美國
證券和交易所
佣金 華盛頓，D.C. 20549
表格
根據1934年證券交易法第13或15(d)條，本季度報告 |
截至季度末
根據1934年證券交易法第13或15（d)條的轉型報告 |
該過渡期從________至________
委託文件編號：001-39866
(根據其章程規定的註冊人準確名稱)
| ||
(所在州或其他司法管轄區) | （美國國內國稅局僱主 | |
(委員會文件號) | 唯一識別號碼） |
，（主要行政辦公地址）
(
(註冊人電話號碼，包括區號)
在法案12(b)下注冊的證券:
每一類的名稱 |
| 標的 |
| 註冊的交易所名字 |
|
|
請確認是否按照證券交易法案第13或15（d）節的要求文件了在過去12個月內（或該註冊人需要提交此類文件的更短期間內）的所有報告，並且在過去90天內一直受到這些文件提交的要求。
請用複選標記指示，註冊者在過去12個月內（或註冊者需要提交此類文件的較短時期內）是否按照S-T規則405條款（本章第232.405條）的要求已經以電子方式提交了每個互動數據文件。
在交易所法案第120億.2條中，勾選表示報告人爲大型加速文件提交人、加速文件提交人、非加速文件提交人、小型報告公司或新成長公司。請參閱「大型加速文件提交者」、「加速文件提交者」、「小型報告公司」和「新興成長公司」的定義。
大型加速報告人 | ☐ | 加速文件提交人 | ☐ |
☒ | 較小的報告公司 | ||
| 新興成長公司 |
如果是新興成長型企業，請勾選是否選擇不使用按照《證券交易法》第13(a)條規定的新或修訂財務會計準則的過渡期。 ◻
請勾選以下項目，指示註冊人是否爲殼公司（在證券交易法案規則12b-2中定義）。
是
截至2024年11月8日，有
22世紀集團，公司
簡明合併資產負債表
(未經審計)
(以千爲單位，除開份額和每份收入數據)
2021年9月30日 | 運營租賃負債： | |||||
|
| 2024 |
| 2023 | ||
資產 |
|
|
|
| ||
流動資產： |
|
|
|
| ||
現金及現金等價物 | $ | | $ | | ||
2,687,823 |
| |
| | ||
存貨 |
| |
| | ||
保險賠款 |
| |
| | ||
GVb期票據 |
| |
| | ||
預付費用和其他流動資產 |
| |
| | ||
處置的持有待售的停止運營的流動資產 |
| |
| | ||
總流動資產 |
| |
| | ||
物業、廠房和設備，淨值 |
| |
| | ||
經營租賃使用權資產，淨值 |
| |
| | ||
無形資產, 淨額 |
| |
| | ||
其他 | | | ||||
總資產 | $ | | $ | | ||
|
|
|
| |||
負債和股東權益（虧損） |
|
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|
| ||
流動負債: |
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|
|
| ||
Notes and loans payable - current | $ | | $ | | ||
開多次數 | | | ||||
營業租賃負債 |
| |
| | ||
應付賬款 |
| |
| | ||
應計費用 |
| |
| | ||
計提訴訟費用 |
| |
| | ||
應計工資 |
| |
| | ||
應計的消費稅和費用 |
| |
| | ||
遞延收益 | | | ||||
其他流動負債 |
| |
| | ||
持有待售已停止經營的不良資產 |
| |
| | ||
流動負債合計 |
| |
| | ||
長期負債： |
|
|
|
| ||
營業租賃負債 |
| |
| | ||
長期債務 | | | ||||
其他長期負債 | | | ||||
負債合計 | | | ||||
100億股認可，分別於2024年5月3日和2024年2月2日擁有發行並流通的股份數量 |
|
| ||||
股東權益（赤字）： |
|
|
|
| ||
優先股，$0.0001 |
|
|
|
| ||
普通股，每股面值爲 $0.0001； |
|
|
|
| ||
股本 and : |
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|
|
| ||
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| |||||
普通股，面值 | ||||||
超過面值的資本 |
| |
| | ||
累積赤字 |
| ( |
| ( | ||
股東權益（虧損）總計 |
| |
| ( | ||
負債總額和股東權益（赤字） | $ | | $ | | ||
百萬美元。
3
22世紀集團，公司
利潤和綜合虧損簡明綜合報表（未經審計，以千爲單位，除股票和每股數據外）
(未經審計)
（金額以千爲單位，除了股份數和每股數據）
三個月結束 | 截至九個月的結束日期 | |||||||||||
2021年9月30日 | 2021年9月30日 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
營業收入, 淨收入 | $ | | $ | | $ | | $ | | ||||
營業成本 | |
| | | | |||||||
產品的消費稅和費用 |
| |
| |
| |
| | ||||
總（虧損）利潤 |
| ( |
| |
| ( |
| ( | ||||
營業費用： |
|
|
|
|
|
| ||||||
銷售，管理及行政 |
| |
| |
| |
| | ||||
研發費用 |
| |
| |
| |
| | ||||
其他經營費用（收入），淨額 | |
| |
| ( |
| | |||||
營業費用總計 |
| |
| |
| |
| | ||||
持續經營業務的營業虧損 |
| ( |
| ( |
| ( |
| ( | ||||
其他收入（支出）： |
|
|
|
|
|
| ||||||
其他收入（費用）淨額 |
| |
| |
| |
| | ||||
利息收入，淨額 |
| |
| |
| |
| | ||||
利息支出 |
| ( |
| ( |
| ( |
| ( | ||||
其他收入（支出）總額 |
| ( |
| |
| ( |
| ( | ||||
持續經營活動的稅前虧損 |
| ( | ( |
| ( | ( | ||||||
所得稅準備 |
| — | — |
| |
| | |||||
持續經營的淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
終止經營： | ||||||||||||
設計自動化。這一領域包括我們的先進硅芯片設計，驗證產品和服務以及系統集成產品。該領域還包括數字、定製和現場可編程門陣列（FPGA）集成電路（IC）設計軟件、驗證軟件和硬件產品，系統集成產品和服務，以及製造軟件產品。設計師使用這些產品來自動化複雜的IC設計過程，並降低可能導致昂貴的設計或製造重新調整或次優終端產品的缺陷。 | $ | ( | $ | ( | $ | | $ | ( | ||||
所得稅準備 | — | — | — | — | ||||||||
淨利潤 (終止經營) | $ | ( | $ | ( | $ | | $ | ( | ||||
淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
視同股息 | ( | ( | ( | ( | ||||||||
普通股股東應占淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
持續經營中每股普通股的基本和攤薄虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
基本和稀釋每股虧損，來自終止經營業務 | $ | ( | $ | ( | $ | | $ | ( | ||||
Basic and diluted loss per common share from deemed dividends | $ | ( | $ | ( | $ | ( | $ | ( | ||||
每股普通股基本和攤薄損失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
加權平均普通股份數-基本和稀釋 |
| | | | | |||||||
淨虧損 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
其他綜合收益: |
|
|
|
|
|
| ||||||
短期投資證券的未實現收益 |
| — |
| — |
| — |
| | ||||
外幣翻譯 |
| — |
| ( |
| — |
| ( | ||||
將已實現的損失重新分類至淨損失 |
| — |
| — |
| — |
| | ||||
其他綜合收益 | — | ( | — | | ||||||||
綜合損失 | $ | ( | $ | ( | $ | ( | $ | ( | ||||
百萬美元。
4
22世紀集團，INC。
股東權益（赤字）簡明綜合權益變動表
(未經查核)
（金額以千位元計，股份數據除外）
2024年9月30日結束的九個月 | |||||||||||||||||
累積的 | |||||||||||||||||
普通 | 票面金額 | 資本中 | 其他 | 總計 | |||||||||||||
股份 | 一般股份 | 超額保額 | 綜合 | 累積的 | 股東權益 | ||||||||||||
| 優越* |
| 分享* |
| 票面價值* |
| 收入（損失） |
| 赤字累計 |
| 權益（虧損） | ||||||
2024 年 1 月 1 日結存 |
| | $ | — |
| $ | |
| $ | — |
| $ | ( | $ | ( | ||
與RSU解約有關的股票發行，扣除稅款後碎股 |
| |
| — |
| ( |
| — |
| — |
| ( | |||||
與授權安排相關的股票發行 | | — | | — | — | | |||||||||||
因行使認股權而發行的股票，扣除$的費用 | | — | | — | — | | |||||||||||
股權基礎的補償 |
| — |
| — |
| |
| — |
| — |
| | |||||
進行股票反向拆股後發行了碎股 |
| |
| — |
| — |
| — |
| — |
| — | |||||
淨損失 |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
於2024年3月31日止之餘額 | | $ | — |
| $ | |
| $ | — |
| $ | ( | $ | ( | |||
股票發行與行使認股權有關 | | — | — | — | — | — | |||||||||||
股票發行用於償還優先債券 | | — | | — | — | | |||||||||||
與資本籌募相關的股票發行，扣除發行成本後的淨額 $ | | — | | — | — | | |||||||||||
根據轉換成權益保證基金，發行的股票 2 | | — | | — | — | | |||||||||||
與已結清債務相關的股份發行 | | — | | — | — | | |||||||||||
股權基礎的補償 | — | — | | — | — | | |||||||||||
淨損失 | — | — | — | — | ( | ( | |||||||||||
截至2024年6月30日的結餘 |
| | $ | — | $ | | $ | — | $ | ( | $ | ( | |||||
與已清償的債務相關的股份發行 | | — | | — | — | | |||||||||||
與Reg A定向增發相關的股票發行，在扣除發行成本後為$ | | — | | — | — | | |||||||||||
與籌集資本有關的股票發行，扣除發行成本後淨額 $ | | — | | — | — | | |||||||||||
與認股權設定有關的股票，扣除 $ 費用後發行 | | — | | — | — | | |||||||||||
資產抵押貸款轉換後發行的股票 | | — | | — | — | | |||||||||||
與授權安排相關的股票發行 | | — | | — | — | | |||||||||||
股權基礎的補償 | — | — | ( | — | — | ( | |||||||||||
淨損失 | — | — | — | — | ( | ( | |||||||||||
股份暫時擱置 | ( | — | — | — | — | — | |||||||||||
2024年9月30日的餘額 |
| | $ | — | $ | | $ | — | $ | ( | $ | | |||||
*對2023年7月5日的股票合併進行追溯生效，然後 進行 於2024年4月2日進行股票逆向拆股。 | |||||||||||||||||
1 包括在期間內行使的 | |||||||||||||||||
2 包括在期間內行使的 | |||||||||||||||||
5
2023年9月30日止九個月 | |||||||||||||||||
累積的 | |||||||||||||||||
常見 | 票面金額 | 資本中 | 其他 | 總計 | |||||||||||||
股份 | 一般股份 | 超額保額 | 綜合 | 累計 | 股東權益 | ||||||||||||
| 優越* |
| 分享* |
| 票面價值* |
| 收入（損失） |
| 赤字累計 |
| 普通股 | ||||||
2023 年 1 月 1 日結存 |
| | $ | — |
| $ | |
| $ | ( |
| $ | ( | $ | | ||
與RSU解約有關的股票發行，扣除稅款後碎股 |
| |
| — |
| ( |
| — |
| — |
| ( | |||||
針對收購而發行的股票 | | — | | — | — | | |||||||||||
股權基礎的補償 |
| — |
| — |
| |
| — |
| — |
| | |||||
採用ASU 2016-13 |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
股票可拆式認股權證 |
| — |
| — |
| |
| — |
| — |
| | |||||
其他綜合收益 |
| — |
| — |
| — |
| |
| — |
| | |||||
淨損失 |
| — |
| — |
| — |
| — |
| ( |
| ( | |||||
截至2023年3月31日的結存 | | $ | — |
| $ | |
| $ | ( |
| $ | ( | $ | | |||
股票發行與RSU解禁相關，扣除用於繳稅的股份後的淨額 | | — | ( | — | — | ( | |||||||||||
與ATm有關的發行股票，扣除費用後的淨額為$ | | — | | — | — | | |||||||||||
與資本籌募相關的股票發行，扣除發行成本後的淨額 $ | | — | | — | — | | |||||||||||
與授權安排相關的股票發行 | | — | | — | — | | |||||||||||
股權報酬 | — | — | | — | — | | |||||||||||
其他全面損失 | — | — | — | | — | | |||||||||||
淨損失 | — | — | — | — | ( | ( | |||||||||||
進行股票反向拆股後發行了碎股 | | — | — | — | — | — | |||||||||||
2023年6月30日結餘 | | $ | — | $ | | $ | | $ | ( | $ | | ||||||
與資本募集有關的股份發行，扣除發行成本後為$ | | — | | — | — | | |||||||||||
股權基礎的補償 | — | — | | — | — | | |||||||||||
其他綜合收益 | — | — | — | ( | — | ( | |||||||||||
淨虧損 | — | — | — | — | ( | ( | |||||||||||
2023年9月31日結餘 |
| | $ | — | $ | | $ | ( | $ | ( | $ | | |||||
*對2023年7月5日的股票合併進行追溯生效，然後 進行 於2024年4月2日進行股票逆向拆股。 | |||||||||||||||||
請參閱簡明綜合財務報表附註。
6
22世紀集團，INC。
簡明財務報表現金流量表
(未經查核)
(金額以千為單位)
截至九個月 | ||||||
九月三十日 | ||||||
| 2024 |
| 2023 | |||
經營活動現金流量： |
|
|
|
| ||
淨損失 | $ | ( | $ | ( | ||
調整以彌補淨虧損與經營活動使用現金之間的差異： |
|
|
|
| ||
商譽和長期資產減損 | — | | ||||
攤銷和折舊 |
| |
| | ||
租賃權資產攤銷 |
| |
| | ||
其他非現金損失 | ( | ( | ||||
信用損失準備 | | | ||||
機械和設備出售的虧損 |
| |
| | ||
包含在利息費用中的債務相關費用 | | | ||||
以股權為基礎的員工酬勞費用 |
| |
| | ||
因條件採計變動而獲利 |
| — |
| ( | ||
公允價值變動 | ( | ( | ||||
衍生負債公允價值變化 | ( | — | ||||
存貨儲備增加 | | | ||||
資產及負債的變動，扣除收購後的淨值： |
|
|
| |||
應收帳款 |
| ( |
| ( | ||
存貨 |
| |
| ( | ||
預付費用及其他資產 |
| |
| ( | ||
應付賬款 |
| ( |
| | ||
應計費用 |
| ( |
| | ||
應計的工資 |
| ( |
| ( | ||
應計貨物稅和費用 |
| ( |
| | ||
其他負債 | ( |
| ( | |||
經營活動所使用之淨現金流量 |
| ( |
| ( | ||
投資活動之現金流量: |
|
|
| |||
收購專利、商標和許可證 |
| — |
| ( | ||
取得固定資產 |
| ( |
| ( | ||
出售物業、廠房及設備所得款項 |
| |
| | ||
併購，扣除取得現金淨額 | — | ( | ||||
財產、廠房及設備保險賠償 | — | | ||||
短期投資證券的銷售和到期 |
| — |
| | ||
購買短期投資證券 |
| — |
| ( | ||
投資活動提供的淨現金流量（使用） |
| ( |
| | ||
來自籌資活動的現金流量: |
|
|
| |||
支付票據負債 | ( | ( | ||||
發行應付票據所得款項 | | | ||||
償還長期債務款項 | ( | — | ||||
發行長期債務證券所得 | — | | ||||
發行債務成本支付 | — | ( | ||||
可換股權發行所得 | — | | ||||
認股權行使的淨收益 | | — | ||||
與ATM相關的普通股發行所得 | — | | ||||
支付與自動櫃員機相關的普通股發行成本 | — | ( | ||||
普通股發行所得款項 | | | ||||
支付普通股發行成本 | ( | ( | ||||
與RSUs淨份額結算相關的稅款已支付 | ( | ( | ||||
籌資活動提供的淨現金 |
| |
| | ||
現金、現金等價物和受限現金的淨增加量 |
| |
| | ||
現金、現金等價物和受限現金-期初 |
| |
| | ||
現金、現金等價物和受限現金-期末 | $ | | $ | | ||
Cash and cash equivalents, end of period | ||||||
期初現金及現金等價物餘額 | $ | | $ | | ||
期初受限現金 | — | — | ||||
期初現金、現金等價物和受限現金 | $ | | $ | | ||
期末現金及現金等價物 | $ | | $ | | ||
期末受限現金 | — | | ||||
期末現金、現金等價物及受限制現金 | $ | | $ | | ||
現金流資訊的補充揭示： |
|
|
|
| ||
非現金交易: |
|
|
|
| ||
已產生但尚未支付的資本支出 | $ | | $ | | ||
租賃資產及對應的營業租賃負債 | $ | — | $ | | ||
視同分紅派息 | $ | | $ | | ||
與已清償的債務相關的股份發行 | $ | | $ | — | ||
非現金對價RXP收購 | $ | — | $ | | ||
非現金授權安排 | $ | | $ | | ||
已計提但尚未支付的股本發行成本 | $ | | $ | — | ||
為清償次級票據而作出的付款 | $ | | $ | — | ||
GVb票據支付 | $ | | $ | — | ||
發行債務成本支付 | $ | | $ | — | ||
償還優先擔保授信設施的股權轉換 | $ | | $ | — | ||
股權認購應收款 | $ | | $ | — | ||
請參閱簡明合併財務報表附註.
7
二十二世紀集團股份有限公司
簡明綜合財務報表附註
二零二四年九月三十日
(未經審核)
金額以千計，除股份和每股數據除外
註 1.-業務性質及重要會計政策摘要
演示基礎— 二十二世紀集團股份有限公司（以及其合併子公司，「第 22世紀集團」或「公司」）是內華達州的一家以「XXII」符號在納斯達克資本市場上市上市交易的公司。22 世紀集團是一家煙草產品公司，銷售和分銷本公司自己的品牌煙草產品，並為第三方品牌提供合同製造服務。該公司的旗艦產品是經 FDA 批准作為改性風險煙草產品的低尼古丁可燃煙草。
隨附的簡明綜合財務報表按照美國（「美國」）的規則和法規呈報證券交易委員會（「SEC」）並不包括美國一般公認會計原則（「美國 GAAP」）所要求的披露，如本公司表格 10-k 年報所載的所有披露。因此，本簡明綜合財務報表應與截至二零二三年十二月三十一日止財政年度之最新年報表 10-k 年報內所載的綜合財務報表及其附註一併閱讀。
根據管理層認為，簡明綜合財務報表反映了所有調整（包括正常定期調整），認為必要，以公平呈現本公司所呈報期間的業績。中期的結果並不一定表明整個財政年度可能預期的結果或趨勢。簡明合併財務報表是使用美國 GAAP 擬備的，要求管理層做出預估和假設，以影響財務報表日期和報告期間內的資產、負債、股本部分部分、銷售、開支和相關披露的報告金額。實際結果可能與這些估計有重大不同。
流動性和資本資源 — 這些簡明的綜合財務報表是根據一般公認的會計原則擬備，適用於持續性企業，該準則考慮在正常業務過程中實現資產和履行負債。
自成立以來，本公司從業務中產生重大損失和負現金流，並預計在煙草業務中產生重大收入和利潤之前，將承受額外損失。該公司營運負現金流為 $
考慮到公司預計的營運需求及其現有現金及現金等值，
因應這些情況，管理層目前正在評估不同的降低開支策略，並採取融資策略，包括通過發行證券、資產銷售以及與戰略合作夥伴安排籌集額外資金。如果本公司在需要的數量時無法使用資金，則可能需要清算庫存、停止或縮短營運，或根據適用的破產法律或類似的州訴訟尋求保障。無法保證本公司能夠籌集其繼續營運所需的資本。管理層的計劃並不減輕本公司在發布簡明綜合財務報表之日起一年內能夠繼續作為持續業務的嚴重疑問。
8
簡明合併財務報表不包括任何與記錄的資產金額之可收回性和分類，或可能因此不確定性結果而產生的負債金額和分類相關的調整。
重新分類 - 公司已修改製品的貨物及勞務稅的呈現及分類，該稅以前在綜合損益表和綜合虧損細目中的營業成本中記錄。
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
認股證 - 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.
公司可能通過支付現金或其他資產來贖回的認股權證，根據ASC 480歸類為負債，並最初和後續按其估計公允價值計量。符合全部權益歸類標準的已發行或修改的認股權證，在發行時被要求記錄為超額股本的一部分。有關認股權證的進一步討論，請參見附註5和附註10。
與反稀釋或向下回合條款相關的被視為股利的負債（通常稱為“棒鉗”）代表當這些條款觸發時，價值轉移給符合股權類獨立財務工具持有人的經濟轉移。此外，向持有人提供替代認股權證的初始公允價值在誘因下也被視為被視為股利。這些被視為股利被呈現為減少淨利潤或增加可供普通股東支配的淨損益，并相應增加超額股本，從而導致股東權益（赤字）無變化。截至2024年9月30日結束的三個月和九個月，總計被視為股利的金額為$，比截至2023年9月30日結束的三個月和九個月的$和$分別多，這是由於股權發行（請參見附註10）。
附帶認股權證發行的債務 公司在核算附有可拆分認股權的債務發行時，將考慮ASC 470-20、債務（ASC 470）、ASC 480和ASC 815指引。正如在“認股權”標題下所述，公司將根據認股權協議的具體條款，將認股權歸類為股本工具、衍生負債或負債。在發行附有可拆分認股權的債務情況下，發行債務的收益首先根據其全面估計公允價值分配給認股權，並附帶對應的債務折扣。剩餘款項，再根據折扣進一步減少（包括通過分離嵌入式衍生金融工具所創建的折扣），則分配給債務。公司將債務按攤銷成本計量為負債，並根據ASC 835的有效利率法在債務工具的預期期限內攤銷由資金分配產生的債務折扣到利息費用。利息（ASC 835）所述，公司在核算附有可拆分認股權的債務發行時，將考慮ASC 470-20、債務（ASC 470）、ASC 480和ASC 815指引。
9
嵌入式衍生工具 公司考慮債務工具中是否存在需要根據ASC 815將其視為衍生金融工具進行分拆和單獨賬務的嵌入特徵。嵌入式衍生工具最初和後續均以公平價值計量。除了“債務”部分的附記6中描述的分拆嵌入轉換選擇權外，與公司的Senior Secured信貸設施和次順位票據相關的嵌入式衍生工具並不重大。
債務發行成本和折扣 - 公司發行的債務相關的發行成本和折扣被推遲並在相關債務的期限內攤銷。與公司的Senior Secured信貸設施和次順位票據相關的債務發行成本和折扣被記錄為相關債務攜帶價值的減少，並按照有效利率法在從發行日到到期日或更早之間的期間內攤銷到利息費用。債務發行成本和折扣的攤銷金額包含在現金流量表中的債務相關費用中包含在利息費用中。備註6“債務”中包含有關公司債務發行成本和折扣的更多信息。
長壽資產的減損 - 公司檢討所有預期持有並使用的所有長期資產的可回收性，當出現表明資產攜帶價值可能無法收回的事項或情況變動時。對可能的減損進行評估是基於從相關業務的預期未來現金流量（不打折且不包括利息費用）中收回資產攜帶價值的能力。如果這些現金流量小於此類資產的攜帶價值，則記錄該估計公允價值與攜帶價值之間差額的減損損失。公司確定在截至2024年9月30日的三個月和九個月期間內沒有出現任何減損指標。
收益和損失條款 - 公司在訴訟和監管事宜具有可能發生損失條款且可以估計的情況下建立一項應計負債。在這種情況下，可能會面臨超過任何已計提金額的損失風險。當損失條款既不可能發生又無法估計時，公司不會建立一項應計負債。隨著訴訟或監管事宜的發展，公司將與處理該事宜的任何外部律師一起，持續評估該事宜是否具有可能發生且可估計的損失條款。如果在評估時，涉及訴訟或監管事宜的損失條款既不可能發生又不可估計，該事宜將繼續受到監控，以進一步發展將使該損失條款既可能發生又可估計。當訴訟或監管事宜相關的損失條款被認定為既可能發生又可估計時，公司將就該損失條款建立一項應計負債，並記錄相應金額的相關費用。公司將繼續監控該事宜以瞭解可能影響任何此類已計提負債金額的進一步發展。
根據ASC 450-30，當收益條件達成並實現時，將認可收益條款，這通常將在最終解決時或當收到現金。如果保險公司確認索賠和補償金額並認為應付款項並有可能收取，則保險理賠可能會比現金收取更早。
公司為其設施保留一般責任保險政策。根據我們的保險政策，若財產受損，公司將遵循ASC 610-30指南的指引。其他收入-強制轉換的收益和損失，將非貨幣資產（財產）轉換為貨幣資產（保險理賠）之ASC 610-30。根據ASC 610-30，一旦認為理賠應收款項是可能的，公司即在摘要合併資產負債表中承認保險理賠應收款項的資產，並相應扣除與在營運和全面損失的摘要合併損益表中記錄的意外損失相對的收入。如果保險理賠金額低於認定的意外損失金額，公司將損失，而如果保險理賠金額高於已認定的意外損失金額，公司將僅認定相當於意外損失金額的理賠，並將超額部分視為盈利抵押。業務中斷保險可視為盈利抵押。
請參考附註12中所有承諾和可能性的進一步討論。
人員遣散費用 - 公司不時評估其資源並優化其業務計劃以配合執行策略的不斷變化的需求。 這些舉措可能導致自願或非自願員工終止福利。 當員工接受相關報價時，將會計提自願終止福利。 當承諾終止計劃並向受影響的員工傳達福利安排時，或根據主管删除或終止的實質計劃的存在性來確定負債是否可能並可估計時，將會計提非自願終止福利。
10
下表彙總了在簡明合併資產負債表的其他流動負債中呈現的遞延遣散責任變動。
2024 年 1 月 1 日結存 | $ | | |
現金支付 | ( | ||
2024年3月31日的結餘 | | ||
現金支付 | ( | ||
截至2024年6月30日的結存 | | ||
應計費用 | | ||
現金支付 | ( | ||
普通股票的交易結算 | ( | ||
2024年9月30日的結餘 | $ | |
以下表格總結了在綜合損益表中關於解僱費用分類的情況：
結束於三個月的期間 | 截至九個月 | |||||||||||
九月三十日 | 九月三十日 | |||||||||||
| 2024 |
| 2023 |
| 2024 |
| 2023 | |||||
銷售、總務和行政 | $ | | $ | ( | $ | | $ | | ||||
其他營運費用，淨額 |
| — |
| |
| — |
| | ||||
總離職遣散費用 | $ | | $ | ( | $ | | $ | | ||||
所得稅-對於中期所得稅報告，由於對淨递延稅款資產設有全額估值準備，除非與某些州地方或特許營業稅有關，或與飛凡或不常發生的項目有關，否則不記錄所得稅支出或利益。飛凡或不常發生的項目的稅務影響，包括對估值準備的判斷變化以及稅法或稅率變化的影響，在其發生的中期予以報告。
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發布了ASU 2023-07，旨在改善可報告的部門披露，以及增強有關顯著可報告的部門費用的披露。此指引將於我們的年度報告開始生效，即2024年12月31日結束的財政年度及其後的中期期間，并要求對所有已呈報的前期期間進行追溯應用。由於這些修訂不改變營運部門的識別方法，營運部門的匯總或定量門檻的應用以確定可報告的部門，我們不認為此指引對我們的財務狀況或經營業績產生實質影響。 分節報告（TOPIC 280）：改進報告的分節披露. 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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尚未選擇或採納會計指引
2023年12月，FASB發布了ASU 2023-09《所得稅（主題740）-改進所得稅披露》，該ASU要求就所得稅進行額外的定量和定性披露，讓合併基本報表的讀者能夠評估公司業務、相關稅務風險和稅務策劃如何影響其稅率和未來現金流的前景。對於上市公司，該ASU自2024年12月15日後開始適用。公司目前正在評估採納該ASU將對其合併基本報表產生的影響。
我們考慮了所有ASUs的適用性和影響。如果ASU未在上述列出，則判定該ASU可能不適用，或者對我們的財務報表和相關披露影響不大。
備註2.已停止運作和剝離
截至2024年9月30日，所有資產和負債均作為目前在簡明綜合資產負債表中呈現的前大麻/大麻處置組板塊。被歸類為待售停業營業的前大麻/大麻處置組資產和負債的攤銷金額如下：
九月三十日 | 十二月三十一日 | ||||
| 2024 | 2023 | |||
預付費用及其他流動資產 | $ | — | $ | | |
不動產、廠房及設備淨值 |
| | | ||
其他資產 | — | | |||
待售停業處分資產 | $ | | $ | | |
應付票據及借款-流動 | $ | — | $ | | |
營運租賃負債 |
| — |
| | |
應付帳款 |
| |
| | |
應計費用 |
| |
| | |
已實現可延展收益 | — | | |||
停業業務持有的待售資產流動負債 | $ | | $ | | |
淨負債 | $ | ( | $ | ( | |
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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 | $ | | ||||||||||
14
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) | ||||||||||||||
$ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||
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| (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
35
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.
46
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
|
| ||
|
| ||
|
| ||
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) | ||
48
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