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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): March 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 |
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500 Seneca Street, Suite 507, Buffalo, New York (Address of Principal Executive Office) |
14204 (Zip Code) |
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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 March 9, 2023, 22nd Century Group, Inc. (the “Company”) issued an earnings release for the year ended December 31, 2022. 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 |
Supplemental financial information for earnings release dated March 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.
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22nd Century Group, Inc. |
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/s/ R. Hugh Kinsman |
Date: March 9, 2023 |
R. Hugh Kinsman |
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Chief Financial Officer |
Exhibit 99.1
22nd Century Group (Nasdaq: XXII) Reports Fourth Quarter and Full Year 2022 Financial Results and Provides Business Update
| ● | Accelerates VLN® Launch with Key National Distribution Agreements |
| ● | Launching VLN® in Texas, California and Florida with New National Scale Distributors and Retail Partners |
| ● | Scaling Hemp/Cannabis Revenue and Gross Margin to Achieve Cash-Positive Operating Results in First Half 2024; Executing New Fully Verticalized Major Retail Category Management Services Agreements |
| ● | Fourth Quarter 2022 Net Revenues $19.2 Million, Up 141% from the Fourth Quarter 2021 |
| ● | New $21.1 Million Senior Secured Credit Facility Expands Working Capital to Fuel Growth |
BUFFALO, N.Y., March 9, 2023 — 22nd Century Group, Inc. (Nasdaq: XXII), a leading biotechnology company dedicated to improving health with reduced nicotine tobacco, hemp/cannabis and hops advanced plant technologies, today reported results for the fourth quarter and full year ended December 31, 2022, and provided an update on recent business highlights. The Company will host a live audio webcast today at 10:00 a.m. ET.
“The fourth quarter and 2022 were transformative for 22nd Century as we launched an aggressive commercial rollout of our FDA authorized VLN® reduced nicotine content cigarettes and accelerated revenue and margin growth opportunities with our hemp/cannabis business unit,” stated James A. Mish, Chief Executive Officer of 22nd Century Group.
“Following our exceptional pilot results indicating our ability to initially capture a 1% share of market, several of the largest convenience store (C-store) chains in the U.S. are seeking to carry our VLN® products on a regional or multi-state basis. Our early 2023 success positioning VLN® with national- and regional-scale distribution partners, such as Core-Mark/Eby-Brown and others in process now, will enable the broad-based launches across hundreds of stores at a time that these retail partners desire.
“As an example of how quickly these new distribution agreements can scale our retail presence, we are readying VLN® launch plans in Texas, California and Florida with a new, national-scale C-store chain partner to be formally announced as soon as the final contract items are completed. Regional chains are also launching VLN® alongside these national partners, such as CEFCO convenience stores, which plans to commence sales at more than 100 Texas and Florida locations in the near future. Based on existing commitments in various contracting phases and a robust pipeline of additional interest, we expect our VLN® business to scale quickly in 2023 as we target sales in up to 18 states by year end. At an estimated 600 million cartons of annual addressable market opportunity in just those states, achieving even a portion of our VLN® goals would put our tobacco business unit well into cash profitable operating results in the second half of 2024, including corporate overhead.
“In our hemp/cannabis business, we achieved approximately 19% quarterly revenue growth in spite of the disruptions from the Grass Valley fire, cementing our leadership position in the growing cannabinoid ingredients and cannabinoid infused consumer products market. As a key part of our continued expansion in 2023, we are currently finalizing multiple innovative CDMO+D license agreements with consumer CBD brands to become their fully verticalized manufacturing and distribution partner, further entrenching our industry leadership. This new-to-the-industry approach will use our entire value chain from ingredients to finished white label goods, and now category management to the retail shelf.
“Additionally, our Prineville crude extraction plant will be online in this month, supporting these contracts and the growing demand for our quality CBD isolates, distillates and minor cannabinoids, plus significantly increasing our gross margin. The submission of the Drug Master File (DMF) to the FDA to produce and supply APIs for the medical and pharmaceutical industries positions 22nd Century as a leading, global provider of high-quality formulated products that meet the exacting standards required by pharmaceutical and consumer product companies. Finally, our new distribution facility in the Netherlands and recent accretive acquisition of RX Pharmatech Ltd will accelerate the growth of GVB’s business in the European Union and United Kingdom, complementing our growth strategies in North America.
“Taken together, we believe the combination of market leadership and these expanded capabilities position our rapidly scaling GVB Biopharma business unit to achieve cash-flow positive operations in first half of 2024, including corporate overhead,” concluded Mr. Mish.
Recent Key Financial and Business Highlights
Tobacco Business
| ● | Leveraged the exceptional Chicago pilot results to expand VLN® sales in Illinois and launch in Colorado, where the state employs a favorable MRTP excise tax program. Announced additional launch plans in Arizona, New Mexico and Utah. |
| ● | Commenced an aggressive multi-state VLN® rollout strategy, targeting up 18 states by year-end 2023, aimed at penetrating geographies and markets with large adult smoker populations, including those with favorable MRTP state excise tax savings, which can be used toward consumer incentives, distribution support, and additional programming to raise awareness of VLN® products. |
| ● | Initiated agreements with national-scale C-store distribution partners, including Core-Mark/Eby-Brown and others pending, to facilitate state-wide or multi-state launches of VLN® at hundreds of stores within our target markets in an accelerated timeline. |
| ● | Announced expansion into Texas, California and Florida, expected in conjunction with the largest multi-state U.S. C-store chain leveraging these new national scale distribution capabilities. |
| ● | Secured additional retail point of sale placements with regional C-stores, such as Texas based CEFCO, and new regional distribution agreements with Hub, Inc., serving regional Midwestern and tribal accounts, and Chambers & Owen, Inc., serving the upper Midwest. |
| ● | Gained authorization to test VLN® sales at four United States military bases located in California, Arizona and North Carolina, beginning in the second quarter. |
| ● | Poised to benefit from federal, state and international regulatory appetite for banning menthol and mandating reduced nicotine content. The Company has the only FDA-authorized combustible cigarette able to meet the stringent reduced nicotine content product standard under the FDA’s Comprehensive Plan requiring that all cigarettes be made “minimally or non-addictive.” |
| o | Proposed FDA menthol cigarette ban, in final rules status, 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, a final decision expected in August 2023. |
| o | In December 2022, New Zealand became the first country to pass a nationwide mandate permitting only reduced nicotine content cigarettes to be sold starting in early 2025. |
| ● | Planted the largest ever VLN® tobacco crop in 2022, including the second-generation VLN® 2.0 reduced nicotine tobacco plants, which have demonstrated approximately 30% higher yields, enhanced quality leaf, improved disease resistance, reduction in nutrient requirements and increased stability across various environments and geographies. |
| o | Announced a dedicated seed cultivation program designed to generate enough tobacco to support the entire New Zealand cigarette marketplace with reduced nicotine content tobacco, more than 2 billion sticks annually. |
| ● | Completed expansion of existing manufacturing operations and increased capacity by 25%, including installation of a new production line and initiation of a second shift. |
Hemp/Cannabis Business
| ● | Fundamentally shifted hemp/cannabis business, moving from primarily research and development efforts to a fully commercialized company with the acquisition of GVB Biopharma, a global scale provider of hemp-derived cannabinoid ingredients and API to the pharmaceutical and consumer goods industries with world-class CDMO capabilities. |
| ● | Positioned for global leadership as 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. |
| ● | Completed vertical integration of novel cannabinoid value chain from receptor science to finished goods and now CDMO+D capabilities for complete category management to retail points of sale. |
| ● | Advancing multiple verticalized license agreements with major consumer CBD and alternative cannabinoid brands to manufacture and distribute key cannabinoid product offerings to retailers throughout the U.S. as a new turnkey solution for consumer facing cannabis product brands. |
| ● | Continued expanding CBD crude production capabilities with new Prineville, Oregon facility, one of the largest hemp extraction plants in the world, with expected capacity exceeding 15,000 kg/month at full operation, further improving gross margin on all GVB cannabinoid products. |
| ● | Responded to a fire at the Company’s Grass Valley manufacturing facility, immediately shifting to alternate supply sources to fulfill all customer deliveries planned in the fourth quarter. New facilities are being established, replacing the prior capacity, as the Company plans for construction of a new, larger and more efficient distillate and isolate manufacturing campus. |
| ● | Submitted DMF to the FDA to produce and supply APIs for the medical and pharmaceutical industries while also pursuing The International Council for Harmonization of Technical Requirements for Pharmaceuticals for Human Use (ICH) Q7 international pharma-grade audit standard certification in order to supply naturally derived hemp/cannabis APIs. |
| ● | Announced a global sales, marketing and distribution agreement with Cannabinoid API Solutions (CAS) and Transo-Pharm for APIs to accelerate opportunities to supply to the largest and most innovative pharmaceutical and consumer goods manufacturers. |
| ● | Acquired RX Pharmatech Ltd. in an accretive transaction securing a portfolio of 1,276 CBD product and ingredient based Novel Food Applications with the U.K. Food Standards Agency, accelerating CBD product growth in the U.K. and EU food and nutraceuticals markets. Announced the Company’s central distribution facility in the Netherlands, opened in November 2022, will support growing demand for hemp/cannabis products in Europe, the Middle East, and Africa (EMEA). |
Fourth Quarter 2022 Financial Results
| ● | Net revenues for the fourth quarter of 2022 were $19.2 million, an increase of 141.3% from 2021. |
| o | Revenue from tobacco-related products was $10.0 million, an increase of 25.7% from 2021, primarily driven by volume increases in contract manufacturing and initial VLN® sales as part of the early rollout in Illinois and Colorado. |
| o | Revenue from hemp/cannabis-related products was $9.3 million, compared to a negligible amount in the prior year fourth quarter, reflecting the acquisition of GVB. |
| ● | Gross profit for the fourth quarter of 2022 was $(0.6) million as compared to $0.2 million in the prior year period. |
| o | Gross profit from tobacco-related products was negligible, a decrease of $0.4 million compared to the prior year period, reflecting lower margin sales mix in contract manufacturing products. |
| o | Gross profit from hemp/cannabis-related products was $(0.6) million compared to $(0.1) million the prior year. Margin declines in the fourth quarter were primarily due to impact of the Grass Valley fire. On a proforma basis, as if the GVB acquisition had occurred effective January 1, 2021, gross profit would have been $1.6 million in the fourth quarter 2021. |
| ● | Total operating expenses for the fourth quarter of 2022 increased to $22.5 million, compared to $9.3 million in the prior year quarter, driven by: |
| o | Sales, general and administrative expenses increased to $14.1 million, driven primarily by the acquisition of GVB, higher strategic consulting and marketing, legal, and personnel costs to expand the launch of VLN®. |
| o | Research and development expenses increased to $2.1 million, driven by personnel expenses and costs associated with the Company’s hemp/cannabis and hops research programs. |
| o | Other operating expenses was $6.3 million, primarily reflecting the unusual and infrequent charges recorded in connection with the Grass Valley fire in November 2022. |
| ● | Operating loss for the fourth quarter of 2022 was $23.2 million, compared to $9.0 million in the prior year period. |
| o | Operating loss includes the $6.3 million of unusual and infrequent charges primarily related to the Grass Valley fire. |
| ● | Net loss was $26.3 million, compared to prior year $14.0 million, representing a net loss per share of $0.12. |
| ● | Adjusted EBITDA was a loss of $13.9 million, compared to prior year $7.5 million. See the tables included in this release for a reconciliation of Adjusted EBITDA (a non-GAAP measure) to net loss. |
“Our fourth quarter operating results, and particularly net loss and cash flows, were significantly affected by the Grass Valley fire. Actions were taken to ensure we fully serviced our customer base to meet our revenue target and immediate investments were made to restore capacity for future operating needs,” said Hugh Kinsman, Chief Financial Officer. “We are fortunate to have a strong balance sheet to enable such a rapid response, much of which cost we expect to recoup through our property, casualty and business interruption insurance programs, a process that will unfold over the coming quarters. We are also investing to accelerate our transformative opportunities in both VLN® and hemp/cannabis to become cash positive in both business units. Our recent working capital financing will support our capital needs to fund the appropriate raw materials and inventory requirements for this acceleration through a debt instrument as we execute on these plans.”
Balance Sheet and Liquidity
| ● | As of December 31, 2022, the Company had $21.2 million in cash, cash equivalents, and short-term investment securities. |
| ● | The fourth quarter 2022 included the following non-recurring or seasonal uses of cash: |
| o | $4.5 million replenishment of working capital connected with the Company’s recovery from the Grass Valley fire, |
| o | $1.9m repayment of GVB bridge notes, and |
| o | Approximately $2.3 million of VLN tobacco leaf inventory. |
| ● | The Company has received casualty loss insurance recoveries of $5.0 million in first quarter of 2023 from the Grass Valley fire, with business interruption insurance claims proceeds expected thereafter. |
| ● | On March 3, 2023, the Company announced a $21.1 million senior credit facility to fund increased working capital needs related to the significant consumer demand for its VLN® product and GVB business lines. |
| o | The new three-year credit facility was issued at 5% original issuance discount (OID), will bear cash interest at a rate of 7% per annum, and commence principal amortization in the second year at a rate of 2% of the original balance per month. The Company has the option to redeem the facility early starting in the second year. |
| ● | The Company’s strengthened balance sheet supports growing working capital needs driven by increased VLN® product shipments to multiple national-scale distribution partners as well as strong customer demand for hemp/cannabis bulk ingredients. |
| ● | 22nd Century’s operating cash requirements are anticipated to decrease through fiscal 2023, reflecting higher sales volume of higher margin contract manufacturing operations (CMO) cigarettes and VLN® products, continued organic growth of GVB’s operations. |
Fourth Quarter and Full Year 2022 Conference Call
22nd Century will host a live webcast today at 10:00 a.m. E.T. to discuss its fourth quarter and full year 2022 financial results and business highlights. During the webcast, James A. Mish, chief executive officer of 22nd Century Group, together with 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 alkaloid 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.
CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except per-share data)
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December 31, |
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December 31, |
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2022 |
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2021 |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
3,020 |
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$ |
1,336 |
Short-term investment securities |
|
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18,193 |
|
|
47,400 |
Accounts receivable, net |
|
|
5,641 |
|
|
585 |
Inventories |
|
|
10,008 |
|
|
2,881 |
Insurance recoveries |
|
|
5,000 |
|
|
— |
Prepaid expenses and other current assets |
|
|
2,743 |
|
|
2,183 |
Total current assets |
|
|
44,605 |
|
|
54,385 |
Property, plant and equipment, net |
|
|
13,093 |
|
|
5,841 |
Operating lease right-of-use assets, net |
|
|
2,675 |
|
|
1,723 |
Goodwill |
|
|
33,160 |
|
|
— |
Intangible assets, net |
|
|
16,853 |
|
|
7,919 |
Investments |
|
|
682 |
|
|
2,345 |
Other assets |
|
|
3,583 |
|
|
3,741 |
Total assets |
|
$ |
114,651 |
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$ |
75,954 |
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|
|
|
|
|
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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|
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|
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Current liabilities: |
|
|
|
|
|
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Notes and loans payable - current |
|
$ |
908 |
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$ |
596 |
Operating lease obligations |
|
|
681 |
|
|
308 |
Accounts payable |
|
|
4,168 |
|
|
2,173 |
Accrued expenses |
|
|
1,428 |
|
|
1,489 |
Accrued payroll |
|
|
3,199 |
|
|
2,255 |
Accrued excise taxes and fees |
|
|
1,423 |
|
|
1,270 |
Deferred income |
|
|
831 |
|
|
119 |
Other current liabilities |
|
|
380 |
|
|
217 |
Total current liabilities |
|
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13,018 |
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|
8,427 |
Long-term liabilities: |
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|
|
|
|
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Notes and loans payable |
|
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3,001 |
|
|
— |
Operating lease obligations |
|
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2,141 |
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|
1,432 |
Other long-term liabilities |
|
|
516 |
|
|
21 |
Total liabilities |
|
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18,676 |
|
|
9,880 |
Commitments and contingencies (Note 12) |
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|
|
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Shareholders' equity |
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|
|
|
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Preferred stock, $.00001 par value, 10,000,000 shares authorized |
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Common stock, $.00001 par value, 300,000,000 shares authorized |
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|
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Capital stock issued and outstanding: |
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|
|
|
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215,238,198 common shares (162,872,875 at December 31, 2021) |
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|
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|
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Common stock, par value |
|
|
2 |
|
|
2 |
Capital in excess of par value |
|
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333,898 |
|
|
244,247 |
Accumulated other comprehensive loss |
|
|
(111) |
|
|
(162) |
Accumulated deficit |
|
|
(237,814) |
|
|
(178,013) |
Total shareholders' equity |
|
|
95,975 |
|
|
66,074 |
Total liabilities and shareholders’ equity |
|
$ |
114,651 |
|
$ |
75,954 |
22nd CENTURY GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in thousands, except per-share data)
|
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Three Months Ended |
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Year Ended |
||||||||
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December 31, |
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December 31, |
||||||||
|
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2022 |
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2021 |
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2022 |
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2021 |
||||
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(unaudited) |
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||||
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|
|
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Revenues, net |
|
$ |
19,206 |
|
$ |
7,960 |
|
$ |
62,111 |
|
$ |
30,948 |
Cost of goods sold |
|
|
19,852 |
|
|
7,729 |
|
|
60,937 |
|
|
29,462 |
Gross profit |
|
|
(646) |
|
|
231 |
|
|
1,174 |
|
|
1,486 |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Sales, general and administrative |
|
|
14,097 |
|
|
8,058 |
|
|
44,517 |
|
|
25,908 |
Research and development |
|
|
2,093 |
|
|
1,126 |
|
|
6,561 |
|
|
3,912 |
Other operating expense, net |
|
|
6,322 |
|
|
78 |
|
|
7,202 |
|
|
78 |
Total operating expenses |
|
|
22,512 |
|
|
9,262 |
|
|
58,280 |
|
|
29,898 |
Operating loss |
|
|
(23,158) |
|
|
(9,031) |
|
|
(57,106) |
|
|
(28,412) |
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on investments |
|
|
— |
|
|
(4,954) |
|
|
(5) |
|
|
(6,994) |
Realized (loss) gain on Panacea investment |
|
|
(748) |
|
|
— |
|
|
(2,789) |
|
|
2,548 |
Realized loss on short-term investment securities |
|
|
(223) |
|
|
— |
|
|
(366) |
|
|
— |
Other income, net |
|
|
15 |
|
|
— |
|
|
71 |
|
|
— |
Interest income, net |
|
|
102 |
|
|
49 |
|
|
313 |
|
|
321 |
Interest expense |
|
|
(123) |
|
|
(14) |
|
|
(353) |
|
|
(58) |
Total other expense |
|
|
(977) |
|
|
(4,919) |
|
|
(3,129) |
|
|
(4,183) |
Loss before income taxes |
|
|
(24,135) |
|
|
(13,950) |
|
|
(60,235) |
|
|
(32,595) |
(Benefit) provision for income taxes |
|
|
2,148 |
|
|
14 |
|
|
(434) |
|
|
14 |
Net loss |
|
$ |
(26,283) |
|
$ |
(13,964) |
|
$ |
(59,801) |
|
$ |
(32,609) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per common share - basic and diluted |
|
$ |
(0.12) |
|
$ |
(0.09) |
|
$ |
(0.31) |
|
$ |
(0.21) |
Weighted average common shares outstanding - basic and diluted (in thousands) |
|
$ |
215,293 |
|
|
162,768 |
|
|
192,837 |
|
|
156,208 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(26,283) |
|
$ |
(13,964) |
|
$ |
(59,801) |
|
$ |
(32,609) |
Other comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized loss on short-term investment securities |
|
$ |
172 |
|
$ |
(135) |
|
$ |
(316) |
|
$ |
(236) |
Foreign currency translation |
|
|
1 |
|
|
— |
|
|
1 |
|
|
— |
Reclassification of realized losses to net loss |
|
|
223 |
|
|
— |
|
|
366 |
|
|
— |
Other comprehensive income (loss) |
|
|
396 |
|
|
(135) |
|
|
51 |
|
|
(236) |
Comprehensive loss |
|
$ |
(25,887) |
|
$ |
(14,099) |
|
$ |
(59,750) |
|
$ |
(32,845) |
Reconciliations of Non-GAAP Measures
Below is a table containing information relating to the Company’s Net loss, EBITDA and Adjusted EBITDA for the years ended December 31, 2022 and 2021, including a reconciliation of these Non-GAAP measures for such periods.
|
|
Quarter Ended |
|||||||
|
|
December 31, |
|||||||
|
|
Dollar Amounts in Thousands ($000's) |
|||||||
|
|
(UNAUDITED) |
|||||||
|
|
|
|
|
|
|
|
|
$ Change |
|
|
2022 |
|
2021 |
|
|
fav / (unfav) |
||
Net loss |
|
$ |
(26,283) |
|
$ |
(13,964) |
|
$ |
(12,319) |
Interest (income)/expense, net |
|
|
21 |
|
|
(35) |
|
|
56 |
Provision for income taxes |
|
|
2,148 |
|
|
14 |
|
|
2,134 |
Amortization and depreciation |
|
|
866 |
|
|
317 |
|
|
549 |
EBITDA |
|
$ |
(23,248) |
|
$ |
(13,668) |
|
$ |
(9,580) |
Adjustments: |
|
|
|
|
|
|
|
|
|
Equity-based employee compensation expense |
|
|
923 |
|
|
1,111 |
|
|
(188) |
Realized loss on Panacea investment |
|
|
748 |
|
|
— |
|
|
748 |
Grass Valley fire |
|
|
4,799 |
|
|
— |
|
|
4,799 |
Impairment charges |
|
|
1,725 |
|
|
78 |
|
|
1,647 |
Acquisition costs |
|
|
164 |
|
|
— |
|
|
164 |
Unrealized loss on investment |
|
|
— |
|
|
4,954 |
|
|
(4,954) |
Inventory step-up |
|
|
978 |
|
|
— |
|
|
978 |
Adjusted EBITDA |
|
$ |
(13,911) |
|
$ |
(7,525) |
|
$ |
(6,386) |
1Fav = Favorable variance, which increases EBITDA and Adjusted EBITDA; Unfav = unfavorable variance, which reduces EBITDA and Adjusted EBITDA
|
|
Year Ended |
|||||||
|
|
December 31, |
|||||||
|
|
Dollar Amounts in Thousands ($000's) |
|||||||
|
|
(UNAUDITED) |
|||||||
|
|
|
|
|
|
|
|
|
$ Change |
|
|
2022 |
|
2021 |
|
|
fav / (unfav) |
||
Net loss |
|
$ |
(59,801) |
|
$ |
(32,609) |
|
$ |
(27,192) |
Interest (income)/expense, net |
|
|
40 |
|
|
(263) |
|
|
303 |
(Benefit) provision for income taxes |
|
|
(434) |
|
|
14 |
|
|
(448) |
Amortization and depreciation |
|
|
2,858 |
|
|
1,248 |
|
|
1,610 |
EBITDA |
|
$ |
(57,337) |
|
$ |
(31,610) |
|
$ |
(25,727) |
Adjustments: |
|
|
|
|
|
|
|
|
|
Equity-based employee compensation expense |
|
|
5,489 |
|
|
3,983 |
|
|
1,506 |
Realized (loss) gain on Panacea investment |
|
|
2,789 |
|
|
(2,548) |
|
|
5,337 |
Grass Valley fire |
|
|
4,799 |
|
|
— |
|
|
4,799 |
Impairment charges |
|
|
1,725 |
|
|
78 |
|
|
1,647 |
Acquisition costs |
|
|
1,046 |
|
|
— |
|
|
1,046 |
Unrealized loss on investments |
|
|
5 |
|
|
6,994 |
|
|
(6,989) |
Inventory step-up |
|
|
978 |
|
|
— |
|
|
978 |
Adjusted EBITDA |
|
$ |
(40,506) |
|
$ |
(23,103) |
|
$ |
(17,403) |
1Fav = 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, inventory step-up amortization, 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.
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XXII FOURTH QUARTER AND FULL YEAR EARNINGS PRESENTATION MARCH 9, 2023 |
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CAUTIONARY NOTE ON FORWARD-LOOKING STATEMENTS This presentation contains forward-looking statements concerning our business operations, and financial performance and conditions, as well as our plans, objectives, and expectations for our business operations and financial performance and conditions that are subject to risks and uncertainties. All statements other than those of historical fact are forward-looking statements. These types of statements typically contain words such as “aim,” “anticipate,” “assume,” “believe,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “potential,” “positioned,” “predict,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends. Forward-looking statements are based on current expectations, estimates, forecasts, and projections about our business, the industry in which we operate, and our management’s beliefs and assumptions. 2 These statements are not guarantees of future performance or development and involve known and unknown risks, uncertainties, and other factors that are in some cases beyond our control. All forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those estimated. The contents of this presentation should be considered in conjunction with the risk factors, warnings, and cautionary statements contained in the Company’s annual, quarterly, and other reports filed with the U.S. Securities and Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statement as a result of new information, future events, or otherwise, except as required by law. |
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$8.0 $9.0 $10.0 $11.5 $10.0 $4.5 $7.9 $9.5 4Q21 1Q22 2Q22 3Q22 4Q22 Exceptional VLN® pilot results positioned for aggressive 2023 multi-state commercial launch program $7.8 M $19.5M +149% YoY Tobacco Hemp/Cannabis Revenue, net (in millions) • 4Q 2022 Tobacco volumes reflected channel inventory adjustments following 3Q accelerated purchasing and California menthol changes • 4Q 2022 hemp/cannabis revenues grew in spite of the November 2022 Grass Valley fire 2022: GROUNDWORK FOR COMMERCIAL TRANSFORMATION Position VLN® and Hemp/Cannabis to Scale Revenue and Transition to Cash Positive Operations 3 Maintained GVB’s volumes through fire, accessed new market opportunities to drive growth and margin in 2023 Confirmed path to cash positive in both tobacco and hemp/cannabis Scaled ingredient and CDMO business in U.S. and Europe; new CDMO+D model for consumer, food & nutraceutical products Submitted Drug Master File to FDA to produce and supply APIs for new medical and pharmaceutical industry markets Executing clearly delineated revenue growth strategies in both business units Advancing to positive cash flow from hemp/cannabis and VLN® business units in 2024, including corporate overhead Enhanced U.S. launch with national scale distribution to support demand from largest C-Store, consumer, and pharmacy chains Readied to launch VLN® in up to 18 states in 2023 |
|
2023: ACCELERATE TO CASH POSITIVE 4 Drive Revenue and Improve Margins by Scaling Both VLN® and Hemp/Cannabis Business Lines 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. 2. Foundation for a Smoke Free World; https://www.smokefreeworld.org/wp-content/uploads/2021/12/Global%20Trends%20in%20Nicotine%20Report%20December%202021.pdf Commercializing FDA MRTP Label for VLN® Reduced Nicotine Content Products 2022 confirmed strong consumer demand and ability to secure rapid VLN market share Large funnel of new national and regional retail partners seeking access to VLN® for their adult smoker customers, 75% of whom want to quit Core-Mark/Eby-Brown and others in process accelerate distribution across multiple states Commercial rollout in up to 18 U.S. States provides access to 600+ million cartons of addressable market Cash positive operations for tobacco business by second half 2024, including corporate overhead Rapidly Scaling GVB Cannabinoid Ingredient, API and CDMO Market Leadership Continued acceleration in consumer demand driving increased ingredient volumes Multiple new major brand fully verticalized manufacturing and retail channel management agreements in process Optimized plant genetics and new extraction unit to support dramatic margin expansion FDA Drug Master File enables supply of APIs for medical and pharmaceutical industry Positioned for new food and nutraceutical markets upon FDA regulations release Cash positive operations for hemp/cannabis business by first half of 2024, including corporate overhead |
|
FDA Authorized VLN® Cannabinoid Ingredients, APIs and CDMO Corporate/Financial |
|
PHASE Q1-Q3 2022 – Initial Pilot and Market Tests: Chicago pilot exceeded expectations, documented high consumer demand, demonstrated ability to achieve initial 1 share target Moved into test marketing and increased share through education, awareness, trial and repeat purchase focus Q3-Q4 2022 – State-by-State Distribution and Rollout: Announced IL, CO, NM, AZ, UT targets, began initial expansion activities Initiated Pivot to national scale distributor networks Scaled VLN® team to expand into additional states and retailers across the convenience, grocery, and drug store channels via state-level relationships 5 Initial Target States = ~7% of U.S. Cigarette Sales At ~63.5M cartons sold, a 1% market share = ~635k VLN® cartons 2022: VLN® PILOT AND FIRST EXPANSION WAVE Leveraging Exceptional Pilot Results and Moving Aggressively Into Commercial Launch Program 6 |
|
100-DAY ACCELERATION TO NATIONAL-SCALE ACCESS 7 *Trade dress subject to change. Opens Largest Distributors, Largest Retail Chains, Largest Markets December 1, 2022 March 9, 2023 Distribution State by state with adjacent category experts Signed #1 C-store distributor in U.S. Signing #2 distributor Growing list of regionals signed and pending Retail Access #2 US C-Store chain Signing #1 C-Store chain Growing list of regional C-Store chains signed and pending Adding club and military sites States Selling in CO, IL Announced AZ, NM, UT Launching TX, CA, FL Accelerated launch via expanded distributor and C-store relationships International 1 Announced 3 Announced |
|
State % of Adult Smokers Pack Volume Retail Sales AZ 15% 160M $1.4B Announced Priority States CA 10% 514M $4.9B CO* 14% 130M $1.0B FL 15% 513M $3.9B IL 15% 253M $2.6B NM* 16% 48M $0.4B TX 15% 736M $5.6B UT* 8% 45M $0.4B Total - 2,397M $20.2B WI 15% 184M $1.6B CT* 12% 65M $0.8B GA 16% 398M $2.5B IN 19% 328M $2.3B KY* 24% 295M $2.0B MI* 19% 351M $2.9B NC* 19% 500M $3.3B NY 13% 180M $2.2B OH 21% 467M $3.7B SC 18% 215M $1.5B Total - 6,159M $43.0B Example VLN® Distribution: MRTP States + Adjacent States 8 2023 VLN® COMMERCIALIZATION Announced Launch State Prospective Expansion State Source: CDC; Current Cigarette Use Among Adults (Behavior Risk Factor Surveillance System) 2019; World Population Review Cigarette Prices by State; Internal Documents Targeting VLN® Sales in up to 18 States by End of 2023 Launching Multiple States and Chains with National-Scale Distributors and Retail Partners *State with MRTP Tax Benefit TBA #2 National Distributor TBA #1 National C-Store Market Leading C-Store & Distribution Partners 18 Prospect Markets 56% of Total U.S. Cigarette Sales |
|
2022 Confirmed VLN® Market Share Gains 2023 Accelerated Multi-State Rollout 2024 Cash Positive VLN® Operations Pilot results demonstrated VLN® can rapidly achieve a 1 share in new markets, then grow its position through repeat purchase and new adopters Further refined the brand strategy and marketing programs with consumer studies and Colorado expansion Built team for fully supported launch with national retail partners New national-level distribution partners enable accelerated multi-state expansion in up to 18 states by year end Many retail chains seeking to carry VLN® VLN® can now launch in hundreds of stores at a time across new states or multiple states Supporting investment in marketing and education to secure sustainable share position VLN® targets 30+ million U.S. adult smokers, 75% of whom want to quit 18 states by year end 2023 represents 600+ million cartons per year opportunity 2023 launch investments generate broad VLN® availability and sustained momentum Once broadly available in multiple states with major retail chains, VLN® can be cash positive at ~1.2 million cartons per year 1. Foundation for a Smoke Free World; https://www.smokefreeworld.org/wp-content/uploads/2019/08/FSFW_Global-Trends-in-Nicotine_6.22.2020.pdf 2. Prohibition Partners; “The Global Cannabis Report – November 2019” 3. Addressable market of third plant-based franchise is based on a global estimate in 2019. THE PATH TO CASH POSITIVE VLN® OPERATIONS 2022 Pilot and Market Test Activities Provided a Clear Path to Success in 2023-2024 9 |
|
New Zealand reduced nicotine mandate takes effect in ~2 years – requires all cigarettes to be 0.8mg/g or less, including test variance Seed development program scaled to supply tobacco to the entire New Zealand market – more than 2 billion cigarettes in total Advancing pilot programs for additional markets in 2023, including: South Korea (updated product) Japan (pilot test) Switzerland (pilot test) VLN® INTERNATIONAL PROGRAMS EXPAND OPPORTUNITY 10 |
|
VLN® CAN BE THE FOUNDATION FOR NATIONAL AND STATE HARM REDUCTION POLICIES IN THE U.S. The science shows a menthol ban absent an off-ramp primarily transitions menthol smokers to traditional cigarettes 11 The science shows a reduced nicotine mandate would help all smokers more easily quit smoking or migrate to less toxic products FDA continues to advance its scientifically based menthol ban and reduced nicotine content policies, plus state and local governments are taking direct action VLN® Menthol King cigarettes could be the only current combustible menthol cigarette potentially exemptfrom the menthol ban. 22nd Century’s research cigarettes continue to fuel numerous independent scientific studiesto validate the enormous public health benefit FDA proposes from a reduced nicotine standard |
|
FDA Authorized VLN® Cannabinoid Ingredients, APIs and CDMO Corporate/Financial |
|
EMBARKING ON HIGH GROWTH 2023 Ramping Ingredient Volumes, New Market Entry and Expanded White Label Opportunities GVB Biopharma (“GVB”) is a global leader in the manufacturing of hemp-derived active ingredients and finished products servicing the consumer products, nutraceutical and pharmaceutical industries 13 Dominant North American position plus broad global footprint in geographic markets targeted for growth Complete, vertically integrated control from biomass to ingredients to finished goods, control for pricing, quality, purity and traceability New CDMO+D model expands revenue and adds value to customers New extraction unit and crop developments by 22nd Century will lead to margin expansion 2023 recovery from Grass Valley fire sets stage for improved scale and efficiency in GVB’s operations On track to achieve cash positive operations in first half 2024, including corporate allocation |
|
Prineville, Oregon: World-scale crude extraction over 15,000 kg/month at full capacity (operational Q1 2023); New ingredient and production and refinement facility with increased capacity and greater efficiency GVB POSITIONED FOR GLOBAL LEADERSHIP Crude Extraction | Prineville Industry Leading Certifications Position GVB as the Supplier of Choice FDA’s Commitment to Advance Regulatory Standards and Product Recommendations on CBD Use in Consumer and Nutraceutical Products will Further Expand the Market 14 Las Vegas, Nevada: 40,000 sq. ft. CDMO facility used for Private Label/Contract Manufacturing United Kingdom: RXP acquisition creates leadership position in novel foods applications market European Union: Netherlands Distribution provides increased availability to higher margin customers Filed FDA DMF to provide pharmaceutical grade API differentiating GVB distillates and isolates |
|
Grass Valley fire November 2022 Immediate transition to supply customers via alternate sources Met $9.5M revenue target in Q4 – Fulfilled 47k kg in Q4 2022, up from 27k kg in Q3 2022 GRASS VALLEY UPDATE No Customer Shipments Missed, Returning to Full In-house Service 15 Growing volumes year-over-year in 2023 20k kg in Jan 2023, seeing shortage of raw hemp in market Establishing Interim 15,000 sq foot facility Testing, blending, QA/QC and fulfillment with growth capacity See margin recovery as extraction unit and new center fully online Build new center of excellence suited to long-term growth Looking at OR and NV options and economic incentives Target 10 million lbs. hemp biomass and 600,000 kg of extracts annually, 100,000 kg dedicated top pharma grade |
|
TRANSFORMATIVE NEW CDMO+D MODEL Fully Verticalized Services from Ingredient to Manufacturing to Retail Category Management Working with the largest and best-known consumer CBD brands 16 New, single-source model provides complete solution Enhances GVB revenue and margin opportunities; generates incremental sales from existing VLN® sales team infrastructure License covers broad range of hemp derived cannabinoid consumer packaged goods at each brand Ingredient Supply White-label manufacturing Retail category management and distribution VLN® sales team and channel to place products with retailers seeking innovative, high velocity, high margin, small footprint consumer CDB products New model for other consumer product CBD brands seeking enhanced services and integrated solution |
|
Key Cannabinoids Cannabinoid Abbreviation Cannabidiol Isolate CBD Isolate Cannabidiol Broad-Spectrum Distillate CBD BSD Cannabigerol Isolate CBG Isolate Cannabidiol Crystal Resistant Distillate CBD CRD Compliant Broad-Spectrum Distillate Compliant BSD Cannabidiol THC-Free Crude CBD THC-Free Crude UK Compliant Broad-Spectrum Distillate UK Compliant BSD Cannabinol Isolate CBN Isolate Cannabichromene Isolate CBC Isolate Cannabidiolic Acid CBDA White Label Contract Manufacturing Product Offering Tinctures Gel Capsules Gummies Mints Tablets Topical Vape Pens POSITIONED FOR INTERNATIONAL SCALE Global Ingredients and Finished Goods Leadership in New Emerging Markets 17 Netherlands Distribution Facility Targets $3.2 billion Euro market opportunity European ingredient fulfillment with superior margin profiles Fully landed cost and delivery in half prior time requirements RX Pharmaceutical Acquisition Accretive acquisition with 1,276 UK FSA novel foods applications UK food and nutraceutical leadership using GVB technical data, formulations and ingredients |
|
Continued revenue growth plus improving margin and operating performance will drive hemp/cannabis to cash positive operations in 2024 Operating Performance Enhancement Scale CDMO+D Business Volumes FDA Drug Master File Food & Nutraceuticals Market Expansion 2023 HEMP/CANNABIS GROWTH DRIVERS Clear Global Leader in Hemp/Cannabis Ingredients, CDMO and Distribution Resume in-house distillate and isolate production New white label plus distribution agreements establish new business model in industry Growing number of CBD pharmaceutical trial activities represents new, high-value addressable market New FDA guidelines will establish enhanced regulatory standards and validate the market 18 New CBD crude extraction to drive incremental margin Scale revenue and increase gross margin across fixed cost base Completed FDA DMF filing to access pharmaceutical grade market currently dominated by high-cost synthetic products Deep vertical integration drives further margin opportunity Robust pipeline of follow-on peer contract opportunities Extensive certification and standardization capabilities distinguish GVB from smaller producers |
|
FDA Authorized VLN® Cannabinoid Ingredients, APIs and CDMO Corporate/Financial |
|
FOURTH QUARTER 2022 FINANCIAL HIGHLIGHTS 1. Gross profit margin is calculated by dividing gross profit by netrevenues. 2. See the tables included in this release for a reconciliation of Adjusted EBITDA (a non-GAAP measure) to net loss. 20 +141% QoQ and 101% YoY increase in Net Revenues due to GVB acquisition. Net Revenues Gross Profit1 Gross Margin1 Operating Loss Adjusted EBITDA2 4Q 2022 $19.2M $(646)K (3.4)% $(23.2)M $(13.9)M 4Q 2021 $8.0M $231K 2.9% $(9.0)M $(7.5)M FY 2022 $62.1M $1.2M 1.9% $(57.1)M $(40.5)M FY 2021 $30.9M $1.5M 4.8% $(28.4)M $(23.1)M |
|
TOBACCO REVENUE & PROFIT BREAKDOWN Tobacco 4Q 2022 4Q 2021 Unit sales1 1.3M 1.1M Net revenue $10.0M $7.9M Gross profit $(44)K $356K Gross profit margin2 (0.4)% 4.5% 21 Net revenues increased QoQ based on the number of cartons sold Gross profit declines QoQ reflecting lower margin sales mix in contract manufacturing products and increased overhead in 4Q 22 attributable to the ramp-up in VLN® manufacturing 1. Tobacco unit sales volume is measure in cartons 2. Gross profit margin is calculated by dividing gross profit by net revenues 3. Contract manufacturing operations (CMO) Opportunity in 2023 for additional tobacco net revenue growth and margin expansion: Increased sales volume of higher margin CMO cigarette customers Accelerated VLN® launch driving increased revenue and margin contribution from premium VLN® products |
|
HEMP/CANNABIS REVENUE & PROFIT BREAKDOWN 22 Net revenue growth QoQ primarily driven by: Addition of acquired GVB revenue contribution Significant GVB organic revenue volume growth QoQ 4Q net revenue increased despite Grass Valley fire Strong consumer demand for GVB bulk ingredients and new CDMO opportunities 1. Hemp/cannabis unit sales volume is measured as kilograms. 2. GVB acquisition occurred on May 13, 2022. All prior period results are provided for illustrative purposes only. These pro forma results do not purport to be indicative of the results that would have been obtained, or to be a projection of results that may be obtained in the futures. Refer to our Annual Report on Form 10-K Note 2 of the Consolidated Financial Statements for description of pro forma adjustments as required under U.S. GAAP. Additional 2023 hemp/cannabis opportunity driven by: Organic growth reflecting continued strong customer demand Profit margin expansion reflecting full restoration of GVB extraction capabilities and vertical integration with new Prineville crude extraction facility becoming fully operational Hemp/Cannabis 4Q 2022 4Q 20212 Unit sales1 41,070 14,243 Net revenue $9.3M $6.8M Gross profit $(602K) $1.6M |
|
NEW $21M DEBT FINANCING 23 Proceeds from new credit facility will fund increased working capital needs reflecting significant growth in both VLN and hemp/cannabis business lines Working capital needs rapidly increasing due to: Summary of Terms: Multiple national-scale distribution partnerships requesting VLN stock Continued strong consumer demand for GVB bulk ingredients as well as new CDMO opportunities 3-year term No amortization in year 1, 2% monthly amortization thereafter 7% cash interest 5% original issue |
|
SUMMARY BALANCE SHEET ITEMS Balance sheet date as of: (in millions) Year End 2022 Year End 2021 Cash and cash equivalents1 $21.2 $48.7 Total assets $114.7 $76.0 Total liabilities $18.7 $9.9 Total shareholders' equity $96.0 $66.1 24 Q4 included the following non-recurring or seasonal uses of cash: $4.5M replenishment of working capital from GVB fire $1.9M repayment of GVB Bridge Notes $2.3M VLN tobacco leaf grow Remaining $2.8MM GVB Bridge Notes outstanding converted to Subordinated Debt with maturity extended through May 2024 New $21.1M Credit Facility strengthens balance sheet and provides working capital to fund strong growth for both VLN and hemp/cannabis business 1. Cash and cash equivalents includes short-term investment securities. Strengthened balance sheet supports growing working capital needs driven by increased VLN® product shipments to multiple national-scale distribution partners as well as strong customer demand for hemp/cannabis bulk ingredients. |
|
Leveraging exceptional VLN® demand into aggressive multi-sate commercial launch program 2023: PATH TO CASH POSITIVE OPERATIONS Growth Across Both VLN® and Hemp/Cannabis Franchises 25 Launching national scale distribution to support demand from largest C-Store, consumer, and pharmacy chains Selling VLN® in up to 18 states in 2023 Increased volumes and new market opportunities drive hemp/cannabis growth and margin Scaling ingredient and CDMO business in U.S. and Europe; launched CDMO+D model Submitted Drug Master File to FDA to produce and supply APIs for new medical and pharmaceutical industry Confirmed path to cash positive in both tobacco and hemp/cannabis Executing clearly delineated revenue growth strategies in both business units Advancing to positive cash flow from hemp/cannabis and VLN® business units in 2024, including corporate overhead |
|
Questions & Answers Q A INVESTOR RELATIONS & MEDIA CONTACT Matt Kreps Investor Relations 22nd Century Group, Inc. +1 -214 -597 -8200 mkreps@xxiicentury.com |
