-March, XXII shares hit $6.20, up 1000% since the June promotion started. XXII had a market value of $400M.
Promotions Have Been Inherent in XXII Since the Beginning
XXII has bought and paid for a very suspect group of stock promoters who have been active in the stock since the reverse merger.
The first paid stock promotion began in June of 2011. Proactive Capital/Quality$tocks ("Proactive") announced XXII as a new client and shared a copy of Rodman & Renshaw's analyst report. This was followed up by another post on June 30th that pointed back to the same Rodman report (source 9). Proactive received 25K shares of XXII in January, 2012 for investor relations services.
Proactive Capital's promotional techniques have recently been the subject of a damning expose from Richard Pearson of MoxReports.com (source 10).
CEOCAST was first mentioned XXII in October 2011. The company subsequently appeared in the November and December editions. CEOCAST was compensated with $15K per month in cash and stock for three months in 2011. (source 30)
Chardan Capital Markets ("Chardan") is the investment bank that acted as the placement agent for XXII's May 2012 and August 2013 preferred stock offerings and as the financial advisor for the warrant exchange program in the 4th quarter of 2013. It was founded in 2003 by Kerry Propper as an offshoot from his father's firm, Chardan Capital. Kerry's father, Dr. Richard Propper, has a long history of securities law abuses (source 46). Father and son have been involved together in multiple dubious Chinese reverse mergers (eg., A-Power Energy and Fuqi International) and in 2010, along with Rodman & Renshaw, were behind the disastrous public offering of DJSP Enterprises Inc. which began trading at $9 and was under $0.50 by the end of 2010 amidst claims of improprieties. (source 31) You can see more of Chardan's horrendous Chinese reverse merger track record here. We have also written about Chardan being questionable as well, which you can read here.
In 2006, Richard Propper was charged by the US Justice Department of defrauding the Small Business Administration of $32M. His partner in this illegal venture, John Torkelsen, pled guilty and was sentenced to seven years in prison. Richard Propper eventually settled by paying a $1.5M fine. Kerry Propper was also a party to this case, and settled for $36K (sources 13-16).
Rodman and Renshaw, meanwhile, saw its parent company eventually file for bankruptcy.
Scott P. Shaffer is a blogger based out of Boca Raton, Florida who first mentioned XXII in the inaugural issue of his newsletter/blog called "How To Find Big Stocks" which was also posted on Seeking Alpha (source 17). XXII was covered in the February, May, June, August 2013 and January, March 2014 editions of the newsletter. Shaffer's FINRA record indicates that he worked at a succession of bucket shops (Sterling Financial, D. Blech and Co. to name a few) before taking off on his own as an independent investor and newsletter/blog writer. Shaffer states that he is not paid by the companies he covers but may take positions in companies he is covering prior to publication. In 2007, Shaffer was promoting CSMG Technologies Inc (CTGI- delisted) with the same statement, however SEC records show that he had received 200K options to purchase shares from the company for "services rendered." (source 32)
The Company Has a Cash Position that Is Going to Necessitate Even More Dilution Soon
The company filed its most recent 10-Q on August 14, 2014, where it disclosed that it has $4,172,795 cash on hand, which equates to roughly enough to last for another 3 quarters. The company is going to be forced to do an offering soon and has filed a $45M shelf registration which was declared effective by the SEC in June of 2014 (source 8)
(click to enlarge)
The Company's Financials are Atrocious. The Only Constants Are Rising Share Count and A Consistent Net Loss
As you can see from the below chart, the company's revenue has been anything but recurring, but it's their net loss that has been the figure that's been consistently growing. The company has gone from a $1.3 million loss in 2011 to a massive $26.1 million loss in 2013. The company has posted a $7.2 million net loss for 2014 thus far, as well.
The company's cash position has relied heavily on the company's ability to perform private placements, as you can see in the above-listed share count. The share count has more than doubled since 2011. Keeping the same market cap, $5 share in 2011 would be worth less than a mere $2.50 in today's environment.
For the second quarter of 2014, the company posted revenue of $16,144, and a net loss of $1.965M. The company had an updated share count of 58,749,240 and cash on hand of $4,172,795. Here's how those numbers have fared in the past couple of years.
2011
2012
2013
2014 1st Quarter
2014 2nd Quarter
Revenue
$1,012,141
$18,775
$7,278,383
$447,535
$16,114
Net Loss
($1,347,787)
($6,736,737)
($26,153,158)
($5,315,128)
(1,965,815)
Avg. Shares
27,209,646
34,286,979
56,902,770
58,264,624
58,749,240
Cash
$252,249
$188
$5,830,599
$5,373,407
$4,172,795
Total Assets
$2,388,623
$2,644,871
$12,286,744
$11,930,499
$11,240,624
(source: XXII filings)
That whopping $16,114 in revenue the company posted just this past quarter? That came from the selling of filtered cigars, as per the company's 10-Q:
(click to enlarge)
We're not really sure where cigars fit into the company's business plan, this is the first we've heard of it. The word "cigar" doesn't appear in the company's 2013 10-K.
Excluding a one-time license payment in Q4 2013 and as of Q1 2014, the company has generated merely $2.5M in unprofitable revenue over the past 5 years from contract manufacturing research cigarettes, with no contracts in place for future sales. The research cigarettes are produced with technology licensed from North Carolina State University, and XXII is technically in default of this licensing agreement which means patent rights can revert to NCSU at any time, barring further amendments to the agreement. The two do seem to continue to have a working relationship (as NCSU is brought up in XXII's 10-K a couple times for 2013), but we believe them to be in default based on the letter agreement technicality linked above.
The company did book a $7M license fee from British American Tobacco (BAT) in 2013, which granted BAT exclusive access to patents for genetic modification of nicotine levels that were developed by XXII separately from the NCSU patents and bulls believe there is potential for additional revenue from commercialization of products BAT develops with this technology. Yet, this is at best years away given that BAT has publicly stated that it has other priorities for commercialization.
Additionally, no one seems to know the arrangements of the BAT agreement except for XXII and BAT. The letter referenced in the agreement (which provides the definition of the "milestones" that need to be achieved in order to unlock the other $7M) hasn't been disclosed.
(click to enlarge)
(source 44)
Bulls also point to the potential of XXII's own brand of standard cigarettes, which are set for national distribution at some point in the future, but these cigarettes have been trumpeted by the company since 2011 with no sales and no advertising spending to date.
The Bull Case has Holes and the Company Is Licensing Their X-22 Product - to Itself.
X-22, the company's original catalyst and story heading into the reverse merger, failed a Phase IIB trial at the end of 2011. Since then, the company hasn't announced any partnerships or material news concerning X-22.
With respect to X-22, listed on the company's website is that the product has now been licensed to Hercules Pharmaceuticals, LLC. Sounds impressive, right? A licensing deal for their touted product? Sounds like this company is going places.
(click to enlarge)
(source: xxiicentury.com)
Until we find out that the company is licensing X-22 to itself. Elsewhere on the company's website, we can see much clearer that Hercules Pharma, LLC is actually a subsidiary of XXII:
(click to enlarge)
We also note that the company apparently failed to update the FDA with the results of its clinical trial, as Clinicaltrials.gov shows that the last update to the trial took place in October 2011 (source 47). Better managed trials often conclude by posting follow-up and results, even for failed trials. We'd also postulate that these steps need to be taken before preparing another trial.
(click to enlarge)
Then, in October of last year, the company entered into an agreement with British American Tobacco (BAT) that would allow it to license nicotine modification patents.
These patents cover genes that regulate nicotine production in the leaf of tobacco plants, while the NCSU patents cover genes that regulate nicotine production at the roots. BAT paid XXII $7M up-front and may pay up to an additional $7M if certain milestones are met. If a commercial product is brought to market, the minimum and maximum amount of annual royalties are $3M and $15M for a period of three years increasing to $5M and $25M thereafter up to a period of 15 years. (source 26)
BAT Commercialization: Bulls think the BAT research agreement will lead to commercial revenues, but British American Tobacco published a 29-page "Science & Technology" report in January 2014 outlining the company's research priorities and providing both 2-year and 4-year development plans. XXII is not named and nicotine reduction is not mentioned at all in the report (source 27). We think this helps easily debunk a majority of the bull case.
The main focus of the BAT program is toxicant reduction in standard cigarettes (nicotine is not a toxicant) and electronic cigarette harm reduction testing. The report also points to BAT subsidiary Nicoventures where commercial development is ongoing for harm reduction products which are currently limited to BAT's e-cigarette called Vype and a nicotine atomizing product which is still in development.
BAT's priorities might change if the FDA required manufacturers to come out with low nicotine cigarettes. But that seems unlikely given general concerns that low nicotine products will result in people smoking more cigarettes to compensate for reduced nicotine levels.
Lowering nicotine levels does not reduce the harm from smoking (source 28). The harm occurs simply from burning the tobacco, regardless of the nicotine content. Lowering the nicotine lowers the addictive properties only. Moreover, there are established alternate methods of lowering nicotine content other than genetic modification, like advanced filtering and chemical stripping. Such commercial products have been introduced in the past with limited success (e.g., the NEXT product from Philip Morris.)
Branded Cigarette Sales: Bulls argue that when the NASCO Products MSA transfer clearance is approved, or when XXII's standalone MSA application is approved, XXII will be able to begin national distribution of its RED SUN and MAGIC branded cigarettes. With the equipment newly purchased, XXII can manufacture these brands at its own production facility instead of being contract manufactured as in the past.
But becoming a signing member of the Master Settlement Agreement is an optional choice for a cigarette manufacturer. There are a number of smaller cigarette makers that opt out of the MSA contract and sell as a non-participating manufacturer ("NPM"). There are certain benefits and protections given under the MSA, but the financial difference between being a member and selling as a NPM is negligible. Importantly, XXII's current branded standard cigarettes have been available since 2011 and could have been sold as a NPM since that time. Revenue from these products is essentially zero.
The company has not stated the logic in approaching MSA membership through acquisition (NASCO Products) versus independent application. In both cases, the participating states in the MSA have to approve the application (new membership) or the transfer request (acquisition) and the administrative work to establish escrow accounts would be the same (MSA-related sources 29).
In either case XXII will be required to deposit on escrow approximately $0.50 per pack of cigarettes sold annually with each individual state in which they sell cigarettes. In the case of the individual states' MSA approval process, these are done state-by-state and there should have been some progress update since the company announced the start of this process in January, 2013, and received its Federal Tobacco Manufacturer permit in March, 2014.
We believe that even if XXII can overcome these hurdles, the company will have to spend heavily on sales and marketing for its branded products to be successful.
Brand A & B: While bulls argue that XXII will continue to develop branded modified tobacco cigarettes and eventually receive FDA approval to market them as modified risk or smoking cessation products, the FDA itself seems concerned that reduced nicotine products could lead people to smoke more cigarettes.
SPECTRUM: A five-year study was initiated in 2011 by the FDA and National Institutes of Health ("NIH") utilizing XXII's SPECTRUM research cigarettes to study the effects of low nicotine cigarettes on smoking habits in the United States (see New York Times, October 28th, 2011). Initial results are expected to be released sometime in late 2014. Similar studies in New Zealand (2013) and Japan (2012-2013) have shown that low nicotine cigarettes alone are not an effective quitting mechanism. The New Zealand study concludes that smokers need a strong motivation to be swayed to use low nicotine cigarettes and suggests offering them at 1/10th the price of standard cigarettes as a potential motivation. XXII delivered no SPECTRUM cigarettes in 2013 and in 2014 only $270K in net revenue has been derived from SPECTRUM cigarette sales.
We believe that XXII is technically in default of the license agreement with North Carolina State University -- this is the technology behind Brand A, Brand B, SPECTRUM, and X-22. There doesn't seem to be any disclosure that NCSU has terminated the agreement based on default, but this creates a large amount of uncertainty going forward.
Export Sales: Bulls argue that export sales of modified tobacco products could be a growth channel, with XXII selling to Belgium, Netherlands, Luxemburg and Poland. From XXII's 2013 10-Q, March 2014: "Laboratory testing and European labeling requirements are expected to be completed soon, and shortly thereafter distribution of the Company's products will commence."
Again, we have seen all talk regarding the export sales and no meaningful revenue.
Marijuana: In April 2014, XXII announced an investment of $700K for a 25% stake in an unnamed plant genetics company. The buzz is that this might be something marijuana-related. To date, there is no evidence at all that XXII has any technology that would work in modifying marijuana, or for that matter, why anyone would want that.
The Company Has No Near Term Prospects
By the 4th quarter of 2013 the original story behind the reverse merger, X-22, which failed Phase IIB trial at the end of 2011, seemed to fall by the wayside. XXII tried to revive the product in 2013 by utilizing cigarettes with slightly higher nicotine levels than those used in the failed trial for additional testing, but results still didn't entice anyone to partner with XXII to fund additional development (source 34).
The 2013 10-K (source 1) shows that the company has suspended further clinical trials of X-22:
(click to enlarge)
However, in October, 2013, XXII entered into an agreement with British American Tobacco (BAT) to license nicotine modification patents that XXII had developed separately from NCSU. These patents cover genes that regulate nicotine production in the leaf of tobacco plants, while the NCSU patents cover genes that regulate nicotine production at the roots. BAT/ paid XXII $7M up-front and may pay up to an additional $7M if certain milestones are met.
In December, 2013, XXII bought a cigarette manufacturing facility (out of bankruptcy) from Renegade Tobacco Inc. for $3M in cash, and then sold $650K of the equipment acquired that it did not need in the same month. This is the first time XXII has owned its own equipment (source 33).
XXII also paid $1M in December to purchase NASCO Products Inc., a tiny tobacco company with no recent operations. However, NASCO is a participating member of the Tobacco Master Settlement Agreement ("MSA").
The MSA was established in 1998 between the state Attorneys General of forty-six states, five U.S. territories, the District of Columbia and the five largest tobacco companies in America concerning the advertising, marketing and promotion of tobacco products. To sell cigarettes in these states, companies must either be affiliated with an MSA member or register as a Non-Participating Member ("NPM") and establish an escrow account in those states which is funded by a percentage of sales.
On March 6th, 2014 XXII shares were approved for listing on the NYSE-MKT exchange and XXII was added as a component of the Russell 2000 index on June 30th.
On March 10th, 2014 the company announced it had received its federal permit to manufacture tobacco products (it had applied in January, 2013). This is a requirement prior to MSA inclusion for any state tobacco sales, including doing so as a NPM, but does not guarantee inclusion.
Most recently, on July 11th, XXII announced-without disclosing the name of the organization or the financials of the agreement-that it had engaged a contract research organization to assist with research and regulatory activities related to FDA approval of modified risk products and a smoking cessation product designation.
The press release is laden with fluff. For instance, it notes that there are "1 billion smokers worldwide" while failing to mention the company doesn't seem to be engaging any of them. Also in the realm of forward looking and unnecessary fluff is this line:
Considering there are approximately 1 billion smokers worldwide, Forbes magazine recently characterized a safer cigarette as follows: A product that could have the biggest impact on human health since the introduction of antibiotics.
This line is true. A product could have a huge impact on human health. The problem is, XXII doesn't seem to have this product, so why put this in the press release? (source 18)
We do not believe there are any prospects in the near future, short of another promotion, that are capable of turning XXII stock back upward.
A History of Press Releases that Haven't Panned Out
While doing our research, we've noted a lot of company press releases that seem impressive on the surface, but that have all ultimately led to where the company is now-poised for more dilution and continually posting losses. When considering whether or not to lend credence to the company's most recent press releases, suggesting that International and European sales could be right around the corner, we chose to check what the company's history of delivering on press releases was. Specifically, the company has issued press releases dating back to 2011 touting potential "big things" which still haven't panned out or of which they've stopped talking about without major explanation. This is a common tactic we've witnessed from other pump and dump style companies. Here's a list of some of the more impressive sounding press releases the company has released: May 29, 2014 - 22nd Century Group Signs Letter of Intent with European Factory For Production of Nicotine-Free Tobacco Cigarettes in Europe
While the letter of intent press release says that MAGIC distribution was expected this summer, the company has already pushed that date back in its last 10-Q filing:
Goodrich Tobacco signed a letter of intent with Orion, a cigarette manufacturer in Poland, to contract manufacture the Company's proprietary tobacco products for distribution in the European Union. The parties are now finalizing a manufacturing agreement. Distribution of MAGIC Zero ® is expected in Spain in the fall of 2014. Orion is a manufacturer and distributor of smoking tobaccos, cigarettes, filter tubes, and smoking accessories with distribution in more than 20 countries. The Company continues to work with its European partner on preparations to launch the Company's products in The Netherlands, Belgium and Luxemburg, which is also expected in the fall 2014. 22nd Century Group is also evaluating the sale and distribution of its products in other European countries and in Asia, including China. September 18, 2013 - 22nd Century Group to Acquire Participating Member of the Tobacco Master Settlement Agreement
The company has had de minimis sales as a result of acquiring NASCO for the MSA agreement, again from the last 10-Q:
Our subsidiary, Goodrich Tobacco, introduced in a limited capacity two super-premium priced cigarette brands, RED SUN and MAGIC , into the U.S. market in the first quarter 2011. There have been de minimis sales of these brands since we intentionally have not expanded marketing and distribution of these brands to facilitate the Company becoming a participating manufacturer of the MSA. April 16, 2013 - 22nd Century Group's Goodrich Tobacco Company Grants Exclusive Distribution Rights For Very Low Nicotine Cigarette Brand in Benelux
The company has had no sustained significant revenue increase as a result of this agreement.
January 31, 2013 - 22nd Century Group Subsidiary, Goodrich Tobacco, Applies for Federal License to Manufacture Tobacco Products
The company has had no sustained significant revenue increase as a result of this application.
September 10, 2012 - 22nd Century to Present on Promising Low Tar-to-Nicotine Ratio Cigarettes; Dr. Gio Batta Gori, Author of Virtually Safe Cigarettes, to Speak at 22nd Century Group Annual Shareholder Meeting
Press release highlights a presentation being made at the upcoming AGM.
April 10, 2012 - 22nd Century Group to File Modified Risk Cigarette Applications with the FDA
Two years later, still listed as in process in the company's 10-Q:
Our ability to generate meaningful revenue from our potential modified risk tobacco products in the United States depends on obtaining FDA authorization to market these products as modified risk, and our ability to generate meaningful revenue in the United States from X-22 depends on FDA approval. If these products are authorized and approved by the FDA, we must still meet the challenges of successful marketing, distribution and consumer acceptance. February 8, 2012 - 22nd Century Announces Nicotine-Free Tobacco Cigarettes Now Available For International Markets
This press release hasn't led to any sustained significant increase in company revenue.
September 27, 2011 - Enrollment Completed in 22nd Century's X-22 Phase II-B Clinical Trial
These FDA Trials have been suspended by the company and offloaded to its subsidiary, Hercules Pharmaceuticals, for them to try and find a partnership to continue with them.
August 8, 2011 - 22nd Century Enrolls First Patients in X-22 Phase II-B Smoking Cessation Clinical Trial
These FDA Trials have been suspended by the company and offloaded to its subsidiary, Hercules Pharmaceuticals, for them to try and find a partnership to continue with them.
July 21, 2011 - FDA Clears X-22 IND For Phase II-B Smoking Cessation Clinical Trial
These FDA Trials have been suspended by the company and offloaded to its subsidiary, Hercules Pharmaceuticals, for them to try and find a partnership to continue with them.
June 8, 2011 - 22nd Century Doubles Acres Planted of Proprietary Tobacco; New Crop Will Increase Tobacco Inventory for Approximately $90 Million in Potential Sales of Finished Products
A stunning headline suggests the company has potential to see $90M in sales in the future. Of course, the company's revenue of $16k last quarter suggests that they're slightly off target for their $90M figure. As of June 30th, 2014, the company lists $1.73M in net inventory.
Summation and Price Target
This could be a case where the dilution alone could likely knock XXII down to a price under what you paid for it. It appears that company is only good at building false hope so it can continue to raise money. With a new shelf registration recently declared effective by the SEC, the company is likely going to be getting ready to raise more cash.
Regardless, we believe that with this company's $47.21 million accumulated deficit, very little revenue, and consistent history of net losses, that the stock is severely overvalued simply as a result of promotion. We believe this company has value only as a resalable shell, on which we place a value of $500,000; strictly for the next reverse merger. This amounts to $0.008/share. In addition, the company currently has $9.1 million in shareholder's equity on the balance sheet, which amounts to roughly $0.16/share.
We believe this company to be worth no more than $0.20 share, the price it closed at on October 10, 2012.
With the company burning cash, we're simply wondering when the next dilutive financing will close.
The clock is running…
Sources:
XXII 2013 10-K
SEC News Digest
The Buffalo News:
BizJournals
UCSF
FBI
UCSF
XXII 10-Q, filed August 14, 2014;
Proactive Capital
Mox Reports
Barrons
CEOcast
USA Today
Paed.uscourts.gov
Philly.Com
NY Times
Seeking Alpha
XXII Press release
Freerepublic.com
Syracuse.com
Otcmagic.com
Federal Reserve
Linkedin.com
XXII Century
XXII Century
XXII Century
Bat-Science.com
NCBI
Public Health Law Center
CEOcast
Business Wire.com
Web Archive
Journalnow.com
XXII Century
XXII 2011 10-K
XXII 2012 10-K
SEC Filing
S1
LAtimes.com
Yahoo Finance
Proxy Statement
Investmentnews.com
Reuters.com
Sec.gov
CEOcast.com
4closurefraud.org
Clinicaltrials.gov
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Latest on XXII
22nd Century Group Q2 resultsThu, Aug 1422nd Century EPS in-lineThu, Aug 14Midday Gainers / LosersMon, Aug 4Premarket Gainers / LosersWed, Jul 3022nd Century Group hires CRO for regulatory helpFri, Jul 11Premarket Gainers / LosersThu, Jul 3Premarket Gainers / LosersThu, May 29E-cig ban teed up by New York state legislatorsWed, Apr 30Tobacco
but this is my favorite part...
Aug. 27, 2014 10:15 AM ET | About: 22nd Century Group, Inc. (XXII), Includes: VGR
Disclosure: The author is short XXII. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.
It was actually my husband...who when to school with Henry.
press release
22nd Century Group: patents granted For 22nd Century Group's technology to virtually eliminate nicotine in tobacco plants
7:49 AM ET, 07/30/2014 - Briefing.com
Co announced that the USPTO on July 29, 2014 and the Korean Intellectual Property Office on July 23, 2014, each granted a patent to the Company for its NBB technology that virtually eliminates nicotine in the tobacco plant.
The resulting tobacco plants are planted, grown, harvested, cured, processed, and made into tobacco products, including cigarettes, exactly the same as conventional tobacco. U.S. Patent 8,791,329, Reducing Levels of Nicotinic Alkaloids in Plants, contains 33 claims. South Korean Patent 10-1413122, also titled, Reducing Levels of Nicotinic Alkaloids in Plants, contains 15 claims. These two patents and related International Patent Application PCT/IB2006/001741, cover methods for producing tobacco plants with decreased nicotine levels and the resulting tobacco plants and products produced therefrom. There are various continuation and divisional patent applications related to these granted patents pending in both patent offices.
Patent applications for the NBB technology have been filed by 22nd Century worldwide and patents are currently issued to 22nd Century in the U.S., China, Europe, Japan, South Korea, Taiwan, Mexico, Australia and South Africa.
I passed by the XXII office a few days ago...it's still there... It's in a small building on Main Street in Clarence NY.
I think you just did!
Interesting conversation about insider posting, and I would agree that insider posting would range from irresponsible to illegal. One thing to keep I mind though is insider lurking. They are here...
Thank you. That was a nicely worded... Non judgmental reply that illustrates my point exactly. We don't all need to agree, but we can communicate with respect for our fellow human beings. I will return to my silence now. Have a great weekend!