22nd Century (XXII) - 2023 Q4 - Annual Results

Fourth Quarter 2023 Earnings Release Executive Summary & Business Outlook CEO Larry Firestone outlines the company's rapid turnaround, targeting breakeven by Q1 2025 through reduced cash burn, contract manufacturing growth, and VLN® brand investment - Cash use significantly reduced from approximately $15 million per quarter in 2023 to less than $4 million projected for Q1 2024[2] - Primary short-term focuses include profitably growing contract manufacturing to cover operating expenses and investing in VLN® brand growth through increased sales and awareness[3] - The company aims to achieve breakeven by the first quarter of 2025 through successful strategy execution[3] Recent Business & Corporate Highlights The company strategically exited hemp/cannabis to focus on tobacco harm reduction, expanded VLN® retail presence, reorganized contract manufacturing, appointed a new CEO, and announced a reverse stock split for Nasdaq compliance Strategic & Operational Updates The company exited hemp/cannabis to focus on tobacco harm reduction and contract manufacturing, expanding VLN® retail presence to over 5,100 stores with renewed marketing efforts - Exited hemp/cannabis operations to fully focus on tobacco harm reduction and contract manufacturing[6] - VLN® retail presence expanded to over 5,100 stores across 26 states, up from approximately 1,100 stores as of June 30, 2023[7] - Refocusing VLN® sales and marketing efforts to drive awareness and sales of its unique, FDA MRTP authorized harm reduction product[7] - Reorganized tobacco contract manufacturing to improve margins and operating performance, actively seeking additional opportunities[7] Corporate Governance & Actions Larry Firestone was appointed Chairman and CEO in November 2023, a new board compensation program aims to save over $1 million annually, and a 1-for-16 reverse stock split was announced for Nasdaq compliance - Larry Firestone appointed Chairman and CEO on November 29, 2023[7] - Reduced board compensation program targets over $1 million in annual cost savings starting in 2024[7] - A 1-for-16 reverse stock split effective April 2, 2024, aims to regain Nasdaq minimum bid price compliance[8] Fourth Quarter & Full Year 2023 Financial Performance Q4 2023 net revenues from continuing operations decreased to $7.4 million, with a $(7.8) million gross loss due to a $(7.9) million inventory write-down, while Adjusted EBITDA loss improved to $(3.2) million from $(10.0) million YoY Statement of Operations Analysis Q4 2023 revenue from continuing operations declined to $7.4 million, resulting in a $(7.8) million gross loss due to a $(7.9) million inventory write-down, with net loss at $(22.1) million Q4 2023 vs Q4 2022 Key Financials (Continuing Operations) | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net Revenues | $7.4M | $10.0M | | Gross Profit (Loss) | $(7.8)M | $(0.1)M | | Operating Expenses | $6.4M | $10.2M | | Operating Loss | $(14.2)M | $(10.2)M | | Net Loss | $(22.1)M | $(11.1)M | | Net Loss per Share | $(0.66) | $(0.77) | - Q4 2023 gross profit included a one-time $(7.9) million charge for inventory write-down adjustments[7] Balance Sheet and Liquidity Analysis As of December 31, 2023, cash and cash equivalents were $2.1 million, total assets decreased to $27.5 million from $114.7 million due to divestitures, resulting in a $(8.4) million shareholders' deficit, with an additional $2.3 million raised subsequently Balance Sheet Summary (as of Dec 31, in thousands) | Metric | 2023 | 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $2,058 | $2,205 | | Total assets | $27,503 | $114,651 | | Total liabilities | $35,914 | $18,676 | | Total shareholders' equity (deficit) | $(8,410) | $95,975 | - Held $2.1 million in cash and cash equivalents as of December 31, 2023[9] - Subsequently secured an additional $2.3 million in gross proceeds via a warrant exchange program and excess inventory sales[9] Non-GAAP Financial Measures (EBITDA & Adjusted EBITDA) Q4 2023 Adjusted EBITDA loss improved to $(3.2) million from $(10.0) million YoY, driven by cost reductions despite a $(14.9) million EBITDA, with full-year Adjusted EBITDA loss at $(30.7) million Q4 EBITDA & Adjusted EBITDA Reconciliation (in thousands) | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | Net loss from continuing operations | $(22,068) | $(11,114) | | EBITDA | $(14,928) | $(10,803) | | Inventory write-down | $7,927 | $0 | | Restructuring and impairment | $1,871 | $35 | | Adjusted EBITDA | $(3,200) | $(9,900) | - Adjusted EBITDA loss per share improved to $(0.10) in Q4 2023 from $(0.69) in Q4 2022[15][21] Financial Statements This section presents the detailed, unaudited Condensed Consolidated Balance Sheets, Statements of Operations, and Non-GAAP reconciliations for 22nd Century Group, Inc Condensed Consolidated Balance Sheets As of December 31, 2023, the balance sheet shows total assets of $27.5 million and total liabilities of $35.9 million, resulting in a $(8.4) million shareholders' deficit, primarily due to discontinued operations divestiture Condensed Consolidated Balance Sheets (in thousands) | | December 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | ASSETS | | | | Total current assets | $16,277 | $44,605 | | Total assets | $27,503 | $114,651 | | LIABILITIES AND SHAREHOLDERS' EQUITY | | | | Total current liabilities | $25,034 | $13,018 | | Total liabilities | $35,914 | $18,676 | | Total shareholders' equity (deficit) | $(8,410) | $95,975 | | Total liabilities and shareholders' equity (deficit) | $27,503 | $114,651 | Condensed Consolidated Statements of Operations and Comprehensive Loss For Q4 2023, net revenues were $7.4 million with a net loss from continuing operations of $(22.1) million, while full-year 2023 net revenues were $32.2 million with a total net loss of $(140.8) million Condensed Consolidated Statements of Operations (in thousands) | | Three Months Ended Dec 31, 2023 | Year Ended Dec 31, 2023 | | :--- | :--- | :--- | | Revenues, net | $7,357 | $32,204 | | Gross (loss) profit | $(7,829) | $(8,696) | | Operating loss from continuing operations | $(14,232) | $(44,931) | | Net loss from continuing operations | $(22,068) | $(54,686) | | Net loss | $(29,332) | $(140,775) | | Basic and diluted loss per common share | $(1.15) | $(7.28) | Reconciliation of Non-GAAP Measures This section details the reconciliation from GAAP Net Loss to Non-GAAP EBITDA and Adjusted EBITDA for Q4 and full year 2023 and 2022, showing Q4 2023 Adjusted EBITDA loss of $(3.2) million after adjustments Full Year EBITDA & Adjusted EBITDA Reconciliation (in thousands) | Metric | Year Ended 2023 | Year Ended 2022 | | :--- | :--- | :--- | | Net loss from continuing operations | $(54,686) | $(36,553) | | EBITDA | $(43,984) | $(35,498) | | Inventory write-down | $7,927 | $0 | | Restructuring and impairment | $2,415 | $35 | | Adjusted EBITDA | $(30,657) | $(30,029) | - EBITDA is defined as net income adjusted for interest, taxes, depreciation, and amortization, while Adjusted EBITDA further excludes non-cash and non-operating expenses such as stock compensation and restructuring charges[23] Company Information 22nd Century Group is an agricultural biotechnology company focused on tobacco harm reduction with the first and only FDA MRTP authorization for a combustible cigarette - 22nd Century Group focuses on tobacco harm reduction using proprietary reduced nicotine content (RNC) tobacco plants and cigarettes[11] - Received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021[11] - A conference call was hosted at 8:00 a.m. E.T. on the release day to discuss financial results and business highlights[10]