22nd Century (XXII) - 2025 Q1 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements 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 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 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 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 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][22][23] - 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] - 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][68][78] - 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][136][138] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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 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] - 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][149][153] Liquidity and Capital Resources 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] - 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] - 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][166] Item 3. Quantitative and Qualitative Disclosures about Market Risk 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] Item 4. Controls and Procedures 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] - No material changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2025[180] Part II. Other Information Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - No unregistered sales of equity securities occurred during the period[184] Item 5. Other Information 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] Item 6. Exhibits 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]