Core Insights - 22nd Century Group is expanding the availability of its VLN® reduced nicotine content products through partnerships with multiple tobacco brands, aiming to reduce smoking rates and related health harms [1][2][3] - The FDA's proposed Tobacco Product Standard for nicotine yield, which sets a maximum nicotine content of 0.7 mg per gram of tobacco, is driving interest in VLN products, which average 0.5 mg per gram [3][4][5] - The implementation of the FDA's proposal could prevent approximately 48 million youth and young adults from starting to smoke by the year 2100 [4][6] Company Overview - 22nd Century Group is recognized as a pioneering company in nicotine harm reduction, providing smokers with options to control their nicotine consumption [7][8] - The VLN® cigarette is designed to offer a familiar alternative for traditional smokers, containing 95% less nicotine than conventional cigarettes [8][9] - The company holds a comprehensive patent portfolio that ensures it has the only low nicotine combustible cigarette in the U.S. and critical international markets [9]

Core Insights - 22nd Century Group, Inc. is leading the fight against smoking-related health harms through its VLN reduced nicotine content products, which are the first and only combustible cigarettes authorized by the FDA to reduce health risks associated with smoking [1][2][4] Product Overview - VLN cigarettes contain 95% less nicotine than conventional cigarettes, supported by decades of independent clinical research demonstrating their effectiveness in reducing nicotine consumption, smoking rates, and increasing quit attempts [2][4] - The VLN product line is designed to provide smokers with non-addictive alternatives, allowing them to control their nicotine intake and potentially reduce tobacco use [2][4] Regulatory Status - The VLN product was originally authorized in December 2021, with a renewal process due in December 2026, and the company expects full FDA support for this renewal based on its compliance with the FDA's low nicotine mandate issued in January 2025 [2][4] Research and Development - The company is committed to ongoing R&D programs aimed at advancing reduced nicotine content in tobacco and introducing additional VLN-based products to offer more health-oriented alternatives to traditional tobacco products [2][4] Company Mission - 22nd Century Group aims to empower smokers to make informed choices regarding their nicotine consumption, promoting a healthier lifestyle by providing options that help avoid addictive levels of nicotine altogether [4][5]

Core Insights - 22nd Century Group is advancing a 100mm VLN® reduced nicotine content cigarette, targeting an FDA submission by Q4 2025, expanding its product line aimed at nicotine harm reduction [1][4] - The new 100mm product is designed to appeal to approximately half of the U.S. smoking population who prefer this size, enhancing the reach of VLN® products [3][4] - The company emphasizes that its proprietary reduced nicotine content tobacco has been validated through independent clinical studies, demonstrating effectiveness in reducing smoking behaviors [3][6] Product Development - The 100mm VLN® cigarette will be available under both VLN® branding and partner brands like Smoker Friendly and Pinnacle, if authorized [2] - The VLN® cigarette contains 95% less nicotine than traditional cigarettes, which has been shown to help smokers reduce consumption and increase quit attempts [6][9] Market Position - 22nd Century Group is positioned as a pioneering company in nicotine harm reduction within the tobacco industry, focusing on providing smokers with choices to control their nicotine consumption [5][7] - The company operates a manufacturing facility in Mocksville, North Carolina, capable of producing over 45 million cartons of combustible tobacco products annually, with room for expansion [8]

Core Insights - 22nd Century Group, Inc. is launching new Pinnacle VLN and moist snuff products in over 1,700 stores across 27 states, marking a significant expansion in its product offerings [1][2] - The new products include Pinnacle VLN Gold and Menthol VLN cigarettes, which are expected to begin sales in late summer and early fall of 2025 [2][4] - The company aims to leverage its established Pinnacle brand, which has a strong sales track record, to drive success in the new product categories [2][5] Product Launch Details - The launch includes four new Pinnacle SKUs, with two specifically in the low nicotine category [1] - The moist snuff products will feature straight and wintergreen flavors, expected to be available in the second half of 2025 [4] - The manufacturing of these products will utilize proprietary VLN tobacco strains and will be distributed through existing national-scale distribution agreements [5][6] Company Background - 22nd Century Group is recognized as a pioneering nicotine harm reduction company, focusing on enabling smokers to control their nicotine consumption [7] - The flagship VLN cigarette contains 95% less nicotine than traditional cigarettes, providing an alternative for smokers looking to reduce their nicotine intake [8][10] - The company operates a facility in Mocksville, North Carolina, with the capacity to produce over 45 million cartons of combustible tobacco products annually [9]

Summary of 22nd Century Group (XXII) Conference Call - May 21, 2025 Company Overview - **Company Name**: 22nd Century Group Inc. - **Ticker Symbol**: XXII - **Headquarters**: Mocksville, North Carolina - **Industry**: Tobacco, specifically focused on nicotine harm reduction - **Key Brands**: VLN, Smoker Friendly, Pinnacle Core Points and Arguments - **Nicotine Harm Reduction**: The company is a pioneer in the nicotine harm reduction space, offering products with significantly lower nicotine content, specifically the VLN brand which contains 95% less nicotine than standard cigarettes [3][11][41] - **FDA Compliance**: 22nd Century Group's VLN products are the only FDA-authorized low nicotine combustible cigarettes, aligning with the FDA's low nicotine mandate issued in January 2025 [5][34] - **Market Strategy**: The company aims to create a new low nicotine category (VLNC) to differentiate its products from traditional cigarettes, similar to how light beers are marketed [4][7] - **Growth Initiatives**: Plans to expand the VLN product line with new SKUs and partner brands, enhancing market penetration through existing retail relationships [6][18][22] - **Retail Presence**: Currently, the company has products in 5,100 retail stores across 26 states, with plans to expand to all 50 states [21][23] Financial Performance - **Debt Reduction**: The company has reduced its debt from over $20 million to $3.9 million, aiming for a debt-free status in the future [31][36] - **Operational Efficiency**: Operating expenses have decreased to under $2 million, with a target to reach breakeven by Q4 2025 [31][37] Market Dynamics - **Consumer Trends**: There is a growing awareness and demand for nicotine harm reduction products, with billions being spent on awareness campaigns [10][12] - **Competitive Landscape**: Traditional tobacco companies continue to focus on high-nicotine products, which creates a market opportunity for 22nd Century Group to position itself as a healthier alternative [42][43] Product Development - **R&D Focus**: The company is working on expanding its product offerings, including non-combustible low nicotine products and new tobacco strains through partnerships with research institutions [29][30] - **New Product Launch**: Smoker Friendly has introduced a natural cigarette product, Smoker Friendly Black Label, which is positioned as a cost-effective alternative to premium brands [25][27] Consumer Targeting - **Ideal Customers**: The target market includes smokers looking to reduce their nicotine dependence, such as pregnant women or those in restrictive work environments [45][46] Additional Insights - **Marketing Strategy**: The company is revamping its branding to make it more appealing and accessible to consumers, aiming to capture attention in retail environments [9][16][20] - **Long-term Vision**: The company is focused on establishing itself as a leader in the low nicotine category, with a commitment to consumer choice and health [8][34][41] This summary encapsulates the key points discussed during the conference call, highlighting the company's strategic direction, market positioning, and financial health.

Core Insights - Emerging Growth Research released a quarterly update report on 22nd Century Group, highlighting operational progress and a positive financial outlook for 2025 [1][4] Financial Performance - 22nd Century Group reported Q1 2025 revenue of $6.0 million, an 8% decrease year-over-year from $6.5 million in Q1 2024, but a significant 48% increase compared to $4.0 million in Q4 2024 [3][8] - Gross profit improved to $(0.6) million in Q1 2025 from $(1.3) million in Q4 2024 [8] - Operating loss narrowed to $(2.6) million from $(4.4) million in Q1 2024 [8] - EBITDA improved to $(2.5) million from $(4.2) million in Q1 2024 [8] Debt and Cash Position - The company's cash position strengthened following a Q2 2025 partial warrant inducement that generated $5.4 million in gross proceeds, with $1.0 million used to repay debt [5] - Total debt reduced to approximately $3 million as of May 7, 2025, resulting in a net cash positive position [5][8] - Management anticipates sufficient cash reserves to maintain operations through year-end 2025 [5] Product Development and Market Position - The VLN® cigarettes, which contain 95% less nicotine than conventional cigarettes, are gaining traction in the marketplace [6] - Management estimates that only 223,000 VLN® cartons are needed to reach profit breakeven, indicating significant growth potential [6] - The company plans to launch additional products, including VLN® SKUs within private label CMO customer brand families [7]

Core Insights - 22nd Century Group, Inc. is focused on nicotine harm reduction and offers smokers choices regarding their nicotine consumption [3][4] - The company will present a corporate update at the Emerging Growth Conference on May 21, 2025, led by CEO Larry Firestone [1][2] Company Overview - 22nd Century Group is a pioneering company in the tobacco industry, enabling smokers to control their nicotine intake [3] - The flagship product, VLN cigarettes, contains 95% less nicotine than traditional cigarettes and aims to reduce overall nicotine consumption [4][6] Product and Technology - VLN cigarettes are designed to provide an authentic smoking experience while allowing smokers to make informed choices about nicotine levels [4] - The company utilizes patented technologies to create reduced nicotine tobacco blends, ensuring high flavor and yield with significantly lower nicotine content [6] Manufacturing Capabilities - The company operates a 60,000 square foot facility in Mocksville, North Carolina, capable of producing over 45 million cartons of combusted tobacco products annually, with room for expansion [5] - The facility also provides turnkey contract manufacturing for other tobacco brands both domestically and internationally [5]

Financial Data and Key Metrics Changes - Net revenue for Q1 2025 was $6 million, a 50% increase sequentially from $4 million in Q4 2024 [28] - Gross margin showed a loss of $600,000, which is an improvement of 50% from the prior quarter [28] - Net loss from continuing operations improved to $3.3 million from $4.2 million in the preceding quarter [31] - Adjusted EBITDA loss improved to $2.3 million from $3.9 million in Q4 2024 [31] Business Line Data and Key Metrics Changes - Total cartons sold were 476,000, an increase of 41% compared to 338,000 in Q4 2024 [29] - The company is focusing on two main segments: reduced nicotine premium products and value-focused CMO brands [10][12] Market Data and Key Metrics Changes - The combustible cigarette market is valued at $85 billion, facing increasing price pressures and regulatory challenges [6] - The company aims to serve the Tier four market, which is approximately two-thirds the price of Tier one brands [10] Company Strategy and Development Direction - The company is transitioning into a growth model, focusing on expanding distribution and launching targeted marketing campaigns [12][20] - New product introductions include Smoker Friendly Black Label and VLN branded products, aimed at capturing market share in the natural cigarette and low nicotine segments [14][15] - The company is not waiting for FDA regulations to finalize its strategy and has developed technology for low nicotine tobacco products [22][23] Management's Comments on Operating Environment and Future Outlook - Management believes the current market dynamics present opportunities for high-quality branded products due to price pressures from big tobacco [21] - The company is on track to achieve breakeven EBITDA by Q4 2025, with expectations of revenue growth and margin improvement [25][35] Other Important Information - The company reduced its outstanding debt to $3.9 million, with debt-for-equity conversions of $3.1 million during the quarter [31] - A capital raise through warrant inducement raised approximately $5.4 million, providing cash runway for growth initiatives [32] Q&A Session Summary Question: Do you still foresee a breakeven of EBITDA for the fourth quarter of this year? - Yes, the company is on track to achieve breakeven in the latter half of the year [35] Question: Will CMO continue to grow from its first quarter level and will VLN kick in over the course of the year? - Yes, both Smoker Friendly and Pinnacle franchises are on a growth path, and state approvals for VLN will enhance distribution [36][37] Question: Does the increase in accounts receivable indicate a need for additional financial capital? - The company is comfortable with its cash runway after recent financing and the increase in receivables is due to new customer agreements [38][39] Question: What is the expected collection period for the accounts receivable balance? - The collection terms are typical for shipments, generally collected upon product delivery [40] Question: What has been the share issuance dilution from the warrants? - Current shares outstanding include approximately 7 million shares issued under the recent warrant inducement offering [42] Question: Are there any implications for twenty second Century Group from competitors' earnings results? - The company sees opportunities in the value segment due to price increases in the market and is anticipating the launch of partner VLNs [46][47] Question: Have we seen the worst of it in 2024, and are we now on a growth trajectory? - Yes, the company is now on a growth trajectory in terms of cartons, price, and revenue [48]

Financial Data and Key Metrics Changes - Net revenue for Q1 2025 was $6 million, a 50% increase sequentially from $4 million in Q4 2024 [28] - Gross margin loss improved by 50% to a loss of $600,000 from the previous quarter [28] - Net loss from continuing operations improved to $3.3 million from $4.2 million in the preceding quarter [31] - Adjusted EBITDA loss significantly improved to $2.3 million from $3.9 million in Q4 2024 [31] Business Line Data and Key Metrics Changes - Total cartons sold were 476,000, an increase of 41% compared to 338,000 in Q4 2024 [29] - The company is focusing on two main segments: reduced nicotine premium products and value-focused CMO brands [9][10] Market Data and Key Metrics Changes - The combustible cigarette market is valued at $85 billion, facing increasing price pressures and regulatory scrutiny [6] - The company aims to serve consumers transitioning from high nicotine products to lower nicotine options, capitalizing on market dynamics [21] Company Strategy and Development Direction - The company is transitioning into a growth phase, focusing on expanding distribution and launching targeted marketing campaigns [12][20] - New product introductions include Smoker Friendly Black Label and additional SKUs for existing brands, aimed at increasing market share [14][15] - The company is not waiting for FDA regulations to finalize its strategy and has developed technology for low nicotine products already approved by the FDA [22][23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about achieving breakeven EBITDA by Q4 2025, supported by improved pricing structures and volume growth [34][36] - The company is focused on restoring fiscal responsibility and improving balance sheet ratios through debt reduction and working capital improvements [27] Other Important Information - The company has reduced its outstanding debt to $3.9 million and executed a capital raise of approximately $5.4 million [31][32] - A lawsuit against Dorchester Insurance Company for $9 million in business interruption insurance is ongoing, with a trial date set for November 2025 [32] Q&A Session Summary Question: Do you still foresee a breakeven of EBITDA for the fourth quarter of this year? - Management confirmed they are on track to achieve breakeven in the latter half of the year [34] Question: Will CMO continue to grow from its first quarter level and will VLN kick in over the course of the year? - Management indicated that both Smoker Friendly and Pinnacle franchises are on a growth path, with state approvals expected to drive distribution [36] Question: Does the increase in accounts receivable indicate a need for additional financial capital? - Management stated they are comfortable with their cash runway following recent financing and attributed the increase in receivables to new customer agreements [38][39] Question: What is the expected timeline for collecting the accounts receivable balance? - Management noted that collections occur upon product delivery, following typical shipment terms [40] Question: What has been the share issuance dilution from the warrants? - Current shares outstanding include approximately 7 million shares issued under the recent warrant inducement offering, with additional warrants expected to be exercised [42] Question: Are there any implications for twenty second Century Group from competitors' earnings results? - Management highlighted that trends in the market, particularly the migration from Tier one to Tier four brands, present opportunities for the company [46][48] Question: Have we seen the worst of it in 2024 past, and are we now on a growth trajectory? - Management confirmed that they are now on a growth trajectory in terms of cartons, price, and revenue [49]

[Part I. Financial Information](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) Q1 2025 financials show decreased cash, improved losses, and a going concern warning due to working capital deficit and low cash [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2025, cash significantly decreased to $1.1 million, total liabilities rose to $17.8 million due to current reclassification, and equity declined Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $1,133 | $4,422 | | Accounts receivable, net | $4,322 | $1,698 | | Total current assets | $11,095 | $11,522 | | Total assets | $21,458 | $21,673 | | **Liabilities & Equity** | | | | Total current liabilities | $16,396 | $9,962 | | Long-term debt | $0 | $5,165 | | Total liabilities | $17,833 | $17,661 | | Total shareholders' equity | $3,625 | $4,012 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) Q1 2025 saw net revenues decrease to $6.0 million, but gross, operating, and net losses significantly narrowed due to cost controls and lower cost of goods sold Q1 2025 vs Q1 2024 Performance (in thousands, except per-share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Revenues, net | $5,956 | $6,469 | | Gross (loss) profit | $(609) | $(1,129) | | Operating loss from continuing operations | $(2,570) | $(4,434) | | Net loss from continuing operations | $(3,274) | $(5,450) | | Net loss | $(4,328) | $(5,739) | | Basic and diluted loss per common share | $(2.50) | $(395.07) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2025 net cash used in operating activities increased to $3.0 million, resulting in a $3.3 million net decrease in cash, ending at $1.1 million Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(2,976) | $(2,255) | | Net cash (used in) provided by investing activities | $(59) | $15 | | Net cash (used in) provided by financing activities | $(254) | $1,699 | | **Net decrease in cash and cash equivalents** | **$(3,289)** | **$(541)** | | Cash and cash equivalents - end of period | $1,133 | $1,517 | [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail a 'going concern' warning, reverse stock splits, discontinued operations, complex debt, legal proceedings, and subsequent capital-raising events - The company's significant losses and negative cash flows raise **substantial doubt** about its ability to continue as a **going concern** for the next year, prompting management to explore expense reduction and capital raising strategies[21](index=21&type=chunk)[22](index=22&type=chunk)[23](index=23&type=chunk) - The company completed **two reverse stock splits** (1-for-16 and 1-for-135) in 2024 to regain **Nasdaq listing requirements** compliance, with all share data retroactively adjusted[26](index=26&type=chunk) - The Senior Secured Credit Facility has undergone **numerous amendments**, with **$4.6 million** outstanding as of March 31, 2025, and **$3.1 million** of debt converted into 518,600 shares in January 2025[57](index=57&type=chunk)[68](index=68&type=chunk)[78](index=78&type=chunk) - Subsequent to quarter-end, a warrant inducement offering in April 2025 raised approximately **$5.4 million** in gross proceeds, and the Needle Rock Farms property was sold for **$770 thousand** in May 2025[134](index=134&type=chunk)[136](index=136&type=chunk)[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2025 revenue decline, improved losses due to cost controls, critical liquidity issues, and subsequent capital-raising efforts to address going concern doubts [Results of Operations](index=39&type=section&id=Results%20of%20Operations) Q1 2025 net revenues decreased by 7.9% to $6.0 million due to repriced cigar contracts, but improved gross and operating losses resulted from significant expense reductions Q1 2025 vs Q1 2024 Operating Results (in thousands) | Metric | Q1 2025 | Q1 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenues, net | $5,956 | $6,469 | (7.9)% | | Gross (loss) profit | $(609) | $(1,129) | (46.1)% | | Sales, general and administrative | $1,799 | $2,906 | (38.1)% | | Research and development | $162 | $425 | (61.9)% | | Operating loss from continuing operations | $(2,570) | $(4,434) | (42.0)% | - Cigarette sales volume **increased** from new CMO contracts, while filtered cigar revenue **decreased** due to contract repricing, and VLN® cigarette net revenues were **negative** from return accruals[147](index=147&type=chunk) - SG&A expenses **decreased by $1.1 million** due to lower headcount, reduced consulting and legal costs, and lower insurance, while R&D expenses **decreased by $263 thousand** from lower headcount and reduced tobacco agreements[146](index=146&type=chunk)[149](index=149&type=chunk)[153](index=153&type=chunk) [Liquidity and Capital Resources](index=42&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces critical liquidity with $1.1 million cash and a $5.2 million working capital deficit, raising going concern doubts, partially addressed by a $5.1 million warrant inducement - The company's **$1.1 million** cash balance and projected operating needs raise **substantial doubt** about its ability to continue as a **going concern** for the next year[155](index=155&type=chunk) - The working capital deficit increased to **($5.2 million)** at March 31, 2025, from a **$1.8 million** surplus at December 31, 2024, primarily due to reclassification of the senior secured credit facility[160](index=160&type=chunk) - Subsequent to the quarter, the company received **$5.1 million** in net proceeds from a warrant inducement, using **$1.0 million** to repay senior secured credit facility debt[159](index=159&type=chunk)[166](index=166&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=48&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) No material changes have occurred in the company's quantitative and qualitative market risk disclosures since its 2024 Annual Report on Form 10-K - There have been **no material changes** to the market risk disclosures from the company's most recent Annual Report on Form 10-K[177](index=177&type=chunk) [Item 4. Controls and Procedures](index=48&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were **effective** as of the end of the first quarter of 2025[179](index=179&type=chunk) - **No material changes** were made to the company's internal control over financial reporting during the quarter ended March 31, 2025[180](index=180&type=chunk) [Part II. Other Information](index=39&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=49&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings, including a shareholder derivative case, insurance litigation, and contract disputes, as detailed in Note 12 - The company is subject to **various legal proceedings**, including a shareholder derivative case, an insurance claim dispute, and contract disputes, as detailed in Note 12[182](index=182&type=chunk) [Item 1A. Risk Factors](index=49&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the company's risk factors since its 2024 Annual Report on Form 10-K filing - **No material changes** have occurred in the company's risk factors since the filing of its 2024 Annual Report on Form 10-K[183](index=183&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=49&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company reported no unregistered sales of equity securities during the period - No unregistered sales of equity securities occurred during the period[184](index=184&type=chunk) [Item 5. Other Information](index=49&type=section&id=Item%205.%20Other%20Information) No modifications were made to director or officer trading plans under Rule 10b5-1(c) during the first quarter of 2025 - **No modifications** were made to director or officer trading plans under Rule 10b5-1(c) during the quarter[184](index=184&type=chunk) [Item 6. Exhibits](index=50&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and Inline XBRL data files - Filed exhibits include **Section 302 and 906 certifications** by the CEO and CFO, along with **XBRL data files**[187](index=187&type=chunk)