美国
证券和交易所
佣金 华盛顿，D.C. 20549
表格
根据1934年证券交易法第13或15(d)条，本季度报告 |
截至季度末
根据1934年证券交易法第13或15（d)条的转型报告 |
该过渡期从________至________
委托文件编号：001-39866
(根据其章程规定的注册人准确名称)
| ||
(所在州或其他司法管辖区) | （美国国内国税局雇主 | |
(委员会文件号) | 唯一识别号码） |
，（主要行政办公地址）
(
(注册人电话号码，包括区号)
在法案12(b)下注册的证券:
每一类的名称 |
| 标的 |
| 注册的交易所名字 |
|
|
请确认是否按照证券交易法案第13或15（d）节的要求文件了在过去12个月内（或该注册人需要提交此类文件的更短期间内）的所有报告，并且在过去90天内一直受到这些文件提交的要求。
请用复选标记指示，注册者在过去12个月内（或注册者需要提交此类文件的较短时期内）是否按照S-T规则405条款（本章第232.405条）的要求已经以电子方式提交了每个互动数据文件。
在交易所法案第120亿.2条中，勾选表示报告人为大型加速文件提交人、加速文件提交人、非加速文件提交人、小型报告公司或新成长公司。请参阅“大型加速文件提交者”、“加速文件提交者”、“小型报告公司”和“新兴成长公司”的定义。
大型加速报告人 | ☐ | 加速文件提交人 | ☐ |
☒ | 较小的报告公司 | ||
| 新兴成长公司 |
如果是新兴成长型企业，请勾选是否选择不使用按照《证券交易法》第13(a)条规定的新或修订财务会计准则的过渡期。 ◻
请勾选以下项目，指示注册人是否为壳公司（在证券交易法案规则12b-2中定义）。
是
截至2024年11月8日，有
22世纪集团，公司
简明合并资产负债表
(未经审计)
(以千为单位，除开份额和每份收入数据)
2021年9月30日 | 运营租赁负债： | |||||
|
| 2024 |
| 2023 | ||
资产 |
|
|
|
| ||
流动资产： |
|
|
|
| ||
现金及现金等价物 | $ | | $ | | ||
2,687,823 |
| |
| | ||
存货 |
| |
| | ||
保险赔款 |
| |
| | ||
GVb期票据 |
| |
| | ||
预付费用和其他流动资产 |
| |
| | ||
处置的持有待售的停止运营的流动资产 |
| |
| | ||
总流动资产 |
| |
| | ||
物业、厂房和设备，净值 |
| |
| | ||
经营租赁使用权资产，净值 |
| |
| | ||
无形资产, 净额 |
| |
| | ||
其他 | | | ||||
总资产 | $ | | $ | | ||
|
|
|
| |||
负债和股东权益（亏损） |
|
|
|
| ||
流动负债: |
|
|
|
| ||
Notes and loans payable - current | $ | | $ | | ||
开多次数 | | | ||||
营业租赁负债 |
| |
| | ||
应付账款 |
| |
| | ||
应计费用 |
| |
| | ||
计提诉讼费用 |
| |
| | ||
应计工资 |
| |
| | ||
应计的消费税和费用 |
| |
| | ||
递延收益 | | | ||||
其他流动负债 |
| |
| | ||
持有待售已停止经营的不良资产 |
| |
| | ||
流动负债合计 |
| |
| | ||
长期负债： |
|
|
|
| ||
营业租赁负债 |
| |
| | ||
长期债务 | | | ||||
其他长期负债 | | | ||||
负债合计 | | | ||||
100亿股认可，分别于2024年5月3日和2024年2月2日拥有发行并流通的股份数量 |
|
| ||||
股东权益（赤字）： |
|
|
|
| ||
优先股，$0.0001 |
|
|
|
| ||
普通股，每股面值为 $0.0001； |
|
|
|
| ||
股本 and : |
|
|
|
| ||
|
| |||||
普通股，面值 | ||||||
超过面值的资本 |
| |
| | ||
累积赤字 |
| ( |
| ( | ||
股东权益（亏损）总计 |
| |
| ( | ||
负债总额和股东权益（赤字） | $ | | $ | | ||
百万美元。
3
22世纪集团，公司
利润和综合亏损简明综合报表（未经审计，以千为单位，除股票和每股数据外）
(未经审计)
（金额以千为单位，除了股份数和每股数据）
三个月结束 | 截至九个月的结束日期 | |||||||||||
2021年9月30日 | 2021年9月30日 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
营业收入, 净收入 | $ | | $ | | $ | | $ | | ||||
营业成本 | |
| | | | |||||||
产品的消费税和费用 |
| |
| |
| |
| | ||||
总（亏损）利润 |
| ( |
| |
| ( |
| ( | ||||
营业费用： |
|
|
|
|
|
| ||||||
销售，管理及行政 |
| |
| |
| |
| | ||||
研发费用 |
| |
| |
| |
| | ||||
其他经营费用（收入），净额 | |
| |
| ( |
| | |||||
营业费用总计 |
| |
| |
| |
| | ||||
持续经营业务的营业亏损 |
| ( |
| ( |
| ( |
| ( | ||||
其他收入（支出）： |
|
|
|
|
|
| ||||||
其他收入（费用）净额 |
| |
| |
| |
| | ||||
利息收入，净额 |
| |
| |
| |
| | ||||
利息支出 |
| ( |
| ( |
| ( |
| ( | ||||
其他收入（支出）总额 |
| ( |
| |
| ( |
| ( | ||||
持续经营活动的税前亏损 |
| ( | ( |
| ( | ( | ||||||
所得税准备 |
| — | — |
| |
| | |||||
持续经营的净亏损 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
终止经营： | ||||||||||||
设计自动化。这一领域包括我们的先进硅芯片设计，验证产品和服务以及系统集成产品。该领域还包括数字、定制和现场可编程门阵列（FPGA）集成电路（IC）设计软件、验证软件和硬件产品，系统集成产品和服务，以及制造软件产品。设计师使用这些产品来自动化复杂的IC设计过程，并降低可能导致昂贵的设计或制造重新调整或次优终端产品的缺陷。 | $ | ( | $ | ( | $ | | $ | ( | ||||
所得税准备 | — | — | — | — | ||||||||
净利润 (终止经营) | $ | ( | $ | ( | $ | | $ | ( | ||||
净亏损 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
视同股息 | ( | ( | ( | ( | ||||||||
普通股股东应占净亏损 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
持续经营中每股普通股的基本和摊薄亏损 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
基本和稀释每股亏损，来自终止经营业务 | $ | ( | $ | ( | $ | | $ | ( | ||||
Basic and diluted loss per common share from deemed dividends | $ | ( | $ | ( | $ | ( | $ | ( | ||||
每股普通股基本和摊薄损失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
加权平均普通股份数-基本和稀释 |
| | | | | |||||||
净亏损 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
其他综合收益: |
|
|
|
|
|
| ||||||
短期投资证券的未实现收益 |
| — |
| — |
| — |
| | ||||
外币翻译 |
| — |
| ( |
| — |
| ( | ||||
将已实现的损失重新分类至净损失 |
| — |
| — |
| — |
| | ||||
其他综合收益 | — | ( | — | | ||||||||
综合损失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
百万美元。
4
22世纪集团，INC。
股东权益（赤字）简明综合权益变动表
(未经查核)
（金额以千位元计，股份数据除外）
2024年9月30日结束的九个月 | |||||||||||||||||
累积的 | |||||||||||||||||
普通 | 票面金额 | 资本中 | 其他 | 总计 | |||||||||||||
股份 | 一般股份 | 超额保额 | 综合 | 累积的 | 股东权益 | ||||||||||||
| 优越* |
| 分享* |
| 票面价值* |
| 收入（损失） |
| 赤字累计 |
| 权益（亏损） | ||||||
2024 年 1 月 1 日结存 |
| | $ | — |
| $ | |
| $ | — |
| $ | ( | $ | ( | ||
与RSU解约有关的股票发行，扣除税款后碎股 |
| |
| — |
| ( |
| — |
| — |
| ( | |||||
与授权安排相关的股票发行 | | — | | — | — | | |||||||||||
因行使认股权而发行的股票，扣除$的费用 | | — | | — | — | | |||||||||||
股权基础的补偿 |
| — |
| — |
| |
| — |
| — |
| | |||||
进行股票反向拆股后发行了碎股 |
| |
| — |
| — |
| — |
| — |
| — | |||||
净损失 |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
于2024年3月31日止之余额 | | $ | — |
| $ | |
| $ | — |
| $ | ( | $ | ( | |||
股票发行与行使认股权有关 | | — | — | — | — | — | |||||||||||
股票发行用于偿还优先债券 | | — | | — | — | | |||||||||||
与资本筹募相关的股票发行，扣除发行成本后的净额 $ | | — | | — | — | | |||||||||||
根据转换成权益保证基金，发行的股票 2 | | — | | — | — | | |||||||||||
与已结清债务相关的股份发行 | | — | | — | — | | |||||||||||
股权基础的补偿 | — | — | | — | — | | |||||||||||
净损失 | — | — | — | — | ( | ( | |||||||||||
截至2024年6月30日的结余 |
| | $ | — | $ | | $ | — | $ | ( | $ | ( | |||||
与已清偿的债务相关的股份发行 | | — | | — | — | | |||||||||||
与Reg A定向增发相关的股票发行，在扣除发行成本后为$ | | — | | — | — | | |||||||||||
与筹集资本有关的股票发行，扣除发行成本后净额 $ | | — | | — | — | | |||||||||||
与认股权设定有关的股票，扣除 $ 费用后发行 | | — | | — | — | | |||||||||||
资产抵押贷款转换后发行的股票 | | — | | — | — | | |||||||||||
与授权安排相关的股票发行 | | — | | — | — | | |||||||||||
股权基础的补偿 | — | — | ( | — | — | ( | |||||||||||
净损失 | — | — | — | — | ( | ( | |||||||||||
股份暂时搁置 | ( | — | — | — | — | — | |||||||||||
2024年9月30日的余额 |
| | $ | — | $ | | $ | — | $ | ( | $ | | |||||
*对2023年7月5日的股票合并进行追溯生效，然后 进行 于2024年4月2日进行股票逆向拆股。 | |||||||||||||||||
1 包括在期间内行使的 | |||||||||||||||||
2 包括在期间内行使的 | |||||||||||||||||
5
2023年9月30日止九个月 | |||||||||||||||||
累积的 | |||||||||||||||||
常见 | 票面金额 | 资本中 | 其他 | 总计 | |||||||||||||
股份 | 一般股份 | 超额保额 | 综合 | 累计 | 股东权益 | ||||||||||||
| 优越* |
| 分享* |
| 票面价值* |
| 收入（损失） |
| 赤字累计 |
| 普通股 | ||||||
2023 年 1 月 1 日结存 |
| | $ | — |
| $ | |
| $ | ( |
| $ | ( | $ | | ||
与RSU解约有关的股票发行，扣除税款后碎股 |
| |
| — |
| ( |
| — |
| — |
| ( | |||||
针对收购而发行的股票 | | — | | — | — | | |||||||||||
股权基础的补偿 |
| — |
| — |
| |
| — |
| — |
| | |||||
采用ASU 2016-13 |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
股票可拆式认股权证 |
| — |
| — |
| |
| — |
| — |
| | |||||
其他综合收益 |
| — |
| — |
| — |
| |
| — |
| | |||||
净损失 |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
截至2023年3月31日的结存 | | $ | — |
| $ | |
| $ | ( |
| $ | ( | $ | | |||
股票发行与RSU解禁相关，扣除用于缴税的股份后的净额 | | — | ( | — | — | ( | |||||||||||
与ATm有关的发行股票，扣除费用后的净额为$ | | — | | — | — | | |||||||||||
与资本筹募相关的股票发行，扣除发行成本后的净额 $ | | — | | — | — | | |||||||||||
与授权安排相关的股票发行 | | — | | — | — | | |||||||||||
股权报酬 | — | — | | — | — | | |||||||||||
其他全面损失 | — | — | — | | — | | |||||||||||
净损失 | — | — | — | — | ( | ( | |||||||||||
进行股票反向拆股后发行了碎股 | | — | — | — | — | — | |||||||||||
2023年6月30日结余 | | $ | — | $ | | $ | | $ | ( | $ | | ||||||
与资本募集有关的股份发行，扣除发行成本后为$ | | — | | — | — | | |||||||||||
股权基础的补偿 | — | — | | — | — | | |||||||||||
其他综合收益 | — | — | — | ( | — | ( | |||||||||||
净亏损 | — | — | — | — | ( | ( | |||||||||||
2023年9月31日结余 |
| | $ | — | $ | | $ | ( | $ | ( | $ | | |||||
*对2023年7月5日的股票合并进行追溯生效，然后 进行 于2024年4月2日进行股票逆向拆股。 | |||||||||||||||||
请参阅简明综合财务报表附注。
6
22世纪集团，INC。
简明财务报表现金流量表
(未经查核)
(金额以千为单位)
截至九个月 | ||||||
九月三十日 | ||||||
| 2024 |
| 2023 | |||
经营活动现金流量： |
|
|
|
| ||
净损失 | $ | ( | $ | ( | ||
调整以弥补净亏损与经营活动使用现金之间的差异： |
|
|
|
| ||
商誉和长期资产减损 | — | | ||||
摊销和折旧 |
| |
| | ||
租赁权资产摊销 |
| |
| | ||
其他非现金损失 | ( | ( | ||||
信用损失准备 | | | ||||
机械和设备出售的亏损 |
| |
| | ||
包含在利息费用中的债务相关费用 | | | ||||
以股权为基础的员工酬劳费用 |
| |
| | ||
因条件采计变动而获利 |
| — |
| ( | ||
公允价值变动 | ( | ( | ||||
衍生负债公允价值变化 | ( | — | ||||
存货储备增加 | | | ||||
资产及负债的变动，扣除收购后的净值： |
|
|
| |||
应收帐款 |
| ( |
| ( | ||
存货 |
| |
| ( | ||
预付费用及其他资产 |
| |
| ( | ||
应付账款 |
| ( |
| | ||
应计费用 |
| ( |
| | ||
应计的工资 |
| ( |
| ( | ||
应计货物税和费用 |
| ( |
| | ||
其他负债 | ( |
| ( | |||
经营活动所使用之净现金流量 |
| ( |
| ( | ||
投资活动之现金流量: |
|
|
| |||
收购专利、商标和许可证 |
| — |
| ( | ||
取得固定资产 |
| ( |
| ( | ||
出售物业、厂房及设备所得款项 |
| |
| | ||
并购，扣除取得现金净额 | — | ( | ||||
财产、厂房及设备保险赔偿 | — | | ||||
短期投资证券的销售和到期 |
| — |
| | ||
购买短期投资证券 |
| — |
| ( | ||
投资活动提供的净现金流量（使用） |
| ( |
| | ||
来自筹资活动的现金流量: |
|
|
| |||
支付票据负债 | ( | ( | ||||
发行应付票据所得款项 | | | ||||
偿还长期债务款项 | ( | — | ||||
发行长期债务证券所得 | — | | ||||
发行债务成本支付 | — | ( | ||||
可换股权发行所得 | — | | ||||
认股权行使的净收益 | | — | ||||
与ATM相关的普通股发行所得 | — | | ||||
支付与自动柜员机相关的普通股发行成本 | — | ( | ||||
普通股发行所得款项 | | | ||||
支付普通股发行成本 | ( | ( | ||||
与RSUs净份额结算相关的税款已支付 | ( | ( | ||||
筹资活动提供的净现金 |
| |
| | ||
现金、现金等价物和受限现金的净增加量 |
| |
| | ||
现金、现金等价物和受限现金-期初 |
| |
| | ||
现金、现金等价物和受限现金-期末 | $ | | $ | | ||
Cash and cash equivalents, end of period | ||||||
期初现金及现金等价物余额 | $ | | $ | | ||
期初受限现金 | — | — | ||||
期初现金、现金等价物和受限现金 | $ | | $ | | ||
期末现金及现金等价物 | $ | | $ | | ||
期末受限现金 | — | | ||||
期末现金、现金等价物及受限制现金 | $ | | $ | | ||
现金流资讯的补充揭示： |
|
|
|
| ||
非现金交易: |
|
|
|
| ||
已产生但尚未支付的资本支出 | $ | | $ | | ||
租赁资产及对应的营业租赁负债 | $ | — | $ | | ||
视同分红派息 | $ | | $ | | ||
与已清偿的债务相关的股份发行 | $ | | $ | — | ||
非现金对价RXP收购 | $ | — | $ | | ||
非现金授权安排 | $ | | $ | | ||
已计提但尚未支付的股本发行成本 | $ | | $ | — | ||
为清偿次级票据而作出的付款 | $ | | $ | — | ||
GVb票据支付 | $ | | $ | — | ||
发行债务成本支付 | $ | | $ | — | ||
偿还优先担保授信设施的股权转换 | $ | | $ | — | ||
股权认购应收款 | $ | | $ | — | ||
请参阅简明合并财务报表附注.
7
二十二世纪集团股份有限公司
简明综合财务报表附注
二零二四年九月三十日
(未经审核)
金额以千计，除股份和每股数据除外
注 1.-业务性质及重要会计政策摘要
演示基础— 二十二世纪集团股份有限公司（以及其合并子公司，「第 22世纪集团」或「公司」）是内华达州的一家以「XXII」符号在纳斯达克资本市场上市上市交易的公司。22 世纪集团是一家烟草产品公司，销售和分销本公司自己的品牌烟草产品，并为第三方品牌提供合同制造服务。该公司的旗舰产品是经 FDA 批准作为改性风险烟草产品的低尼古丁可燃烟草。
随附的简明综合财务报表按照美国（「美国」）的规则和法规呈报证券交易委员会（「SEC」）并不包括美国一般公认会计原则（「美国 GAAP」）所要求的披露，如本公司表格 10-k 年报所载的所有披露。因此，本简明综合财务报表应与截至二零二三年十二月三十一日止财政年度之最新年报表 10-k 年报内所载的综合财务报表及其附注一并阅读。
根据管理层认为，简明综合财务报表反映了所有调整（包括正常定期调整），认为必要，以公平呈现本公司所呈报期间的业绩。中期的结果并不一定表明整个财政年度可能预期的结果或趋势。简明合并财务报表是使用美国 GAAP 拟备的，要求管理层做出预估和假设，以影响财务报表日期和报告期间内的资产、负债、股本部分部分、销售、开支和相关披露的报告金额。实际结果可能与这些估计有重大不同。
流动性和资本资源 — 这些简明的综合财务报表是根据一般公认的会计原则拟备，适用于持续性企业，该准则考虑在正常业务过程中实现资产和履行负债。
自成立以来，本公司从业务中产生重大损失和负现金流，并预计在烟草业务中产生重大收入和利润之前，将承受额外损失。该公司营运负现金流为 $
考虑到公司预计的营运需求及其现有现金及现金等值，
因应这些情况，管理层目前正在评估不同的降低开支策略，并采取融资策略，包括通过发行证券、资产销售以及与战略合作伙伴安排筹集额外资金。如果本公司在需要的数量时无法使用资金，则可能需要清算库存、停止或缩短营运，或根据适用的破产法律或类似的州诉讼寻求保障。无法保证本公司能够筹集其继续营运所需的资本。管理层的计划并不减轻本公司在发布简明综合财务报表之日起一年内能够继续作为持续业务的严重疑问。
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简明合并财务报表不包括任何与记录的资产金额之可收回性和分类，或可能因此不确定性结果而产生的负债金额和分类相关的调整。
重新分类 - 公司已修改制品的货物及劳务税的呈现及分类，该税以前在综合损益表和综合亏损细目中的营业成本中记录。
逆拆股 – On April 2, 2024, the Company effected a reverse stock split of its common stock in order to regain compliance with Nasdaq's continued listing requirements. Fractional shares resulting from the reverse stock split were rounded up to the nearest whole share, which resulted in the issuance of a total of
认股证 - The Company accounts for stock warrants as either equity instruments, derivative liabilities, or liabilities in accordance with ASC 480, Distinguishing Liabilities from Equity (ASC 480) and ASC 815, Derivatives and Hedging (ASC 815) depending on the specific terms of the warrant agreement. The assessment considers whether the warrants are freestanding financial instruments pursuant to ASC 480, meet the definition of a liability pursuant to ASC 480, and whether the warrants meet all of the requirements for equity classification under ASC 815, including whether the warrants are indexed to the Company’s own ordinary shares and whether the warrant holders could potentially require “net cash settlement” in a circumstance outside of the Company’s control, among other conditions for equity classification. This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.
公司可能通过支付现金或其他资产来赎回的认股权证，根据ASC 480归类为负债，并最初和后续按其估计公允价值计量。符合全部权益归类标准的已发行或修改的认股权证，在发行时被要求记录为超额股本的一部分。有关认股权证的进一步讨论，请参见附注5和附注10。
与反稀释或向下回合条款相关的被视为股利的负债（通常称为“棒钳”）代表当这些条款触发时，价值转移给符合股权类独立财务工具持有人的经济转移。此外，向持有人提供替代认股权证的初始公允价值在诱因下也被视为被视为股利。这些被视为股利被呈现为减少净利润或增加可供普通股东支配的净损益，并相应增加超额股本，从而导致股东权益（赤字）无变化。截至2024年9月30日结束的三个月和九个月，总计被视为股利的金额为$，比截至2023年9月30日结束的三个月和九个月的$和$分别多，这是由于股权发行（请参见附注10）。
附带认股权证发行的债务 公司在核算附有可拆分认股权的债务发行时，将考虑ASC 470-20、债务（ASC 470）、ASC 480和ASC 815指引。正如在“认股权”标题下所述，公司将根据认股权协议的具体条款，将认股权归类为股本工具、衍生负债或负债。在发行附有可拆分认股权的债务情况下，发行债务的收益首先根据其全面估计公允价值分配给认股权，并附带对应的债务折扣。剩余款项，再根据折扣进一步减少（包括通过分离嵌入式衍生金融工具所创建的折扣），则分配给债务。公司将债务按摊销成本计量为负债，并根据ASC 835的有效利率法在债务工具的预期期限内摊销由资金分配产生的债务折扣到利息费用。利息（ASC 835）所述，公司在核算附有可拆分认股权的债务发行时，将考虑ASC 470-20、债务（ASC 470）、ASC 480和ASC 815指引。
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嵌入式衍生工具 公司考虑债务工具中是否存在需要根据ASC 815将其视为衍生金融工具进行分拆和单独账务的嵌入特征。嵌入式衍生工具最初和后续均以公平价值计量。除了“债务”部分的附记6中描述的分拆嵌入转换选择权外，与公司的Senior Secured信贷设施和次顺位票据相关的嵌入式衍生工具并不重大。
债务发行成本和折扣 - 公司发行的债务相关的发行成本和折扣被推迟并在相关债务的期限内摊销。与公司的Senior Secured信贷设施和次顺位票据相关的债务发行成本和折扣被记录为相关债务携带价值的减少，并按照有效利率法在从发行日到到期日或更早之间的期间内摊销到利息费用。债务发行成本和折扣的摊销金额包含在现金流量表中的债务相关费用中包含在利息费用中。备注6“债务”中包含有关公司债务发行成本和折扣的更多信息。
长寿资产的减损 - 公司检讨所有预期持有并使用的所有长期资产的可回收性，当出现表明资产携带价值可能无法收回的事项或情况变动时。对可能的减损进行评估是基于从相关业务的预期未来现金流量（不打折且不包括利息费用）中收回资产携带价值的能力。如果这些现金流量小于此类资产的携带价值，则记录该估计公允价值与携带价值之间差额的减损损失。公司确定在截至2024年9月30日的三个月和九个月期间内没有出现任何减损指标。
收益和损失条款 - 公司在诉讼和监管事宜具有可能发生损失条款且可以估计的情况下建立一项应计负债。在这种情况下，可能会面临超过任何已计提金额的损失风险。当损失条款既不可能发生又无法估计时，公司不会建立一项应计负债。随著诉讼或监管事宜的发展，公司将与处理该事宜的任何外部律师一起，持续评估该事宜是否具有可能发生且可估计的损失条款。如果在评估时，涉及诉讼或监管事宜的损失条款既不可能发生又不可估计，该事宜将继续受到监控，以进一步发展将使该损失条款既可能发生又可估计。当诉讼或监管事宜相关的损失条款被认定为既可能发生又可估计时，公司将就该损失条款建立一项应计负债，并记录相应金额的相关费用。公司将继续监控该事宜以了解可能影响任何此类已计提负债金额的进一步发展。
根据ASC 450-30，当收益条件达成并实现时，将认可收益条款，这通常将在最终解决时或当收到现金。如果保险公司确认索赔和补偿金额并认为应付款项并有可能收取，则保险理赔可能会比现金收取更早。
公司为其设施保留一般责任保险政策。根据我们的保险政策，若财产受损，公司将遵循ASC 610-30指南的指引。其他收入-强制转换的收益和损失，将非货币资产（财产）转换为货币资产（保险理赔）之ASC 610-30。根据ASC 610-30，一旦认为理赔应收款项是可能的，公司即在摘要合并资产负债表中承认保险理赔应收款项的资产，并相应扣除与在营运和全面损失的摘要合并损益表中记录的意外损失相对的收入。如果保险理赔金额低于认定的意外损失金额，公司将损失，而如果保险理赔金额高于已认定的意外损失金额，公司将仅认定相当于意外损失金额的理赔，并将超额部分视为盈利抵押。业务中断保险可视为盈利抵押。
请参考附注12中所有承诺和可能性的进一步讨论。
人员遣散费用 - 公司不时评估其资源并优化其业务计划以配合执行策略的不断变化的需求。 这些举措可能导致自愿或非自愿员工终止福利。 当员工接受相关报价时，将会计提自愿终止福利。 当承诺终止计划并向受影响的员工传达福利安排时，或根据主管删除或终止的实质计划的存在性来确定负债是否可能并可估计时，将会计提非自愿终止福利。
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下表汇总了在简明合并资产负债表的其他流动负债中呈现的递延遣散责任变动。
2024 年 1 月 1 日结存 | $ | | |
现金支付 | ( | ||
2024年3月31日的结余 | | ||
现金支付 | ( | ||
截至2024年6月30日的结存 | | ||
应计费用 | | ||
现金支付 | ( | ||
普通股票的交易结算 | ( | ||
2024年9月30日的结余 | $ | |
以下表格总结了在综合损益表中关于解雇费用分类的情况：
结束于三个月的期间 | 截至九个月 | |||||||||||
九月三十日 | 九月三十日 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
销售、总务和行政 | $ | | $ | ( | $ | | $ | | ||||
其他营运费用，净额 |
| — |
| |
| — |
| | ||||
总离职遣散费用 | $ | | $ | ( | $ | | $ | | ||||
所得税-对于中期所得税报告，由于对净递延税款资产设有全额估值准备，除非与某些州地方或特许营业税有关，或与飞凡或不常发生的项目有关，否则不记录所得税支出或利益。飞凡或不常发生的项目的税务影响，包括对估值准备的判断变化以及税法或税率变化的影响，在其发生的中期予以报告。
Recently Issued Accounting Pronouncements –
The Company adopted ASU 2016-13, or ASC 326 Financial Instruments-Credit Losses, effective January 1, 2023 under a modified retrospective approach. Under the current expected credit losses (“CECL”) model, the Company immediately recognizes an estimate of credit losses expected to occur over the life of the financial asset at the time the financial asset is originated or acquired. Estimated credit losses are determined by taking into consideration historical loss conditions, current conditions and reasonable and supportable forecasts. Changes to the expected lifetime credit losses are recognized each period. The new guidance applies to the Company’s trade receivables and contract asset balances. Due to the nature of business operations and contracts with customers, the Company has historically not experienced significant bad debt expense or write-offs and as a result, the adoption of ASC 326 did not have a material impact to the Company’s Condensed Consolidated Financial Statements. In connection with the adoption of ASC 326, the Company recorded a provision for credit losses of $
2023年11月，FASb发布了ASU 2023-07，旨在改善可报告的部门披露，以及增强有关显著可报告的部门费用的披露。此指引将于我们的年度报告开始生效，即2024年12月31日结束的财政年度及其后的中期期间，并要求对所有已呈报的前期期间进行追溯应用。由于这些修订不改变营运部门的识别方法，营运部门的汇总或定量门槛的应用以确定可报告的部门，我们不认为此指引对我们的财务状况或经营业绩产生实质影响。 分节报告（TOPIC 280）：改进报告的分节披露. The ASU requires additional disclosures regarding segment expenses and other items on an interim and annual basis. The amendments in ASU 2023-07 were adopted by the Company effective January 1, 2024. While this update will result in enhanced disclosures in our annual report for the fiscal year-ended December 31, 2024 and interim reports beginning in fiscal year 2025, the Company does not expect it will have a material impact on the Company’s consolidated financial statements.
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尚未选择或采纳会计指引
2023年12月，FASB发布了ASU 2023-09《所得税（主题740）-改进所得税披露》，该ASU要求就所得税进行额外的定量和定性披露，让合并基本报表的读者能够评估公司业务、相关税务风险和税务策划如何影响其税率和未来现金流的前景。对于上市公司，该ASU自2024年12月15日后开始适用。公司目前正在评估采纳该ASU将对其合并基本报表产生的影响。
我们考虑了所有ASUs的适用性和影响。如果ASU未在上述列出，则判定该ASU可能不适用，或者对我们的财务报表和相关披露影响不大。
备注2.已停止运作和剥离
截至2024年9月30日，所有资产和负债均作为目前在简明综合资产负债表中呈现的前大麻/大麻处置组板块。被归类为待售停业营业的前大麻/大麻处置组资产和负债的摊销金额如下：
九月三十日 | 十二月三十一日 | ||||
| 2024 | 2023 | |||
预付费用及其他流动资产 | $ | — | $ | | |
不动产、厂房及设备净值 |
| | | ||
其他资产 | — | | |||
待售停业处分资产 | $ | | $ | | |
应付票据及借款-流动 | $ | — | $ | | |
营运租赁负债 |
| — |
| | |
应付帐款 |
| |
| | |
应计费用 |
| |
| | |
已实现可延展收益 | — | | |||
停业业务持有的待售资产流动负债 | $ | | $ | | |
净负债 | $ | ( | $ | ( | |
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Net income (loss) from discontinued operations for the three and nine months ended September 30, 2024 and 2023 was as follows:
Three Months Ended | Nine Months Ended | ||||||||||
September 30, | September 30, | ||||||||||
2024 |
| 2023 | 2024 |
| 2023 | ||||||
Revenues, net | $ | — | $ | | $ | — | $ | | |||
Cost of goods sold | — | | — | | |||||||
Gross loss | — | ( | — | ( | |||||||
Operating expenses: | |||||||||||
Sales, general and administrative | ( | | ( | | |||||||
Research and development | — | | | | |||||||
Other operating (income) expense, net | | | ( | | |||||||
Goodwill impairment | — | | — | | |||||||
Total operating expenses | | | ( | | |||||||
Operating (loss) income from discontinued operations | ( | ( | | ( | |||||||
Other income (expense): | |||||||||||
Other income, net | — | ( | — | | |||||||
Interest expense | ( | ( | ( | ( | |||||||
Total other expense | ( | ( | ( | ( | |||||||
Income (loss) from discontinued operations before income taxes | ( | ( | | ( | |||||||
Provision (benefit) for income taxes | — | — | — | — | |||||||
Net income (loss) from discontinued operations | $ | ( | $ | ( | $ | | $ | ( | |||
During the three- and nine-month periods ended September 30, 2024, the Company settled outstanding obligations which resulted in reversals of previously accrued liabilities of $
Cash flow information from discontinued operations for the three and nine months ended September 30, 2024 and 2023 was as follows:
Nine Months Ended | |||||
September 30, | |||||
2024 |
| 2023 | |||
Cash used in operating activities | $ | ( | $ | ( | |
Cash provided by (used in) investing activities | $ | | $ | ( | |
Depreciation and amortization | $ | - | $ | | |
Capital expenditures | $ | - | $ | | |
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NOTE 3. – INVENTORIES
Inventories at September 30, 2024 and December 31, 2023 consisted of the following:
| September 30, |
| December 31, | |||
| 2024 |
| 2023 | |||
Raw materials | $ | | $ | | ||
Work in process | — | — | ||||
Finished goods |
| | | |||
$ | | $ | | |||
NOTE 4. – INTANGIBLE ASSETS, NET
Intangible Assets, Net
Our intangible assets, net at September 30, 2024 and December 31, 2023 consisted of the following:
Gross | Accumulated |
| Net Carrying | ||||||
September 30, 2024 |
| Carrying Amount |
| Amortization |
| Amount | |||
Definite-lived: | |||||||||
Patent | $ | | $ | ( | $ | | |||
License fees |
| | ( | | |||||
Total amortizing intangible assets | $ | | $ | ( | $ | | |||
Indefinite-lived: |
| ||||||||
Trademarks | $ | | |||||||
MSA signatory costs | | ||||||||
License fee for predicate cigarette brand | | ||||||||
Total indefinite-lived intangible assets | $ | | |||||||
Total intangible assets, net | $ | | |||||||
Gross | Accumulated |
| Net Carrying | |||||||||
December 31, 2023 |
| Carrying Amount |
| Amortization |
| Impairment | Amount | |||||
Definite-lived: | ||||||||||||
Patent | $ | | $ | ( | $ | ( | $ | | ||||
License fees |
| | ( | ( | | |||||||
Total amortizing intangible assets | $ | | $ | ( | $ | ( | $ | | ||||
Indefinite-lived: |
| |||||||||||
Trademarks | $ | | ||||||||||
MSA signatory costs | | |||||||||||
License fee for predicate cigarette brand | | |||||||||||
Total indefinite-lived intangible assets | $ | | ||||||||||
Total intangible assets, net | $ | | ||||||||||
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Aggregate intangible asset amortization expense comprises of the following:
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
Cost of goods sold | $ | | $ | | $ | | $ | | ||||
Research and development |
| |
| |
| |
| | ||||
Total amortization expense | $ | | $ | | $ | | $ | | ||||
Estimated future intangible asset amortization expense based on the carrying value as of September 30, 2024 is as follows:
| Remainder of 2024 |
| 2025 |
| 2026 | 2027 | 2028 | Thereafter | ||||||||||
Amortization expense | $ | | $ | | $ | | $ | | $ | | $ | | ||||||
NOTE 5. – FAIR VALUE MEASUREMENTS AND SHORT-TERM INVESTMENTS
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Fair value measurement standards apply to certain financial assets and liabilities that are measured at fair value on a recurring basis (each reporting period). For the Company, these financial assets and liabilities include equity investments. The Company does not have any nonfinancial assets or liabilities that are measured at fair value on a recurring basis.
The following table presents information about our liabilities measured at fair value as of September 30, 2024 and December 31, 2023, and indicates the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value:
Fair Value | ||||||||||||
September 30, 2024 | ||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Liabilities | ||||||||||||
Omnia 2024 warrants | $ | — | $ | — | $ | | $ | | ||||
Derivative liability | — | — | | | ||||||||
Total liabilities | $ | — | $ | — | $ | | $ | | ||||
Fair Value | ||||||||||||
December 31, 2023 | ||||||||||||
| Level 1 |
| Level 2 |
| Level 3 |
| Total | |||||
Liabilities |
|
|
|
|
|
|
|
| ||||
Detachable warrants | $ | — | $ | — | $ | | $ | | ||||
Derivative liability | — | — | | | ||||||||
Total liabilities | $ | — | $ | — | $ | | $ | | ||||
15
Warrants
The following table sets forth a summary of the changes in fair value of the Company’s common stock warrants accounted for as liabilities (Level 3) for the period ended September 30, 2024:
Fair value measurement at January 1, 2024 | $ | | |
Fair value measurement adjustment | — | ||
Fair value measurement at March 31, 2024 | $ | | |
Settlement and release (See Note 6) | ( | ||
Initial measurement (See Note 6) | | ||
Fair value measurement adjustment | ( | ||
Fair value measurement at June 30, 2024 | $ | | |
Fair value measurement adjustment | ( | ||
Fair value measurement at September 30, 2024 | $ | |
The Omnia warrants were measured at September 30, 2024 and December 31, 2023 using a Monte Carlo valuation model with the following assumptions:
September 30, | December 31, | ||||||
2024 | 2023 | ||||||
Omnia 2024 warrants | Omnia 2023 warrants | ||||||
Risk-free interest rate per year |
| | % |
| | % | |
Expected volatility per year |
| | % |
| | % | |
Expected dividend yield |
| — | % |
| — | % | |
Contractual expiration |
| | years |
| | years | |
Exercise price | $ | $ | |||||
Stock price | $ | $ | |||||
The warrants are measured at fair value using certain estimated factors which are classified within Level 3 of the valuation hierarchy. Significant unobservable inputs that are used in the fair value measurement of the Company’s detachable warrants include the volatility factor, anti-dilution provisions, and contingent put option. Significant increases or decreases in the volatility factor would have resulted in a significantly higher or lower fair value measurement. Additionally, a change in probability regarding the anti-dilution provision or put option would have resulted in a significantly higher or lower fair value measurement. The Omnia 2023 warrants were extinguished and the Omnia 2024 warrants were issued in April 2024. See Note 6 for further details.
Derivative Liability
The following table sets forth a summary of the changes in fair value of the Company’s derivative liability accounted for as liabilities (Level 3) as of September 30, 2024:
Fair value measurement at January 1, 2024 | $ | | |
Fair value measurement adjustment | | ||
Fair value measurement at March 31, 2024 | $ | | |
Fair value measurement adjustment | ( | ||
Fair value measurement at June 30, 2024 | $ | | |
Fair value measurement adjustment | ( | ||
Fair value measurement at September 30, 2024 | $ | |
16
The derivative liability related to the debentures and embedded conversion option was measured at September 30, 2024 and December 31, 2023 using a binomial lattice valuation model and contained the following assumptions:
September 30, | December 31, | ||||||
2024 | 2023 | ||||||
Stock price volatility |
| | % |
| | % | |
Expected term |
| | years |
| | years | |
Stock price | $ | | $ | | |||
Risk-free rate |
| | % |
| | % | |
Credit rating | CCC | CCC | |||||
Market yield (credit risk) | % | % | |||||
The debentures and derivative liability are measured at fair value using certain estimated factors which are classified within Level 3 of the valuation hierarchy. Significant unobservable inputs that are used in the fair value measurement of the Company’s derivative liability include a decrease/increase in our stock price, stock price volatility, credit rating, and simulated stock price upon conversion could significantly change the fair value measurement as either an increase or decrease.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
During the three and nine months ended September 30, 2024 and 2023 respectively, the Company did not have any financial assets or liabilities measured at fair value on a nonrecurring basis.
NOTE 6. DEBT
The Company has a senior secured credit facility (the “Senior Secured Credit Facility”), which consists of Debentures (as defined below) and previously, a subordinated promissory note (the “Subordinated Note). The Debentures were issued at a
Debt related to the Senior Secured Credit Facility and Subordinate Note as of September 30, 2024 and December 31, 2023 consists of the following:
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Senior Secured Credit Facility |
| $ | |
| $ | |
Subordinated Note | — | | ||||
Unamortized discount on loan and deferred debt issuance costs | ( | ( | ||||
Total debt | $ | | $ | | ||
Current portion of long-term debt | ( | ( | ||||
Total long-term debt | $ | | $ | | ||
17
Debentures
On March 3, 2023, the Company entered into a Securities Purchase Agreement with each of the purchasers party thereto (collectively, the “Purchasers”) and JGB Collateral, LLC, as collateral agent for the Purchasers (the “Agent”) which pursuant to the agreement, the Company sold
The Company’s obligations under the Debentures can be accelerated upon the occurrence of certain customary events of default. In the event of a default and acceleration of the Company’s obligations, the Company would be required to pay the Prepayment Amount, liquidated damages and other amounts owing in respect thereof through the date of acceleration.
The Debentures contain customary representations, warranties and covenants including among other things and subject to certain exceptions, covenants that restrict the Company from incurring additional indebtedness, creating or permitting liens on assets, making or holding any investments, repaying outstanding indebtedness, paying dividends or distributions and entering into transactions with affiliates. Substantially all of the company’s assets, including intellectual property, are collateralized and at risk if Debenture obligation is not satisfied. In addition, the Company was required to maintain at least $
In connection with the sale of the Debentures, the Company issued warrants to purchase up to
On October 16, 2023, the Company entered into a Waiver and Amendment Agreement (the “October Amendment”) with each of the subsidiaries of the Company executing the Debentures, the Holders and the Agent, pursuant to which, among other things, (a) the Holders waived an event of default under Section 7(d) of the Debentures which required the Company to achieve revenue of at least $
As additional consideration for the waiver, the Company agreed to assign, transfer and convey to the Agent, the Company’s entire right, title and interest in and to (i) the Promissory Note made by J&N Real Estate Company, L.L.C. (“J&N”) payable to the Company in the principal amount of $
18
In connection with the waiver, the Company and Holders agreed to exercise the outstanding put provision to redeem
Subsequently, on December 22, 2023, the Company, the Holders and the Agent entered into an Amendment Agreement (the “December 2023 Amendment”) pursuant to which the Holders and the Agent consented to the Purchase Agreement, as amended by the GVB Amendment (see Note 2 “Discontinued Operations and Divestitures”). In consideration of the Holders and the Agents’ consent, the Company agreed to (i) pay to the Agent, a cash payment of $
Effective June 24, 2024, GVB Biopharma (“GVB”), the Company’s former subsidiary, made a scheduled principal and interest payment against the Company’s outstanding indebtedness to JGB, reducing the Company’s total outstanding principal indebtedness with JGB by $
As of September 30, 2024, the $
As part of the December amendment, the Company, the Holders and the Agent also agreed to amend the Debentures to (i) allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock (“Voluntary Conversion Option”) on the earlier of (i) June 30, 2024 and (ii) the public announcement of a Fundamental Transaction at a conversion price equal to the lower of (x) $
Additional terms of the December 2023 Amendment include a financial covenant holiday through the third quarter of 2024 and revised certain covenants thereafter to reflect the sale of the Purchased Interests, including lowering the Company’s quarterly revenue targets. As of September 30, 2024, the Company was in compliance with these financial covenants.
On April 8, 2024, the Company, the Holders and the Agent entered into that certain Letter Agreement to modify the terms of the Amendment Agreement, the JGB SPA and the Debentures, as amended (“April 2024 Amendment”).
Under the terms of the Letter Agreement, the Holders are permitted to convert their debt to common stock at anytime and the Conversion Price (as defined in the Debentures) at which the Holders may convert the principal amount of their Debentures to the Company’s common stock is reduced to $
On May 10, 2024, the Company, the Holders and the Agent entered into that certain May 2024 Exchange Agreement and May 2024 Letter Agreement to modify the terms of the Amendment Agreement, the Securities Purchase Agreement and the Debentures, as amended (“May 2024 Amendment”).
19
Under the terms of the May 2024 Amendment, the Company and Holders have agreed the Company shall incur an aggregate amendment charge to the undersigned holders equal to $
On August 27, 2024, the Company, the Holders and the Agent entered into that certain August 2024 Letter Agreement to modify the terms of the Amendment Agreement, the JGB SPA, and the Debentures, as amended (“August 2024 Amendment”).
Under the terms of the August 2024 Agreement, each Holder agreed that it shall not exercise its Holder Redemption Right (as defined in the Debentures) for more than
In accordance with ASC 470-60 Troubled Debt Restructurings by Debtors and ASC 470-50, Debt Modifications and Extinguishment, the Company performed an assessment of whether the transaction was deemed to be a troubled debt restructuring, and if no, whether the transaction was deemed modification of existing debt, or an extinguishment of existing debt and new debt.
The October 2023 Amendment, April 2024 Amendment, May 2024 Amendment, and August 2024 Amendment were concluded to be a modification, and not an extinguishment, based on an analysis of the present value of future cash flows. A new effective interest rate was determined, and the debt continued to be amortized. The December 2023 Amendment was concluded to be an extinguishment, due to the addition of a substantive conversion option. As a result, the pre-amended debt carrying value was extinguished and the new debt was recorded at fair value, which is subsequently amortized using the effective interest method. Extinguishment charges were $
The Company analyzed the conversion feature of the December 2023 Amendment for derivative accounting consideration under ASC 815-15 and determined that the embedded conversion features should be classified as a bifurcated derivative because the exercise price of these convertible notes are subject to a variable conversion rate. The Company has determined that the conversion feature is not considered to be solely indexed to the Company’s own stock and is therefore not afforded equity treatment. In accordance with ASC 815, the Company has bifurcated the conversion feature of the note and recorded a derivative liability at fair value in the amount of $
See Note 13 “Subsequent Events” for additional information related to the Debentures.
Subordinated Note
On March 3, 2023, the Company executed a Subordinated Promissory Note (the “Subordinated Note”) with a principal amount of $
Under the terms of the Subordinated Note, the Company is obligated to make interest payments in-kind (the “PIK Interest”). The PIK Interest accrues monthly at a compounding rate of
20
In connection with the Subordinated Note, the Company issued to Omnia, warrants to purchase up to
On April 29, 2024, the Company entered into a General Release and Settlement Agreement (the “Omnia Agreement”) with Omnia Capital LP (“Omnia”). The Omnia Agreement settles and extinguishes all outstanding debt and interest owed to Omnia under the outstanding Subordinated Promissory Note dated March 3, 2023 (the “Old Note”) and the put provision contained in the 2023 Omnia Warrants, amounting to a total of approximately $
Contractual Maturities
The Company has $
Additionally, commencing August 2024, at its option, JGB may require the Company to redeem
21
Debt Issuance Costs
The fair values of the warrants at issuance of $
Total | |||
January 1, 2023 | $ | - | |
Issuance | | ||
Amortization during the year | ( | ||
Debt extinguishment charges | ( | ||
December 31, 2023 | | ||
Amortization during the period | ( | ||
March 31, 2024 | $ | | |
Amortization during the period | ( | ||
June 30, 2024 | $ | | |
Amortization during the period | ( | ||
Amendment fee | | ||
September 30, 2024 | | ||
NOTE 7. – NOTES & LOANS PAYABLE
The table below outlines our notes and loans payable balances as of September 30, 2024 and December 31, 2023:
September 30, | December 31, | |||||
|
| 2024 |
| 2023 | ||
Insurance loans payable | $ | | $ | | ||
Total current notes and loans payable | $ | | $ | | ||
Insurance loans payable
During the second quarter of 2024, the Company renewed its Director and Officer (“D&O”) insurance for a
During the second quarter of 2023, the Company renewed its Director and Officer (“D&O”) insurance for a
The Company also has other insurance loans payable related to property and general liability across the Company.
22
Estimated future principal payments to be made under the above notes and loans payable as of September 30, 2024 are as follows:
2024 | $ | | |
2025 | | ||
Total | $ | |
NOTE 8. – REVENUE RECOGNITION
The Company’s revenues are derived primarily from contract manufacturing organization (“CMO”) customer contracts that consist of obligations to manufacture the customers’ branded filtered cigars and cigarettes. Additional revenues are generated from sale of the Company’s proprietary low nicotine content cigarettes, sold under the brand name VLN®, or research cigarettes sold under the brand name SPECTRUM®.
The Company recognizes revenue when it satisfies a performance obligation by transferring control of the product to a customer. For certain CMO contracts, the performance obligation is satisfied over time as the Company determines, due to contract restrictions, it does not have an alternative use of the product and it has an enforceable right to payment as the product is manufactured. The Company recognizes revenue under those contracts at the unit price stated in the contract based on the units to customers and is recognized net of cash discounts, sales returns and allowances. There was
Disaggregation of Revenue
The Company’s net revenue is derived from customers located primarily in the United States and is disaggregated by the timing of revenue. Revenue recognized from Tobacco products transferred to customers over time represented
The following table presents net revenue by product line:
| Three Months Ended | Nine Months Ended | |||||||||||
| September 30, | September 30, | |||||||||||
|
| 2024 | 2023 | 2024 | 2023 | ||||||||
Contract Manufacturing | |||||||||||||
Cigarettes | $ | | $ | | $ | | $ | | |||||
Filtered Cigars | | | | | |||||||||
Cigarillos | | - | | - | |||||||||
Total Contract Manufacturing | | | | | |||||||||
VLN® | - | | | | |||||||||
Total Product Line Revenues | $ | | $ | | $ | | $ | | |||||
23
The following tables present net revenues by significant customers, which are defined as any customer who individually represents 10% or more of disaggregated product line net revenues:
Three Months Ended | ||||||
September 30, | ||||||
| 2024 | 2023 | ||||
Customer A | | % | | % | ||
Customer B | | % | | % | ||
Customer C | | % | | % | ||
All other customers | | % | | % | ||
Nine Months Ended | ||||||
September 30, | ||||||
2024 | 2023 | |||||
Customer A | | % | | % | ||
Customer B | | % | | % | ||
Customer C | | % | | % | ||
Customer D | | % | | % | ||
All other customers | | % | | % | ||
Contract Assets and Liabilities
Unbilled receivables (contract assets) represent revenues recognized for performance obligations that have been satisfied but have not been billed. These receivables are included as Accounts receivable, net on the Condensed Consolidated Balance Sheets. Customer payment terms vary depending on the terms of each customer contract, but payment is generally due prior to product shipment or within credit terms up to
Total contract assets and contract liabilities are as follows:
September 30, | December 31, | |||||
| 2024 |
| 2023 | |||
Unbilled receivables |
| $ | |
| $ | |
Deferred income | ( | ( | ||||
Net contract assets | $ | | $ | | ||
During the nine months ended September 30, 2024, the Company recognized $
24
NOTE 9 – EQUITY- BASED COMPENSATION
The Company maintains certain stock-based compensation plans that were approved by the Company’s shareholders and are administered by the Compensation Committee of the Company’s Board of Directors. The stock-based compensation plans provide for the granting of stock options, time and performance based restricted stock units (RSU’s), among other awards to employees, non-employee directors, consultants, and service providers. The 2021 Omnibus Incentive Plan was amended on June 28, 2024, increasing the authorized shares by an additional
Compensation Expense – The Company recognized the following compensation costs, net of actual forfeitures, related to restricted stock units (“RSUs”) and stock options:
Three Months Ended | Nine Months Ended | ||||||||||||
September 30, | September 30, | ||||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | ||||||
Sales, general, and administrative | $ | | $ | | $ | | $ | | |||||
Research and development |
| ( |
| |
| |
| | |||||
Total equity based compensation - continuing operations | ( | | |
| | ||||||||
Total equity based compensation - discontinued operations | — | | — |
| | ||||||||
Total equity based compensation | $ | ( | $ | | $ | | $ | | |||||
Restricted Stock Units – We typically grant RSUs to employees and non-employee directors. The following table summarizes the changes in unvested RSUs from January 1, 2024 through September 30, 2024.
Unvested RSUs | |||||
Weighted | |||||
Average | |||||
Number of | Grant-date | ||||
| Shares |
| Fair Value | ||
$ per share | |||||
Unvested at January 1, 2024 |
| | $ | | |
Vested | ( | | |||
Forfeited | ( | | |||
Unvested at March 31, 2024 | | | |||
Forfeited | ( | | |||
Unvested at June 30, 2024 | | | |||
Granted | | | |||
Vested | ( | | |||
Forfeited | ( | | |||
Unvested at September 30, 2024 | | $ | | ||
The fair value of RSUs related to employee grants that vested during the nine months ended September 30, 2024 was approximately $
25
Stock Options – Our outstanding stock options were valued using the Black-Scholes option-pricing model on the date of the award. There was no stock option grant activity during the nine months ended September 30, 2024. A summary of the status of stock options activity since January 1, 2024 and at September 30, 2024 is as follows:
Weighted | |||||||||||
Weighted | Average | ||||||||||
Average | Remaining | Aggregate | |||||||||
Number of | Exercise | Contractual | Intrinsic | ||||||||
| Options |
| Price |
| Term |
| Value | ||||
$ per share | |||||||||||
Outstanding at January 1, 2024 |
| | $ | |
|
|
|
|
| ||
Expired |
| ( | |
|
|
|
|
| |||
Forfeited |
| ( | |
|
|
|
|
| |||
Outstanding at March 31, 2024 |
| | |
| years |
| $ | — | |||
Expired | ( | | |||||||||
Outstanding at June 30, 2024 | | | years | $ | — | ||||||
Expired | ( | | |||||||||
Outstanding at September 30, 2024 | | $ | | years | $ | — | |||||
Exercisable at September 30, 2024 |
| | $ | |
| years |
| $ | — | ||
The intrinsic value of a stock option is the amount by which the current market value or the market value upon exercise of the underlying stock exceeds the exercise price of the option.
NOTE 10. – CAPITAL RAISES AND WARRANTS FOR COMMON STOCK
The following tables summarize the Company’s warrant activity:
Warrants outstanding at January 1, 2024 | | |
Issued | | |
Exercised | ( | |
Warrants outstanding at March 31, 2024 | | |
Issued | | |
Abandoned | ( | |
Exercised | ( | |
Warrants outstanding at June 30, 2024 | | |
Issued | | |
Exercised | ( | |
Warrants outstanding at September 30, 2024 | |
26
The following tables summarizes the Company’s outstanding warrants as of September 30, 2024:
# of warrants outstanding | Issue date exercise price | Current exercise price (1) | Expiration date | |||||||
July 2022 RDO warrants | | $ | | $ | | July 25, 2027 | ||||
Senior Secured Credit Facility - JGB | | $ | | $ | | September 3, 2028 | ||||
July 19, 2023 RDO warrants | | $ | | $ | | July 20, 2028 | ||||
October 2023 CMPO warrants | | $ | | $ | | October 19, 2028 | ||||
2023 Inducement warrants | | $ | | $ | | February 15, 2029 | ||||
April 2024 RDO | | $ | | $ | | June 28, 2029 | ||||
August 2024 Reg A+ warrants (3) | | $ | | $ | 0.0600 (4) | (2) | ||||
September 2024 Reg A+ warrants (3) | | $ | | $ | 0.0600 (4) | (2) | ||||
September 2024 RDO warrants (3) | | $ | | $ | 0.0600 (4) | (2) | ||||
September 2024 RDO PA warrants (3) | | $ | | $ | 0.0600 (4) | (2) | ||||
September 2024 Inducement warrants (3) | | $ | | $ | 0.0600 (4) | (2) | ||||
September 2024 Inducement PA warrants (3) | | $ | | $ | 0.0600 (4) | (2) | ||||
Omnia Pre-Funded Warrants | | $ | | $ | | Not applicable | ||||
Omnia warrants | | $ | | $ | | May 1, 2029 | ||||
| ||||||||||
(1) Warrant price adjusted as a result of anti-dilution or ratchet provisions. | ||||||||||
(2 Expiration date is 5-years following shareholder approval date. | ||||||||||
(3) The exercise prices of the warrants are subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock. In addition, subject to stockholder approval, the warrants will contain anti-dilution protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants. | ||||||||||
(4) Reflects the exercise price assuming stockholder approval is obtained. | ||||||||||
2023 Warrant Inducement Offering
On November 28, 2023, the Company commenced a warrant inducement offering with the holders of the Company’s outstanding
For the period from January 1, 2024 to February 15, 2024, the date of shareholder approval, the Company entered into warrant inducement agreements with certain holders of the 2023 Existing Warrants to purchase an aggregate of
27
attributable to down round pricing protection (ii) $
As a result of subsequent offerings, the exercise price on
In connection with the September 2024 Warrant Inducement Offering,
April 2024 Registered Direct Offering
On April 8, 2024, the Company and certain investors entered into a securities purchase agreement (the “April SPA”) relating to the issuance and sale of shares of common stock (or pre-funded warrants in lieu of common stock) pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock (collectively, the “April Offering”). The investors purchased approximately $
The Company also issued an aggregate of
The net proceeds to the Company from the Offering, after deducting placement agent fees and the Company’s estimated offering expenses, were approximately $
As a result of subsequent offerings, the exercise price on
In connection with the September 2024 Warrant Inducement Offering,
September 2024 Registered Direct Offering
On September 27, 2024, the Company and certain investors entered into a securities purchase agreement (the “September SPA”) relating to the issuance and sale of shares of common stock of the Company pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock. The Investors purchased approximately $
The net proceeds to the Company from the Offering, after deducting placement agent fees and the Company’s offering expenses were $
28
In addition, the Company issued an placement agent warrants to purchase an aggregate of
As a result of subsequent offerings, the exercise price on
2024 Warrant Inducement
On September 29, 2024, the Company commenced a warrant inducement offering (the “2024 Warrant Inducement”) with the holders of outstanding warrants to purchase
In connection with the 2024 Warrant Inducement, the Company issued
In addition, the Company agreed to issue placement agent warrants to purchase an aggregate of
The incremental fair value, determined using a Black Scholes valuation model, of the 2024 Inducement Warrants issued to the holders that exercised the 2024 Existing Warrants was $
As a result of a subsequent offerings in October 2024, the exercise price on
Other Equity Financings
Pursuant to a Regulation A offering of Form 1-A, the Company entered into subscription agreements with certain accredited investors and high net worth individuals, pursuant to which the Company issued and sold to the investors
The shares that were offered and sold above or at-the-market under Nasdaq rules and pursuant to the Company’s Form 1-A, initially filed by the Company with the Securities and Exchange Commission under the Securities Act of 1933, as amended, on August 2, 2024 and qualified on August 13, 2024.
29
Private Placement of Warrants
During the third quarter of 2024, the Company and certain investors entered into warrant purchase agreements related to the private placement of
As a result of subsequent offerings, the exercise price on
Other Agreements
During the second quarter of 2024, the Company settled an aggregate of $
During the third quarter of 2024, the Company settled an aggregate of $
30
NOTE 11. – LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted loss per common share for the three and nine months ended September 30, 2024 and 2023, respectively. Outstanding warrants, options and RSUs were excluded from the calculation of diluted EPS as the effect was antidilutive to consolidated net loss.
Three Months Ended | Nine Months Ended | |||||||||||
September 30, | September 30, | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
(in thousands, except for per-share data) | ||||||||||||
Net loss from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Net loss from discontinued operations | ( | ( | | ( | ||||||||
Net loss | ( | ( | ( | ( | ||||||||
Deemed dividends | ( | ( | ( | ( | ||||||||
Net loss available to common shareholders | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Weighted average common shares outstanding - basic and diluted |
| | | | | |||||||
Basic and diluted loss per common share from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic and diluted loss per common share from discontinued operations | ( | ( | | ( | ||||||||
Basic and diluted loss per common share from deemed dividends | ( | ( | ( | ( | ||||||||
Basic and diluted loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Anti-dilutive shares are as follows as of September 30: | ||||||||||||
Warrants (excluding pre-funded) | | | | | ||||||||
Options | | | | | ||||||||
Restricted stock units | | | | | ||||||||
| | | | |||||||||
NOTE 12. - COMMITMENTS AND CONTINGENCIES
License agreements and sponsored research – The Company has entered into various consulting, license and tobacco growing agreements (the “Agreements”) with various counter parties in connection with the Company’s plant biotechnology business relating to tobacco. The schedule below summarizes the Company’s commitments, both financial and other, associated with each Agreement. Costs incurred under the Agreements are generally recorded as research and development expenses on the Company’s Condensed Consolidated Statements of Operations and Comprehensive Loss.
Future Commitments | |||||||||||||||||||||||
Commitment |
| Counter Party |
| Commitment Type |
| 2024 |
| 2025 |
| 2026 |
| 2027 | 2028 & After | Total |
| ||||||||
License Agreement | NCSU | Minimum annual royalty | $ | | $ | | $ | | $ | | $ | | $ | | (1) | ||||||||
License Agreement | NCSU | Contract fee | | | — | — | — | | (2) | ||||||||||||||
Consulting Agreements | Various | Contract fee | | | | — | — | | (3) | ||||||||||||||
Growing Agreements | Various | Contract fee | | — | — | — | — | | (4) | ||||||||||||||
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
31
| (1) | The minimum annual royalty fee is credited against running royalties on sales of licensed products. The Company is also responsible for reimbursing NCSU for actual third-party patent costs incurred, including capitalized patent costs and patent maintenance costs. These costs vary from year to year and the Company has certain rights to direct the activities that result in these costs. |
| (2) | On November 1, 2023, the Company entered into a license agreement with NCSU for an exclusive sublicensable right and license under specific patent rights and plant variety rights for the field of use in specific licensed territories. Additional milestone fees could be required pending achievement of events pursuant to the agreement. |
| (3) | As a requirement for a modified risk tobacco product and condition of the marketing authorization by the FDA, the Company engaged various consulting firms to conduct post-market studies and research. |
| (4) | Various R&D growing agreements for tobacco. |
Litigation - The Company is subject to litigation arising from time to time in the ordinary course of its business. The Company does not expect that the ultimate resolution of any pending legal actions will have a material effect on its consolidated results of operations, financial position, or cash flows. However, litigation is subject to inherent uncertainties. As such, there can be no assurance that any pending legal action, which the Company currently believes to be immaterial, will not become material in the future. In accordance with applicable accounting guidance, the Company establishes an accrued liability for litigation and regulatory matters when those matters present loss contingencies that are both probable and estimable. In such cases, there may be an exposure to loss in excess of any amounts accrued. When a loss contingency is not both probable and estimable, the Company does not establish an accrued liability. As a litigation or regulatory matter develops, the Company, in conjunction with any outside counsel handling the matter, evaluates on an ongoing basis whether such matter presents a loss contingency that is probable and estimable. If, at the time of evaluation, the loss contingency related to a litigation or regulatory matter is not both probable and estimable, the matter will continue to be monitored for further developments that would make such loss contingency both probable and estimable. When a loss contingency related to a litigation or regulatory matter is deemed to be both probable and estimable, the Company will establish an accrued liability with respect to such loss contingency and record a corresponding amount of related expenses. The Company will then continue to monitor the matter for further developments that could affect the amount of any such accrued liability.
In connection with ongoing restructuring efforts and the hemp/cannabis disposal group (see Note 2 “Divestitures and discontinued operations”) the Company has received unasserted claims related to disputed contracts, which could result in accrual of an additional amount up to $
Shareholder Derivative Cases
On February 6, 2019, Melvyn Klein, a resident of Nassau County New York, filed a shareholder derivative claim against the Company, the Company’s then Chief Executive Officer, Henry Sicignano III, the Company’s Chief Financial Officer, John T. Brodfuehrer, and each member of the Company’s Board of Directors in the United States District Court for the Eastern District of New York entitled: Melvyn Klein, derivatively on behalf of 22nd Century Group v. Henry Sicignano, III, Richard M. Sanders, Joseph Alexander Dunn, Nora B. Sullivan, James W. Cornell, John T. Brodfuehrer and 22nd Century Group, Inc., Case No. 1:19 cv 00748. Mr. Klein brings this action derivatively alleging that (i) the director defendants supposedly breached their fiduciary duties for allegedly allowing the Company to make false statements; (ii) the director defendants supposedly wasted corporate assets to defend this lawsuit and the other related lawsuits; (iii) the defendants allegedly violated Section 10(b) of the Securities Exchange Act and Rule 10b 5 promulgated thereunder for allegedly approving or allowing false statements regarding the Company to be made; and (iv) the director defendants allegedly violated Section 14(a) of the Securities Exchange Act and Rule 14a 9 promulgated thereunder for allegedly approving or allowing false statements regarding the Company to be made in the Company’s proxy statement. Numerous other shareholder derivative cases were subsequently filed and consolidated into the main action.
On December 5, 2023, the parties entered into a Memorandum of Settlement to fully resolve all claims pending the Court’s approval of a motion for preliminary approval of settlement. The settlement amount is $
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Insurance Litigation
In November 2022, there was a fire at the Company’s Grass Valley manufacturing facility in Oregon, which resulted in a total loss of the facility. The Company submitted an insurance claim with Dorchester Insurance Company, Ltd. (“Dorchester”) for casualty loss and business interruption coverage which was acknowledged on November 23, 2022. Dorchester funded $
On July 19, 2023, the Company filed a Complaint against Dorchester in the United States District Court for the District of Oregon, Pendleton Division, Case No. 2:23-cv-01057-HL. The Company is alleging breach of contract and breach of duty of good faith and fair dealing. The Company is seeking full recovery of its business interruption claim of approximately $
KeyGene Dispute
On April 11, 2024 the Company received a Request for Arbitration from Keygene N.V. (“Keygene”) in connection with the Company’s termination of various framework collaborative research agreements described below. On April 3, 2019, the Company entered into the Framework Collaborative Research Agreement with KeyGene in the field of hemp/cannabis. On April 30, 2021, the Company and KeyGene entered into a First Amended and Restated Framework Collaborative Research Agreement which extended the agreement term, from first quarter 2024 to first quarter 2027. On March 30, 2022, the Company and KeyGene entered into a new Framework Collaborative Research Agreement for a term of
The Company filed its Answer to Request for Arbitration with Defenses and Counterclaims on June 4, 2024. On July 25, 2024, an arbitrator was formally appointed. Discovery commenced in September 2024. The arbitration date has been set for March 24, 2025. The Company believes it has substantial defenses to KeyGene’s claims and intends to defend itself vigorously.
Maison Dispute
On January 23, 2024, the Company received a Notice of Intent to Arbitrate from Maison Placements Canada Inc. (“Maison”) in connection with the Company’s March 2023 Senior Secured Credit Facility transaction. Maison claims it is owed fees for closure of the Senior Secured Credit Facility transaction as a result of discussions with former Company personnel and a purported letter of engagement dating from 2021. The parties have mutually agreed on settlement terms which are expected to be finalized in November 2024.
Cookies Retail Products Dispute
On October 23, 2024, Cookies Retail Products, LLC (“CRP”) filed a complaint against the Company, a subsidiary of the Company (“PTB”), Cookies Creative Consulting, Inc. (“CCC”), Cookies SF, LLC (“CSF”), GMLC WLNS, LLC (“GMLC”) and other defendants, Case No. 24STCV27828, Superior Court of California, County of Los Angeles.
The complaint alleges three counts against all defendants: Count I for Breach of Contract related to a Settlement Agreement entered into between CRP, Paul Rock, CSF, GMLC, CCC and PTB (the “Settlement Agreement”), and a Purchase Agreement entered into between PTB and CRP (the “Purchase Agreement”); Count II for Fraud – False Promise related to the Settlement Agreement and Purchase Agreement; and Count III for Violation of Penal Code Section 496 related to a Licensing and Distribution Agreement between GMLC, CCC and PTB. CRP is seeking monetary damages.
The Company has not been served with the Complaint. The Company believes it has substantial defenses to CRP’s claims, and counterclaims, and intends to defend itself vigorously.
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NOTE 13. SUBSEQUENT EVENTS
Senior Secured Credit Facility
On October 10, 2024, the Company entered into that certain Letter Agreement to modify the terms of the Securities Purchase Agreement dated March 3, 2023 (the “JGB SPA”) and debentures (the “Debentures”), as amended, with JGB Partners, LP (“JGB Partners”), JGB Capital, LP (“JGB Capital”) and JGB Capital Offshore Ltd. (“JGB Offshore” and collectively with JGB Partners and JGB Capital, the “Holders”) and JGB Collateral, LLC, as collateral agent for the Holders (the “Agent”).
Under the terms of the Letter Agreement, subject to obtaining shareholder approval as described below, Company will be able to reset the Conversion Price (as defined in the Debentures) currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of the
The reduction in the Conversion Price will be subject to shareholder approval. The Company has agreed to seek shareholder approval for the Conversion Price reset pursuant to applicable Nasdaq rules no later than December 31, 2024, and to seek shareholder approval at each shareholder meeting thereafter if approval is not obtained by then.
October 2024 Registered Direct Offering
On October 11, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of shares of common stock of the Company pursuant to a registered direct offering and a private placement of warrants to purchase shares of common stock. The investors purchased approximately $
The net proceeds to the Company from the Offering, after deducting the placement agent fees and the Company’s offering expenses were $
In addition, the Company agreed to issue placement agent warrants to purchase an aggregate of
The October 2024 registered direct equity offering resulted in down-round adjustments whereby the exercise price on
October 2024 PIPE Offering
On October 23, 2024, the Company and certain investors entered into a securities purchase agreement relating to the issuance and sale of prefunded warrants to purchase shares of common stock of the Company and warrants to purchase shares of Common Stock pursuant to a private placement. The investors purchased approximately $
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The net proceeds to the Company from the offering, after deducting placement agent fees and the Company’s offering expenses, are approximately $
The shares issuable upon exercise of the warrants are subject to stockholder approval. The Company has agreed to hold an annual or special meeting on or before May 30, 2025, to have stockholders approve the issuance of the shares of common stock underlying the warrants pursuant to applicable Nasdaq rules.
In addition, the Company agreed to issue placement agent warrants to purchase an aggregate of
The October 2024 PIPE offering resulted in down-round adjustments whereby the exercise price on
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
For purposes of this Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”), references to the “Company,” “we,” “us” or “our” refer to the operations of 22nd Century Group, Inc. and its direct and indirect subsidiaries for the periods described herein. In addition, dollars are in thousands, except per share data or unless otherwise specified.
The following MD&A should be read in conjunction with, our audited consolidated financial statements, the accompanying notes and the MD&A included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, as well as our Condensed Consolidated Financial Statements and the accompanying notes included in Item 1 of this Form 10-Q. Note references are to the notes to consolidated financial statements included in Item 1 of this Form 10-Q.
On March 28, 2024, we implemented a 1-for-16 reverse stock split (the “Reverse Stock Split”) of our common stock. As a result of the Reverse Stock Split, every sixteen (16) shares of our pre-Reverse Stock Split common stock were combined and reclassified into one share of our Common Stock. The number of shares of common stock subject to outstanding options, warrants, and convertible securities were also reduced by a factor of sixteen and the exercise price of such securities increased by a factor of sixteen, as of March 28, 2024. All historical share and per-share amounts reflected throughout this section have been adjusted to reflect the Reverse Stock Split. The par value per share of our common stock was not affected by the Reverse Stock Split.
Forward Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this section are forward-looking statements. Forward-looking statements typically contain terms such as “anticipate,” “believe,” “consider,” “continue,” “could,” “estimate,” “expect,” “explore,” “foresee,” “goal,” “guidance,” “intend,” “likely,” “may,” “plan,” “potential,” “predict,” “preliminary,” “probable,” “project,” “promising,” “seek,” “should,” “will,” “would,” and similar expressions. Forward looking statements include, but are not limited to, statements regarding (i) our ability to continue as a going concern, (ii) our expectations regarding our debt obligations, (iii) our ability to remain listed on NASDAQ (iv) our financial and operating performance, (v) our strategic alternatives, including our cost savings initiatives, (vi) our expectations regarding regulatory enforcement (vii) our products, and (viii) the volatility of our common stock and warrants. Actual results might differ materially from those explicit or implicit in forward-looking statements. Important factors that could cause actual results to differ materially are set forth in “Risk Factors” herein and in our Annual Report on Form 10-K filed on March 28, 2024 and within Part II Item 1A of our Form 10-Q for the three months ended March 31, 2024. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new
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information, future events, or otherwise, except as otherwise required by law. All information provided in this quarterly report is as of the date hereof, and we assume no obligation to and do not intend to update these forward-looking statements, except as required by law.
Our Business
22nd Century Group, Inc. (NASDAQ: XXII) is an agricultural biotechnology company focused on tobacco harm reduction by offering tobacco products with 95% less nicotine, designed to improve health and wellness by giving smokers a choice to control their nicotine consumption. Backed by comprehensive and extensively patented technologies that regulate nicotine biosynthesis activities in the tobacco plant, the Company has pioneered development of high-yield, proprietary reduced nicotine content (RNC) tobacco plants and clinically validated RNC cigarette products. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. The Company is a subsequent participating manufacturer under the Master Settlement Agreement ("MSA") and vertically integrated for the production of its both own products and contract manufacturing operations ("CMO"), which consist primarily of branded filtered cigars and conventional cigarettes.
Financial Overview
| ● | Net revenues for the third quarter of 2024 were $5,946, a decrease of 24.5% from $7,871 in the prior year period. |
| o | Third quarter 2024 cartons sold of 439 compared to 827 in the comparable prior year period. |
| ● | Gross profit for the third quarter of 2024 was a loss of $588 compared to a profit of $77 in the prior year period. |
| ● | Total operating expenses for the third quarter of 2024 decreased to $2,789 compared to $8,330 in the prior year quarter driven by: |
| o | Sales, general and administrative expenses decreased to $2,547 compared to $6,939 in the prior year period, primarily driven by lower headcount (compensation and benefits), strategic consulting, sales and marketing costs and public company expenses due to our cost savings initiatives implemented in the second half of 2023. |
| o | Research development expenses decreased to $240, compared to $623 in the prior year period, driven by lower headcount (compensation and benefits costs), and contract and IP costs due to our continued cost saving initiatives with a focus on specific tobacco research. |
| o | Other operating expenses (income), net decreased to $2, compared to $768 in the prior year period, primarily attributable to prior year restructuring costs. |
| ● | Operating loss from continuing operations for the third quarter 2024 was $3,377, compared to a loss of $8,253 in the prior year period for the reasons described above. |
| ● | Net loss from continuing operations in the third quarter of 2024 was $3,585 and basic and diluted loss from continuing operations per common share was $0.27 compared with net loss from continuing operations in the third quarter of 2023 of $8,081, and basic and diluted net loss from continuing operations per common share of $6.70. |
| ● | As of September 30, 2024, we had $5,341 in cash and cash equivalents. |
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Our Financial Results
| Three Months Ended | |||||||||||
| September 30 | September 30 | Change | |||||||||
|
| 2024 |
| 2023 | $ | % | ||||||
Revenues, net | $ | 5,946 | $ | 7,871 | (1,925) | (24.5) | ||||||
Cost of goods sold | 3,102 | 3,921 | (819) | (20.9) | ||||||||
Excise taxes and fees on products | 3,432 | 3,873 | (441) | (11.4) | ||||||||
Gross (loss) profit | (588) | 77 | (665) | (863.6) | ||||||||
Gross (loss) profit as a % of revenues, net | (9.9) | % | 1.0 | % | ||||||||
Operating expenses: | ||||||||||||
Sales, general and administrative ("SG&A") | 2,547 | 6,939 | (4,392) | (63.3) | ||||||||
SG&A as a % of revenues, net | 42.8 | % | 88.2 | % | ||||||||
Research and development ("R&D") | 240 | 623 | (383) | (61.5) | ||||||||
R&D as a % of revenues, net | 4.0 | % | 7.9 | % | ||||||||
Other operating expenses, net ("OOE") | 2 | 768 | (766) | (99.7) | ||||||||
Total operating expenses | 2,789 | 8,330 | (5,541) | (66.5) | ||||||||
Operating loss from continuing operations | (3,377) | (8,253) | 4,876 | (59.1) | ||||||||
Operating loss as a % of revenues, net | (56.8) | % | (104.9) | % | ||||||||
Other income (expense): | ||||||||||||
Other income (expense), net | 100 | 1,272 | (1,172) | (92.1) | ||||||||
Interest income, net | 3 | 79 | (76) | (96.2) | ||||||||
Interest expense | (311) | (1,179) | 868 | (73.6) | ||||||||
Total other income (expense) | (208) | 172 | (380) | (220.9) | ||||||||
Loss before income taxes | (3,585) | (8,081) | 4,496 | (55.6) | ||||||||
Provision for income taxes | - | - | - | - | ||||||||
Net loss from continuing operations | $ | (3,585) | $ | (8,081) | 4,496 | (55.6) | ||||||
Net loss as a % of revenues, net | (60.3) | % | (102.7) | % | ||||||||
Net loss per common share from continuing operations (basic and diluted)* | $ | (0.27) | $ | (6.70) | 6.43 | (95.97) | ||||||
*Giving retroactive effect to the 1-for-16 reverse stock split on April 2, 2024 and the 1-for-15 reverse stock split on July 5, 2023.
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| Nine Months Ended | |||||||||||
| September 30 | September 30 | Change | |||||||||
|
| 2024 |
| 2023 | $ | % | ||||||
Revenues, net | $ | 20,361 | $ | 24,848 | (4,487) | (18.1) | ||||||
Cost of goods sold | 11,184 | 13,327 | (2,143) | (16.1) | ||||||||
Excise taxes and fees on products | 10,324 | 12,388 | (2,064) | (16.7) | ||||||||
Gross (loss) profit | (1,147) | (867) | (280) | 32.3 | ||||||||
Gross (loss) profit as a % of revenues, net | (5.6) | % | (3.5) | % | ||||||||
Operating expenses: | ||||||||||||
Sales, general and administrative ("SG&A") | 7,814 | 27,058 | (19,244) | (71.1) | ||||||||
SG&A as a % of revenues, net | 38.4 | % | 108.9 | % | ||||||||
Research and development ("R&D") | 915 | 2,152 | (1,237) | (57.5) | ||||||||
R&D as a % of revenues, net | 4.5 | % | 8.7 | % | ||||||||
Other operating expenses (income), net ("OOE") | (18) | 622 | (640) | (102.9) | ||||||||
Total operating expenses | 8,711 | 29,832 | (21,121) | (70.8) | ||||||||
Operating loss from continuing operations | (9,858) | (30,699) | 20,841 | (67.9) | ||||||||
Operating loss as a % of revenues, net | (48.4) | % | (123.5) | % | ||||||||
Other income (expense): | ||||||||||||
Other income (expense), net | 439 | 504 | (65) | (12.9) | ||||||||
Interest income, net | 26 | 201 | (175) | (87.1) | ||||||||
Interest expense | (1,828) | (2,578) | 750 | (29.1) | ||||||||
Total other expense | (1,363) | (1,873) | 510 | (27.2) | ||||||||
Loss before income taxes | (11,221) | (32,572) | 21,351 | (65.6) | ||||||||
Provision for income taxes | 27 | 46 | (19) | (41.3) | ||||||||
Net loss from continuing operations | (11,248) | (32,618) | 21,370 | (65.5) | ||||||||
Net loss as a % of revenues, net | (55.2) | % | (131.3) | % | ||||||||
Net loss per common share from continuing operations (basic and diluted)* | $ | (1.35) | $ | (33.35) | 32.00 | (95.95) | ||||||
*Giving retroactive effect to the 1-for-16 reverse stock split on April 2, 2024 and the 1-for-15 reverse stock split on July 5, 2023.
Three and Nine Months Ended September 30, 2024 Compared to Three and Nine Months Ended September 30, 2023
Product line revenue, net
| Three Months Ended | ||||||||
| September 30, | ||||||||
|
| 2024 | 2023 | Change | |||||
$ | Cartons | $ | Cartons | $ | Cartons | ||||
Contract Manufacturing | |||||||||
Cigarettes | 4,078 | 156 | 3,463 | 200 | 615 | (44) | |||
Filtered Cigars | 1,664 | 253 | 4,088 | 621 | (2,424) | (368) | |||
Cigarillos | 204 | 30 | - | - | 204 | 30 | |||
Total Contract Manufacturing | 5,946 | 439 | 7,551 | 821 | (1,605) | (382) | |||
VLN® | - | - | 320 | 6 | (320) | (6) | |||
Total Product Line Revenues | 5,946 | 439 | 7,871 | 827 | (1,925) | (388) | |||
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Nine Months Ended | |||||||||
September 30, | |||||||||
2024 | 2023 | Change | |||||||
$ | Cartons | $ | Cartons | $ | Cartons | ||||
Contract Manufacturing | |||||||||
Cigarettes | 10,942 | 416 | 11,735 | 640 | (793) | (224) | |||
Filtered Cigars | 8,593 | 1,249 | 12,414 | 1,937 | (3,821) | (688) | |||
Cigarillos | 756 | 120 | - | - | 756 | 120 | |||
Total Contract Manufacturing | 20,291 | 1,785 | 24,149 | 2,577 | (3,858) | (792) | |||
VLN® | 70 | 1 | 699 | 14 | (629) | (13) | |||
Total Product Line Revenues | 20,361 | 1,786 | 24,848 | 2,591 | (4,487) | (806) | |||
For the third quarter and first nine months of 2024, contract manufacturing net revenues decreased to $5,946 and $20,361, respectively, compared to the prior year periods.
For the third quarter 2024, cigarette sales benefitted from strong summer seasonal demand with key customers and price increases that took effect in April 2024. For the first nine months of 2024, volume decreases were result of prior year comparable period stocking orders of Pinnacle cigarettes launched in a top-five convenience store chain and a large one-time order of export product.
For the third quarter and first nine months of 2024, filtered cigars net revenues decreased to $1,664 and $8,592, respectively, compared to the prior year periods, reflecting lower volumes as the Company continues to transition away from low or negative margin manufacturing agreements- in favor of higher margin cigarette manufacturing agreements.
Cigarillo distribution net revenues for the third quarter and first nine months of 2024 amounted to $204 and $756, respectively, reflective of the expanded Pinnacle branded product offerings launched in April 2024 with a top-five national convenience store chain.
VLN® cigarette net revenues were negligible in the third quarter 2024 and $70 for the first nine months of 2024, a decrease from the comparable prior year periods which benefited from stocking orders with major c-stores. While the Company has secured broad distribution of its VLN® products, the sell-through has not yet materialized. The Company is currently making changes to rebrand and relaunch its VLN® products.
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Gross (loss) profit
| Three Months Ended |
| Nine Months Ended | |||||||||||
| September 30 | September 30 |
| September 30 | September 30 | |||||||||
|
| 2024 |
| 2023 |
| 2024 | 2023 | |||||||
Gross (loss) profit | $ | (588) | $ | 77 | $ | (1,147) | $ | (867) | ||||||
Percent of Revenues, net |
| (9.9) | % |
| 1.0 | % | (5.6) | % | (3.5) | % | ||||
Gross profit (loss) for the third quarter and first nine months of 2024 decreased compared to the prior year periods, primarily driven by lower sales volume, offset by implementation of cost cut initiatives, efficiency, and the shift in product mix.
Sales, general and administrative (“SG&A”) expense
|
| Changes From Prior Year | ||||
Three Months Ended | Nine Months Ended | |||||
Compensation and benefits (a) | $ | (1,594) | $ | (7,976) | ||
Sales and marketing (b) | (1,130) | (2,389) | ||||
Strategic consulting (b) | (619) | (6,045) | ||||
Public company expenses (c) | (463) | (1,113) | ||||
Insurance expenses (d) | (381) | (1,076) | ||||
Travel and entertainment (b) | (112) | (602) | ||||
Other (e) | (93) | (43) | ||||
Net decrease in SG&A expenses | $ | (4,392) | $ | (19,244) | ||
(a) Compensation and benefits and equity compensation expense decreased for the three and nine months ended September 30, 2024 compared to the prior year periods due to a reduction of headcount as part of our cost cut initiatives.
(b) Decreases of strategic consulting, sales and marketing and travel and entertainment for the three and nine months ended September 30, 2024 compared to the prior year periods were due to reduced spending as part of our cost cut initiatives.
(c) Decreases in public company expenses for the three- and nine-month periods ended September 30, 2024 compared to the prior year periods were mainly due to waived board of director compensation fees in the current year periods and a decrease in professional services fees due to the restructuring of our business.
(d) Insurance expenses decreased for the three and nine months ended September 30, 2024 compared to the prior year periods due to lower D&O and other insurance premiums.
(e) Other expenses decreased for the three and nine months ended September 30, 2024 compared to the three and nine month periods ended September 30, 2023 were mainly due to decreases in insurance, technology and legal expenses.
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Research and development (“R&D”) expense
| Changes From Prior Year | |||||
Three Months Ended | Nine Months Ended | |||||
Compensation and benefits (a) | $ | (106) | $ | (460) | ||
License, Royalty, and Contract costs (b) | (168) | (348) | ||||
IP costs (c) | (116) | (337) | ||||
Other (d) | 7 | (92) | ||||
Net decrease in R&D expenses | $ | (383) | $ | (1,237) | ||
| (a) | Decreased compensation and benefits for the three and nine months ended September 30, 2024 are mainly related to the decrease in headcount in the current year periods compared to the prior year periods. |
| (b) | Decreases in licenses, royalty and contract costs for the three- and nine-month periods ended September 30, 2024 relate to growing and contract arrangements that occurred in the prior year periods. |
| (c) | Decreases in IP costs for the three- and nine-month periods ended September 30, 2024 compared to the prior year periods relate to a decrease in patent expenses and amortization from restructuring of our tobacco IP portfolio to align to our current strategy. |
| (d) | Other expenses decreased for the nine months ended September 30, 2024 compared to the prior year period, were attributable to a decrease in consulting and testing costs due to our cost cut initiatives. |
Other income (expense)
| Changes From Prior Year | |||||
|
| Three Months Ended | Nine Months Ended | |||
Other income (expense), net (a) | $ | (1,172) | $ | (65) | ||
Interest income, net | (76) | (175) | ||||
Interest expense (b) | 868 | 750 | ||||
Net (increase) decrease in other expense | $ | (380) | $ | 510 | ||
| (a) | Other income (expense), net increased for the three months ended September 30, 2024 compared to the same prior year period, mainly due to an increase of $1,162 loss resulting from change in fair value of warrant liabilities. |
Other income (expense), net increased for the nine months ended September 30, 2024 compared to the same prior year period, due to a decrease of $51 of realized losses on short term investments and $116 loss resulting from change in fair value of warrant liabilities.
| (b) | For the three months ended September 30, 2024 compared to the prior year period, interest expense primarily decreased as a result of ongoing repayment and elimination of debt obligations on our balance sheet. Cash interest decreased $250 and non-cash interest amortization decreased $252 recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $52), and additional decreases of $23 as a result of change in fair value of conversion option derivative liability. Additionally, interest expense decreased $394 from the Subordinated Note, which was extinguished prior to maturity in April 2024. |
For the nine months ended September 30, 2024 compared to the prior year period, interest expense decreased as a result of ongoing repayment and elimination of debt obligations on our balance sheet. Cash interest decreased $352 and non-cash interest amortization decreased $601 recognized from the Senior Secured Credit Facility (of these totals, interest that was allocated to discontinued operations decreased by $71), and additional decreases of $482 as a result of change in fair value of conversion option derivative liability. Additionally, interest expense decreased $215 from the Subordinated Note, which was extinguished prior to maturity in April 2024 and resulted in a loss on extinguishment of $400.
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Liquidity and Capital Resources
We have incurred significant losses and negative cash flows from operations since inception and expect to incur additional losses until such time that we can generate significant revenue and profit in our tobacco business. We had negative cash flow from operations of $9,947 for the nine months ended September 30, 2024 and an accumulated deficit of $389,315 as of September 30, 2024. As of September 30, 2024, we had cash and cash equivalents of $5,341 and working capital from continuing operations of $1,568 (compared to working capital deficit from continuing operations of ($6,826) at December 31, 2023). Given our projected operating requirements and existing cash and cash equivalents, there is substantial doubt about our ability to continue as a going concern through one year following the date that the Condensed Consolidated Financial Statements herein are issued.
In response to these conditions, management is currently evaluating different strategies for reducing expenses, as well as pursuing financing strategies which include raising additional funds through the issuance of securities, asset sales, and through arrangements with strategic partners. If capital is not available to the Company when, and in the amounts needed, it could be required to liquidate inventory or assets, cease or curtail operations, seek to negotiate new business deals with our business partners or seek protection under applicable bankruptcy laws or similar state proceedings. There can be no assurance that the Company will be able to raise the capital it needs to continue operations. Accordingly, there is substantial doubt regarding our ability to continue in operations. Management’s plans do not alleviate substantial doubt about the Company’s ability to continue as a going concern through one year following the date that the Condensed Consolidated Financial Statements are issued.
Our cash, and cash equivalents and working capital from continuing operations as of September 30, 2024 and December 31, 2023 are set forth below:
| September 30 | December 31 | ||||
|
| 2024 |
| 2023 | ||
Cash and cash equivalents | $ | 5,341 | $ | 2,058 | ||
Working capital | $ | 1,568 |
| $ | (6,826) | |
Working Capital
As of September 30, 2024, we had working capital from continuing operations, excluding assets and liabilities held for sale, of approximately $1,568 compared to working capital deficit of approximately ($6,826) at December 31, 2023 an increase of $8,394. This increase in working capital was primarily due to a decrease in net current liabilities of $8,705 offset by a decrease of $311 in net current assets. Cash and cash equivalents increased by $3,283 and the remaining net current assets decreased by $3,594. As a result of the working capital balance, management has taken a number of steps to improve liquidity. Refer below to “Cash demands on operations.”
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Summary of Cash Flows
| Nine Months Ended | |||||||
September 30, | Change | |||||||
|
| 2024 |
| 2023 | $ | |||
Cash provided by (used in): | ||||||||
Operating activities | $ | (9,947) | $ | (50,184) | 40,237 | |||
Investing activities |
| (119) |
|
| 17,352 | (17,471) | ||
Financing activities |
| 13,349 |
|
| 40,162 | (26,813) | ||
Net change in cash, cash equivalents and restricted cash | $ | 3,283 |
| $ | 7,330 | |||
Net cash used in operating activities
Cash used in operating activities decreased $40,237 from $50,184 in 2023 to $9,947 in 2024. The primary driver for this decrease was lower net loss of $100,833, a decrease of $66,249 related to net adjustments to reconcile net loss to cash, and a decrease in cash used for working capital components related to operations in the amount of $5,653 for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023.
Net cash (used in) provided by investing activities
Cash used in investing activities amounted to $119 the nine months ended September 30, 2024, as compared to cash provided by investing activities of $17,352 for the nine months ended September 30, 2023. The decrease in cash provided by investing activities of $17,471 was primarily the result of (i) a decrease in net proceeds from short-term investments of $18,239; (ii) decrease of $3,500 in property, plant and equipment casualty loss insurance proceeds collected in the prior year period and (iii) a decrease of $229 of proceeds from the sale of property, plant and equipment. These decreased cash inflows were partially offset by a decrease in cash outflows of (i) $4,243 related to the acquisitions of patents, trademarks and property, plant and equipment and (ii) $254 from the acquisition of RXP in the prior year period
Net cash provided by financing activities
During the nine months ended September 30, 2024, cash provided by financing activities decreased by $26,813, from $40,162 in the prior year period, to $13,349, resulting from decreases in (i) net proceeds of $16,048 from issuance of long-term debt, (ii) proceeds of $6,016 from issuance of detachable warrants, (iii) net proceeds of $10,238 from the issuance of common stock (iv) proceeds from issuance of notes payable of $1,104 offset by an increase in net proceeds from warrant exercise of $3,403. These cash inflows were offset by decreases in cash outflows of note payable payments of $3,441 and taxes paid related to net share settlement of RSUs of $419 and increases in payments of long-term debt of $670.
Cash demands on operations
We have financed our operations to date primarily through the issuance of equity securities, proceeds from the exercise of warrants to purchase common stock and sale of debt instruments with various institutions, accredited investors, high net worth individuals and creditors.
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In January and February 2024, we received net proceeds of $2,245 from the inducement and exercise of 820,769 warrants for shares of common stock and issuance of 1,641,535 warrants to purchase common stock. In April 2024, we received net proceeds of $3,913 from the issuance of 1,855,000 shares of common stock, 125,000 pre-funded warrants and 1,980,000 warrants to purchase common stock in a registered direct offering. In August and September 2024, we received net proceeds of $5,208 from the issuance of 9,720,000 shares of common stock pursuant to a Regulation A offering, and in separate private placements, issued 14,796,000 warrant to purchase common stock. In September 2024 we received net proceeds of $1,054 from the issuance of 5,153,508 shares of common stock and 10,307,016 warrants to purchase common stock in a registered direct offering. Also, in September 2024 we received net proceeds of $1,073 from the inducement and exercise of 5,079,244 warrants for shares of common stock and issuance of 10,158,488 warrants to purchase common stock. In October 2024 we received net proceeds of $2,002 from the issuance of 14,266,666 shares of common stock and 28,533,332 warrants to purchase common stock in a registered direct offering. Also, in October 2024 we received net proceeds of $2,909 from the issuance of 28,354,914 prefunded warrants to purchase shares of common stock and 42,532,372 warrants to purchase common stock in a private placement offering.
As of September 30, 2024, the remaining principal balance under our Senior Secured Credit Facility is $8,321 of which $1,500 remains current with corresponding pledged assets. The Debentures under the Senior Secured Credit Facility allow the Holders to voluntarily convert the Debentures, in whole or in part, into shares of the Company’s common stock and the conversion option price in effect is $0.7458. On October 9, 2024, the Company entered into that certain Letter Agreement to modify the terms of the Debentures with JGB, subject to obtaining shareholder approval, Company will be able to reset the Conversion Price currently in effect, at the discretion of the Board of Directors and on a one time basis, to an amount equal to the average of the daily VWAPs for each of the five (5) consecutive Nasdaq trading days immediately preceding the date on which the Conversion Price shall be reset. The reset Conversion Price shall in no event be greater than the Conversion Price in effect.
Additionally, at its option, JGB may require the Company to redeem 2% of the original principal amount of the Debentures, as amended to be no more than 50% or $210 per calendar month through July 2025 and $421 per calendar month thereafter which amount may at the Company’s election, subject to certain exceptions, be paid in cash, shares of the Company’s common stock, or a combination thereof. JGB elected the monthly redemption feature and the Company repaid 421k in cash during the three month period ended September 30, 2024. If the redemption feature is elected, as of September 30, 2024, contractual maturities under the Senior Secured Credit Facility for the remainder of 2024 are $632, for 2025 are $3,579, and for 2026 are $4,110.
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Outstanding Warrants
As of November 10, 2024, we had the following warrants outstanding:
# of warrants outstanding | Issue date exercise price | Current exercise price (1) | Expiration date | |||||||
July 2022 RDO warrants | 4,067 | $ | 492.00 | $ | 492.00 | July 25, 2027 | ||||
Senior Secured Credit Facility - JGB | 20,645 | $ | 306.000 | $ | 205.248 | September 3, 2028 | ||||
July 19, 2023 RDO warrants | 28,125 | $ | 38.7200 | $ | 0.0504 | July 20, 2028 | ||||
October 2023 CMPO warrants | 12,500 | $ | 8.4000 | $ | 0.0504 | October 19, 2028 | ||||
2023 Inducement warrants | 2,500 | $ | 3.4400 | $ | 0.0504 | February 15, 2029 | ||||
April 2024 RDO | 15,300 | $ | 2.1400 | $ | 0.0504 | June 28, 2029 | ||||
August 2024 Reg A+ warrants (3) | 2,596,000 | $ | 1.0000 | $ | 0.0504 (4) | (2) | ||||
September 2024 Reg A+ warrants (3) | 12,200,000 | $ | 1.0000 | $ | 0.0504 (4) | (2) | ||||
September 2024 RDO warrants (3) | 10,307,016 | $ | 1.0000 | $ | 0.0504 (4) | (2) | ||||
September 2024 RDO PA warrants (3) | 309,211 | $ | 1.2500 | $ | 0.0504 (4) | (2) | ||||
September 2024 Inducement warrants (3) | 10,158,490 | $ | 1.0000 | $ | 0.0504 (4) | (2) | ||||
September 2024 Inducement PA warrants (3) | 304,754 | $ | 1.2500 | $ | 0.0504 (4) | (2) | ||||
October 2024 RDO warrants (3) | 28,533,332 | $ | 1.0000 | $ | 0.0504 (4) | (2) | ||||
October 2024 RDO PA warrants (3) | 856,000 | $ | 1.2500 | $ | 0.0504 (4) | (2) | ||||
Omnia Pre-Funded | 1,150,000 | $ | 0.00001 | $ | 0.00001 | Not applicable | ||||
Omnia warrants | 460,000 | $ | 2.14 | $ | 2.14 | May 1, 2029 | ||||
October 2024 PIPE Prefunded Warrants (3) | 28,354,914 | $ | 0.00001 | $ | 0.00001 | Not applicable | ||||
October 2024 PIPE Warrants (3) | 42,532,372 | $ | 1.00 | $ | 1.00 | (2) | ||||
October 2024 PIPE PA Warrants (3) | 2,268,393 | $ | 1.25 | $ | 1.25 | (2) | ||||
140,113,619 | ||||||||||
(1) Warrant price adjusted as a result of anti-dilution or ratchet provisions. | ||||||||||
(2 Expiration date is 5-years following shareholder approval date. | ||||||||||
(3) The exercise prices of the warrants are subject to appropriate adjustment in the event of recapitalization events, stock dividends, stock splits, stock combinations, reclassifications, reorganizations or similar events affecting the Company’s common stock. In addition, subject to stockholder approval, the warrants will contain anti-dilution protection provisions relating to subsequent equity sales of shares of the Company’s common stock or common stock equivalents at an effective price per share lower than the then effective exercise price of such warrants. | ||||||||||
(4) Reflects the exercise price assuming stockholder approval is obtained. | ||||||||||
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements in accordance with accounting principles generally accepted in the U.S. requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements and accompanying notes. Our estimates, assumptions and judgments are based on historical experience and various other assumptions believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amount of assets and liabilities that are not readily apparent from other sources. Making estimates, assumptions and judgments about future events is inherently unpredictable and is subject to significant uncertainties, some of which are beyond our control. Management believes the estimates, assumptions and judgments employed and resulting balances reported in the Condensed Consolidated Financial Statements are reasonable; however, actual results could differ materially.
There have been no material changes to the information set forth in our Annual Report on Form 10-K for the year ended December 31, 2023.
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Impact of Recently Issued Accounting Standards
In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, SEC, or other authoritative accounting bodies to determine the potential impact they may have on our Condensed Consolidated Financial Statements. See Note 1 “Nature of Business and Summary of Significant Accounting Policies” of the Notes to Condensed Consolidated Financial Statements contained in Item 1 of this report for additional information about these recently issued accounting standards and their potential impact on our financial condition or results of operations.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements as defined by Item 303(a)(4) of Regulation S-K.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There have been no material changes to the information set forth in our Annual Report on Form 10-K for the year ended December 31, 2023.
Item 4. Controls and Procedures
(a) | Evaluation of Disclosure Controls and Procedures: |
The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in its Securities Exchange Act of 1934 (“Exchange Act”) reports are recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our chief executive officer and chief financial officer, after evaluating the effectiveness of the Company’s “disclosure controls and procedures” (as defined in the Exchange Act Rules 13a-15(e) or 15d-15(e)) as of the end of the period covered by this quarterly report, have concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-Q to ensure information required to be disclosed is recorded, processed, summarized and reported within the time period specified by SEC rules, based on their evaluation of these controls and procedures as required by paragraph (b) of Exchange Act Rules 13a-15 or 15d-15.
(b) | Changes in Internal Control over Financial Reporting: |
There were no changes in our internal control over financial reporting during the quarter ended September 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Part II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 12 - Commitments and Contingencies – Litigation - to our Condensed Consolidated Financial Statements included in this Quarterly Report for information concerning our on-going litigation. In addition to the lawsuits described in Note 12, from time to time we may be involved in claims arising in the ordinary course of business. To our knowledge other than the cases described in Note 12 to our Condensed Consolidated Financial Statements, no material legal proceedings, governmental actions, investigations or claims are currently pending against us or involve us that, in the opinion of our management, could reasonably be expected to have a material adverse effect on our business and financial condition.
Item 1A. Risk Factors
Except as set forth below, there have been no material changes from the risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the SEC on March 28, 2024.
Our securities are currently listed on the Nasdaq. If Nasdaq delists our securities from trading on its exchange, we could face significant material adverse consequences, including:
| ● | a limited availability of market quotations for our securities; |
| ● | reduced liquidity with respect to our securities; |
| ● | a determination that shares of our Class A common stock are “penny stock” which will require brokers trading in our shares to adhere to more stringent rules, possibly resulting in a reduced level of trading activity in the secondary trading market for our shares; |
| ● | a limited amount of news and analyst coverage; and |
| ● | a decreased ability to issue additional securities or obtain additional financing in the future. |
As previously disclosed, on July 16, 2024, we received a deficiency letter from the Nasdaq Listing Qualifications Department indicating that for the last 30 consecutive business days our common stock did not maintain a minimum closing bid price of $1.00 (“Minimum Bid Price Requirement”) per share for continued listing on Nasdaq pursuant to Nasdaq Listing Rule 5550(a)(2). Under Nasdaq Listing Rule 5810(c)(3)(A), if during the 180 calendar days following the date of the notification, or prior to January 13, 2025, the closing bid price of our stock is at or above $1.00 for a minimum of 10 consecutive business days, we will regain compliance with the Minimum Bid Price Requirement. If the Company does not regain compliance with Rule 5550(a)(2) by January 13, 2025, the Company may be afforded a second 180 calendar day period to regain compliance.
If we fail to evidence compliance with Nasdaq listing rules, we will be delisted and we could face significant adverse consequences.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Default Upon Senior Securities.
None
Item 4. Mine Safety Disclosures
None
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Item 5. Other Information
During the three months ended September 30, 2024, there were no
Item 6. Exhibits
|
| ||
|
| ||
|
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101.INS | Inline XBRL Instance Document | ||
|
| ||
101.SCH | Inline XBRL Taxonomy Extension Schema Document | ||
|
| ||
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | ||
|
| ||
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | ||
|
| ||
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | ||
|
| ||
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | ||
Exhibit 104 | Cover Page Interactive Data File (formatted as Inline XBRL) | ||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized:
| 22nd CENTURY GROUP, INC. |
|
|
Date: November 12, 2024 | /s/ Lawrence D. Firestone |
| Lawrence D. Firestone |
| Chief Executive Officer |
| (Principal Executive Officer and Authorized Officer) |
|
|
Date: November 12, 2024 | /s/ Daniel A. Otto |
| Daniel A. Otto |
| Chief Financial Officer |
| (Principal Accounting and Financial Officer) |
49