8-K
22nd Century Group, Inc. (XXII)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 9, 2023
22nd Century Group, Inc.
(Exact Name of Registrant as Specified in Charter)
| Nevada | 001-36338 | 98-0468420 |
|---|---|---|
| (State or Other Jurisdiction of Incorporation) | (Commission File Number) | (I.R.S. Employer<br>Identification No.) |
| 500 Seneca Street , Suite 507 , Buffalo , New York<br><br>(Address of Principal Executive Office) | 14204<br><br>(Zip Code) | |
| <br><br>Registrant’s telephone number, including area code: ( 716 ) 270-1523 |
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading symbol | Name of each exchange on which registered |
|---|---|---|
| Common Stock, $0.00001 par value | XXII | NASDAQ Capital Market |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
| Item 2.02 | Disclosure of Results of Operations and Financial Condition |
|---|
On May 9, 2023, 22nd Century Group, Inc. (the “Company”) issued an earnings release for the quarter ended March 31, 2023. A copy of the earnings release is furnished as Exhibit 99.1 to this report.
The information in this item shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”), or otherwise subject to the liabilities of Section 18, nor shall it be deemed incorporated by reference in any of the Company’s filings under the Securities Act of 1933, as amended, or the Exchange Act, except to the extent, if any, expressly set forth by specific reference in such filing.
| Item 9.01(d) | Financial Statements and Exhibits |
|---|
| Exhibit 99.1 | Earnings release dated May 9, 2023 |
|---|---|
| Exhibit 99.2 | Supplemental financial information for earnings release dated May 9, 2023 |
| --- | --- |
| 104 | Cover Page Interactive Data File - The cover page XBRL tags are embedded within the inline XBRL document |
| --- | --- |
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 hereunto duly authorized.
| 22nd Century Group, Inc. | |
|---|---|
| /s/ R. Hugh Kinsman | |
| Date: May 9, 2023 | R. Hugh Kinsman |
| Chief Financial Officer |
Exhibit 99.1
22nd Century Group (Nasdaq: XXII) Reports First Quarter 2023 Financial Results, Introduces 2023 Full Year Revenue Outlook
| ● | Readying Q2 VLN^®^ Commercial Sales in California, Texas and Florida, Booking Additional Launches Targeting 18 States Throughout 2023 |
|---|---|
| ● | Advancing VLN^®^ Pilot Programs in Switzerland, Japan, and South Korea |
| --- | --- |
| ● | Delivered Record GVB Ingredient Volumes as Dominant Supplier in North America |
| --- | --- |
| ● | Signs Exclusive CDMO Plus Distribution Agreements Worth More Than $140 Million with Cookies and Old Pal |
| --- | --- |
| ● | First Quarter 2023 Net Revenues $22.0 Million, Up 143% from the First Quarter 2022 |
| --- | --- |
| ● | Provides Initial 2023 Revenue Outlook of $105 Million to $110 Million, 69% to 77% Year-Over-Year Growth |
| --- | --- |
| ● | Continued Execution of Business Unit Strategies, Poised to Achieve Cash Positive Operating Goals in 2024 |
| --- | --- |
BUFFALO, N.Y., May 9, 2023 — 22nd Century Group, Inc. (Nasdaq: XXII), a leading biotechnology company focused on utilizing advanced plant technologies to improve health and wellness with reduced nicotine tobacco, hemp/cannabis and hops, today reported results for the first quarter ended March 31, 2023, and provided an update on recent business highlights. The Company will host a live audio webcast today at 10:00 a.m. ET.
“22nd Century is executing an aggressive commercial rollout of our FDA authorized VLN^®^ reduced nicotine content cigarettes and a revolutionary new CDMO plus distribution business model for our hemp/cannabis business unit, the combination of which will accelerate revenue, increase gross margin and drive 22nd Century to cash profitable operating results for both business units in 2024,” stated James A. Mish, Chief Executive Officer of 22nd Century Group.
“Having clearly confirmed the incredible consumer demand for VLN^®^ and rapidly expanding pipeline of retail stores wanting to carry the brand, we are now fully focused on commercialization. We are working steadily toward commercial sales covering thousands of stores in California, Texas and Florida with a top retail chain, as well as booking launch windows and orders with both existing and new chains seeking to sell VLN^®^ products across an expanding geography. To support these launches and accelerate the rollout of hundreds or even thousands of new stores across multiple states within a very narrow timeframe, we have now secured agreements with the #1, and #2 national-scale C-store distribution providers, which are already taking warehouse stocking quantities of VLN^®^ for customer distribution. These actions provide a clear pathway for a rapid acceleration in VLN^®^ sales activity and our goal of entering up to 18 states by year-end 2023, which we believe will make VLN^®^ available in almost 60% of the $80 billion U.S. tobacco market.”
“Within our hemp/cannabis business, we are laser focused on growth initiatives to capitalize on our dominant market position in cannabinoid ingredients and products. We again reported record cannabinoid ingredient volumes delivered in the first quarter, a trend we expect to further increase throughout 2023. Adding to that growth, in April 2023 we signed a three-year transformational CDMO+D license agreement with industry leader Cookies to manufacture and distribute their alternative cannabinoid product offerings in retailers throughout the U.S., and have now added a second similar three-year license with Old Pal. This new model utilizes our entire value chain, from ingredients to finished white label goods, then leverages our extensive sales and distribution infrastructure to take these products all the way to distribution and retail point of sale.
“We believe 22nd Century is poised for phenomenal growth this year in both our tobacco and hemp/cannabis businesses. As such, we are introducing our first revenue guidance, calling for full-year 2023 revenue of $105 million to $110 million, representing a 69% to 77% increase from $62.1 million in 2022. Our growth will be driven by the rapid stocking and ramp up of new VLN^®^ customers, new Pinnacle CMO sales, continued record cannabinoid ingredient volumes, start-up of our CDMO+D hemp/cannabis agreements and a full year of GVB sales. Achieving that goal plus execution on several margin improvement initiatives already in progress provides a clear pathway to achieve cash positive operations from both business units in 2024, as previously indicated,” concluded Mr. Mish.
Recent Key Financial and Business Highlights
Tobacco Business
| ● | Continued an aggressive multi-state VLN^®^rollout strategy, targeting 18 states by year-end 2023, accounting for almost 60% of the U.S. tobacco sales market. |
|---|---|
| ● | Signed agreements with the #1 and #2 national-scale convenience store (“C-store”) distribution partners to facilitate customer required rapid state-wide and multi-state launches of VLN^®^ in hundreds or thousands of stores at a time within our target markets. |
| --- | --- |
| ● | Advanced plans with a new customer to commence sales of VLN^®^ in thousands of c-stores across the three largest state markets of Texas, California and Florida in the second quarter. |
| --- | --- |
| ● | Secured additional retail point of sale placements with regional C-stores in existing and new expansion markets, including retail chains already scheduling VLN^®^ launches for later in 2023. |
| --- | --- |
| ● | Refined new consumer incentives, educational marketing materials, distribution support, and programming supporting the launch of VLN^®^ products among targeted adult smoker and influencer audiences interested in reducing smoking rates. |
| --- | --- |
| ● | Initiated sales under a new contact manufacturing agreement for a private label conventional premium cigarette brand, Pinnacle, selling at one of the nation's top-10 gas station convenience store chains, comprising almost 1,700 stores in 27 states. |
| --- | --- |
| ● | Gained authorization to test VLN^®^ sales at four United States military bases located in California, Arizona and North Carolina, anticipated to start in the second quarter. |
| --- | --- |
| ● | Accelerated a major seed cultivation project for its proprietary reduced nicotine content tobacco sufficient to produce the entire annual cigarette consumption of New Zealand in support of that nation’s reduced nicotine content mandate – up to 2 billion sticks. |
| --- | --- |
| ● | Advanced VLN^®^ pilot activities in international markets, including: |
| --- | --- |
| o | Switzerland, where product has been shipped for distribution, expected to commence by late May; |
| --- | --- |
| o | Japan, where product is being readied for shipment to our distributor ahead of test sales, expected to commence in June 2023; and |
| --- | --- |
| o | South Korea where updated packaging is being designed in response to initial market tests and product is expected to be shipped to the distributor during the summer 2023 for additional market testing. |
| --- | --- |
| ● | Poised to benefit from federal, state and international regulatory appetite for banning menthol and mandating reduced nicotine content, including the proposed FDA menthol cigarette ban, in final rules status with a decision expected in August 2023, which could leave VLN^®^ Menthol King as the only combustible menthol cigarette on the market, providing a critical off-ramp to help current menthol smokers to smoke less. |
| --- | --- |
Hemp/Cannabis Business
| ● | Shipped record cannabinoid ingredient volumes as the Company believes it is now the largest provider of cannabinoid extracts and isolates in North America, focused on cannabidiol (CBD) and cannabigerol (CBG) extracted and refined at industrial scale into distillates. |
|---|---|
| ● | Executed transformational strategic three-year exclusive license and distribution agreements with Cookies and Old Pal, widely recognized hemp/cannabis brands, establishing an innovative new fully verticalized CDMO plus distribution business model expected to generate an initial $140 million or more in revenue across the term of these initial contracts. |
| --- | --- |
| ● | Gained validation of more than 1,100 of a total of 1,276 novel food applications from the U.K. Food Standards Agency (FSA), acquired as part of the January 2023 purchase of RX Pharmatech Ltd., accelerating CBD product growth in the U.K. and EU food and nutraceuticals markets. |
| --- | --- |
| ● | Contracted new growing programs to cultivate hemp biomass for extraction, designed to improve both margin on and availability of biomass volumes sufficient to meet rising customer demand. |
| --- | --- |
| ● | Developed a plan for comprehensive new facilities to replace the Company’s prior Grass Valley manufacturing plant with construction of a new, higher capacity, fully integrated crude, distillate and isolate manufacturing campus. |
| --- | --- |
| ● | Crude extraction and CBD distillate operations are expected to be fully online in Prineville, Oregon by early June and will facilitate gross margin improvement on GVB produced cannabinoid products beginning in the second quarter of 2023. The Company’s crude extraction plant is expected to be one of the largest hemp extraction units in the world. |
| --- | --- |
First Quarter 2023 Financial Results
| ● | Net revenues for the first quarter of 2023 were $22.0 million, an increase of 142.8% from the same period in 2022. |
|---|---|
| o | Revenue from tobacco-related products was $8.9 million, a decrease of 1.3% from the first quarter of 2022, as the Company reallocates NASCO production resources away from lower margin filtered cigars to higher margin VLN^®^ and conventional cigarette products. |
| --- | --- |
| o | Revenue from hemp/cannabis-related products was $13.0 million, compared to $0 in the prior year first quarter, reflecting the acquisition of GVB and continued sequential quarterly growth in ingredient supply sales. |
| --- | --- |
| o | Continued revenue growth in tobacco and hemp/cannabis combined with operating performance initiatives are expected to improve gross profit and operating results from the second quarter of 2023 onward as the company advances to its goal of cash positive operations. |
| --- | --- |
| ● | Gross profit for the first quarter of 2023 was $(1.2) million as compared to $0.3 million in the prior year period. |
| --- | --- |
| o | Gross profit from tobacco-related products was breakeven, reflecting costs related to shifting product mix for increased production of VLN^®^ and higher margin premium store brand CMO products, such as Pinnacle. |
| --- | --- |
| o | Gross profit from hemp/cannabis-related products was $(1.2) million compared to $0 in the prior year, reflecting costs associated with buying and selling ingredients while the Company rebuilds its distillate and isolate manufacturing capacity following the November 2022 Grass Valley fire; both crude extraction and distillate production will be online in the second quarter of 2023. |
| --- | --- |
| o | The Company expects to recoup a portion of the lost GVB gross profit, including cumulative catch-up proceeds, through its business interruption insurance policy beginning in May 2023. |
| --- | --- |
| o | Gross margin will improve significantly in the second quarter of 2023 and going forward reflecting: |
| --- | --- |
| ◾ | Substantially higher margin product mix for tobacco including rapid growth of VLN^®^ sales |
| --- | --- |
| ◾ | Crude extraction and distillate production will be online beginning in the second quarter of 2023 for hemp/cannabis |
| --- | --- |
| ◾ | Initial harvest of hemp/cannabis biomass will significantly reduce raw material expenses in the second half of 2023 |
| --- | --- |
| ◾ | New CDMO+D contracts with higher margins will begin shipping product in the second half of 2023. |
| --- | --- |
| ● | Total operating expenses for the first quarter of 2023 increased to $16.6 million, driven by the addition of GVB operations, investment in the VLN^®^ products sales and launch team and ongoing investments in back-office support and scale to meet the significant revenue growth of the Company. |
| --- | --- |
| ● | Operating loss for the first quarter of 2023 was $17.8 million, compared to $8.1 million in the prior year period. |
| --- | --- |
| ● | Net loss was $18.2 million, compared to prior year $8.9 million. |
| --- | --- |
| ● | Adjusted EBITDA was a loss of $14.7 million, compared to prior year loss of $6.6 million. See the tables included in this release for a reconciliation of Adjusted EBITDA (a non-GAAP measure) to net loss. |
| --- | --- |
“We are confident in the revenue opportunities ahead, leading us to announce our first full year revenue forecast, calling for sales of $105 million to $110 million for 2023,” said Hugh Kinsman, Chief Financial Officer of 22nd Century Group. “We anticipate sequential growth in each quarter going forward, as well as improving gross margin performance, reflecting accelerated distribution and sales growth for both VLN^®^ and Pinnacle, increasing consumer purchase patterns, substantial increase in cannabinoid ingredient sales volumes, the return of our hemp/cannabis production capacity, new cultivation initiatives, and the rollout of our license and distribution agreements with leading hemp/cannabis brands. Executing on this plan will deliver our goal of cash positive operations in 2024 on a consolidated basis after corporate overhead.”
Balance Sheet and Liquidity
| ● | As of March 31, 2023, the Company had $23.7 million in cash, cash equivalents, short-term investment securities, and restricted cash. |
|---|---|
| ● | The Company has received casualty loss insurance recoveries of $5.0 million in first quarter of 2023 from the Grass Valley fire, with additional proceeds from its ongoing business interruption insurance claims expected in the second quarter and thereafter. |
| --- | --- |
| ● | On March 3, 2023, the Company strengthened its balance sheet with a $21.1 million senior credit facility to fund increased working capital driven by increased VLN^®^ product shipments to multiple national-scale distribution partners as well as strong customer demand for hemp/cannabis bulk ingredients. |
| --- | --- |
First Quarter 2023 Conference Call
22nd Century will host a live webcast today at 10:00 a.m. E.T. to discuss its first quarter 2023 financial results and business highlights. During the webcast, James A. Mish, chief executive officer of 22nd Century Group, John Miller, president of 22nd Century’s tobacco business, and Hugh Kinsman, chief financial officer, will provide an update on the Company.
Following prepared remarks, the Company will host a Q&A session, during which management will accept questions from its covering analysts.
The live webcast, interactive Q&A, and slide presentation will be accessible in the Events section on 22nd Century’s Investor Relations website at www.xxiicentury.com/investors/events. An archived replay of the webcast will also be available shortly after the live event has concluded.
About 22nd Century Group, Inc.
22nd Century Group, Inc. (Nasdaq: XXII) is a leading biotechnology company focused on utilizing advanced plant technologies to improve health and wellness through tobacco harm reduction, reduced nicotine tobacco, hemp/cannabis and hops. With dozens of patents allowing it to control nicotine biosynthesis in the tobacco plant, the Company has developed proprietary reduced nicotine content (RNC) tobacco plants and cigarettes, which have become the cornerstone of the FDA’s Comprehensive Plan to address the widespread death and disease caused by smoking. The Company received the first and only FDA Modified Risk Tobacco Product (MRTP) authorization for a combustible cigarette in December 2021. In tobacco, hemp/cannabis and hop plants, 22nd Century uses modern plant breeding technologies, including genetic engineering, gene-editing, and molecular breeding to deliver solutions for the pharmaceutical and consumer products industries by creating new, proprietary plants with optimized alkaloid and flavonoid profiles as well as improved yields and valuable agronomic traits.
Learn more at xxiicentury.com, on Twitter, on LinkedIn, and on YouTube.
Learn more about VLN^®^ at tryvln.com.
Cautionary Note Regarding Forward-Looking Statements
Except for historical information, all of the statements, expectations, and assumptions contained in this press release 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. 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” in the Company’s Annual Report on Form 10-K filed on March 9, 2023. All information provided in this release is as of the date hereof, and the Company assumes no obligation to and does not intend to update these forward-looking statements, except as required by law.
Investor Relations & Media Contact Matt Kreps
Investor Relations
22nd Century Group
mkreps@xxiicentury.com
214-597-8200
22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(amounts in thousands, except per-share data)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | March 31, | | December 31, | ||
| | **** | 2023 | **** | 2022 | ||
| ASSETS | | | ||||
| Current assets: | | | ||||
| Cash and cash equivalents | | $ | 10,952 | | $ | 3,020 |
| Short-term investment securities | | 5,275 | | 18,193 | ||
| Accounts receivable, net | | 9,131 | | 5,641 | ||
| Inventories | | 10,528 | | 10,008 | ||
| Insurance recoveries | | 3,000 | | 5,000 | ||
| Prepaid expenses and other current assets | | 2,252 | | 2,743 | ||
| Total current assets | | 41,138 | | 44,605 | ||
| Property, plant and equipment, net | | 14,322 | | 13,093 | ||
| Operating lease right-of-use assets, net | | 5,309 | | 2,675 | ||
| Goodwill | | 33,160 | | 33,160 | ||
| Intangible assets, net | | 18,385 | | 16,853 | ||
| Investments | | 682 | | 682 | ||
| Restricted cash | | 7,500 | | — | ||
| Other assets | | | 3,642 | | | 3,583 |
| Total assets | | $ | 124,138 | | $ | 114,651 |
| | | | ||||
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | ||||
| Current liabilities: | | | ||||
| Notes and loans payable - current | | $ | 314 | | $ | 908 |
| Operating lease obligations | | 862 | | 681 | ||
| Accounts payable | | 4,602 | | 4,168 | ||
| Accrued expenses | | 6,306 | | 1,428 | ||
| Accrued payroll | | 1,276 | | 3,199 | ||
| Accrued excise taxes and fees | | 2,330 | | 1,423 | ||
| Deferred income | | | 257 | | | 831 |
| Other current liabilities | | 923 | | 380 | ||
| Total current liabilities | | 16,870 | | 13,018 | ||
| Long-term liabilities: | | | ||||
| Notes and loans payable | | 154 | | 3,001 | ||
| Operating lease obligations | | 4,602 | | 2,141 | ||
| Long-term debt | | 16,417 | | — | ||
| Other long-term liabilities | | | 4,736 | | | 516 |
| Total liabilities | | | 42,779 | | | 18,676 |
| Commitments and contingencies (Note 11) | | | | | ||
| Shareholders' equity | | | ||||
| Preferred stock, $.00001 par value, 10,000,000 shares authorized | | | ||||
| Common stock, $.00001 par value, 300,000,000 shares authorized | | | ||||
| Capital stock issued and outstanding: | | | ||||
| 217,057,927 common shares (215,238,198 at December 31, 2022) | | | | | ||
| Common stock, par value | | | 2 | | | 2 |
| Capital in excess of par value | | 337,512 | | 333,898 | ||
| Accumulated other comprehensive loss | | (41) | | (111) | ||
| Accumulated deficit | | (256,114) | | (237,814) | ||
| Total shareholders' equity | | 81,359 | | 95,975 | ||
| Total liabilities and shareholders’ equity | | $ | 124,138 | | $ | 114,651 |
22nd CENTURY GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(Unaudited)
(amounts in thousands, except per-share data)
| | | | | | | |
|---|---|---|---|---|---|---|
| | | Three Months Ended | ||||
| | | March 31, | ||||
| | **** | 2023 | **** | 2022 | ||
| Revenues, net | | $ | 21,962 | | $ | 9,045 |
| Cost of goods sold | | 23,139 | | 8,736 | ||
| Gross (loss) profit | | (1,177) | | 309 | ||
| Operating expenses: | | | | | ||
| Sales, general and administrative | | 14,231 | | 7,262 | ||
| Research and development | | 1,517 | | 1,141 | ||
| Other operating expense, net | | 898 | | 52 | ||
| Total operating expenses | | 16,646 | | 8,455 | ||
| Operating loss | | (17,823) | | (8,146) | ||
| Other income (expense): | | | | | ||
| Unrealized loss on investments | | — | | (817) | ||
| Other income, net | | 5 | | — | ||
| Interest income, net | | 57 | | 50 | ||
| Interest expense | | (421) | | (5) | ||
| Total other expense | | (359) | | (772) | ||
| Loss before income taxes | | (18,182) | | | (8,918) | |
| (Benefit) provision for income taxes | | — | | — | ||
| Net loss | | $ | (18,182) | | $ | (8,918) |
| | | | | | | |
| Net loss per common share - basic and diluted | | $ | (0.08) | | $ | (0.05) |
| Weighted average common shares outstanding - basic and diluted | | | 215,784 | | | 163,157 |
| | | | | | | |
| | | | | | | |
| Net loss | | $ | (18,182) | | $ | (8,918) |
| Other comprehensive loss: | | | | | ||
| Unrealized gain (loss) on short-term investment securities | | 61 | | (400) | ||
| Foreign currency translation | | (4) | | — | ||
| Reclassification of realized losses to net loss | | 13 | | — | ||
| Other comprehensive income (loss) | | | 70 | | | (400) |
| Comprehensive loss | | $ | (18,112) | | $ | (9,318) |
Reconciliations of Non-GAAP Measures
Below is a table containing information relating to the Company’s Net loss, EBITDA and Adjusted EBITDA for the three month periods-ended March 31, 2023 and 2022, including a reconciliation of these Non-GAAP measures for such periods.
| | | | | | | | | |
|---|---|---|---|---|---|---|---|---|
| | | Quarter Ended | ||||||
| | | March 31, | ||||||
| | | Dollar Amounts in Thousands (000's) | ||||||
| | | (UNAUDITED) | ||||||
| | **** | | **** | | | **** | | $ Change |
| | | 2023 | | 2022 | | | fav / (unfav) | |
| Net loss | | | $ | (8,918) | **** | $ | (9,264) | |
| Interest (income)/expense, net | | | | | (45) | | 409 | |
| Amortization and depreciation | | | | | 329 | | | 552 |
| EBITDA | | | $ | (8,634) | **** | $ | (8,303) | |
| Adjustments: | | | | | | | | |
| Equity-based employee compensation expense | | | | | 1,213 | | (38) | |
| Needlerock Farms settlement | | | | | — | | 747 | |
| Grass Valley fire | | | | | — | | | 68 |
| Loss on change of warrant liability | | | | | — | | | 139 |
| Loss on change in contingent consideration | | | | | — | | | 22 |
| Acquisition costs | | | | | — | | | 68 |
| Unrealized loss on investment | | | | | 817 | | | (817) |
| Adjusted EBITDA | | | $ | (6,604) | **** | $ | (8,114) |
All values are in US Dollars.
^1^Fav = Favorable variance, which increases EBITDA and Adjusted EBITDA; Unfav = unfavorable variance, which reduces EBITDA and Adjusted EBITDA
Notes regarding Non-GAAP Financial Information
In addition to the Company’s reported results in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company provides EBITDA and Adjusted EBITDA.
In order to calculate EBITDA, the Company adjusts net (loss) income by adding back interest expense (income), provision (benefit) for income taxes, and depreciation and amortization expense from intangible assets. Adjusted EBITDA consists of EBITDA adjusted by the Company for certain non-cash and non-operating expense, including adding back equity-based employee compensation expense, (gain) loss on investments, acquisition costs, and any unusual or infrequently occurring items.
The Company believes that the presentation of EBITDA and Adjusted EBITDA are important financial measures that supplement discussion and analysis of its financial condition and results of operations and enhances an understanding of its operating performance. While management considers EBITDA and Adjusted EBITDA to be important, these financial performance measures should be considered in addition to, but not as a substitute for or superior to, other measures of financial performance prepared in accordance with GAAP, such as operating (loss) income, net (loss) income and cash flows from operations. Adjusted EBITDA is susceptible to varying calculations and the Company’s measurement of Adjusted EBITDA may not be comparable to those of other companies.
Exhibit 99.2
| XXII<br>FIRST QUARTER EARNINGS<br>PRESENTATION<br>MAY 9, 2023 | |
|---|---|
| CAUTIONARY NOTE<br>ON FORWARD-LOOKING STATEMENTS<br>This presentation contains forward-looking statements<br>concerning our business operations, and financial performance<br>and conditions, as well as our plans, objectives, and<br>expectations for our business operations and financial<br>performance and conditions that are subject to risks and<br>uncertainties. All statements other than those of historical fact<br>are forward-looking statements.<br>These types of statements typically contain words such as “aim,”<br>“anticipate,” “assume,” “believe,” “could,” “due,” “estimate,”<br>“expect,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,”<br>“positioned,” “predict,” “should,” “target,” “will,” “would” and<br>other similar expressions that are predictions of or indicate<br>future events and future trends. Forward-looking statements are<br>based on current expectations, estimates, forecasts, and<br>projections about our business, the industry in which we operate,<br>and our management’s beliefs and assumptions.<br>2<br>These statements are not guarantees of future performance or<br>development and involve known and unknown risks,<br>uncertainties, and other factors that are in some cases beyond<br>our control. All forward-looking statements are subject to risks<br>and uncertainties that could cause actual results to differ<br>materially from those estimated. The contents of this<br>presentation should be considered in conjunction with the risk<br>factors, warnings, and cautionary statements contained in the<br>Company’s annual, quarterly, and other reports filed with the<br>U.S. Securities and Exchange Commission. We undertake no<br>obligation to publicly update or revise any forward-looking<br>statement as a result of new information, future events, or<br>otherwise, except as required by law. | |
| --- | |
| $30.9<br>$40.5<br>$21.9<br>2021 2022 2023F<br>VLN® executing aggressive 2023 multi-state commercial launch program<br> Exceptional product demand drives market share accumulation<br> Readying to add thousands of new retail locations in CA, TX & FL<br> More than 100 chains in the funnel, scheduling launches rest of 2023<br>GVB dominating ingredient, manufacturing and distribution roles<br> Continued record ingredient volume drives market leading position<br> $140 million in exclusive CDMO+D agreements with two major brands<br> Bringing on new distillate production facilities in Prineville, OR<br>New 2023 revenue guidance confirms growth outlook<br> Expecting $105 - $110 million in sales, +69% to +77% YoY<br> Improving margin and operating performance<br> Clear path to cash positive in business units in 2024<br>$105 - $110M<br>+69% to +77%<br>YoY<br>Tobacco Hemp/Cannabis<br>Revenue, net (in millions)<br>• 4Q 2022 & 1Q 2023 Tobacco volumes reflects transition away from lower<br>margin filtered cigar business to reallocate capacity to higher margin store<br>brand CMO and VLN® business ahead of volume ramp<br>• Hemp/cannabis revenues grew on record ingredient volumes and<br>increased contract manufacturing activity even after the November 2022<br>Grass Valley fire<br>2023: INITIAL REVENUE GUIDANCE $105 - $110 MILLION<br>3<br>Revenue and Margin Expected to Scale Through Year, Driving Business Units to Cash Positive in 2024<br>$62.4M<br>$30.9M | |
| --- | |
| 2023 REVENUE RAMP DRIVES 2024 CASH POSITIVE GOAL<br>4<br>Both VLN® and Hemp/Cannabis Business Lines Benefit from Improved Operating Performance Drivers<br>1. Grandview Research; https://www.grandviewresearch.com/industry-analysis/us-tobacco-market#:~:text=The%20U.S.%20tobacco%20market%20size%20was%20estimated%20at%20USD%2075.9,USD%2078.3%20billion%20in%202022.<br>2. Foundation for a Smoke Free World; https://www.smokefreeworld.org/wp-content/uploads/2021/12/Global%20Trends%20in%20Nicotine%20Report%20December%202021.pdf<br>Commercializing FDA MRTP<br>Label for VLN® Reduced<br>Nicotine Content Products<br> Confirmed demand from both consumer and retail channels, updated marketing programs to support<br> Secured #1, #2 national scale distributors, #3, #4 and regional in discussions<br> Launching thousands of stores across largest U.S. state markets supported by updated marketing<br>campaign; massive funnel of 100+ retailers in discussion or scheduling launches throughout rest of 2023<br> Commercial rollout in up to 18 U.S. States in 2023 represents 600+ million cartons of addressable market<br> Shifting mix toward higher margin store brand CMO and VLN® volumes will increase operating profit<br> Cash positive operations for tobacco business by second half 2024, including corporate overhead<br>Rapidly Scaling GVB<br>Cannabinoid Ingredient,<br>API and CDMO<br>Market Leadership<br> Accelerating across 3 distinct growth drivers and profit centers<br> Record ingredient volumes as dominant share leader in North America<br> Increased demand and new agreements drive CDMO volume growth<br> Multiple new exclusive fully verticalized sales and distribution agreements with major brands<br> In-house growing, extraction and new distillation facilities will increase operating profit<br> Cash positive operations for hemp/cannabis business by first half of 2024, including corporate overhead | |
| --- | |
| FDA Authorized VLN®<br>Cannabinoid Ingredients,<br>APIs and CDMO<br>Corporate/Financial | |
| --- | |
| 12 MONTHS OF VLN®:<br>FROM FIRST SALES TO MAJOR MULTI-STATE LAUNCH<br>One year ago, VLN® was less than 30 days into the<br>pilot, announcing its first sales April 13, 2022<br>Exceptional early sales and consumer interest<br>exceeded all industry expectations<br>New tobacco team has upgraded VLN’s launch plans<br>since December 2022 to best take advantage of<br>consumer and retail interest<br>Now moving into full commercialization as a<br>mainstream disruptor with clear path to cash positive<br>in 2H 2024<br>VLN allows consumers to literally stare smoke<br>in the face and say, “I don’t need you.” 6 | |
| --- | |
| State % of Adult<br>Smokers<br>Pack<br>Volume Retail Sales<br>AZ 15% 160M $1.4B<br>Announced<br>Priority States<br>CA 10% 514M $4.9B<br>CO* 14% 130M $1.0B<br>FL 15% 513M $3.9B<br>IL 15% 253M $2.6B<br>NM* 16% 48M $0.4B<br>TX 15% 736M $5.6B<br>UT* 8% 45M $0.4B<br>Total - 2,397M $20.2B<br>WI 15% 184M $1.6B<br>CT* 12% 65M $0.8B<br>GA 16% 398M $2.5B<br>IN 19% 328M $2.3B<br>KY* 24% 295M $2.0B<br>MI* 19% 351M $2.9B<br>NC* 19% 500M $3.3B<br>NY 13% 180M $2.2B<br>OH 21% 467M $3.7B<br>SC 18% 215M $1.5B<br>Total - 6,159M $43.0B<br>Example VLN® Distribution: MRTP States + Adjacent States<br>7<br>NEW VLN® LAUNCH IN TOP CA, TX AND FL MARKETS<br>Announced Launch State Prospective Expansion State<br>Source: CDC; Current Cigarette Use Among Adults (Behavior Risk Factor Surveillance System)<br>2019; World Population Review Cigarette Prices by State; Internal Documents<br>8 States Announced; Targeting VLN® Sales<br>in up to 18 States by End of 2023<br>2023 VLN® Expansion Now Underway, Retail Chains Booking Launches Throughout the Year<br>*State with MRTP Tax Benefit<br>Rapidly Accelerating<br>Commercial Rollout<br>18 Targeted Markets,<br>56% of Total U.S. Cigarette Sales<br> Secured #1, #2 national scale c-store<br>distributors; In process with #3, #4,<br>regionals<br> Readying to launch with major c-store chain in CA, TX, FL; #2 C-store<br>chain on board in IL, CO<br> Adding new national and regional<br>c-store chains in key states<br> Scaling initial 500 stores in 2 states<br>with 4,000+ stores in 3 new states<br> More than 100 chains in pipeline<br>interested in VLN®, plus additional<br>distribution | |
| --- | |
| VLN® READY TO LAUNCH NEW CAMPAIGN SPECIFICALLY<br>DESIGNED TO EVOKE TRIAL AND REPEAT PURCHASE<br>8<br>4<br>VLN Has Real Competitive Advantages that Support Commercial Success<br>CREATIVE HERE<br>Our recent research produced two very important findings that VLN,<br>and NOT other reduction/cessation products, can take advantage of:<br>Smokers are addicted to the act of smoking, not just nicotine<br>Current cessation messaging and products are perceived negatively and<br>make smokers feel less confident and competent, potentially discouraging<br>reduction and cessation<br>1<br>2<br>Our new campaign is designed to establish this VLN Advantage:<br>Our recent research showed that VLN was the preferred method<br>for smoking reduction because it doesn’t force smokers to quit<br>the behavior “cold turkey.”<br>Reinforce the fact that they<br>don’t have to quit “cold turkey”<br>Optimistically encourage<br>them to try VLN<br>1<br>2<br>3 Inspire confidence and<br>competence<br>Entice them to learn more about<br>VLN and how it can help them<br>8 | |
| --- | |
| CAMPAIGN SUPPORTED THROUGH TARGETED PAID MEDIA<br>Hyper-Targeted Media Blitzes in Rollout Markets Will Reach Prospects through Multiple Digital<br>Touchpoints Generating Top-of-Mind Awareness, VLN Advantage Education and Retail Foot Traffic<br> Program will run on content that has an age composition<br>of at least 85% age 21+<br> Combination of online video, large-format display banners<br>and dynamic native ads engage prospects, reinforce brand’s<br>value proposition and increase product credibility<br> Dollars focused within priority zip-codes based on<br>high concentration of adult consumers and retailers<br>Advanced targeting techniques ensure most efficient programs are in market,<br>strong penetration against key target segments and high message frequency<br>for brand name recognition<br>Campaign success will be measured by a third-party pre/post<br>brand awareness study and retail foot traffic measurements<br>to allow for real-time media optimizations<br>9 | |
| --- | |
| ONGOING ACTIVITY DELIVERS CONTINUOUS ENGAGEMENT<br>Integrated Efforts Will Keep VLN in Front of Consumers and Business Partners<br>with a Consistent Message to Grow the Brand<br>Brand Website<br>Enhanced PR Efforts<br>Brand Community<br>Influencer<br>Revamped website will deliver education, user<br>testimonials, smoking reduction support tools and<br>consistently updated articles to attract consumers<br>and fuel organic search.<br>Interested consumers will receive ongoing<br>communication with news, information and offers to<br>help keep them on their reduction journey with VLN<br>Local market advocates are being engaged to speak<br>out in support of VLN’s mission and product. Proactive<br>media relations underway to create incremental market<br>level paid and earned media opportunities.<br>Currently exploring macro and micro influencers<br>to have a consistent stream of voices helping to<br>educate and establish brand trust.<br>10 | |
| --- | |
| THE PROOF IS IN THE PINNACLE (LAUNCH)<br>Pinnacle is a conventional, premium, store brand<br>cigarette for current adult smokers<br>Sold at a top 5 retail C-store chain, 1,700+ locations<br>across 22 states<br>Leverages national scale distributor also being used for<br>VLN® distribution and stocking<br>Initial sales demonstrated strong share gains on<br>compelling value proposition and consistent<br>availability, even ahead of in-store promotion<br>Demonstrates how XXII’s new distribution can launch<br>VLN® into thousands of key c-store locations within<br>weeks<br>11<br>Rapid Rollout to Hundreds of Stores Confirms Rapid Scalability for VLN® Distribution | |
| --- | |
| Advancing pilot programs for additional<br>markets in 2023, including expected:<br> Switzerland (pilot test) – product shipped for<br>distribution commencing by late May<br> Japan (pilot test) – product readying for<br>shipment to distributor ahead of test sales<br>commencing in late June 2023<br> South Korea (updated product) – updated<br>packaging being designed in response to initial<br>market tests, product expected to be shipped<br>to the distributor in Summer 2023 for<br>additional market testing<br>INTERNATIONAL ADVANCEMENT<br>12<br>Moving ahead with product sales in Switzerland, Japan, South Korea | |
| --- | |
| IMPROVING MIX TO ENHANCE CAPACITY AND MARGIN<br>13<br>Shifting product mix at NASCO to improve<br>operating results<br>Rotating out of lower margin filtered cigar<br>volumes to free capacity for higher margin<br>premium cigarettes<br>Specialty CMO products like Spectrum provide<br>superior margin and more predictable demand<br>patterns<br>VLN® provides premium margin opportunities and<br>will require greater share of capacity as warehouse<br>stocking and retail sales expand throughout 2023<br>Prioritizing Higher Margin CMO and VLN® Production to Support Increasing Demand | |
| --- | |
| VLN® CAN BE THE FOUNDATION FOR HARM<br>REDUCTION POLICIES IN THE U.S. AND ABROAD<br>The science shows a menthol ban absent an off-ramp primarily<br>transitions menthol smokers to traditional cigarettes, while a reduced<br>nicotine mandate would help all smokers more easily quit smoking or<br>migrate to less toxic products<br>14<br>FDA continues to advance its scientifically based menthol ban and<br>reduced nicotine content policies, plus state and local governments<br>are taking direct action<br>VLN® Menthol King cigarettes could be the only current combustible<br>menthol cigarette potentially exemptfrom the menthol ban.<br>New Zealand’s reduced nicotine mandate takes effect in ~2 years –<br>requires all cigarettes to be 0.8mg/g or less, including test variance<br>Seed development program scaled to supply tobacco to the entire<br>New Zealand market – more than 2 billion cigarettes in total<br>14 | |
| --- | |
| Expanded<br>availability and<br>supportive voices<br>drive trial, repeat<br>purchase and<br>market share,<br>leading to cash<br>positive operations<br>in 2024<br>Expanded Major Distribution Onboarding Top Retail Partners<br>New Consumer Campaign Optimizing Operations<br>VLN® PATH TO CASH POSITIVE 2024<br>Customers and Retailers WANT to Access VLN®<br> Agreements with #1, #2 U.S. c-store distributors<br>accelerates launching thousands of stores across<br>multiple states<br> Provides access to stores within days or weeks<br>after retailer agrees to carry VLN® or<br>conventional products<br> Adding international activity in South Korea,<br>Japan, Switzerland<br> Starting from ~500 stores across 2 core states<br> Adding Pinnacle to ~1,700 stores in 20+ states<br>during April and May<br> Adding 4,000+ VLN® stores in CA, TX and FL starting<br>in May<br> Adding regional stores, expanding Smoker Friendly<br> Pipeline of 100+ national and regional chains,<br>scheduling launches throughout 2023<br> Designed to inspire confidence, competence<br>and optimism, VLN® provides a new path for<br>smokers to take control and succeed in their<br>reduction goals<br> Activating influencers to create a consistent<br>stream of voices supporting smokers’<br>decisions to reduce their habit<br> Transitioning capacity away from low margin<br>filtered cigar business<br> Scaling higher margin VLN and premium CMO<br>products to meet increased store count and<br>distributor stocking needs<br> Upfront investment in sales team driving rapid<br>market penetration and supports new CDMO+D<br>license and distribution agreements 15 | |
| --- | |
| FDA Authorized VLN®<br>Cannabinoid Ingredients,<br>APIs and CDMO<br>Corporate/Financial | |
| --- | |
| Dominant North American position plus broad global footprint in<br>geographic markets targeted for growth<br> Record ingredient sales quarter after quarter<br> New CDMO+D model expands revenue and adds value to<br>customers<br> New extraction unit, production facilities and plant biotechnology<br>by 22nd Century will lead to margin expansion<br> Contract farming increases biomass availability and stabilizes costs<br> On track to achieve cash positive operations in first half 2024, including<br>corporate allocation<br>DELIVERING 2023’s HIGH GROWTH PROMISE<br>Ramping Ingredient Volumes, New License and Distribution Agreements, New Facilities<br>22nd Century’s GVB Biopharma (“GVB”) is transforming the manufacturing<br>and distribution of hemp-derived active ingredients and finished goods in<br>the consumer products, nutraceutical and pharmaceutical industries<br>17 | |
| --- | |
| 16,524<br>26,546 27,912<br>41,070<br>68,195<br>1Q22 2Q22 3Q22 4Q22 1Q23<br>DRIVING RECORD INGREDIENT SALES VOLUMES<br>Growing Volumes Sets Stage For Return To Internal Production, Margin Recovery<br>GVB bulk ingredient volumes (kgs)<br> GVB bulk ingredient volumes rising rapidly based on reputation as<br>reliable supplier of consistent, quality extracts<br> New campus expected to target capacity for 10 million lbs. hemp<br>biomass and 600,000 kg of extracts annually, 100,000 kg dedicated top<br>pharma grade<br>18 | |
| --- | |
| TRANSFORMATIVE NEW CDMO+D MODEL<br>First Two Agreements Signed With Estimated $140 Million Cumulative Sales Value Over Three-year Terms<br>Working with the largest<br>and best-known<br>consumer CBD brands<br>19<br>New, single-source<br>model provides<br>complete solution<br>Enhances GVB revenue<br>and margin opportunities<br>with distribution services<br> Initial agreements with brand<br>leaders like Cookies, Old Pal,<br>and others in process<br> License covers broad range of<br>hemp derived cannabinoid<br>consumer packaged goods at<br>each brand<br> Ingredient Supply<br> White-label<br>manufacturing<br> Retail category<br>management and<br>distribution<br> VLN® sales team and channel<br>to place products with retailers<br>seeking innovative, high<br>velocity, high margin, small<br>footprint consumer CBD<br>products | |
| --- | |
| Prineville, Oregon: World-scale crude extraction over 15,000<br>kg/month at full capacity (operational Q1 2023); New ingredient and<br>production and refinement facility with increased capacity and<br>greater efficiency<br>GVB POSITIONED FOR GLOBAL LEADERSHIP<br>Crude Extraction | Prineville<br>Industry Leading Certifications Position GVB as the Supplier of Choice<br>FDA’s Commitment to Advance Regulatory Standards and Product Recommendations<br>on CBD Use in Consumer and Nutraceutical Products will Further Expand the Market<br>20<br>Las Vegas, Nevada: 40,000 sq. ft. CDMO facility used for<br>Private Label/Contract Manufacturing<br>United Kingdom: RXP acquisition creates leadership position<br>in novel foods applications market<br>European Union: Netherlands Distribution provides increased<br>availability to higher margin customers<br>Filed FDA DMF to provide pharmaceutical grade API differentiating<br>GVB distillates and isolates |
| --- | |
| Continued revenue<br>growth plus<br>improving margin<br>and operating<br>performance<br>will drive<br>hemp/cannabis to<br>cash positive<br>operations in 2024<br>Operating Performance Enhancement Scale CDMO+D Business Volumes<br>FDA Drug Master File Food & Nutraceuticals Market Expansion<br>HEMP/CANNABIS PATH TO CASH POSITIVE 2024<br>Rapid scale plus operating enhancements create clear path to profitability<br> Resume in-house distillate and isolate production New white label plus distribution agreements<br>establish new business model in industry<br> Growing number of CBD pharmaceutical trial<br>activities represents new, high-value<br>addressable market<br> New FDA guidelines will establish enhanced<br>regulatory standards and validate the market<br>21<br> New CBD crude extraction and biomass cultivation to<br>drive incremental margin<br> Scale revenue and increase gross margin across<br>fixed cost base<br> Completed FDA DMF filing to access<br>pharmaceutical grade market currently dominated<br>by high-cost synthetic products<br> Deep vertical integration drives further margin opportunity<br> Robust pipeline of follow-on peer contract opportunities<br> Extensive certification and standardization capabilities<br>distinguish GVB from smaller producers | |
| --- | |
| FDA Authorized VLN®<br>Cannabinoid Ingredients,<br>APIs and CDMO<br>Corporate/Financial | |
| --- | |
| FIRST QUARTER 2023 FINANCIAL HIGHLIGHTS<br>1. Gross profit margin is calculated by dividing gross profit by netrevenues.<br>2. See the tables included in this release for a reconciliation of Adjusted EBITDA (a non-GAAP measure) to net loss.<br>+144% YoY increase in Net Revenues primarily due to GVB acquisition.<br>Net Revenues Gross Profit1 Gross Margin1 Operating Loss Adjusted EBITDA2<br>1Q 2023 $22.0M $(1.2)M (5.4)% $(17.8)M $(14.7)M<br>1Q 2022 $9.0M $309K 3.4% $(8.1)M $(6.6)M<br>Introducing 2023 full year revenue outlook for net revenues of $100 million to $105 million:<br> Net revenues expected to scale steadily through 2023 driven by increased VLN® sales, growing GVB bulk<br>ingredient revenue and new CDMO+D license agreements<br> Gross profit projected to improve significantly in Q2 2023 and going forward reflecting<br> higher product mix in tobacco and<br> return of production capabilities, farming program and new CDMO+D contracts for hemp/cannabis<br> 22nd Century on pace to achieve cash positive business unit operations in 2024<br>23 | |
| --- | |
| TOBACCO REVENUE & PROFIT BREAKDOWN<br>Tobacco<br>1Q 2023 1Q 2022<br>Unit sales1 1.0M 1.4M<br>Net revenue $8.9M $9.0M<br>Gross profit $18K $309K<br>Gross profit margin2 0.2% 3.4%<br>24<br> Net revenues decreased slightly QoQ reflecting a planned<br>reallocation in production resources at the Company’s<br>NASCO facilities away from lower margin filtered cigars to<br>higher margin VLN® and conventional cigarette products<br> Gross profit declines QoQ reflecting the transition.<br>1. Tobacco unit sales volume is measure in cartons<br>2. Gross profit margin is calculated by dividing gross profit by net revenues<br>3. Contract manufacturing operations (CMO)<br>Opportunity in 2023 for additional tobacco<br>net revenue growth and margin expansion:<br> New Pinnacle launch scaling rapidly, creating new sales<br>volumes<br> Increased sales volume of higher margin<br>CMO cigarette products in place of lower margin<br>filtered cigar volumes<br> Accelerated VLN® launch driving increased revenue<br>and margin contribution from premium VLN® products | |
| --- | |
| HEMP/CANNABIS REVENUE & PROFIT BREAKDOWN<br>25<br>Net revenue growth QoQ primarily driven by:<br> Addition of acquired GVB revenue contribution<br> Significant GVB organic revenue volume growth QoQ<br> 1Q net revenue increased despite 4Q Grass Valley fire<br> Strong consumer demand for GVB bulk ingredients and<br>new CDMO opportunities<br>1. Hemp/cannabis unit sales volume is measured as kilograms.<br>2. GVB acquisition occurred on May 13, 2022. All prior period results are provided for illustrative purposes<br>only. These pro forma results do not purport to be indicative of the results that would have been<br>obtained, or to be a projection of results that may be obtained in the futures. Refer to our Annual Report<br>on Form 10-K Note 2 of the Consolidated Financial Statements for description of pro forma adjustments<br>as required under U.S. GAAP.<br>Additional 2023 hemp/cannabis<br>opportunity driven by:<br> Organic growth reflecting continued strong<br>customer demand for ingredient volumes and<br>manufacturing support<br> Contracted farming to produce internally-sponsored<br>biomass at lower cost<br> New CDMO+D license agreements beginning initial<br>distribution activities<br> Profit margin expansion reflecting full restoration of<br>GVB extraction capabilities and vertical integration<br>with new Prineville crude extraction facility becoming<br>fully operational<br>Hemp/Cannabis<br>1Q 2023 1Q 20222<br>Unit sales1 68,195 16,524<br>Net revenue $13.0M $7.0M<br>Gross profit $(1.2M) $1.0M | |
| --- | |
| SUMMARY BALANCE SHEET ITEMS<br>Balance sheet date as of:<br>(in millions) Q1 2023 Year End 2022<br>Cash and cash equivalents1 $23.7 $21.2<br>Total assets $124.1 $114.7<br>Total liabilities $42.7 $18.7<br>Total shareholders' equity $81.4 $96.0<br>26<br>New $21.1M Credit Facility strengthens balance sheet and<br>provides working capital to fund strong growth for both VLN and<br>hemp/cannabis business<br>Collected $5M of casualty loss insurance proceeds from the Grass<br>Valley fire during Q1 23. Anticipated additional business<br>interruption insurance proceeds estimated at approximately $8<br>million beginning in Q2 23.<br>1. Cash, cash equivalents, short-term investment securities and restricted cash.<br>Strengthened balance sheet supports growing working capital needs driven by increased VLN®<br>product shipments to multiple national-scale distribution partners as well as strong customer<br>demand for hemp/cannabis bulk ingredients. | |
| --- | |
| Leveraging exceptional VLN® demand into aggressive multi-state<br>commercial launch program<br>2023: REVENUE GUIDANCE $105 - $110 MILLION<br>Growth Across Both VLN® and Hemp/Cannabis Franchises Tracks to 2024 Cash Positive Operations<br>27<br> Launching national scale distribution to support demand<br>from largest C-Store, consumer, and pharmacy chains<br> Selling VLN® in up to 18 states in 2023<br>Increased volumes and new market opportunities drive<br>hemp/cannabis growth and margin<br> Scaling ingredient and CDMO business in U.S. and Europe;<br>launched CDMO+D model<br> Submitted Drug Master File to FDA to produce and supply<br>APIs for new medical and pharmaceutical industry<br>Confirmed path to cash positive in both tobacco and hemp/cannabis<br> Executing clearly delineated revenue growth strategies in<br>both business units<br> Advancing to positive cash flow from hemp/cannabis and<br>VLN® business units in 2024, including corporate overhead | |
| --- | |
| Questions<br>& Answers<br>Q<br>A INVESTOR RELATIONS<br>& MEDIA CONTACT<br>Matt Kreps<br>Investor Relations<br>22nd Century Group, Inc.<br>+1<br>-214<br>-597<br>-8200<br>mkreps@xxiicentury.com | |
| --- |