Business Context and Reporting Period
This Form 8-K was filed by 22nd Century Group, Inc. on December 14, 2016, with a signature date of December 20, 2016. The filing reports the entry into material definitive agreements by a wholly-owned subsidiary of the Company.
Key Financial Metrics
The filing does not provide standard financial metrics such as revenue, profit, cash flow, margins, debt, or liquidity. The only specific financial figure disclosed is a commitment to provide approximately $1,100,000 in research funding over a three-year period.
Material Changes and Agreements
On December 14, 2016, the Company entered into two significant agreements with the University of Virginia:
- Research Funding Agreement: The Company will provide approximately $1,100,000 over three years to the University of Virginia. The funds will support multi-year R&D activities focused on creating unique industrial hemp plants with optimized traits for commercial and medical use.
- Exclusive License Agreement: The Company received exclusive rights to commercialize all results from the collaboration with the University of Virginia Patent Foundation (UVA LVG). In consideration, the Company must pay royalties to UVA LVG based on net sales from the commercialization of these results.
Outlook, Risks, and Management Commentary
Management highlighted a press release issued on December 20, 2016, regarding these agreements. The filing notes that all work under the research agreement must be conducted under necessary federal and state licenses and permits. The full terms of the agreements are subject to the documents expected to be filed as exhibits to the Company's Annual Report on Form 10-K for the year ended December 31, 2016.
Key Facts for Investor Verification
- Verify the specific royalty rates and payment terms in the Exclusive License Agreement with UVA LVG.
- Confirm the status of federal and state licenses required for the industrial hemp research.
- Review the full text of the Research Funding Agreement and Exclusive License Agreement when filed as exhibits to the 2016 Form 10-K.
- Assess the impact of the $1,100,000 funding commitment on the Company's future cash flow and liquidity.