22Nd Century Group, Inc. (XXII) 10-Q Quarterly Report November 2022

— 22nd Century Group, Inc. (Nasdaq: XXII), a leading agricultural biotechnology company dedicated to improving health with reduced nicotine tobacco, hemp/cannabis, and hops advanced plant technologies, today reported results for the third quarter ended September 30, 2022, and provided an update on recent business highlights. The Company will host a live audio webcast today at 10:00 a.m. E.T.

James A. Mish, Chief Executive Officer of 22nd Century Group, stated: “The past few months have demonstrated tremendous commercial progress in 22nd Century’s reduced nicotine tobacco and hemp/cannabis businesses. Our VLN^® product launch has expanded from the exceptional pilot in Chicago to now five states. We plan to expand that base to as many as 18 states over the next twelve months. Doing so would give us access to more than half the $80 billion U.S. tobacco market and position us in most, if not all, of the states that have enacted MRTP excise tax provisions favorable to our unique product authorization. Even just a 1% share, which we view as eminently achievable based on our pilot results, would be transformative to our revenue line. The FDA is also continuing to advance its interests in transformative menthol and reduced nicotine policies, and 22nd Century is positioned at the forefront of this opportunity with the only MRTP authorized 95% reduced nicotine combustible cigarette and years of clinical research documenting the benefits of our products.

“We also reported our first full quarter of hemp/cannabis revenue benefitting from the acquisition of GVB Biopharma this spring. We are now the largest merchant market supplier of CBD in North America and positioned to grow that stake even further. We are moving quickly to complete the startup of our new Prineville crude extraction plant and secure additional certifications for our facilities that will further differentiate our products and make us the premier supplier of hemp-derived extracts and ingredients to consumer and wellness products. Success in these endeavors will enable us to increase our gross margin on this portion of our business and compete from a position of strength in a much larger active ingredient market once FDA announces its highly anticipated new product standards for the industry.

“With a strengthened balance sheet and a clear path to increased revenue and gross margins, we are excited about the path forward as we work to rapidly drive market share and create operating scale across our business units,” concluded Mish.

Recent Key Financial and Business Highlights

Tobacco Business

●	22nd Century Group has moved aggressively into its commercial launch program for VLN^®, leveraging its exceptional pilot results to develop an efficient, reproducible VLN^® Sales Launch Blueprint that focuses resources to achieve the greatest returns.

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The launch blueprint is designed to be repeatable as the Company expands VLN^® availability to new markets.

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The Company expects to gain significant market share in a new market based on consumer adoption.

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Consumers have described VLN^® as “game-changing” and “lifesaving”.

●	22nd Century has refined its VLN^®rollout strategy to focus on going deeper into select geographies and markets with high cigarette volume and large adult smoker populations.

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The Company estimates that every 1% share of the U.S. retail market equates to approximately $800 million in retail sales, which is $500 million in revenue for a premium cigarette manufacturer.

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22nd Century will also prioritize states with Modified Risk Tobacco Product (MRTP) state excise tax savings, which can be used toward adult consumer incentives, expand distribution, and additional programming to raise awareness, education, and trial among adult smokers of its unique products.

●	22nd Century announced that it is expanding its retail sales presence in Illinois following exceptional results in its Chicago pilot.

●	The Company subsequently launched VLN^®in Colorado through its expanded network of retailers and distribution partners, including Circle K, Eagle Rock Distributing Company, and Creager Mercantile.

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The Colorado VLN^® distribution plan includes thousands of retail sites and numerous new retailers supported by 22nd Century’s distribution partnerships.

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The Company is initially acting on approximately 3,000 locations across the state where VLN^®will be available.

●	The Company also announced that it will launch VLN^®in three additional states – Arizona, New Mexico, and Utah – covering the Four Corners region.

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Expanding into the Four Corners gives VLN^® access to concentrated centers of adult smokers allowing the Company to market VLN^®in a streamlined and efficient manner where resources can be pooled and focused.

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New Mexico and Utah have an MRTP tax benefit that 22nd Century Group can leverage similar to its activities in Colorado.

The following information was filed by 22Nd Century Group, Inc. (XXII) on Tuesday, November 8, 2022 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Inside 22Nd Century Group, Inc.'s 10-Q Quarterly Report:

Financial - Earnings Highlight
The increase in gross profit and gross profit as a percent of sales for the nine months ended September 30, 2022, compared to the nine months ended September 30, 2021, was primarily driven by favorable tobacco volume, price, and mix, and new hemp/cannabis profit that was not reflected in the prior year period.

Financial - Earnings Highlight
The increase in gross profit and gross profit as a percent of sales for the three months ended September 30, 2022, compared to the three months ended September 30, 2021, was driven by higher volumes in both tobacco and hemp/cannabis, partially offset by an inventory write-down of $281.
Revenue - Product Highlight
o Net revenues from tobacco related products was $11,535, an increase of 47.7% from 2021 primarily driven by volume increases in the number of cartons sold, price increases, and favorable mix for filtered cigar and cigarettes (including export cigarettes).
Other - Other Highlight
Under the new leadership at the FDA and Center for Tobacco Products ("CTP"), we believe that the FDA will refocus on implementing its ground-breaking Comprehensive Plan for Tobacco and Nicotine Regulation, in particular the Agency's plan to cap the amount of nicotine in combustible cigarettes to a "minimally or non-addictive" level.
Financial - Expense Highlight
The increase in SG&A expense during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was driven by $4,149 of GVB expenses that were not reflected in the prior year period, and increases in severance charges and accelerated equity compensation expense of $1,928, strategic consulting expenses of $3,575, additional personnel expenses of $867 and sales and marketing expense of $906 due to the acceleration of our VLN launch, one-time transaction costs related to the acquisition of GVB of $882, legal fees of $529, and other expenses of $673.
Revenue - Product
As described below, on July...Read more
Revenue - Product
Our cash, cash equivalents and...Read more
Financial - Expense
o Research and development expenses...Read more
Financial - Earnings
Hemp/cannabis gross profit was negligible...Read more
Other - Other
Management believes the estimates, assumptions...Read more
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Net cash (used in) operating...Read more
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Important factors that could cause...Read more
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To reflect this difference in...Read more
Revenue - Product
The increase in net revenue...Read more
Other - Other
Unrealized gain (loss) on investment...Read more
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22nd Century's cash requirements in...Read more
Other - Other
? The Company announced that...Read more
Revenue - Product
? Net revenues for the...Read more
Revenue - Product
The increase in net revenue...Read more
Revenue - Product
The increase was due to...Read more
Financial - Earnings
? Gross profit for the...Read more
Other - Other
We believe that recent political...Read more
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22nd Century is already seeing...Read more
Financial - Shares
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M & A - Other
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Financial Statements, Disclosures and Schedules

Inside this 10-Q Quarterly Report

Material Contracts, Statements, Certifications & more

22Nd Century Group, Inc. provided additional information to their SEC Filing as exhibits

Exhibit 31.1: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 31.2: Rule 13A-14(A)/15D-14(A) Certification

Exhibit 32.1: Section 1350 Certification

Ticker: XXII
CIK: 1347858
Form Type: 10-Q Quarterly Report
Accession Number: 0001558370-22-016728
Submitted to the SEC: Tue Nov 08 2022 7:00:49 AM EST
Accepted by the SEC: Tue Nov 08 2022
Period: Friday, September 30, 2022
Industry: Cigarettes

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22Nd Century Group, Inc. (XXII) SEC Filing 10-Q Quarterly Report for the period ending Friday, September 30, 2022

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