TPS Position Update – January 26, 2016

| January 26, 2016

TPS Position Update

. . . . Nevada Gold (NYSE: $UWN) – Hold 

We’re delighted with the way things are going with this under the radar gaming company.

We recommended Nevada Gold in June 2015 at $1.66. Now it’s at $2.13 after running up as high as $2.50.

For Q2 of fiscal 2016, net revenue was up $400,000 on a comparable unit basis.  Overall, reported net revenue was $16.1 million, down by $300,000.

But the real story is on the balance sheet, where we see debt being paid down.  $1.4 million in debt was paid down during the quarter.

The company still has a problem to solve with a bad bet in South Dakota, where it operates slot machines in Deadwood.  Business is soft… net revenue for the quarter was $2.4 million compared to $2.6 million for the prior year period. South Dakota EBITDA slid to $252,000 from $313,000.

What lies ahead?  The company is looking to boost revenues following its December 2015 acquisition of the Club Fortune Casino in the Las Vegas suburb of Henderson.

The new assets include a 35,000 square foot building on 8 acres.

Club Fortune operates 541 slot machines, 7 table games, a poker room, and a sports book along with a restaurant, two bars, and a lounge. 

. . . . 22nd Century Group, Inc. (NYSE: $XXII) – Hold 

We recommended 22nd Century in July 2015 at $0.74. Now it’s at $0.65.

When Q3 financials were reported late last year, the story was one of growing revenues.

The company is selling its RED SUN premium cigarettes for the domestic market, doing contract manufacturing of a third-party cigarette brand and filtered cigars.

In Europe, it is selling MAGIC “0.0mg nicotine” cigarettes.

Q3 net revenues were $2.668 million.  Net revenues for the first nine months of 2015 were $5.591 million.

These numbers are higher than forecast and outstrip the $529,000 for 2014.

Despite the progress, 22nd Century isn’t making money.  The net loss for the quarter was $2.8 million.

What lies ahead?  

It would be good to see FDA approval for the firm to label and market a brand of cigarettes as a reduced exposure tobacco product, which 22nd Century positions as “The World’s Lowest Nicotine Tobacco Cigarettes”.

The so-called “BRAND A” cigarettes contain 95% less nicotine than most typical brands.

It would also be good to see the company’s portfolio of 200 patents bring in more licensing fees and other revenue. 

Action To Take

  • Hold Nevada Gold (NYSE: $UWN)
  • Hold 22nd Century Group, Inc. (NYSE: $XXII)

Category: TPS Update

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