Business Context and Reporting Period
Company: 22nd Century Group, Inc. (formerly Touchstone Mining Limited)
Filing Type: Form 10-Q (Unaudited)
Reporting Period: Three months ended December 31, 2010
Status: Development Stage Company / Shell Company
Operations: The Company has discontinued its original mineral exploration activities in Nevada and is currently inactive, seeking mergers, acquisitions, or other ventures. It has generated no operating revenue since inception.
Key Financial Metrics
| Metric | Three Months Ended Dec 31, 2010 | Three Months Ended Dec 31, 2009 | Balance Sheet (Dec 31, 2010) |
|---|---|---|---|
| Revenue | $0 | $0 | N/A |
| Net Loss | $(48,199) | $(19,177) | N/A |
| Cash and Cash Equivalents | N/A | N/A | $24 |
| Total Assets | N/A | N/A | $4,354 |
| Total Liabilities | N/A | N/A | $226,954 |
| Stockholders' Deficit | N/A | N/A | $(222,600) |
| Working Capital Deficit | N/A | N/A | $(176,930) |
| Accumulated Deficit (Inception) | N/A | N/A | $(369,102) |
Debt Structure: The Company holds $162,327 in notes payable to stockholders (current and long-term) and $14,824 in accrued interest. All notes are convertible promissory notes with interest rates ranging from 8.25% to 10%.
Material Changes vs. Prior Period
- Increased Expenses: Total operating expenses rose from $17,514 in Q4 2009 to $44,652 in Q4 2010, driven primarily by a $44,652 increase in professional fees.
- Worsened Liquidity: Cash and cash equivalents declined from $323 at September 30, 2010, to $24 at December 31, 2010.
- Debt Increase: The Company secured a new $50,000 loan from a minority shareholder in October 2010, increasing total notes payable.
- Corporate Actions: The Company changed its name from Touchstone Mining Limited to 22nd Century Group, Inc. and effected a 2.782:1 forward stock split in November 2010.
Outlook, Risks, and Management Commentary
- Going Concern: The filing explicitly states substantial doubt regarding the Company's ability to continue as a going concern. The Company has a significant working capital deficit and relies on debt and equity financing to fund operations.
- Strategic Shift: Management has discontinued mineral exploration and is actively seeking business combinations, mergers, or acquisitions to enhance shareholder value. A non-binding Letter of Intent was signed in October 2010 with 22nd Century Limited, LLC.
- Capital Needs: The Company intends to raise additional funds through public or private placements. Without material operations or revenue, it remains dependent on external financing.
- Management Changes: In November 2010, Ronald Asirwatham resigned from all executive roles, and David Rector was appointed as CEO, CFO, and President.
- Risks: Risks include the inability to secure financing, the uncertainty of the proposed business combination, and the lack of historical operating revenue.
Investor Verification Checklist
- Liquidity Crisis: Verify the Company's ability to meet obligations with only $24 in cash against $176,954 in current liabilities.
- Debt Conversion Terms: Review the specific conversion prices and maturity dates of the $162,327 in convertible notes payable to stockholders.
- Business Combination Status: Confirm the current status of the non-binding Letter of Intent with 22nd Century Limited, LLC and whether the name change is permanent.
- Mineral Claims: Verify the status of the 10 mineral claims in Nevada, as the Company has discontinued exploration but retains the property.
- Stock Split Impact: Ensure all share counts and per-share data are adjusted for the 2.782:1 forward stock split effected in November 2010.