TPS Position Update – March 29, 2016

| March 29, 2016

TPS Position Update

. . . . . Broadway Financial (NASD: BYFC)  – Hold 

We recommended this community bank stock in January at $1.47 and it has been doing well.

Today, it closed at $1.85.

Last month, Broadway Financial reported Q4 2015 earnings.  Net income came in at $5.6 million compared to $716,000 for Q4 2014.

Net income for 2015 was $9.1 million, compared to $2.5 million for 2014.

One of the key reasons why: an income tax benefit of $4.6 million.  This is thanks to a partial reversal of the valuation allowance on deferred tax assets.

In 2015, total assets grew by $52.0 million to $402.9 million, up from $350.9 million at the end of 2014.

There has also been good news on the regulatory front.

The Office of the Comptroller of the Currency (“OCC”) has terminated both a Consent Order and an Order to Cease and Desist. The two moves indicate that federal regulators now view Broadway as a sound operation.

Loan originations are growing, and so is the bank’s asset quality.

. . . . 22nd Century Group  (NASD: XXII) – Hold 

There’s nothing terribly complicated about this stock.

We need 22nd Century to start making money.

When 2015 financials were released recently, the company reported significant revenue growth… $8.522 million for 2015 compared to $529,000 for 2014.

But the operating losses are severe.  22nd Century lost $12.0 million in 2015, up from $11.7 million in 2014.

Clearly, management needs to quickly get its arms around expenses. If we do not see improvement in this area, we will advise you to sell, but for now we are giving the firm a fair chance to deliver.

22nd Century’s priorities right now…

  • Monetizing its intellectual property portfolio
  • Getting a marketing order from the FDA in response to the Modified Risk Tobacco Product application for BRAND A Very Low Nicotine cigarettes
  • Securing strategic partners to establish a joint venture to fund Phase III clinical trials for X-22 smoking cessation aid in development
  • Launching “proof of concept” exposure studies for BRAND B low tar-to-nicotine ratio cigarettes in advance of submitting a Modified Risk Tobacco Product application to the FDA for BRAND B
  • Growing RED SUN sales in the United States and MAGIC sales in Europe
  • Opening up new Asian markets

We like the direction of the company, but we don’t like the expenses.  We’ll keep a close eye on 22nd Century and keep you updated.

Action To Take

  • Hold Broadway Financial (NASD: BYFC)
  • Hold 22nd Century Group (NASD: XXII)

Category: TPS Update

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